Advice-Only Financial Advisers Don't Touch Your Money

A small group of financial advisers wants to change how their profession operates.

Most financial advisers provide more than just advice; they manage client investments, earning fees or commissions, which is how they make their money. But some advisers are offering financial advice and nothing more, letting clients handle their own investments and providing guidance on a range of financial issues beyond asset management. These advisers charge by the hour or follow a subscription model, providing, say, several months of advice for a set fee.

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“The main benefit of ‘advice only’ is for consumers who haven’t traditionally been served by the financial planning industry to finally get the opportunity to get financial advice without handing over their investments,” says Cody Garrett, a certified financial planner and owner of Measure Twice Financial in Texas. 

These advisers say they’re the future. But others aren’t so sure. 

Will it Catch on? 

“I think it's a noble idea that has little chance of making inroads into the conventional financial planning business model,” says Michael Finke, professor of wealth management at The American College of Financial Services.

Both Finke and Garrett agree that currently, only a very small number of financial advisers offer advice-only services — likely fewer than 1% — while the vast majority of advisers operate under the AUM model.

Finke is skeptical that the advice-only model will catch on, mainly because it doesn’t pay financial advisers enough to make it worth their time. Advisers who manage client investments typically operate under a model known as assets under management, or AUM. They may charge a commission on investments or a fee that is a flat percent of the value of the client’s assets. Commissions can come with conflicts of interest because, for example, the adviser may receive higher commissions on some investments. A fee-based adviser typically doesn't have a vested interest in recommending one financial product over another.

Financial blogger Michael Kitces is more bullish on the concept than Finke: “From the broader industry perspective, I do expect advice-only to continue to gain traction with a segment of consumers, similar to how fee-only did (going all the way back to when fee-only also constituted just a miniscule portion of advisors, as advice-only does today).”

Kitces notes that the different types of advisers serve different types of consumers. Fee-only advisers, he says, work well for people who “have accumulated assets and want to delegate the management of those investments to an adviser they can trust as an objective adviser (rather than a brokerage or insurance salesperson), which is where fee-only has long thrived.”

But consumers without accumulated assets or who are comfortable managing their own portfolios may want an adviser, Kitces says, “who is really there to JUST give them the advice they want, and not have a potential ulterior motive to get them to turn the relationship into one of ongoing AUM that they didn’t really want to delegate.”

Garrett has a three-month planning process and says about 80% of his clients return once a year. He charges $6,400 the first time and $4,800 every time they return.  He maintains he saves his clients an average of $20,000 a year, compared with AUM advisers. Garrett says his fee works out to about $320 an hour. He says his fee is probably higher than the average advice-only adviser fee, which he estimates is “probably closer to $150 to $250 an hour.”

Finke says that even though consumers may save money overall, they would likely resist paying flat fees for advice. He notes that clients are more aware of how much they’re paying advice-only planners because it’s a separate charge, rather than something that gets folded into their asset management.

Garrett says he has more than enough business as an advice-only adviser. “I currently receive over 20 client inquiries per week running this model,” he says. “I’m sure a lot of other advisers would like this level of demand.” 

Finke said he could see the idea catching on if, say, employers offered to provide advice-only sessions to their workers as part of their retirement savings plan. “In that sense it is probably the most appealing model for the hourly compensation advice mode,'' he says. “But even then, people would need to seek out the advice, and not enough people do.”

Advisers Say They’re The Future

Garrett says his typical client is a married couple in their early fifties with $2.5 million in investable assets wanting to retire within the next five years. His youngest client, he says, is 30 and the oldest is mid seventies.

Garrett says how to manage investments is only a small part of the financial advice he offers. He provides a list of 25 different categories of advice, ranging from estate documents, to charitable giving to life and disability insurance and funding long-term care. 

Financial planner Sean W. Mullaney,president of Mullaney Financial & Tax Inc. in California, also offers advice-only services. He predicts the AUM model will “die a long, slow death” as advisers cling to that model, while younger clients navigate to advice-only services. Mullaney says he earns the same, whether his clients are uber wealthy or middle class, so he treats everyone the same. He charges $4,400 for a 90-day planning process, regardless. And when clients return, the fee goes down.

How to find an advice-only adviser? 

Cody Garrett compiled a list of advice-only advisers you can find here: measuretwicefinancial.com/wp-content/uploads/2022/03/Advice-Only-Financial-Planner-Referral-List.pdf

The following fiduciary networks also have advice-only members: XY Planning Network, NAPFA, Fee-Only Network, and Garrett Planning Network. 

In addition, Kitces suggested the Alliance of Comprehensive Planners at https://www.acplanners.org/home.