Price vs. Cost


One of the most frequent questions that comes up during introductory meetings with prospective clients is "How much does this cost?" Rightfully so.

Financial planning services aren't cheap, and paying someone to help you develop a plan for your money probably feels a bit like buying higher octane gas in hopes of getting better gas mileage. A long-term play at best, counteractive at worst.

But I think there are two parts to the answer. It all comes down to the difference in price and cost.

Price is the easy part. After an introductory meeting, I can tell you exactly what the annual price of financial planning and investing services will be. Price is simply what you pay.

Cost is different. Cost is the expense that you incur – one way or another.

To determine cost, you'll need to think a bit deeper.

What's the cost of your time? Developing a financial plan, even with the help of a professional, is a serious time commitment. What's the cost of implementation? Hiring a financial planner and not buying into the plan is worthless. What's the cost of having tough conversations about money? What's the cost of change if it's needed to improve your financial future?

All these costs need to be seriously considered. But so do the costs on the opposite side of the decision.

Maybe you're considering the DIY route. Financial planning isn't brain surgery, and chances are, you're capable of putting together a decent plan for your family.

But again, what's the cost of your time? Time spent researching, creating, implementing, and monitoring a financial plan is time not spent doing your job, playing with your kids, or enjoying your retirement.

The most important job of a good financial planner is being the thing that lies squarely between you and a detrimental financial decision. What's the cost of having no checkpoint there? What's the cost of making that one big investment mistake? What's the cost of worrying if you've got it right?

Calculating the cost of apathy is even harder.

What's the cost of not having a financial plan at all? What's the cost of not having the right life insurance in place? What's the cost of cutting corners on your estate planning? What's the cost of years of missed compounding interest? What's the cost of getting financial advice for "free," but in reality paying exorbitant hidden fees? What's the cost of conflicted advice from a product salesperson?

Price is important. But I think it's safe to say that the costs have higher stakes.

Tyler Reeves, CFP®