What Agents Deal With In Moving To Fee-Based Planning

“For our existing clients we can continue our relationship as is and we are happy to continue to do that,” Thompson explains. “But we position it [fee-based planning] as a value-added service that if youd like to become part of our private client group we have an additional service wed like to offer. Its not mandatory for existing clients, we give them a choice,” he says.

Mark Olson has taken a slightly different approach to the transition. “I know a lot of people try to transition to it slowly, but I just made the change,” he says. “All new clients had to do a financial plan.”

For his existing clients, Olson said he would continue to service them for a period of time. Eventually, however, he would not be available to help them on their service issues. “The people that chose not to do a financial plan, they still have product with me, I didnt fire them and transfer their business to another agent. I gave them the choice of either working with me as a financial planner, or if they needed any service most likely not being able to meet with me,” he says.

Most planners view the fee they charge as an annual “retainer” for their services. In Thompsons agency, planners provide clients with a list of life events (such as a new job, new house, or a new child) that would require an update to their financial plan. At the very least, Thompson requires an annual review of the plan.

“In the financial planning world since there is an additional fee, the update is almost a contractual obligation, and thats a selling point,” Thompson says.

Genett also recommends an annual review for his clients, but notes that some clients may need to see him more often, and some may need him less. “I recommend that clients do it once a year formally, but sometimes not much has changed and they dont want to spend the time and the money to review everything formally every year,” he says.

But many of Genetts clients are nearing retirement, and are in a very dynamic situation, and he sees them more often.

“Im free to my clients as far as being accessible. I charge the annual fee, and I dont charge any extra for calling me 10 or 20 times a year,” he says.

Olson encourages his clients to contact him throughout the year. He sets the expectation that he will have 5 client meetings to review the plan in the first year, plus any implementation meetings to purchase financial products. After the first year, he plans on meeting with clients every six months.

“I make it clear to them that theyre buying me, theyve got me, if they need to talk to me they call me,” he says.

At first glance to the outsider, the primary advantage to switching to a fee-based practice is the financial benefit of collecting both a fee and a commission. But all agents with whom NU spoke described a very different experience. Most planners could not survive on their income from fees. According to planners, these fees help build the relationship between the client and advisor.

“It dramatically enhances the clients view of us, they look at us entirely different than they did before,” says Genett.

He notes that while in the past he viewed what he did with a great deal of pride, he now sees the enhanced value he brings to his clients through fee-based planning.

“We are able to address substantially more for our clients than we could have addressed before and weve helped them in a number of areas where we couldnt really help them before,” he says.

Olson agrees. “Clients look at you differently, they look at you as their advisor. Youre the person they turn to when they have questions about what they need to do.”

“The presentation becomes much more consultative, it allows you to get into the professional centers of influence,” adds Larry Moore, a financial advisor with Northeast Planning, Short Hills, N.J.

“Youre not just peddling a product, youre actually offering a service, and I think its become much more in the forefront today with whats happened in the last two-and-a-half years with the stock market and people pushing product,” he explains. “People now believe that maybe they do need to use a fee-based planner.”

Some advisors who have made the transition explain that probably the biggest reward to fee-based planning is their renewed feeling of self-worth. “Mentally you feel great about what youre doing when youre charging a fee to do an objective job,” Olson explains.

Lou Genett agrees, “I look at myself entirely different than I did before.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, September 2, 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.