An added benefit, relative to most other advisor business models, is that hourly fees provide immediate revenue, as most advisors assess the fee “on the spot” at the end of the meeting (as opposed to a commission-based model where the advisor isn’t compensated until the product is sold and implemented and the commission is paid, or the AUM model where the first AUM fee may not come for several months after the relationship starts until the next quarter fee is assessed). Because if the pension buy-back was the best solution, it would be funded by transferring assets already held with their present advisor (the advisor would likely receive less compensation ongoing if his compensation were tied to “assets under administration”). This involves charging a set price for a particular service. Search only financial professionals that are verified to be fee-only, fiduciary, and independent as defined by The National Association of Personal Financial Advisors (NAPFA) Search advisors that offer a variety of specialties and service models – financial planning, asset … The $2,000/year fee from the example above represents 2% of a $100,000/year household income and is therefore on the upper end of that 1%-2% range. Typically, the services at each tier are defined in advance, and the pricing for each tier is set at a level where those services can be delivered profitably; prospective clients then pick from the ‘menu’ of service tiers based on what’s an appropriate fit for them. We are happy to introduce our fee-only financial planning as a service done by Certified Financial Planners & Advisors. For instance, some regulators have asked that advisors stop using the term “retainer” because “monthly retainer” or “quarterly retainer” resembles more of an attorney-like fee where a client puts money in escrow and an hourly rate is billed against that money held on retainer (and it’s important to ensure that “unearned” fees are refunded back to the client if the relationship terminates). Do you want to work 20 hours/week because you want a lifestyle practice that provides a lot of flexibility? We tailor a financial plan according to your financial situation, goals, and risk tolerance. In this guest post, Alan Moore of XY Planning Network and AdvicePay, shares his thoughts on how to profitably price a fee-for-service financial planning offering, including the options for calculating financial planning fees (e.g., flat fee, hourly, project-based, percentage of net worth and income), the structure of paying advice fees (e.g., one-time fees, ongoing fees, or a combination), setting the right advice fee frequency (e.g., monthly, quarterly, semi-annual, annual), how to integrate some combination of fee-for-service and AUM fees (for firms that are looking to transition from an existing AUM model), how to make sure your fees are both profitable for the advisor and reasonable for your (niche) clientele! Monthly billing is considered the “Netflix” model of financial planning, and is most common for clients paying their advice fees directly out of their (typically monthly) cash flow. As you can see, financial planner fees usually range from 0.59% to 1.18% using the percentage of the AUM fee method. Fee Only Advice You can call me a fee-only advisor, fee-for-service planner, advice-only planner, or a money coach - it does not matter. “How often should I charge clients?” This is a very common and very important question, especially when charging ongoing fees, where advisors may bill monthly, quarterly, semi-annually, or annually. And bear in mind, for most clients, it’s much easier to accept a fee increase of 3% every year, than 12%, 15%, or even 20% every five years (which is a heck of a hit to take all at once!). The key takeaway: consult with your state compliance regulator, and/or compliance consultant, to determine which particular types of fee-for-service models your state will and will not allow. Quarterly. That’s not to say that advisors can’t charge more; one advisor in Brazil charges as much as 5% of income and has grown a very successful firm! Continuing education that actually teaches you something. While roughly 36% of all advisors of all ages are charging a fixed fee for financial planning, a staggering 62% of millennial advisors are using a fee-for-service model. Perhaps the crux of the equation, though, is determining just how much the advisor needs to charge for services, as setting the acutal fee level is what directly dictates the advisor’s (maximum) revenue. And notably, the trend appears to be accelerating with the generational rotation of financial advisors themselves. Or are you willing to work 45 hours/week to build a financial planning enterprise? However, the way that advisors charge for such financial advice requires serious contemplation – a phenomenon that wasn’t necessary in a product-based sales world (because the commissions were set by the company), and was less challenging in an AUM world (where the 1% AUM fee is so ubiquitous), but creates serious challenges for purely fee-for-service “advice-only” advisors trying to sell a purely intangible service like financial planning. With our “fee for service” model we have adopted a holistic view of financial planning. You might better cover off all aspects at once. It can be argued that there is some overlap in providing both investment management and financial planning services, so when they’re combined, the combined work for both is less than the cumulative work of doing each separately. as more advisors adopt fee-for-service financial planning models, regulators are trying to catch up as well, some regulators have asked that advisors stop using the term “retainer”, XY Planning Network’s first ever Benchmarking Survey in 2017. Similarly, selling the value of financial planning as an annual fee (paid incrementally throughout the year to make it easier to incorporate into the client’s cash flow) also reduces the risk that if you bill financial planning as a monthly service and you do not provide a service any given month, regulators may ask you to refund your client for the unearned month of fees. While the fee-for-service model has gained popularity over the past few years, with many advisors moving away from investment management and focusing exclusively on comprehensive financial planning, most advisors retain at least some investment management services (and charge some AUM fees) as well. From the simple to complex, a Fee-Only Financial Planner can help you work toward your objectives. Forest Financial Planning is a fee-only financial planning company in Ottawa. But find your focus and you’ve found your secret weapon. For example, Utah has banned any fees where clients are charged based on their ability to pay rather than the services rendered, claiming that an hour of the advisor’s time should have the same cost (regardless of whether it’s more valuable to one client than another). Their fees are clearly laid out so that you know exactly what you are paying for and how much. With the tiered fee option, clients are charged fees at varying tiers depending on the depth of services rendered. Minimum standards for the financial planning industry only require a Diploma of Financial Services. Compensation is solely to produce the plan and there is no product sale involved.  If the plan recommended a need that required purchasing a product i.e. It is important to understand what value the advisor/planner is providing value under this model, and they can – … Annual billing is often an appealing way to wrap together a comprehensive set of annual services. The specific fee depends on the scope of services provided and the experience level of the advisor. That’s why it’s important to consider doing a comprehensive plan looking at your whole situation. Going through the data gathering phase, defining financial goals, developing the plan, and creating and implementing the plan, all contribute to the time it takes to go through the initial planning process. Financial Sales Advisor : Salary or paid a commission by a third party. But if you charge $2,000 for the initial financial plan, for example, your revenue increases to $130,000/year, and as those 18 new clients become ongoing clients, your revenue continues to climb towards that $200,000/year goal. For instance, the advisor charges $3,600/year for financial planning and any investment management services, until the client reaches $360,000 of AUM, at which point the client pays 1% of AUM going forward. Additionally, you need to select a financial advisor that is competent in the area of expertise you require. At a very minimum, I would recommend using a “Certified Financial Planner” and make sure to have a pre-meeting with that advisor whereby you discuss your general situation and ask whether they are qualified to provide that kind of advice. Or Reach Michael Directly: This browser is no longer supported by Microsoft and may have performance, security, or missing functionality issues. Understanding how exactly the advisor should charge clients, and how often, are important steps of determining your fee structure. An example would be a situation I was asked to assess several years ago.  The client had an existing financial advisor they liked but the decision revolved on whether they should do a pension buyback, for past service . As an added benefit, a clearly defined niche or other target clientele also typically have a fairly consistent level of net worth or average household income, which ensure the advisor can set a fee that makes sense both for clients’ wallets and the advisor’s bottom line. Certified financial planner John DeGoey, portfolio manager with Burgeonvest Bick Securities and a MoneySense Approved advisor, tackles these issues in his book, The Professional Financial Advisor III. So how can you develop, implement, and run a fee-for-service model for your financial planning firm and profitably serve traditionally neglected clients without needing to “give away” financial advice for free to get paid by other means? Discover the Tetrault Wealth Difference! On the other hand, a $2,000/year fee is less than 1% of a $300,000/year household income, in which case the advisor might consider raising the fee to a more “appropriate” $4,500/year. Most financial Where to find a fee-only financial planner The most comprehensive listing of Canadian fee-only financial planners on the He is also the host of XYPN Radio, one of the largest podcasts for independent financial advisors.