Adding Project-Based Planning to Your Advisory Business
This useful addition to a practice can broaden the reach of advice.
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The landscape of the financial advice industry continues to evolve. As more clients seek financial planning over investment management services, advisors must adjust their fees and offerings to keep up.
Traditionally, most fee-only and fee-based advisors charged clients based on assets under management. But to serve the mass affluent or early wealth accumulators, advisors are experimenting with alternative fee models, such as flat fees, hourly fees, and subscription or retainer fees.
One newer model that many traditional fee-only planners might not be familiar with is project-based financial planning. It's a useful addition to a practice that can help broaden your reach.
Groups like the Alliance of Comprehensive Planners and the XY Planning Network have made the ongoing fee-for-service financial planning model a popular option. While there are many benefits to a retainer model, it also has its downfalls, such as:
For advisors interested in expanding their services to underserved markets (particularly prospective clients who do not have enough assets to meet the minimums of traditional AUM business models or enough income to justify an ongoing financial planning fee), that's where project-based financial planning comes in.
While there are many ways to provide project-based financial planning services, I've found three methods that work well among peers. The following can be customized in a number of ways, but here are simple outlines of the three:
This service works well with early accumulators who have fairly simple finances and are not in a life stage where ongoing planning is valued or necessary. For example, a young professional who is a W-2 wage earner and single with no children could benefit from this kind of financial guidance. Ongoing services could be overkill, but a short-term engagement or a check-in every few years is sufficient. Project-based financial planning services also work well for do-it-yourselfers who are financially savvy but value periodic check-ins from a professional to ensure they are on the right track.
Advisors who provide these services must also consider the personalities and behaviors of prospective clients. Project-based financial planning is most effective with clients who have a history of good financial habits. The ideal clients are comfortable with following recommendations and do not need ongoing accountability or support. Clients who would be better served with ongoing financial planning may opt into project-based financial planning because of the lower price. It is important to identify the appropriate candidates for this service so you can feel confident that the relationship is mutually beneficial.
Pricing: The fee for these services must be attractive to the client (in terms of affordability and value) and profitable for the advisor. When determining the fee structure, consider your target client, the time involved in providing the service, and the value of the service to the client.
Business goals: You should also consider how these services fit in with other services your firm offers. Advisors who focus primarily on offering ongoing financial planning services may want to charge a premium for one-time plans, as the work can be accelerated into a condensed time frame. If you desire to have most of your revenue come from ongoing services, consider how many project-based clients you take on at once and how much time you would like to allocate to each service offering. If most of your revenue comes from project-based services, you will have to market to new clients to earn consistent revenue.
Client access: When delivering services, consider how much access you want to give project-based clients to your software or other services. For example, do you want them to have the same access to your financial planning software or other systems that ongoing clients have? Are you comfortable providing investment management services for these clients, or do you only offer this service for ongoing clients?
Communication: As we all know, but sometimes forget, communication is key. When offering project-based financial planning services, it is imperative that you set expectations with the client. For the best experience, clearly communicate the time frame of the engagement to your client and what you require from them. You should also communicate the number of meetings, expected deliverables, and guidelines for support windows or follow-up actions.
Project-based financial planning services provide an opportunity for advisors to expand their services to clients who may not otherwise qualify to work with an advisor under the more traditional service models. There are countless ways to provide a service that is meaningful to the client and profitable to the advisor. Careful planning around your target market, services provided, pricing, and execution can lead to a successful, sustainable business model.
Chloé Moore, CFP, is the founder of Financial Staples, a virtual, fee-only financial planning firm based in Atlanta that serves clients nationwide. Her firm is dedicated to serving tech employees who are entrepreneurial-minded, philanthropic, and purpose-driven. Moore believes money is an emotional topic that impacts many aspects of our lives. She enjoys helping clients unpack their money history and discover how they can use money to support a life that is most meaningful to them. Follow Moore on Twitter: @finstaples. The views expressed in this article do not necessarily reflect the views of Morningstar.
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