When asked what the most important purchase of your life is – without hesitation most people will say their home. A great deal of time, energy and resources are put into this purchase. Professionals are hired as well to assist in making sure you’re making the right decisions throughout the process.
I may be biased – but I would make the argument that financial freedom (ie. retirement) is a much larger purchase than a home. The average American will purchase three homes in their lifetime. (1) According to Forbes the average home price in the United States in 2024 is $495,000. (2) Compare this to a recent CNBC article – citing a 30 year retirement requires roughly $1,000,000 on average. (3) This is entirely case by case, many will need much more or possibly less, depending on how you see yourself spending this time.
You may or may not be surprised by these numbers, but what surprises me most often is people saying they do not know what their financial professional charges them, or the ever so famous phrase “they do not charge me.” Much like purchasing a home, there's more to the cost of advice than the cost of the home/investment. Professional fees, transaction costs, add ons can add up to a meaningful amount.
Chances are if you do not know, you’re paying much more than the person who does know! Also – when was the last time anything in this life was free?
Someone once made the comment, I would absolutely pay a financial planner one days’ worth of volatility in the market to help me manage my financial wellbeing for the other 364 days of the year. This really resonated with me – there are a variety of different ways people pay for their advice, flat fees, hourly, and most common a % of Assets under management – with the 2023 average being 1.02% for AUM over $1 Million.
Coming from outside of this industry I am shocked at how so many hidden fees and ways people make money – often with the end consumer/client having no knowledge of it. Here are a few examples.
Ultimately – everyone must make money, that is business. You as a consumer must educate yourself to know how and what you’re paying for and then decide if that’s what you feel is best for your situation.
Transparency and trust are two things we believe hold the biggest value in our relationships. Heck, it's what our values are based on.
Last but far from least - paying for an investment manager versus a Financial Planner cannot be compared. The financial planning process is much more complex and comprehensive. In addition to Investments, it incorporates planning for cash flow, retirement, taxes, estate, and insurance. If you’re paying for financial planning and only receiving investment advice – I would urge you to explore your options.
Educated consumers make empowered clients, make sure you seek advice from someone who wants you to be empowered and not dependent!
(2) https://www.forbes.com/advisor/mortgages/real-estate/median-home-prices-by-state/