{"id":207508,"date":"2025-04-26T21:37:11","date_gmt":"2025-04-26T21:37:11","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/investing\/why-most-financial-planners-dont-offer-very-short-engagements-oblivious-investor\/"},"modified":"2025-04-26T21:37:11","modified_gmt":"2025-04-26T21:37:11","slug":"why-most-financial-planners-dont-offer-very-short-engagements-oblivious-investor","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=207508","title":{"rendered":"Why Most Financial Planners Don\u2019t Offer Very Short Engagements \u2014 Oblivious Investor"},"content":{"rendered":"


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One question I receive regularly is why most financial planners don\u2019t offer an option for an engagement that consists of just a one-hour paid phone call, to answer a handful of questions.<\/p>\n

There are a few reasons (which I think most people outside the industry are unaware of) for the rarity of such a business model.<\/p>\n

State Regulation of Billing Models<\/h3>\n

Firstly, state regulation of registered investment advisers (RIAs)<\/a> often creates incentives for RIAs to prefer billing models other than hourly.<\/p>\n

For instance here in Missouri, hourly fees of above $250 are \u201cpresumptively excessive and unreasonable.\u201d But an asset-based fee must exceed 2% per year before the regulator takes the same position. So that means that, for example, for a client with a $1 million portfolio, an RIA can charge up to $20,000 per year, without any regulatory hassle with respect to the fee, as long as the fee was calculated based on assets. But special justification would need to be provided in order to charge the same client $300\/hour for 20 hours over the course of the year (totaling $6,000).<\/p>\n

You can do the math yourself with respect to portfolios of $2 million, $3 million, etc. \u2014 and quickly see how this results in a situation that\u2019s kind of crazy in terms of how it influences the way that RIAs choose to charge for their services.<\/p>\n

The details vary by state, but the general situation is that the regulators are more comfortable with asset-based fees than other billing models<\/a>.<\/p>\n

It\u2019s no surprise that many RIAs opt for the billing model that results in more compensation and less regulatory hassle<\/em>.<\/p>\n

Client On-Boarding Time<\/h3>\n

Another factor that makes 1-hour (or similar) engagements rare is that there\u2019s more \u201cbehind the scenes\u201d work than people realize. In my own experience, it takes somewhere in the range of 2-4 hours just to:<\/p>\n

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  1. Meet with the potential-client to discuss a possible engagement and terms thereof,<\/li>\n
  2. Get up to speed on the new client\u2019s facts and circumstances,<\/li>\n
  3. Set the client up in the recordkeeping software and perform the necessary related compliance activities, and<\/li>\n
  4. Set the client up in the actual financial planning software.<\/li>\n<\/ol>\n

    In other words, before even attempting to answer any actual financial planning questions, the planner has typically already invested a few hours of their time. And that has to be factored into the pricing in one way or another.<\/p>\n

    An important point here is that, in a DIY context, none of items #1-3 above would be applicable at all (as there is no compliance required and the person is already of course up to speed on their own circumstances). I think this is relevant for two reasons:<\/p>\n