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How much can an individual expect to pay an RIA for fee-only hourly? What about flat fee for 3(16) fiduciary services?

Oct 30, 2013 by KC from Champaign, IL in  |  Flag
6 Answers  |  8 Followers
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2 votes
Andy Tilp, CFP® Level 16

Hi KC

Perhaps you are familiar with Garrett Planning Network (GPN). If not, all Garrett advisors provide hourly-based pricing services. All Garrett advisors are RIAs and CFP (R). They charge based on the amount of time involved to work with and for you, and your advisor will provide a written agreement outlining the services and cost in advance.

Regarding your specific questions, the hourly rate can vary, depending on your location and the individual planner. Costs can range from $150 to $300/hour and up. I would suggest you interview 2-3 hourly planners in your area. They should be willing to tell you their hourly charge up front.

To put in a plug for this business model, which I will fully admit that I have a biased opinion toward. The hourly fee may seem to be a large upfront cost. But when compared to some other models, it is often much less costly in the long run. Much like an CPA or attorney, you pay only for the services you need. It is not uncommon that I will structure a comprehensive plan that can save a client ten to hundreds of $1000 over their lives. That means more money in their pocket to achieve their own goals.

You can find a hourly planner at http://garrettplanningnetwork.com Full disclosure - I am a member of GPN.

Hope this helps.

1 Comment   |  Flag   |  Oct 30, 2013 from Sherwood, OR
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Flag |  Oct 30, 2013 near Prince Street, NY

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2 votes

Hi KC,

Andy has some good advice. Planning costs may range from $1.5k to $3.5k depending on the complications with your personal situation. If you are looking for portfolio management some planners may charge a flat fee and others may charge around 1% of your portfolio with this percentage decreasing depending on the size of the portfolio. Here is a decent article you may want to read: http://www.bankrate.com/finance/savings/financial-planners-not-just-for-millionaires-anymore-1.aspx

Regards, Glen

Comment   |  Flag   |  Oct 31, 2013 from Uniontown, OH

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Andy and Glen provide some good points and I just want to elaborate on Glen's statement that planning costs range from $1,500 to $3,500 generally. Often you'll find that an advisor may say their hourly rate is $200 but price the planning they'll do for you on a flat rate. For example, I may tell a client my hourly rate is $200 and their plan will cost $2,000 because I would expect my work for them to take approximately 10 hours. I would say in many if not most cases, when the planning is done and you divide the flat fee by the # of hours spent, the hourly rate for that case is much less than the $200 (meaning the planner spent much more than 10 hours). My point is don't always just compare hourly rates but the total cost of the planning. ...and remember, you usually get what you pay for.

Comment   |  Flag   |  Oct 31, 2013 from Harrisburg, PA

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James Holland Level 18

KC the 3(16) service is for a 401k or 403b plan correct?

2 Comments   |  Flag   |  Oct 31, 2013 from Charlotte, NC
KC

James, Correct, the first question was more for personal interest, but also 401(k) if an employer chose to remain the fiduciary, but wanted some unbiased advice. The second question, 3(16) service, was if an employer wanted to outsource that role for an employee sponsored 401(k) plan.

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Flag |  Oct 31, 2013 near Champaign, IL
James Holland

KC We are big believers in outsourcing the running of a Retirement plan to a team of Qualified, Independent UN-Conflicted professionals. It saves a significant amount of $$, between 100-200 hrs of labor a year and removes a great deal of Liability from the RPF ( Responsible Plan Fiduciary) as for compensation that is set by the RPF , the named Fiduciary cannot be involved in setting their own compensation. So the RPF should vet all potential 3 (16) Fiduciaries to make sure the are qualified, also make sure they are properly Insured & Bonded. The RPF should review the Service Agreement to make sure all the duties they are looking to off load are there and make sure there are NO indemnification clauses. The 3 (16) must take FULL Fiduciary responsibility in writing. FULL Disclosure it is one of the many Fiduciary services we provide so If I can help let me know.

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Flag |  Oct 31, 2013 near Charlotte, NC

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1 vote

Fees for a 3(16) are all over the map because the services aren't all the same. Some retirement plan providers will take care of a number of the responsibilities that fall under 3(16). It's only recently that we've come across vendors saying they'll be the named 3(16) and the prices have varied tremendously. I'd echo all of James Holland's comments regarding extreme due diligence and add this: if you're hiring someone who doesn't work for your company to oversee the 401k, they better intimately understand your company and employees so they can act in their best interest and be someone that you'd trust with your own mother's bank account too.

1 Comment   |  Flag   |  Nov 12, 2013 from Alexandria, VA
James Holland

Thank you Courtenay And I agree 100% with her last statement.

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Flag |  Nov 12, 2013 near Charlotte, NC

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Hourly fees should be in the range of $150 - $300 per hour. Fees that run to the higher end of that spectrum usually involve some complex estate planning or non qualified retirement planning for business owners.

Comment   |  Flag   |  Jan 24, 2014 from Canton, GA

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