AdvicePay Financial Advisor Community Blog

Why Giving Away Financial Planning for Free as a Financial Advisor May Haunt Your Practice

October 31, 2023 By Shannon Beck
Shannon Beck

As Halloween night approaches with its haunted houses, creepy costumes, and ghoulish tales, you might be tempted to join in on the spirit of giving away financial planning for free.  If you are still relying solely on the sale of products and working with clients through AUM (Assets Under Management), then you know that for most of its history, "getting paid" for financial planning has really been about giving away financial planning at little or no cost. However, before you embrace the idea of giving away your expertise like candy on Halloween night, it's crucial to consider the potential consequences. 

👻 The Financial Planning Industry is Evolving: A Ghoulish Reality 

In recent years, trends show that almost a third of Americans fail to meet a $100,000 asset minimum, and many struggle to manage their finances effectively. Enter the XY Generations, a group with substantial incomes but hampered by student loans, mortgages, and credit card debt. They're more than willing to pay for financial advice but haven't yet amassed significant assets. The traditional AUM-centric model falls short in serving this demographic, limiting your reach. 

According to Cerulli, 61% of households prefer to pay for their advice via a fee, compared to 39% who prefer commissions. As this new generation of investors continues to seek advice, they will demand more nontraditional fee arrangements, aligning with how they currently pay for other services. It's time to adapt your financial advisory model to these evolving preferences and embrace change for the betterment of your practice.

🧞‍♂️ The Curse of Undervaluing Your Expertise

By giving away your services, you may inadvertently undervalue your expertise. When you work for free, it could send the message that your services aren't worth paying for. Investor fee awareness continues to reach new heights, and the fee-for-service model lets the advice become front and center of your relationship with your client. While only 35% of investors in 2011 were aware of the fees they were being charged, by the second quarter of 2020, more than half (55%) of surveyed investors understood how they paid for financial advice. When you align the value of your advice toward the financial planning services you provide and the process rather than just investment management, it strengthens your client relationships and makes the conversion of a prospect to a client that much easier. 

🧟‍♂️ The Zombie Effect: Draining Your Energy

By giving away your services, you might be missing out on lucrative opportunities to grow your business. Every hour spent providing free financial planning is an hour you could have spent nurturing paying clients or expanding your practice. It's not just about the potential loss of income; it's the emotional toll of constantly giving away your expertise without receiving fair compensation. Over time, this could lead to burnout and leave you feeling like the living dead.

🎃 Transitioning to the Fee-For-Service Model

For advisors who have been successful with AUM-based clients, transitioning to the fee-for-service model may feel like stepping into the unknown. Here are some considerations to help guide your journey:

Clarify Service Offerings: Distinguish between investment planning (managed through AUM) and financial planning (with a separate fee). Clearly communicate these distinctions to your clients. Check out this blog on how to create an annual client service calendar to help you get started.

Define Fees: Determine your fees for financial advice and decide whether you'll switch all clients at once or transition gradually. Download this guide on how to price your fee-for-service offerings.

Test the Waters: If you’re hesitant to introduce fees to existing clients, consider offering the fee-for-service model to new clients, gaining valuable experience to support future transitions.

This transition to a fee-for-service model is not a passing trend; it's a revolution in the industry. In the spirit of Halloween, it's essential to remember that while giving is admirable, it's equally crucial to ensure your practice remains sustainable and your expertise is valued. Offering free financial planning may seem like a treat, but it can quickly turn into a trick. As you embark on your fee-for-service journey, remember that it's not about letting go of the past but embracing the future, a future where financial planning is valued, accessible, and transparent.


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Posted by Shannon Beck

In her role, Shannon oversees all aspects of AdvicePay’s marketing and brand communications. Her experience in marketing for continuing education and tech companies means that she’s both a learner and a teacher through her work. When she’s not using her creative skills to help folks learn about AdvicePay and how to get the most out of it, you can find her kayaking, camping, and trying out new recipes with her husband. Born in Baltimore, she’s still an avid Raven’s fan, cheering from Montana.

Topics: Practice Management, Case Studies, Fee-For-Service, Sales, Enterprise