More Carriers Now Offering Fee-Based Financial Planning

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At one time, agents who were new to the business were trained to tell new prospects, “There is no fee for my service, but if you decide to act on one of my ideas I would appreciate you do so with me.”

How times have changed. Those new agents of yesteryear have grown up to be fee-based financial planners, collecting both a fee for their advice and commissions through the sale of products.

“Charging fees is like charging for your wisdom,” explains Charles A. Brewster Jr., a planner from Osterville, Mass.

Brewster, a 24-year member of the Million Dollar Round Table, 10-time Court of the Table and 3-time Top of the Table qualifier, began charging fees 7 years ago, after 20 years in the business. “Because I charge a fee, Im getting paid for my time. Im able to completely eliminate any possibility of pressing someone into a product.

“Clients feel like they have a third party objective review,” Brewster explains. “All they care about is getting the right advice, and the right place to go for the right products, and theyll pay a fee for that.”

More and more carriers are implementing their own programs for field reps to charge fees for planning, and then follow up with providing commission-based products to fulfill the needs outlined in those plans.

Driving carriers to fee-based planning is what some company insiders feel is a shift in consumer behavior. Industry experts at some major carriers feel that consumers now want to pay for their financial planning advice. These carriers are giving their clients a choice on their relationship: fee-based advice, or strictly commissions from the sale of products.

“I believe many of the more affluent clients prefer a fee-based relationship. Its the way they work with their accountant and attorney, and the way they want to work with professionals,” says Jeff Harrison, assistant vice president for MONY Life, New York.

Consumers today want one person to pull their financial plan together, adds Donn Sharer, who is vice president of financial planning for MetLife Financial Services, New York. He notes that this is one of the reasons MetLife has entered the fee-based planning market.

“Consumers want it, they need it, its the direction the industry is going,” adds Bette Skandalis, vice president of financial planning for New England Financial, Boston, Mass.

“What consumers want is a trusted advisor, they dont want someone to sell them stuff,” says Skandalis.

There are two basic business models that carriers new to this market are following– one providing local expertise and the other centralizing these skills in the carriers home office.

New England Financial and MetLife Financial Services have entered the fee-based planning market, and while part of the same corporate family, they employ two very different models for their fee based business platform.

New England Financial began its pilot program in January 2002, by adding a planning specialist at an existing Advanced Marketing Firm agency. “The specialist is the person we pinpoint at the local level to build infrastructure, to have the technical skills to mobilize the people who need to be involved,” Skandalis explains.

Out of New Englands 83 Advanced Marketing Firms, 35 have now begun providing fee-based advice to their clients. Skandalis adds that each plan may cost anywhere from $500 to $30,000, depending on the complexity of the case.

MetLife uses a more centralized model. Expertise is found internally within their corporate home office where they have formed a “Case Consulting Unit.” This unit works with field reps in developing a comprehensive financial plan. Sharer describes the internal unit as “a dedicated team of financial planning specialists.”

“The Case Consulting Unit will do the underlying financial planning, and then theyll partner with the advanced markets group,” he says.

By paying a fee, Sharer says “people feel like theyre getting more objective advice, and they can implement the plan with whomever they want.”

Since MetLife has such a diverse client base, Sharer recognizes that not every client will need a fee-based plan, which is why his plans range in price from nothing for a very basic plan, to a few hundred dollars, to several thousand for more sophisticated plans.

“Theres a misperception out there that you need to be rich to take advantage of, or need, financial planning,” he says.

Other carriers in the fee-based planning market are MONY Life, Guardian Life, and Prudential Financial. While Guardian and Prudential have been up and running with fee-based planning for the last few years, MONY Life is just wrapping up a pilot program that has been in place since March. According to officials at MONY, they are about to open the program to all qualified participants in their field.

Similar to MetLifes centralized planning structure, MONY Life uses its existing internal expertise to guide planners in developing fee-based plans for clients.

“The financial planning effort is part of the MONY advice and solutions team, which includes case development, field attorneys, advanced underwriting attorneys, as well as case design professionals,” explains Harrison.

According to Harrison, MONY planners first identify prospects who will benefit from a financial plan, gather the data, then enter all the information on a dedicated Web site that generates a computer-based report.

“The numbers are a starting point, but theyre only part of the story,” he says.

Depending on the complexity of the plan, members of MONYs advanced planning team are brought in to further develop and customize a clients plan.

“Weve created a trigger mechanism that identifies various opportunities–we help facilitate the process of bringing in the other specialists,” he says.

MONY establishes the cost of its plans by charging clients based on their asset base. Harrison explains the price for a plan ranges from $1,000 for clients with less than $2 million in assets, to as much as $6,000 for clients with more than $10 million.

“I think this is at an attractive pricing point,” Harrison says.

At Guardian, there are approximately 200 agents who are qualified to market fee-based plans, according to James Clemments, vice president investment advisory services at Guardians broker dealer subsidiary, Park Avenue Securities, LLC, New York.

At the local level, Guardian agents collect client information, and then, similar to MONY, they utilize a computer-based financial planning software system.

“Before they [planners] actually submit the plan to the client, those plans are submitted to the home office,” Clemments explains.

Once a clients plan is reviewed by compliance, and in many instances by Clemments himself, “we send them back with any comments, and at that point they would submit the plan to their client.”

“If they indicate that theyre doing a comprehensive financial plan, we want to make sure its a comprehensive plan and not just a retirement plan,” he says.

Guardians fee structure allows agents to select whether they want to be paid on an hourly basis or as a flat fee per plan. The rates for plans range from an hourly rate of $100-$300 or a flat rate of $250-$10,000, depending on the complexity of the plan. “Primarily, most will charge a flat fee,” says Clemments.

Prudentials fee-based planning business has been evolving for the last five years, according to Tom Crawford, president of Prudentials Retail Distribution, Newark, NJ.
“We have a goal of fee-based financial planning becoming a core competency of the distribution channel.

“Were moving a distribution organization from transactional sales to relationship sales,” Crawford explains. “The financial plan is nothing more than a vehicle to build that relationship.”

Prudential agents who develop financial plans for clients first run their plans by their Managing Director, who signs off on the suitability of the plan. Then, a plan is reviewed by a centralized area where its checked, verified, and ultimately returned to the agent for delivery. Crawford explains that it can take anywhere from 45-60 days from initial appointment to delivery of the plan.

When Prudential began to shift its distribution to the fee-based market, they gave their veteran agents a choice: become a fee-based financial planner, or maintain your current focus as a product specialist. Since then, Prudential has made an overhaul of its recruiting efforts, focusing on hiring professionals with a career track to become fee-based financial planners, says Crawford.

New agents joining Prudential go through a 2-year program, he says, “dedicated to teaching them the basics of the business, products, sales skills, relationship building and how to use our planning tools.”

Crawford says Prudential has about 1400 new hires going through the program, with 300 planners actively marketing fee-based financial plans. Plans range in cost from $500-$5,000.

All these carriers recognize that fee-based planning is not something any agent can step into. All carriers with whom NU spoke required full securities licensing along with some type of financial planning designation, most commonly the Certified Financial Planner (CFP), or the Chartered Financial Consultant (ChFC), in addition to some production requirements.

And while each carrier uses a slightly different business model, each stressed the importance of separating the financial planning advisory role from the implementation of the plan. No carrier offered plans that in turn obligated clients to make additional product purchases. Clients are always free to take the financial plans purchased from these carriers and implement them elsewhere.


Reproduced from National Underwriter Life & Health/Financial Services Edition, August 19, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.