A fellow NAPFA advisor and I were pondering this question this morning.
Our meeting was centered upon marketing our 401(k) participant advice services to employers, individuals, and related service providers. In our minds people should be beating our doors down given the general state of retirement readiness in this country.
The interesting obstacle that we’ve encountered is a resistance among many plan participants to pay for advice, with fees starting as low as $400 per year. Both of us run our own separate practices that focus on moderate to high net individuals, and in my case also to retirement plan sponsors, foundations, and endowments. These folks are used to paying fees and the level of the fees we ask are usually not a surprise to these clients.
We came up with two great questions in terms of the 401(k) participant advice market. How much is financial advice worth? Is your financial future worth $400?
I recently needed a new water heater, and we paid upwards of $1,500 for the water heater and the labor to install it. Given that this is not an area of expertise for me, and the fact that working with our gas connection made me very uncomfortable this seemed like money well-spent.
Depending upon their specialty and your location, an attorney might charge $250 -$500 per hour. If you find yourself in a situation requiring their legal expertise, most of us wouldn’t bat an eye at these fees.
People routinely spend $1,000; $2,000; or more on a vacation. This is money well-spent; I know that our adult children still talk about some of the family vacations we took when they were younger.
So how much is competent, unbiased financial advice worth? Part of the answer lies in the benefit that you expect to receive from spending the money. I ask the question rhetorically because we really want input. Please leave a comment with your thoughts; we’d really love to know what you think.
As always please feel free to contact me with your financial planning questions and concerns.
Photo credit: 401(K) 2012