While the fee-for-service revolution continues to change the landscape of financial planning, many advisors aren’t quite sure how to incorporate it seamlessly into their practice. It can seem daunting to change your current way of doing business, or even just adding a new service line! Even advisors who have been doing fee-for-service for years could benefit from looking at their current processes to see if anything can be done more efficiently. So whether you’re new to the game or a seasoned professional, here are five things people often get wrong about fee-for-service and how you can learn from their mistakes!

They’re giving away too much for free!

You’re valuable to your clients. You know this, and so do they (and if they don’t, here are some tips on communicating your value). But we often see advisors giving away advice for free. While this may have its place from time to time, you’re doing a disservice to yourself and to your clients when you aren’t being compensated as you should be. 

So why are financial planners giving away so much for free? Oftentimes, financial planning is wrapped into an AUM fee, and advisors have never taken stock of all the financial planning they’re doing for their clients. With fee-for-service planning, first, determine what an hour of your time is worth to your clients. Then determine how much time you spend creating and maintaining financial plans. This will give you an idea of what you can reasonably charge for certain services.

The start of a new client/advisor relationship typically takes a reasonable amount of time, so where it makes sense, advisors can charge an upfront payment to kick off the relationship. This not only compensates you for your value, but also ensures you’re working with clients who are serious about their financial goals. 

While there are several ways to charge for your fee-for-service business, having a “menu” of services and grouping them into tiers is a great way to make sure you’re being compensated fairly.

Check out this blog to find out more about charging for what you’re giving away for free.

They think fee-for-service is just for younger clients.

Fee-for-service financial planning is often marketed as the solution for younger generations that are cash-flow heavy. While there certainly is a great opportunity with Gen X and Millennials (and yes, even Gen Z as they enter the workforce), finding ways to implement fee-for-service with your existing clients can help you provide even more value.

If you’re working with pre-retirees and retirees, AUM may seem like your only option, but financial planners are finding the fee-for-service model can accommodate retirement clients as well. While you may not want to overhaul your business immediately, you may start to offer services that can be paid for outside of the AUM structure. A great place to start is with 401(k)/403(b) advice. For pre-retirees who may not be able to move these assets, charging a recurring fee to review their outside accounts is a great segway into fee-for-service financial planning.  

Check out one AdvicePay user’s success story in working with retirees! 

They’re not setting clear expectations with their clients.

If you’re not clear with clients, they may assume that paying their financial planning fees monthly means a monthly meeting with you. You may choose to operate this way, but if you do not intend to, make sure your clients understand what their fee gets them. We often recommend advisors charge clients an annual fee, billed monthly or quarterly! Setting that expectation upfront can save you from a potentially painful conversation when your client wonders why you didn’t reach out one month.

Other than positioning your fee as an annual fee that’s conveniently charged monthly, quarterly, or semi-annually, we find that an annual service calendar can highlight how you’re taking care of clients, even if you’re not in direct communication each month. Check out Michael Kitces’ article, Crafting An Annual Financial Planning Service Calendar, for in-depth samples.

They don’t review their financial planning agreements and other legal documents.

While I’m certainly not a compliance officer, I do recommend you review your current contract verbiage to ensure you’re compliantly supporting fee-for-service in your contracts. While auditing your agreements, consider adding verbiage to include automatic fee increases! This can save you additional paperwork down the road. Don’t worry -- if you build automatic fee increases into your invoicing on AdvicePay, your client will have to approve it at the onset of their payments, so there shouldn’t be any surprises. A friendly reminder is, of course, recommended! :) 

They don’t take the time to streamline their invoicing process.

You provide value by partnering with your clients to help them achieve their financial goals, not by spending hours each month sending out invoices. Even if you have a team to help, I’m sure there are better ways for them to spend their time! AdvicePay, of course, makes it easy to set up automatic payments with your clients, but are you using all of our awesome features to your advantage?

Fee Calculator

Creating fee calculators can save you time and help prevent erroneous billing by allowing you to determine the appropriate fee as you’re setting up billing in AdvicePay.

eSignature

Integrating your financial planning agreements into AdvicePay’s electronic signature platform means you can send out invoices and contracts simultaneously. We’ll even take care of sending out emails when your client needs to sign and when they’re able to pay. Lastly, invoices and agreements are stored electronically so and your clients can view them at any time.

Fee Increases

Incorporating fee increases automatically adjusts billing at a predetermined rate, either based on dollar amounts or percentages. No more canceling subscriptions and spending time creating new ones each year.

Client Portal

Encourage your clients to create their own AdvicePay client portal so they can update their email address and/or payment information if needed. They can also control email settings and view past invoices and agreements, saving you and your team time from having to do this for them.

We want you to be as successful as possible with your fee-for-service business. Avoiding these mistakes can help your business become even more efficient, allowing you to serve your clients better every day!

Ready to see how AdvicePay can help you launch or grow your fee-for-service business?