Making Cents: Understanding the cost of advice

US Wealth Napolitano |

By: John P. Napolitano, CFP®, CPA, PFS, MST


The demand for financial advice is growing. This is caused by many factors. I believe that aging baby boomers, complexity in the tax code and market volatility are the primary causes for this increased demand. As such, the business of giving advice is also growing, and you need to identify if you’re getting the advice that you need and to better understand how much and how you are paying for that advice.

In terms of the advice you need, I’m an advocate for getting your entire financial house in order, and working to keep it that way forever. Remember that getting your entire house in good order goes way beyond having enough money to do what you want. For my money, I’d find an advisor committed to helping you with that endeavor. But for whatever reason, many people walk around either thinking that their entire house is in good shape or they don’t have an idea what may be out of order.

The cost of the advice you receive should be understood, and placed in the context of the actual service and advice you are getting. For example, if you’re working with an investment advisor and simply getting help with your portfolio, that limited scope engagement should be priced lower than the 1+/-% that many pay. But if that same person or firm is working with you on the big picture and committed to sitting next to you to oversee the implementation of estate planning, cash flow retirement planning, income tax planning and risk management, you should expect a higher fee for that extra effort.

Another side of the cost of advice are fees or commissions that may be somewhat hidden. Sometimes these fees or commissions go to the advisor or firm, or they may go to a third party custodian or service provider. Clearly cost is an issue, and needs to be understood and evaluated. It’s fair game to inquire and thoroughly understand the nature, frequency and amount of these costs up front and on an ongoing basis as you enter into the new financial planning relationship or try to better understand your current one. Full disclosure of any conflicts of interests along with transparency of commission based compensation should be a part of your discussions with any broker or advisor.

Cost, however, isn’t the only relevant factor. The level of service and then the competency and performance of the stated objectives are what really drive the relationship. If the relationship is limited scope or single service, cost matters more. But if the relationship is more holistic, and the value of getting everything together is far beyond the numbers or performance, then cost may be a lesser consideration. When it comes to your finances, few people really understand this until you’ve had a good, comprehensive experience. But when it comes to clothing, automobiles and other products or services that we value, we as consumers are not afraid of the higher cost items where there is demonstrated or perceived value.


John P. Napolitano CFP®, CPA is CEO of U. S. Wealth Management in Braintree, MA. Visit JohnPNapolitano on LinkedIn or The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.