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  • Writer's pictureChristy

To Fee or Not To Fee


If you gather a large group of unacquainted financial advisors and ask whether or not advisors should charge for an initial financial plan, sparks will probably fly. There are two strongly divergent views.


Those who defend fee-based planning are often strong believers in the superiority of the approach and are adamant about its merits, including:

  • Faster turnaround and higher response rates from clients

  • Greater client buy-in

  • Deeper and more detailed dialog

  • Greater perceived client value and loyalty

  • Strong perceived implementation rates

In contrast, advisors who offer the initial plan for free follow a tried-and-true strategy. Like a free app with paid upgrades, free samples from a food store, or a free trial that converts to a paid subscription, a high-quality plan is offered to convince a potentially broader set of prospective clients of the value of a paid planning or advisory relationship. The benefits of this approach include:

  • No upfront selling

  • A broader set of potential clients

  • The ability to demonstrate value and expertise before payment is requested (let the planning work do the selling)

  • A lower potential threshold/initial client expectation for value delivery in the plan

  • Higher perceived value in the plan

For advisors considering the two approaches, one common concern is that by offering the plan for free, might the advisor inadvertently diminish the perceived value of the financial planning process or plan output.


Interestingly, a recent Kitces.com study by Derek Tharp tested this concern by dividing participants into 4 groups. All four groups were presented with a scenario in which they inherited $1M and were seeking out an advisor to help them manage it. The groups were varied in the initial planning fee they would have to pay, which included: $0, $1k, $2k, and $3k. All were told the planning presented would save them $500k in taxes over the next 30 years and were asked to provide what they thought a reasonable annual fee would be for the ongoing services of the advisor.


You may be surprised to learn that the group who suggested the highest ongoing pricing was actually the group who received their planning for free!


Tharp speculates that perhaps the initial fees created value anchors for the other groups that were used to estimate a reasonable cost, while the only anchor the $0 fee group had was the $500k long-term savings the plan would deliver.


If there’s a take-away consideration for the fee-based advisors reading, it might be this: Make sure your initial fee sets the tone for how you want your long-term value to be perceived.


And if you do need to raise initial plan prices, you might want to do it soon; COVID is finally an excuse of the past and the days of being able to blame price increases on inflation may be numbered.



Christy Charise, Founder & CEO of Strategic Advisor

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