Cross said after a 10-year career as a registered representative, he wanted to offer services to those “who may not typically qualify” for an assets-under management type relationship.
Cody Garrett, owner of Measure Twice Financial in Houston, said he decided to launch his own flat-fee planning firm a year ago after years spent at an RIA that used a 1% AUM fee model.
The impetus was the four to five calls he received weekly from prospects who said they could not find an advisor to provide comprehensive financial planning while allowing them to manage their own trades.
“I launched Measure Twice Financial last year to provide comprehensive financial planning to DIY investors on the path to early retirement. My clients are people who want to be work optional before 60 and want to retire early, in the next five years. Every client pays the same flat fee for the same process, which provides three meetings over three months for $6,400,” Garrett said.
The demand for this service has exceeded supply. Garrett said he refers away about 25 clients per week.
Why did he avoid charging AUM-based fees? “We’re not forced to operate under one compensation model,” Garrett said. “My DIY clients don’t want the constant handholding—they don’t want the gym membership, they just want to pay when they need advice.”
Garrett said that to give advice in a client’s best interests “you have to first understand their interests, so to me I believe financial planning as a service has to proceed any type of implementation, whether it’s investment management or insurance sales.”
He also stressed he does not believe that fees should be influenced by the implementation of plan recommendations.
“I know as fiduciaries, there is this kind of boundary between disclosing conflicts of interest and avoiding conflicts of interest, but I believe if the fees for clients are increased or reduced based on implementation, than those recommendations are conflicted in some way,” Garrett said.
“If I started managing investments, I’d charge separately for financial planning and investment management and use flat fees on both sides,” he added.