Should You Pay Your Financial Advisor Based on Time or Assets?

When it comes to managing your finances, it's important to have a trusted advisor who can guide you through the maze of investment options, tax strategies, and retirement planning. When it comes to finding that adviser, you have a choice: A commission-based Certified Financial Planner (CFP®) or an hourly-based CFP®. While both options have their advantages, there are several compelling reasons why dealing with an hourly CFP® may be a better choice for you.

1. Transparency: When you work with an hourly CFP®, you know exactly what you're paying for. An hourly CFP® charges for their time, not for the products they recommend. This means that they have no financial incentive to recommend certain products or investments that may not be in your best interest. With a commission-based CFP®, on the other hand, there may be a conflict of interest, as they may be more incentivized to recommend products that earn them a higher commission, even if those products are not the best fit for your needs.

2. Flexibility: An hourly CFP® is often more flexible in terms of the services they provide. They may be willing to work with clients who have smaller portfolios or who only need occasional advice, while a commission-based CFP® may be more focused on high-net-worth clients or clients with larger portfolios. An hourly CFP® can also be a good option for those who prefer to take a more hands-on approach to their finances, as they can provide guidance and advice on an as-needed basis.

3. Cost-effectiveness: While an hourly CFP® charges for their time, they can often be more cost-effective in the long run. A commission-based CFP® may charge a percentage of your portfolio value, which can add up over time, especially if your portfolio grows significantly. An hourly CFP®, on the other hand, can provide valuable advice and guidance without charging a percentage of your portfolio value. Leaving more of your money in your portfolio.

4. Objective advice: An hourly CFP® is focused on providing objective advice and guidance that is tailored to your individual needs and goals. Because they are not incentivized by commissions, they have no reason to push certain products, investments or strategies, such as paying off debt vs. investing; they can advise on what is truly best fit for you. This means that you can trust that the advice you receive is in your best interest.

5. No minimum investment requirements: An hourly CFP® often does not have a minimum investment requirement, which means that they can be a good option for those who are just starting out or who have smaller portfolios. A commission-based CFP® may require a minimum investment in order to work with you, which can be a barrier for some people.

Overall, while a commission-based CFP® can be a good option for some people, there are many compelling reasons to consider working with an hourly CFP®. From transparency and flexibility to cost-effectiveness and objective advice, an hourly CFP® can provide valuable guidance and support that is tailored to your individual needs and goals. Or they can offer objective second opinions to those who want to use commissioned-based advisors to choose their investments for them.