Financial planners are an important service provider for business owners, and there are basically two ways financial planning services are offered: either fee-based per service provided or by contract as a contracted agent. Fee-based financial planning services have their pros and cons to consider. Here is a look at those perks and pitfalls to help you make the best decision.
Perk: You will not have to commit to a long-term service contract.
The biggest reason business owners will reach out to a fee-based financial planner is that they will not have to commit to paying for a long-term service if they only need help with one aspect of financial planning. For small businesses that only have a limited amount of money to spend on these specialty services, it is far more logical to pay a planner on an as-needed basis instead of long term.
Pitfall: The financial planning service will only provide what they charge you for.
This may sound like a logical sentiment as a business owner who understands you can't just give services or products away for free, but this particular pitfall can be an issue nevertheless. For instance, if you hire a financial planner specifically for creating a sales revenue plan for the long term, they will likely not offer information about your taxes in the process. The set rates for different types of services will not involve crossing over into other service areas without additional fees, which is understandable.
Perk: Fee-based financial planning allows you to try several providers.
If you hire a financial planning agency for the long term, you are pretty much tied to them by the contract until the term of that contract is up. This does not leave a lot of room to try other agencies to see if they will work out better for you. If you opt for a fee-based service, however, you get the opportunity to work with multiple providers to determine who is the best fit for your business needs.
Pitfall: Fee-based financial planning services can add up if used regularly.
Just as it is with most fee-based services, if you use the services on a frequent basis, you will spend more for the services than what you would by just committing to a full-service contract. For instance, you may pay several thousand dollars in service fees if you need a planner several times a month when you could hire that planner for a lesser price on a contract.