Should you charge for financial plans?

April 2, 2018 by Nathan Lukow

A financial advisor crafts a financial plan.

about the author:

Nathan Lukow

Account executive

Nathan is an account executive at Advicent, the financial planning technology provider of choice for nearly 100,000 financial professionals.

The vast majority of advisors I work with already offer — or want to start offering — financial plans to their clients. This is not particularly surprising, as most advisors interested in offering financial planning use some sort of technology solution.

There is no consensus, however, on where planning should fit into an overall service offering. This is also pretty unsurprising, as not all advisors and market segments are identical. Within financial services, we should explore the diametrically opposed and seemingly mutually exclusive opinions advisors have on whether or not it makes sense to charge for financial plans.

The “value-added” advisor

Speaking broadly, there seem to be two schools of thought on the subject. The first is what I will call the “value-added crowd.” These advisors craft plans for prospects and clients in hopes that the goodwill earned by the plan with make these individuals more likely to invest with them. While this model works well in some market segments, it does not necessarily translate to others.

To provide a comprehensive plan to every potential client requires advisors to be very selective about with whom they are willing to meet. The high barriers to entry may be acceptable for those with established, profitable books of business. Newer firms, however, often do not have the luxury of being so exclusive. For advisors in the latter category, the logistical challenges of providing a comprehensive plan for every prospect make it implausible.

The “charge-for-plan” advisor

Moving on from the “value-added crowd,” there are advisors that charge their clients for the plan itself as an ancillary to any advisory fees. Some of these advisors require all prospects to pay for plans prior to becoming investment clients. Other advisors, however, present it as an option for existing clients and others provide planning as a standalone service. The constant here is that all of these advisors recognize the intrinsic value of financial planning and are able to frame it in a way that clients are willing to pay for it.

The ideal strategy here, in my opinion, is to take elements from each of these schools of thought and create a hybridized planning model. Using a flexible planning platform, advisors can offer their planning services for prospects as a way to demonstrate value without precluding themselves from charging for comprehensive planning services down the road.

Starting with the Forecaster tool within NaviPlan®, for example, advisors can put together a simple report to illustrate the need for a plan without necessarily providing all the answers. After getting a degree of buy-in from the prospect, the ability to position more comprehensive planning as a premium service because much easier. Conversely, the advisor still maintains the ability start with comprehensive planning to win the business of more lucrative prospects.  

While the capacity to charge for planning varies a great deal between different advisors and market segments, I have consistently found that many advisors — even those that do comprehensive planning — consistently undervalue the willingness of their clients to pay for it. The result, these firms end up leaving a lot of money on that table for work they are already doing for free.

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