What is a flat fee advisor?
A flat-fee advisor is defined as a financial advisor who:
- Charges a fixed fee that does not vary over the length of the contract;
- Provides both financial planning and investment management services for that fee; and
- May also be referred to as a “fixed-fee advisor.”
Example: I charge $4,500 annually for an individual client & $5,820 for a couple plus a one-time upfront fee of $1,000 for financial planning and investment management.
A flat-fee advisor is not somebody who:
- Provides financial planning for a flat fee, and investment management services for an AUM fee;
- Provides financial planning for a flat fee, and receives commissions for selling insurance or brokerage products;
- Offers clients the option to be charged either a flat fee, a commission, or an AUM fee. No multiple fee options provided; there is only one option provided;
- Makes more money when the value of the assets in the client’s portfolio goes up;
- Works for a wirehouse or broker dealer firm and charges commissions;
- Is dual-registered;
- Is a hybrid advisor;
- Charges an AUM fee in addition to a flat fee;
- Charges commissions in addition to a flat fee;
- Earns commissions for selling insurance in addition to a flat fee; or
- Provides only financial planning services (this is called ‘advice-only’; not flat fee).
Some flat-fee advisors:
- Adjust their contracts for inflation; or
- Provide differing levels of service for different flat-fee amounts.
Example: I charge $2,250-$4,500 for a One-Time Financial Plan depending on complexity and needs of the client.
Why work with a flat fee advisor?
- Reduced conflict-of-interests: no incentive to encourage managing more of your assets instead of recommending the funds be utilized for other purposes such as paying down debt, etc.
- Transparency: you know the exact price you’ll be paying
- Simplicity: no calculations necessary to understand fee