Fee-Only Financial Planning

In last week’s blog post, we discussed financial planning – what it is, and how it can help you realize all those things you’ve always wanted to do. Today, we’ll discuss a very special kind of financial planning: fee-only financial planning. (Fee-only financial planning is what we offer at Wealth Analytics.)

With fee-only financial planning, you’re able to create your financial plan without the conflict of interest that comes from the desire to sell financial products. What happens if this is not the case? That is, how does a run-of-the-mill financial plan compare to a fee-only financial plan? Consider an example:

To iron out his retirement plan, Temüjin meets with a financial advisor. Temüjin’s plan is ambitious, with a travel itinerary spanning from China to Bulgaria. Undoubtedly, such a vacation will be expensive. To help save for this coming expense, Temüjin’s financial advisor suggests an indexed universal life insurance policy. With a built-in cash value component – the financial advisor argues – Temüjin will amass a sizeable vacation fund in no time at all!

As fee-only financial planners, we’re of the opinion that you’re probably better off without a permanent life insurance policy. After accounting for all the costs involved (including the salesmen’s commission), the cost of such a policy does not make sense for most individuals. There are much better alternatives available for saving and/or investing.

Fee-Only Financial Planning

What are those alternatives – and how are they presented in a financial plan created by a fee-only Certificed Financial Planner ® (CFP®)? Let’s return to the example of our hypothetical wandering Mongolian:

The fee-only financial planner works with Temüjin to visualize his whole trip:

• • Which cities will be visited?

• • How long will he stay?

• Will he travel by plane? Train? Horseback?

With the itinerary cemented, planning for the trip takes center stage:

• • How much will the trip cost?

• What’s the best way to save for the trip?
  • • A taxable savings account?
  • • A government bond fund offered by the Mongolian Empire’s 401(k) plan?
  • Large capitalization stocks inside a Roth IRA?

The fee-only financial planner works with Temüjin to figure out the best way to save for the trip, given Temüjin’s:

• • State & Federal Tax Brackets

• • Tolerance for Investment Risk

• Timeline for withdrawal of assets

In financial planning performed by an insurance agent or commissioned sales advisor, the financial product du-jour is ready for sale before the client’s interests are ever considered. With fee-only financial planning, the client’s best interests are put first – because there are never any financial products to sell.

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If you’re interested in planning out your life (or planning for your retirement), work with a fee-only financial planner. Working with a fee-only financial planner means your financial advisor has the single objective of mapping out your life for your benefit, without the conflict of interest that comes the desire to sell financial products for a commission. As a fiduciary, a fee-only Certified Financial Planner®  (CFP®) works for you!