Q&A: ‘Assets under management’ advisors

Dear Liz: We’ve been using a fee-only financial advisor for 25 years. We’d discuss what we needed, she would tell us how many hours it would take, then she invoiced us at an hourly fee.

She recently joined a company that charges 1% of investment portfolios to provide financial advice. Is this still considered fee-only financial planning? If so, how do we find a firm that charges an hourly rate? We don’t want to spend thousands of dollars for someone to just tweak the detailed roadmap that’s already been created.

Answer: So-called “assets under management,” or AUM, fees are indeed considered fee-only planning, as long as the advisor only accepts fees paid by the clients and does not receive commissions or other compensation for the investments they recommend. AUM fees are a common compensation method and 1% is a fairly standard fee. If the advisor is doing significant, ongoing planning and investment management for you, the fee may be worthwhile. If not, there are other compensation methods that may be a better fit. Garrett Planning Network represents fee-only advisors willing to charge by the hour, while XY Planning Network and the Alliance of Comprehensive Planners offer fee-only advisors who charge retainer fees.

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