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More 'Forward-Looking' FAs Charging Separate Financial Planning Fees

By Crucial Clips     February 16, 2021
The following text is a transcript of a portion of a speaker's presentation made at an industry conference or during an interview. This transcript solely represents the view of the individual who spoke, and not the view of Financial Advisor IQ or any other group.
Source: FA-IQ, Dec. 31, 1969 

PETER RAWLINGS, ASSOCIATE EDITOR, FINANCIAL ADVISOR IQ: Hi, this is Peter Rawlings with Financial Advisor IQ. I'm here with Justin Duft, director of advanced planning with Commonwealth. How substantial is the recent rise in advisors charging separate fees for financial planning?

JUSTIN DUFT, DIRECTOR OF ADVANCED PLANNING, COMMONWEALTH FINANCIAL NETWORK: So I think it's significant for sure. And I think you can equate the rise and separate planning fees to the industry conversation that's around fee compression and fee transparency. So if you have an entire industry that's feeling downward pressure on the revenue, their natural tendency is to try to seek out alternative ways to make money. And for those advisors who have the skill set to do true holistic financial planning, it's an easy way to generate revenue that could replace lost AUM due to this fee compression.

Now, the concept of fee compression — I think it's scary to practices that are built on AUM fees. And no advisor wants to have a conversation with a client about fees. They want their work and the results to speak for themselves. And separating out a planning fee for comprehensive financial planning work, in my opinion, that's the way to do that.

PETER RAWLINGS: So why do you think we're seeing more advisors make the decision to charge a discrete planning fee now at this particular moment as opposed to earlier, say?

JUSTIN DUFT: Honestly, I think it's the more entrepreneurial advisors, the more forward looking advisors that are trying to get ahead of this. If clients are going to start exploring low-cost platforms like robo and access to planners like Vanguard and Schwab, advisors feel like they need to follow suit and starting to charge separate fees for planning. That's in above and beyond their asset measured fees. There's a way to do that.

PETER RAWLINGS: Well, then do you expect this trend to continue into the future? Do you think it's reached roughly its peak, or it's going to progress more slowly?

JUSTIN DUFT: I don't think it's reached its peak. I don't think it's run its course. But I also don't expect it to happen overnight either.

Clients, especially the next gen of clients who are really savvy with technology, they're more comfortable with the technology platforms like robo. They're going to be bombarded with advertisements touting the low-cost alternatives. So to compete with this, I think advisors are going to have to differentiate themselves with their skill set.

It's one thing to have access to a team of planners that can answer questions for you as needed. But it's another thing to have a relationship with an advisor who's truly going to partner with you to build your wealth and help you reach your goals. And that one-on-one planning, it can't be duplicated with access to a call center of CFPs. It's a true partnership with a skilled professional. And clients are willing to pay planning fees for work with somebody like that.

PETER RAWLINGS: Thanks so much for taking the time, Justin. I really appreciate it.

JUSTIN DUFT: Thanks for having me.

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Tags:  Finding and winning new clients , Client retention , Fees and compensation , Investment strategies , Portfolio management

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