The pandemic and corresponding financial market correction filled my inbox with a cornucopia of advice on what to do.  The problem is the information is after the fact, in a reactive gesture rather than proactive wisdom.  Indeed the majority of this sage advice is contrived in the marketing departments of the financial product manufacturers and is a self-serving veiled attempt to keep investors in the market and, as a result, retain management fees. 

To me, the cart and the horse have been in the wrong direction since the beginning of the financial advisor/financial planner profession. Sincere advice cannot be provided to the public if it is based on a direct requirement of the sale of a financial product.  

You can argue that the industry has evolved from the embedded compensation, obscene commissions,  sales incentives, trips, rewards, and trinkets that drove the industry from its infancy to become a powerhouse of financial services.  

All of these changes have benefited consumers, but have they improved the advice provided?   I would argue this point as being a maybe.  

The prolific emergence of Fee-Based advisors is, in reality, a commission-based method of compensation, again being driven by the size of the account and not by the quality of the advice provided.  As the cost of delivering advisory services rose,  client segmentation, based on the size of the portfolio, became the focus.

The problem with this is that the smaller accounts of younger investors go to advisors who are transactional and lack financial planning skills and the necessary basic credentials.  These investors need financial plans, not a financial product.   

The reason I retired from the Fee-Based, AUM driven model to an hourly rate advisory practice is so that I can provide excellent advice without the pressure of a product sale.  I can provide my services regardless of the size of the account! 

Interestingly, the larger accounts are quick to realize that paying a $250 hourly rate  is far more economical than paying the traditional 1% that most Fee-Based advisors are charging. By offering a flat fee for accounts above $1 million, representing 30 hours of work, the bigger the account, the more the client saves.

At 1%, a 2 million dollar account is paying $20,000 annually for financial advice, focused solely on rates of return, active/passive, asset allocation, and several terms advisors use that make the client’s eyes gloss over with boredom.

I prefer to charge an hourly rate that is less than half of what they are paying and focus on the client’s life goals.

It is far more rewarding for me to talk about the Trips, Homes, RVs, Cottage, Sports cars, University degrees earned by children and grandchildren; than to discuss the rate of return of a portfolio.  It’s also far more relevant to the clients.  


Kevin O’Brien CFP, CDFA, CIM     

Kevin O'Brien

Author Kevin O'Brien

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