Dear Financial Advisor: “What Have You Done for Me Lately?”

As it turns out, “What Have You Done for Me Lately?” isn’t just a great song by Janet Jackson. It’s also a great question for your financial advisor; one that could provide important insights into the value you’re receiving (or not receiving for your annual fee).

Now that you have the song stuck in your head (you’re welcome, by the way), let’s pause to acknowledge the irony that the song dropped on an album called Control in 1986. It’s the perfect playlist for taking back control of your retirement planning. And it begins with the following question:

“What Have You Done for Me Lately?”

We’re not literally suggesting you pose the question verbatim because chances are you already know the answer to the question. That’s because the retail financial advisor playbook hasn’t changed since the 80s when the song dropped.

It goes like this: your financial advisor gets to know you. You discuss their special planning process. You talk about Social Security, Medicare, taxes, insurance, income planning strategies, and estate planning. It sounds holistic and tailored to your goals. Then the end of the rainbow comes a few weeks later. In Fire Your Financial Advisor, Greg sums it up best:

“Despite the multiple meetings and hours of time invested, all you have to show for all that work and meetings is a list of investments and an annual advisor fee contract. If you’re lucky, you many even get a special leather financial-planning binder. Paper-clipped inside will be a few business cards of attorney or CPAs that you’re supposed to call but won’t.

Services complete.”

Then you continue to pay your fee based on AUM until the next review. And what about all the discussions about estate planning, taxes, and other retirement planning staples that sounded so comprehensive? That’s what those business cards in your binder were for. As it turns out, your financial advisor can’t actually provide that advice—hence the disclaimer conveniently placed somewhere easy to miss on their website—unless they just so happen to also be a CPA, attorney, or have one on staff.

So, what happens next?

You’ll meet with them once or twice a year. They’ll call on your birthday. The “planning” is done. Now it’s just “managing” your investments.

Which begs the question, after that first year, how much time do you think they put into servicing your account annually? Maybe an hour? Yet you’re still paying the same fee.

For argument’s sake, let’s say that’s 1% AUM (though let’s be real, the total fees charged by many retail financial advisors are much higher). And let’s say you have a $500,000 IRA invested with this advisor. That would make your annual fee $5,000.

That’s How Much Per Hour?!

In this example, let’s be generous and say your advisor is providing 10 hours of service each year, they’re making $500 per hour. For comparison’s sake, that’s almost twice the average hourly rate of an estate planning attorney (which by the way, you’ll still need to call)! Realistically, it’s probably closer to 2 hours which is $2,500 per hour.

So, back to Ms. Jackson’s question: “What Have you Done for Me Lately?” Think back over the past year, consider what services you actually received, what planning was actually put in place and how much it all cost you. If the value doesn’t seem right, it’s time to consider firing your financial advisor.

Download the Financial Advisor Performance Review Guide.