Broker Check

How Much Should A Financial Plan Cost?

November 14, 2019

When I was young, I remember my dad coming home from work one evening very upset about the cost of a repair on our car. This was the first automobile we owned and because we didn’t have a lot of money, he bought very used car. Anyway, he needed the car for his sales job and the $75 repair cost was a real financial hardship (that was a lot of money in the late 50’s).  

He told me that the only thing wrong was that a $2 part broke and it needed to be replaced. In fact, he found the damaged part on the ground where car broke down. So, I asked him, if the part only cost $2 why was the repair cost so high. My father told me that he asked the mechanic the same question and was told that the part was $2 but knowing where to put it cost $73.

Although the events recounted above are true to the best of my recollection, my father later admitted that his $2 / $73 story was a version of a parable that had been around for a long time.

But in truth, wasn’t the mechanic’s expertise and advice worth something?

In my adult life, I spent about 20 years practicing law. Although, I usually charged my clients by the hour, there were many hours of time spent on client matters that I didn’t routinely charge for. I found it more trouble than it was worth to charge for a few short telephone conversations, even though my usual retainer agreement indicated they could be billable time. 

I was involved in a minor matter representing a client I’ll call “nervous Nellie.”  During my three-week long representation, she called my office 26 times and she spoke to me at least a dozen times totaling about 8 hours. In my monthly statement, I added a $100 charge for 8 hours of telephone time which resulted in an objection from Nellie. She claimed she shouldn’t have to pay for telephone time because she was “only asking me for advice.”

But in truth, wasn’t my legal expertise and advice worth something?

So, what is the value of expertise? More specifically, what is the value of a financial plan that may help you get to your goals and reduce the risk of bad things happening? How much should you pay for it?

The answer depends on what we mean when we talk about a financial plan and the motivation for engaging a planner to construct one.

So, I guess the first question is: “What do I mean by a financial plan?”

  • By financial plan, I mean: a customized written document stating your financial objectives, assessing your current financial position relative to those objectives and making recommendations on how you can increase the likelihood of achieving those objectives.

  • My definition also assumes that the objectives, observations and recommendations in the plan are arrived at collaboratively with you, and with input from your tax and legal advisors; and that assessments and recommendations are arrived at only after significant fact finding to ascertain all of the surrounding facts and circumstances that might be relevant.

  • The relevant surrounding facts and circumstances in my definition not only includes the hard data such statements, tax returns and legal documents, but also the soft data such as your attitude toward money.

So, my definition of a financial plan is comprehensive and intensive. Success doesn’t guess. The more information that goes into your planning, the fewer guesses you may need to make. This can lead to a higher probability of success.

The second question involves your motivation. If you don’t mind guessing, I guess my definition of a financial plan won’t apply to you - you shouldn’t pay too much for guesses. 

However, if you are motivated to engage in a more rigorous and collaborative fact-finding planning process with an experienced, knowledgeable planner, in truth, isn’t that expertise, time, commitment and advice worth something?

If you would like to explore how my definition of a financial plan can apply to you and what it might cost, please contact us. 

Remember, we are here to help.