Advisors who don’t charge for financial plans usually cite one primary reason:  If they propose charging for an initial financial plan, they might not get the client.  After all, there’s a lot of competition out there, so it’s necessary to woo prospects with free services, right?  But, let’s think about this.  Do you really want clients that don’t place value on professional advice?

 

I assert that we should always charge for initial financial plans.  Why? 

 

Clients value what they pay for.  I typically charge about $5,000 for a basic plan, asking for 50 percent up front, with the remaining 50% due on presentation of the plan.  When a client pays money up front, they are “buying in” to the process.  They will have more incentive to actively participate, provide information, and act on recommendations.  By charging for this service, the advisor is validating the value proposition while the client acknowledges that there is a value to financial planning.

 

As financial advisors, we differentiate ourselves from stockbrokers and portfolio managers by providing services beyond mere investment management.  We tout our value as financial planners, yet some of us charge only for investing, not for financial plans!

 

By not charging, initial financial plans are essentially a “loss leader.”  That’s just a plain bad business practice.  Think about how much time is spent on preparing and presenting financial plans.  As opposed to giving this time away, financial planning should be treated as its own business unit.  And, you should charge a fair price.  

 

How many financial plans do you provide for free?  If you average just two plans per month, charging $5,000 each would increase your annual revenue by $120,000.  In the end, any revenue increase from financial planning is a winner – and you will ensure a stream of new clients that truly value you.