What Is Advice-Only Financial Planning?

Owen Winkelmolen

Fee-for-service financial planner and founder of PlanEasy.ca

What is advice-only financial planning exactly? What does advice-only financial planning entail?

Also known as fee-for-service financial planning, advice-only financial planning involves no products, no commissions, just advice.

With traditional forms of financial advice, there is always the nagging doubt about whether the advice is truly unbiased or if is it just to sell a product and receive a commission? There is always that lingering question, is this advice really in your best interest or is it in the best interest of the advisor?

Advice-only financial planning eliminates this conflict of interest. An advice-only financial planner is compensated directly by the client and only the client. There are no products, no commissions, just pure advice.

An advice-only financial planner works for the client to provide the best advice possible and good financial advice can be extremely helpful. It can reduce stress, provide peace of mind, capture unseen opportunities, avoid unnecessary risks etc. etc.

There are many different ways to receive financial advice, but one of the most unbiased and trustworthy is advice-only financial planning.

Let’s go deeper into exactly what advice-only financial planning is and why, in today’s world of low-cost self-directed investing, it makes more sense than ever to get an advice-only financial plan…

 

 

No Products And No Commissions

Advice-only financial planning is defined by the complete lack of any products or commissions.

Advice-only financial planning is pure advice, nothing else.

An advice-only financial planner is compensated by the client and only the client.

This is the strict definition of advice-only financial planning. An advice-only financial planner works for the client and no one else. They’re compensated by the client and no one else. They provide advice and nothing else.

As soon as investment management, insurance policies, mortgage or debt products enter the picture, that’s a clear sign that it’s no longer advice-only financial planning.

 

 

Unbiased Advice

Because advice-only financial planners are compensated by the client and no one else there is an extremely high level of trust.

Advice and recommendations provided by an advice-only financial planner are completely free from bias. There is no second guessing the motives behind the advice being given.

This high level of trust actually leads to more action from the client because the client trusts the advice being given. They know the planner is working in their best interest. This helps the client implement recommendations without the worry and second guessing.

 

 

Not Limited By Product

Many traditional financial advisors have a limited number of tools in their tool belt, they have to recommend the products that they are licensed to sell.

“If all you have is a hammer, then everything looks like a nail”

Advice-only financial planners on the other hand are also not limited by a particular set of products or services. Unlike more traditional financial advisors, who are incentivized to recommend the products or services they sell, advice-only financial planners are free to recommend any product or service on the market.

This freedom allows an advice-only financial planner to create a truly custom financial plan that perfectly fits each client.

An advice-only financial planner can recommend products or services that perfectly fit with their client’s goals. They can explain exactly why this particular mix of products or services helps the client achieve their financial goals faster, and they can do so without any bias.

 

 

Different Types Of Advice

When choosing an advice-only financial planner it’s important to choose a financial planner who specializes in your particular set of circumstances.

Beware of planners who supposedly do everything and work with any client.

Due to the different needs of clients, different planning opportunities, and different tools/processes required, it’s very difficult to be all things to all people. A planner like this might be “good at everything, but great at nothing”. A great financial planner should be able to quickly tell a client who they will work with, but also who they won’t work with.

Because many advice-only financial planners work with clients online, it’s very easy to find the perfect fit with an advice-only financial planner. Look for an advice-only financial planner that is extremely familiar with your particular set of circumstances.

 

Some circumstances to consider…

  • Budgeting/cash flow coaching
  • Creating financial routines
  • Salaried employees vs commissioned employees
  • Unique types of compensation (RSUs etc)
  • Planning to buy a house
  • Planning to start a family
  • Defined benefit pensions
  • Young family/children
  • Divorce/separation
  • Blended families
  • Low-cost investment planning
  • Approaching retirement
  • Entering retirement
  • Low-income planning (GIS, GAINS etc)
  • Tax and benefit planning
  • Leveraged investing
  • Real estate investing
  • Unique types of compensation (stock options etc)
  • Self-employed business owners
  • Incorporated business owners
  • Dual citizens (especially US)
  • Multi-generational planning
  • Trusts or complex estates

 

Each of these area’s requires a unique mix of knowledge, skills, tools and experience. Some areas naturally overlap, and some advice-only financial planners may focus on a few areas, but most advice-only financial planners will not focus on all areas (nor should they).

 

 

Fees and Pricing Options

Because advice-only financial planners are compensated by the client, there are many different pricing options available. Depending on the type of client and the type of service they offer, a planner could have any combination of these different pricing options.

 

  • Upfront fee or monthly fee or both
  • Package pricing or hourly pricing
  • Pre-set pricing or custom pricing

 

The fee for a financial plan could range from $1,000 to $10,000+ depending on the circumstances. A comprehensive financial plan will range from $1,500 to $3,500 for the average household. Add in unique aspects like business ownership, real estate investments, cross border, trusts and the cost can quickly increase.

 

 

Typical Process

Because advice-only financial planners are focused on providing advice and not selling products, the process is different than other financial professionals like investment advisors and insurance advisors.

Advice-only financial planners do not need personal details like SIN numbers, account numbers, bank numbers etc. There is no need for tedious paperwork to open new accounts or set up new investment or insurance products.

There is however a need for very detailed information. This typically occurs over the course of a few meetings with some work for the client to complete in-between.

Financial advice and recommendations are best when they come from a deep shared understanding of the client’s current situation and their future goals, so a well-defined process helps ensure that all the relevant information is shared…

 

Typical Process:

  • Initial meeting (usually free)
  • Proposal
  • Discovery
  • Planning
  • Implementation
  • Ongoing updates

 

Through this process an advice-only financial planner will create a very detailed financial plan that spans from today until late in retirement. It will capture opportunities and highlight risks. It will provide a road map of what to do year-by-year for the next 5, 10, 15, 20+ years to achieve a client’s financial goals.

More importantly, through this process the planner will help guide a client through different exercises, tools, and processes that will help craft a plan that perfectly reflects a client’s values, goals, hopes, and dreams. Often, this process of building a plan is as valuable as the plan itself.

 

 

Advice-Only Financial Planning

Advice-only financial planning eliminates the typical conflict of interest that arises with other forms of financial advice.

An advice-only financial planner is compensated directly by the client and only the client. There are no products, no commissions, just pure advice. An advice-only financial planner works for the client to provide the best advice possible.

With the introduction of low-cost self-directed investment options there has never been a better time to engage with an advice-only financial planner.

Advice-only financial planning is the new way to receive financial advice.

…it separates products from advice.

…it aligns the goals of the client with the goals of the financial planner.

…it allows the client to receive unbiased advice that they trust.

…it helps build a truly comprehensive financial plan that perfectly reflects a client’s values, goals, hopes and dreams.

…it allows the client to choose the best product on the market to implement their plan.

If you haven’t built an advice-only financial plan, now might be the time to start planning.

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Owen Winkelmolen

Financial planner, personal finance geek and founder of PlanEasy.

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

New blog posts weekly!

Tax planning, benefit optimization, budgeting, family planning, retirement planning and more...

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