For decades, the standard financial advisory fee model charged a percentage of assets under management. A growing number of small business owners are questioning whether that model actually fits their situation.
How the AUM Model Works
Under an assets-under-management fee, an advisor charges a percentage, often around 1%, of the total investments they manage. This model works well for someone with a large investment portfolio and few other financial questions.
Why It Fits Small Business Owners Poorly
Many business owners have most of their net worth tied up in the business itself, not in a managed investment account. An AUM fee structure has little to offer someone whose biggest financial questions involve payroll, pricing, and cash flow.
How Hourly Billing Works Instead
Hourly financial planning charges for time spent, similar to how an accountant or attorney bills. A business owner might work with an advisor for a few hours during a specific decision, rather than paying an ongoing percentage fee indefinitely. Many owners find hourly financial planning services especially useful for exactly this kind of one-time, high-stakes question.
This structure means the fee scales with the actual complexity of the question, not with the size of an unrelated investment account. A business owner with modest personal investments but complex operational questions is not penalized under this model.
A Concrete Example
An owner deciding whether to take on a business loan might spend three or four hours with an advisor reviewing the numbers. Under an AUM model, that same conversation might be bundled into a fee based on unrelated investment holdings, regardless of how much time it actually took.
The Cost Comparison Over Time
A percentage fee on a growing investment account can quietly become quite expensive over many years. Hourly billing keeps costs tied directly to the actual work being done, which many owners find easier to budget around.
When Hourly Advice Makes the Most Sense
- Evaluating a major one-time decision, like taking on debt or hiring a first employee.
- Getting a second opinion on an existing financial plan.
- Building an initial budget or cash flow forecast from scratch.
What Hourly Advice Does Not Replace
Ongoing investment management for a large portfolio may still benefit from a dedicated, continuously engaged advisor. Hourly advice fits project-based questions better than continuous portfolio oversight.
How to Prepare for an Hourly Session
Coming in with specific documents, like recent bank statements or a cash flow summary, makes the limited time far more productive. A vague, open-ended question tends to use up hours without reaching a clear conclusion.
What Owners Say They Appreciate About This Model
Many owners describe hourly billing as easier to justify internally, since the cost ties directly to a specific decision rather than an abstract ongoing fee. That clarity can make the difference between seeking advice early and delaying it until a problem becomes urgent.
How This Affects the Advisor’s Incentives Too
An advisor paid hourly has no incentive tied to the size of a client’s investment account. That removes a subtle pressure that can otherwise shape recommendations under an AUM structure.
What to Watch for When Comparing Advisors
Some advisors offer hourly rates but still push clients toward bundled ongoing packages. Confirming that a truly project-based engagement is available, without pressure to convert to a recurring fee, is worth clarifying upfront.
How Hourly Advice Handles Tax Season Questions
Many owners book an hourly session specifically ahead of tax filing to review deductions and structure decisions with fresh eyes. This kind of narrowly scoped, seasonal question fits the hourly model especially well.
Why Some Advisors Resist Offering Hourly Rates
An advisor built primarily around AUM revenue may see less financial incentive in offering hourly sessions. This is worth keeping in mind when a firm seems reluctant to quote a straightforward hourly rate.
How This Fits Owners Who Already Work With an Accountant
An accountant handles tax filing and compliance, while hourly financial planning fills the forward-looking gap that bookkeeping alone does not cover. Many owners find the two services complement each other rather than overlap.
Why This Shift Matters Given Current Conditions
With 60% of small businesses facing cash flow gaps between paying suppliers and receiving payments, according to recent Federal Reserve research, many owners want financial guidance without adding another ongoing percentage-based expense.
How Hourly Billing Affects Long-Term Planning
Some owners worry that hourly billing discourages ongoing, big-picture planning in favor of narrow, transactional questions. A good hourly advisor addresses this by periodically stepping back to review broader goals, not just the specific question that prompted the session.
Combining Hourly Advice With Other Professional Relationships
Hourly financial planning often works alongside an existing accountant or bookkeeper rather than replacing either one. Coordinating these relationships, rather than treating them as separate silos, tends to produce more consistent financial decisions.
What a Typical Hourly Rate Range Looks Like
Rates vary by region and advisor experience, but many fee-only hourly advisors charge somewhere between market averages for professional consulting services. Asking for a clear rate upfront, along with an estimate of hours needed, avoids surprises on the final invoice.
Neither fee model is universally better. The right choice depends on whether an owner needs continuous portfolio management or focused help with specific business decisions.
