Why I Started an Hourly Financial Planning Firm

TL;DR: I want to help the people who don't have millions of liquid dollars — or do, but don't want to hand it over to an advisor to manage — and still need comprehensive financial planning and investment advice.

Does the world need another 1%-AUM RIA?

Does the world need another generalist, fee-only RIA charging around 1% of assets under management (AUM) for comprehensive financial planning and ongoing portfolio management, serving clients with at least a million dollars?

Twenty years ago, the answer would have been an unqualified yes. Advisors were breaking away from conflicted, commission-based brokerage models in droves to set up fee-only, fiduciary shops — a huge improvement for the clients who followed them, in cost, objectivity, and service.

The recurring nature of fees tied to the markets made these firms extremely profitable. Some used those margins to expand services and grow into real enterprises. More recently, private equity has noticed the value of the model and driven up firm valuations to multiples that would have been unthinkable a decade ago.

For the fee-only, fiduciary client, this has been a boon — wealthy clients have flocked to this model for twenty years. But there are only so many investors with over a million dollars (a common minimum for an AUM-based RIA) who want to hand that money over to an advisor to manage for life. Meanwhile, the supply of fee-only, fiduciary advisors charging around 1% to manage a million dollars has grown substantially.

So, again: does the world need another generalist, fee-only RIA chasing that same million-dollar-plus client?

I'm not convinced it does.

That's not to say it's impossible to start and grow a new RIA under this model — plenty of firms are doing it every day. But I think most of the growth from here will come from clients switching advisors, not from serving new millionaires. And the new RIAs that do succeed tend to have a niche: “I work with mid-career Microsoft employees.” “I work with real estate entrepreneurs.” “I work with women in tech.”

Competing with large, established RIAs as a generalist is a hard game to win, and misses most of the people who need financial advice.

The people the traditional model leaves behind

That's not why I started an hourly firm, though. The real question driving me is this:

What about everyone who doesn't have a million liquid dollars (or does, but doesn't want to hand it over to be managed) yet still needs comprehensive financial planning and investment advice?

● The business owner worth $8 million, but with nearly all of it tied up in the business, a business retirement plan, and other illiquid assets like real estate. Complex planning and tax needs, but no fit for a traditional AUM model — at least not until the business sells and the wealth becomes liquid.

● The teacher couple, empty nesters approaching retirement. Each expects a modest pension, and together they've saved $500,000 in self-directed retirement accounts. They just want to know if — and how — they'll be financially secure through retirement.

● The young professional, early in her career, with a strong income and real upward momentum, living in an expensive city to access the opportunity. Her employer offers a great 401(k), solid benefits, and an employee stock purchase plan. She has real financial goals and wants help building a foundation for success.

● The HENRYs — High Earners, Not Rich Yet. A busy, successful couple who save diligently in their retirement plans and own their home, but don't have enough liquid assets outside their 401(k)s to meet a traditional AUM advisor's minimum.

● The DIY investor, self-taught through Bogleheads and Reddit, wary of advisors after being burned by expensive, complex insurance or investment products in the past. His portfolio has grown substantially and his tax situation has gotten complicated. He wants a professional second opinion (on his portfolio, on upcoming decisions, on tax savings) without signing over his life savings or committing to an ongoing fee.

These are the people I want to help.

Why hourly

Despite the hourly model being suitable for so many investors, Advisors who operate an exclusively hourly* fee-for-service financial planning practice are still rare. According to the 2024 Kitces Report, only 3% of Financial Advisors surveyed report hourly as their primary revenue source. Within ten miles of my office, I can find about a dozen hourly-only advisors — compared to  thousands of traditional advisors across RIAs, brokerages, banks, and insurance-based practices.

Does the world need another fee-only, fiduciary financial advisor who charges by the hour, built for the people who don't fit the traditional model?

I think so.

* In the past decade, fee-for-service models beyond hourly billing have grown significantly — flat fees for one-time plans, flat annual fees for ongoing investment management, monthly retainers for ongoing planning. I admire these models. I chose hourly for my firm because I think it aligns best with clients who need in-depth financial planning but aren't looking for a constant, ongoing service relationship.