3 not-so-obvious reasons to charge for financial planning

3 not-so-obvious reasons to charge for financial planning


Kendall Hahn, Director – External Practice Development with Waddell & Reed, Inc.

Great Practice Solutions

I don’t believe anyone can dispute the value of financial planning – it fills a valuable client need and adds a new dimension to the client experience. Plus, it gives you an additional income stream. But there are some not-so-obvious reasons to offer – and charge for – financial planning. As you consider whether to add planning to your business, these may be worth factoring into your decision.

  1. Clients find value in something they pay for

When clients make an investment with expectations of receiving value, they’re likely to be more engaged. Committing their dollars motivates them to commit the time and effort needed to complete a plan and actively participate in the wealth management experience. Clients willing to make this investment show that they see value in your time as well as their own.

Many financial professionals base their planning fee on the complexity of the client’s situation and their industry experience/designations. Using these factors to market your value can help you increase your client base. Against the backdrop of a consumer environment that is saturated with free stuff, communicating tangible worth to clients is more important than ever before. This isn’t just a good skill to work on or something to employ occasionally — it’s essential to your business’ long-term survival.

  1. Outside planning resources can fill a gap

If you’re interested in offering financial planning services but aren’t a planning expert or don’t have time to add it to your business mix, consider the services of an outside financial planning resource. Advisors at Waddell & Reed have access to the firm’s Plan Development Service to build customized financial plans. From data entry to presentation creation, services such as this help with all aspects of plan development. While you will incur an expense for the service, it is recouped through the fees you collect from your clients. Outside planning resources represent the best of both worlds, allowing you to deliver quality planning services while maintaining your current business focus. Another option is to add a paraplanner to your staff.

  1. Fee transparency separates the planning and asset management experiences

Consumers are demanding greater control over what they pay for, when they pay for it and how much they are paying. They expect a lot and can resist a “one size fits all” type of fee schedule. They also want all charges to be fully transparent and customized to their needs. Therefore, it is critical to differentiate investment management services from holistic planning services.

A planning fee separates the planning experience from the asset management experience. As the commoditization of investment products continues, we’ll likely see less delineation between products and their performance. Furthermore, investment advisory fees that have been taken for granted have begun to undergo fee compression more aggressively. Charging for financial planning not only separates the experience and expectations for the client but also enables them to focus on the planning process and goal progress as product performance fluctuates.

Set yourself apart from the competition while engaging clients and building long-lasting relationships. While charging a fee for planning can be important to the financial sustainability of your business, perhaps the greater benefits are those that are not-so-obvious but ever-so valuable.

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