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Determine Your Needs, Learn Fee Schedule Before Retaining Financial Planner

January 11, 1998|CARLA LAZZARESCHI

Q: I understand the reasons someone might want to hire a fee-only financial planner. But is there any way to know just what these planners charge for their services or what's considered "average"?


A: Although it's an overstatement to say that there are as many different fee schedules for financial planners as there are financial planners, you can safely assume that these fees vary greatly, as do the services provided.

For example, members of a large accounting firm may charge well into five figures to draft a financial plan for an individual or couple.

But such plans tend to be sophisticated and complicated because the clients have either such extensive holdings or such complicated estate planning requirements (or both) that they need the detailed analysis. In other words, high net worth individuals need, and can afford, a level of financial planning that most taxpayers don't need.

So what should an average taxpayer expect to pay for a financial plan?

It depends on what you want and need. Margie Mullen, a fee-only financial planner in Los Angeles, says she charges a minimum of $2,000 for a comprehensive plan in which there are no complicating factors.

This plan, she says, includes in-depth examinations of a taxpayer's or couple insurance needs, investment strategies, tax situation, budget, retirement and estate planning and other critical issues, such as college saving planning or parental care issues.

Although many planners charge set fees for service packages, others prefer to charge a straight hourly fee that can widely vary. New planners looking to build a practice might charge $75 an hour, whereas more experienced professionals may charge $125 an hour or more.

The key to getting the plan you need at a price you can afford, Mullen says, is your ability to explain your needs accurately and in detail. This information enables a planner to decide how much time will be necessary and to price his or her service accordingly.

According to Mullen, it is a common practice for financial planners to meet with prospective clients once on a no-cost, no-obligation basis. It is at this meeting that you should explain what type of financial planning you need and what your financial goals are.

You should also ask for the planner's marketing materials, including his or her ADV form, a disclosure form required to be given to prospective clients.

Following this initial consultation, the planner should be able to give you an estimate of which services he or she can provide you and the cost.

By no means should you engage a financial planner without knowing the likely cost of the services.


Q: I own an appreciated stock that qualifies for the new long-term capital gains tax rate of 20%. However, the stock just split, and I am wondering if the new shares I received as a result of the split would qualify for the long-term holding period if I elect to sell my holdings? Do I get the 20% rate, or does the calendar start afresh for these new shares?


A: Your entire holdings--original shares as well as "new" split shares--qualify as long-term holdings, allowing you to treat any capital gain you receive from the sale to a 20% tax. Why? Our experts say it's because the new shares you received were based on your original purchase and are not the result of any subsequent purchase.


Carla Lazzareschi cannot answer mail individually but will respond in this column to financial questions of general interest. Write to Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or e-mail to

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