Can I Use a Financial Planner if I’m Not Rich?
Illustration by Koji Yamamoto
There are a lot of things that automatically scream “Rich Person”: an Amex Black Card, a casual sailing hobby, owning a racehorse, or having a “money guy.” The first three have all earned their place on that list because they’re laughably expensive, but what about the last one?
Unlike a horse or a sailboat, we all have money, even if we don’t have a lot of it. Getting professional advice on what to do with our cash shouldn’t be reserved for people already sitting on Scrooge-McDuck-style piles of money, and it turns out, it’s not.
There’s a perception out there that financial advice is reserved for the already-rich, but Helen Ngo, CFP® and CEO of Capital Benchmark Partners, LLC, says the media plays a big part in that. “The media sensationalizes finance, especially in movies like Wolf of Wall Street, or when you see these big honchos with millions of dollars. It's not like that at all.”
Ngo works with clients of all income levels, ranging from $30,000 to over six-figures, and says that financial planning can be accessible to people of any wealth or income level. Maybe you can’t afford to work with an advisor on a full-time basis, but there are more and more options available outside of the traditional financial advice business model—a business model which, by the way, also contributes to the perception that financial planning is for the rich.
The most common way that financial advisors charge for their services is using assets under management, or AUM. They’ll charge you a percentage of the total dollar value you have invested with them, and to make sure it’s profitable, they’ll often set a minimum account size. When you hear that you need $100,000 just to get started, it’s easy to see why people think financial advice is only for the rich.
Luckily, that’s not the only way financial planners and advisors charge for their services these days, and you probably don’t need the full-service option in the first place.
Ngo recommends that if you’re just getting started, you should look for an advisor who charges an hourly rate. “Say, ‘Hey. I just want a spending plan. I just want you to look over everything, give me a second opinion on my tax planning, and the accounts that I own.’ That might turn out to just be $500, but it’s a $500 investment that you can use for the year, and go back to the advisor when you need him or her again.”
If you’re thinking that even $500 sounds like a steep price to pay, consider it in the same way you’d think about counseling, or even paying for legal advice. Yes, it can be expensive upfront, but working with an expert can save you time and money in the long term.
Just think about all the financial products in your life right now. If you’re an employee, you’re often dealing with a whole range of accounts and benefits that, despite what you say to HR, you don’t really understand. Optimizing your work benefits is a big part of what an advisor can do for you.
“Sometimes clients don't even realize that they're paying too much for benefits, or not utilizing all of their benefits at work, for tax efficiency purposes and for saving,” says Ngo. “I gather all of their pay stubs just to show them, ‘Hey, this is how much you're putting away. Are you underutilizing some benefits at work? Are you overpaying in taxes throughout the year?’”
While that might not seem like a big deal, Ngo’s advice helps her clients find more money every month, without losing any of the perks they actually use. A financial advisor can also help you build a realistic budget to achieve your goals and save more money.
“Let's say you want to save $2,000. Well, not all of that $2,000 goes into emergency savings. We’d break it down into your specific goals, and figure out how much of that $2,000 is going to be earmarked for travel, and gifts, and charity donations.”
For us non-rich types who’d like to get some financial advice, Ngo recommended a few key things to keep in mind.
First and foremost, you’re going to want to look for a fee-only CFP, and you can find one through XYPN Network or NAPFA. Secondly, you’ll want to find one who charges by the hour if you want to keep a hard limit on the total cost. Don’t be afraid to talk to someone you’re thinking of working with to make sure there’s a personality fit, and feel free to be upfront about the amount you want to spend for the work.
After all, they’re financial pros. They’re used to talking budgets.
Desirae Odjick is a personal finance writer who's all about demystifying money. She writes about how to be good at money without giving up the stuff you love on her blog, Half Banked.