Could you use more revenue?Article added by Ed Morrow on November 19, 2010
Ed Morrow

Ed Morrow

Middletown, OH

Joined: October 29, 2005

Our surveys indicate that over 80 percent of all individuals holding themselves out as financial planners are not charging fees of any kind. This includes fees for comprehensive plans, modular plans or assets under management (AUM).

A smaller number applies to those with a designation, such as Registered Financial Consultants, Certified Financial Planners, Chartered Financial Consultants or Certified Financial Analysts. Most of those charging fees hold either a designation or a post graduate degree, such as MBA, JD or MSFS.

Nearly every financial planner who has a background as a certified public accountant (CPA) charges a plan fee, whether or not they also still provide tax service, business accounting, AUM or commissionable products. The CPAs are more comfortable charging a fee, although some indicate they feel their charges are not nearly enough for the work performed.

We queried financial advisers who are not charging plan fees, “Why aren’t you charging for your valuable advice and service?” The responses were very interesting, and many of those saying “no” gave two or three of the following reasons:
  • My broker/dealer won’t allow me to charge a fee

  • I only sell insurance on a commission basis

  • I am primarily in one market (LTC, annuities, mortgage coverage, etc.)

  • I concentrate on selling securities

  • I only offer AUM services through a B/D or an RIA

  • I would need an additional license that I do not have now

  • I do not have a way (i.e., software) to prepare a good plan

  • I do not have sufficient training to produce a good plan

  • I am not confident people in my market will pay a planning fee
But the overwhelming and primary response was, “I’ve just never done it!”
In many respects, a modular plan or analysis is simply one component of a comprehensive financial plan. Many planners would be willing to deliver just one or two components using either their comprehensive software or modular programs.

Then, we asked a critical question: “Could you use more revenue?” As you might expect, the answer from those surveyed was a resounding, “Yes!”

Then we asked, “Do you believe that a person who had paid a fee for a plan would be more or less likely to implement with you?” The answer was always, “More likely.”

The logical follow-up was, “What do you need to start delivering fee-based plans?”

Tools advisers require

The following responses were not necessarily given in order, and various advisers attached greater significance to some items than to others. The key seemed to be that almost every one of the following would represent a reason to not proceed.

“What do I charge, and how do I convey this to a prospect in a credible fashion?" No fee schedule. It is obvious; you can’t charge a fee unless you have a written schedule. Solution: A printed fee schedule.

“Prospective clients may be reluctant. How can I overcome this?” The answer is so obvious: borrow the technique used by other merchandisers — a guarantee. The responders said, “What’s that?” You need a certificate to support this quality assurance.

“I offer commission-based products. How can I explain that the plan fee is not reduced or offset by those commissions?” Solution: Just do it! The physician who does an exam and diagnosis also charges for tests performed in office and for subsequent treatment such as surgery, therapy and monitoring.

“How do I present this service?” An effective client acquisition interview requires a script, a presentation and supporting tools or documents. You can invent all of them if you have the time, but why not use an existing system like Client Builder and modify it to suit your practice?

“How can I limit my liability? If a plan is delivered on a fee basis, how can the issue of additional exposure be addressed, since this is a very litigious society?” When delivering investment advice, you must be within an RIA structure. But non-investment advice is not regulated by the SEC or FINRA — although most registered representatives still have compliance review responsibilities.
“Does a plan have to include investment advice?” The SEC has indicated that this element can be delivered only by an RIA or ARIA. But you can avoid this, if you are precise in the way your plans are marketed, produced and delivered. You are not required to deliver “investment advice” as part of your “strategic financial analysis,” for which you charge a fee.

“How do I set myself apart from commission-only reps? What will make prospects really believe that I really offer a higher level of service?” This is an image-building issue. You must be perceived as an adviser at a “higher level” which is endorsed by every step you take at the opening, your sense of organization, credentials, ethics, presentations and plan satisfaction assurance.

“What is the most persuasive action to get a fee?” Most advisers knew the answer, but they didn’t have it ready – a nice, colorful, well-organized sample plan.

“How can I avoid tension and stress?” This is important whenever launching a new product or service. The solution is careful preparation, and having a recognizable distinction from the competition. Use of a checklist is essential. To be sure everything has been developed and delivered to establish the image of professionalism, you need a source of letter, agenda, checklists and articles.

“How do I control the planning process steps?” Maintaining powerful top of mind awareness (TOMA) will accomplish this, but many planners are not natural writers. They don’t mind sending letters or e-mails, they just do not like writing them.

“How do I get more high-level prospects?” Those who will pay a reasonable (or substantial) fee must be rare, and few planners have a big marketing budget.

Your services are needed

Qualified and experienced financial planners, such as members of the IARFC, are very persuasive individuals. They communicate well. They are knowledgeable. They are ethical at a time when ethics is most appreciated. But more importantly, they are desperately needed.

Turmoil prevails. Economic distress and political unrest. Greater longevity is welcome, but carries a long term price. No one knows the impact of Obamacare or Social Security underfunding.

Fear is widespread. Consumers at all economic levels need an adviser who is competent, trusted and successful.
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