Charging the Right Financial Planning Fees as an Advisor

It can be confusing to know how or why to charge financial planning fees. If you don’t understand the value of the wisdom you’re providing, how can you put a monetary value on your advice and expect the client to buy into it?

How can financial planners monetize their wisdom with financial planning fees?

Your clients aren’t just buying a wealth management plan. They’re paying for the time and expertise it takes to build and implement custom financial advisor strategies with specific recommendations. Dedicate an appropriate amount of time to your clients so they understand the plan and the financial advisor strategies you recommend.

Many wealth professionals hesitate to charge financial planning fees, fearing that it will deter prospects. But we have found that charging financial planning fees takes the pressure off the client and puts them in a more trusting mindset.

There are two compensation models for financial advisors. You can either monetize your time by charging financial planning fees or charge for helping clients with the implementation of their wealth management.
By viewing these compensation models as two different opportunities, you can begin to consider charging financial planning fees as selling the process rather than the product. Unbundling the process from the product in this way also benefits the client because it disarms them.

What is the right financial planning fee structure for your practice?

Fee only financial planning faces fewer conflicts of interest because there are no commissions earned for product sales. The financial planner is rewarded when the client does well: it’s a win-win situation.

Commission-based advisors earn income from selling investment products, regardless of how they perform for the client.

Some of our offices provide a free basic plan that sketches out the client’s assets in The Bucket Plan®. They do this by performing a Volatility Tolerance Analysis, investment audit, and a Social Security analysis. This is a quick process that focuses on moving assets without diving deep into fee only financial planning. It works well for the mass affluent who don’t have a lot of complexity and don’t feel like they need an advanced comprehensive financial plan.

For clients who need a more advanced plan, you would then pivot to a more customary fee only financial planning arrangement in which you are charging appropriately for things like estate or tax planning.

How to charge financial planning fees

Although it can seem counterintuitive at first, charging planning fees can establish more trust between clients and advisors. When we pay for something, we tend to value it more. When advisors charge planning fees for services, we’re signaling to our clients that we are trusted professionals.

There are several ways to charge planning fees fees for a comprehensive financial plan:Attend The Bucket Plan 2.0

  • Annual/Monthly Retainer
  • Flat Fee
  • Per Service Charge
  • Hourly Rate

The nice thing about a flat fee is that you can tell your clients exactly what you’re charging them for. Price your services so that your clients can utilize you anytime while you are proactively working behind the scenes to bring value to their situation.

It’s like an all you can eat buffet; the clock is never running when we are helping our clients navigate incredibly important decisions.” – Dave Alison, CFP®, EA, BPC

How should you sell your planning process to clients?

Remember, we are in the sales business. Until you make a sale, you can’t do any of your best behind-the-scenes work. Continue to sell fee only financial planning to plant seeds and uncover additional concerns and priorities throughout the process.

If your business model revolves around holistic financial planning, where you’re managing assets and executing strategies on your client’s behalf, you should consider a fee only financial planning process, where you charge a percentage based on the assets you manage.

One of the biggest challenges to fee only financial planning is there is not a one-size-fits-all approach. It comes down to what type of practice management you have and what kind of clients you serve. For example:

  • Are you building a lifestyle business, or are you trying to build enterprise value with critical mass?
  • Do you only need to feed yourself, or are you trying to feed multiple advisors and need more activity?
  • Are you willing to do some work for free to hopefully earn business, or do you want to guard your wisdom for only paying customers?
  • Are you working with simple clients or advanced clients who need time-consuming planning such as estate or tax planning.
  • Do the clients have a lot of investment experience and want to see every detail, or are they more high level?

Be upfront with your prospects; position your fees in their mind. Remind them what they receive in return for your practice management fees—education, advice, onboarding, planning, strategy development, and most importantly, time to get to know each other. They’re paying for your advice and experience just as they would any other professional: attorney, accountant, etc.

You can learn more about financial practice management and how to get paid for your advice by taking our Bucket Plan live trainings. Schedule a call below to find out if you qualify.

Financial Professional Use Only

The information provided in this presentation is not intended as investment advice or legal advice. The information provided is for informational and training purposes only. The information in this presentation was accurate as of the time of the material was created. Tax laws and rulings can frequently change. Please discuss the client’s current situation with an accountant or tax advisor.