3 Ways to Boost Service and Advisory Fees
The fee-for-service model has emerged as a mainstream opportunity for advisory firms to attract next-generation clients, a previously untapped client market, according to a report from AdvicePay. The report suggests three ways that advisors can incorporate fee-for-service financial planning into their larger practices and appeal to new clientele.
Young investors may not yet have significant financial assets, AdvicePay said, but they are reaching a stage in their lives where they have the financial wherewithal to pay for advice directly from their income. And with the right technology in place, scalability becomes achievable.
The fee-for-service model enables advisors to be flexible when pricing their services. In addition, the model’s transparency fosters trust and helps clients understand the value they are receiving.
In a deep dive into some 380,000 transactions on its platform, AdvicePay found that in 2023, average pricing for monthly subscriptions was $265, a 6% year-over-year increase. Quarterly recurring fees averaged $968, a 1.6% increase from 2022. Single one-time payments averaged $1,578, up 6.7%.
AdvicePay noted that these results argue for choosing a subscription model over one-time payments, as the former can lead to a substantial increase in revenue generated per client, up to 2 1/2 times higher. This, in turn, translates to a higher recurring lifetime value per client.
With the great wealth transfer underway, AdvicePay said it is time for advisors to think about incorporating fee-for-service financial planning into their broader practices to attract the beneficiaries. It offered three ways to do this:
1. Firmwide
For advisors offering fee-based financial planning to both new and existing clients, communicating what the plan encompasses is essential.
Advisors should give advanced notification about the firm’s shift to a new fee model to all households currently engaged in planning services. They should provide detailed information about clients’ current fees and a breakdown of the proposed fees following the conversion.
It is essential for advisors that are already offering some form of financial planning to clarify the services included in the existing assets under management fee, and — this is important — explicitly outline the financial planning they have been providing at no cost.
Advisors should emphasize their commitment to delivering increased value and how they will address every facet of their clients’ economic lives. This may include such things as retirement planning, college planning, tax planning, budgeting, estate planning and Social Security strategies.
