The world of financial planning can be a confusing place. Layer that with an additional complex fee structure charged by financial institutions and advisors – and we won’t blame you for asking, “What am I actually paying for?”

If you haven’t asked this question before, you certainly should. Pinnacle Financial Advisors encourages this question because it helps our clients understand exactly what they’re getting for their money. That’s why we offer a comprehensive service and fee schedule that helps individuals get the answers they need.

Let’s start with an overview of the types of fees that are typically charged.

• Financial planning service fees – These are usually based on total wealth and the complexity of your life situation.
• Investment account management fees – These are strictly based on the monetary balance in your account.
• Deductions – This is the occasional deduction from accounts by financial institutions, as disclosed in prospectus documents.

The first two fees – financial planning and investment account management – are typically billed directly from the advisor to the client for the services they need. Deductions are usually paid to the financial institution, though the financial advisor may receive a commission.

There’s some debate on which type of fee creates a greater conflict of interest for the financial advisor. For example, an advisor’s compensation might incentivize recommending one product over another, leading them to intentionally limit the variety of products they recommend to clients. “Financial products” refer to the specific instruments used to save, invest or acquire insurance.  While this can work for clients who are looking for a specific product, it can easily inhibit a complete financial plan that covers all bases.

So, it’s easy to understand what an advisor gains from fees. But what about a client?

It can be difficult for an individual to assess whether the service they received was indeed worth the cost. The same goes for most professional services. Plus, an evaluation is purely subjective: they might consider time, meeting certain milestones, the insight their advisor provides, the level of customer service, monetary growth, the number of investments they have – the list goes on.

Working with a holistic financial planner who has a fiduciary responsibility can offer improved clarity when it comes to the value of the services you’re receiving. In contrast, the value can be quickly obscured when purchasing individual financial products from a salesperson. Even if a salesperson has a fiduciary responsibility, as Registered Investment Advisers do, it’s only limited to the product purchased from them.

Please excuse the cliché, but you truly do get what you pay for. This rings especially true if your advisor can demonstrate the value provided. Investing in a financial planner can help you achieve your long-term goals, even if it feels expensive in the short-term.

Bill Kelso, CPA, CFP®, is a financial planner* at Pinnacle Financial Advisors, which assists individuals, families, and businesses with financial planning and wealth management in Sedona and the Verde Valley. He is a Registered Representative offering Securities through UNITED PLANNERS FINANCIAL SERVICES, Member: FINRA, SIPC. *Advisory Services offered through SEROS FINANCIAL, LLC. Pinnacle Financial Advisors, Seros Financial, and United Planners are independent companies.