Why More Advisors Are Offering Financial Planning Services

A new report from Cerulli explains the growing popularity of planning services among advisors, especially younger ones

Financial planning is becoming an increasingly popular offering among advisors. Almost 50% currently offer planning services to clients, up from just under 33% just four years ago, and millennial advisors are the most avid adopters, according to a new report from Cerulli Associates.

“The rising trend of comprehensive planning has swept up millennial advisors who entered the workforce during its growing popularity,” according to the report. “They have already calibrated their practices, including pricing and service models to fit a comprehensive planning structure and many provide expansive planning offerings.”

Almost 83% of millennial advisors provide planning services to clients, compared with about two-thirds of Gen X advisors and just over 71% of boomer advisors, according to Cerulli. But millennial advisors account for just under 12% of the advisor population, whose average age is 50.

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Clients are demanding planning services, and advisors see financial planning as a way to differentiate themselves from cheaper digital offerings and to provide revenue as commission-based products lose popularity due to costs and the new Labor Department fiduciary standard for retirement assets, according to Cerulli.

Although full implementation of the fiduciary rule has been delayed until July 1, 2019, advisors are currently required to follow the impartial conduct standard for their clients’ retirement assets — to act in the best interest of clients, charge reasonable compensation and refrain from making misleading statements.

(Related: Fidelity Redefines the Future Value Proposition for Advisors)

"In this competitive landscape advisors feel compelled to justify the fees they charge by adding more services to their menu and expanding their repertoire,” the report notes.

Many advisors would like to charge a separate fee for financial planning, which takes up time and resources, but only 36% of advisors do and those fees constitute just 4% of advisor compensation, according to Cerulli.

Planning fees also can’t necessarily make up for asset-based fees in rising markets or commissions. They’re fixed and don’t rise — or fall — as asset-based fees do, and are difficult to increase. “Every time advisors raise the fee to account for inflation and other costs, they need to discuss the charge with clients and justify those changes,” the report says.

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