I received an email the other day, from a “fee-only” financial planner in response to my Oct. 7 blog, Do We Really Want to Separate Financial Planning From Asset Management? He made some pretty interesting points in favor of separating financial planning from investment management (which as you might have guessed, I’m not in favor of), but I thought I’d share anyway.

First, despite my contention in the above blog that “I think we can safely say that nobody—but nobody—is ‘selling’ financial planning without asset management,” he might be doing just that. Here’s what he wrote: “So financial planners can claim separation of tax planning, insurance, estate planning, dependent planning, but not asset management? I have to agree with Jim Schwartz [who advocates such a separation] on this one.”

Then he goes on to provide an excellent example of why such a separation would be valuable: “How does one charge a client who has $2 million in a 401k, rental properties, secondary business, no money in IRAs/taxable accounts and has a net worth of $5M and desperately needs financial planning? There is no possible AUM, so you charge a fee based on the work involved.”

Yet, it’s not clear from what he wrote how “a fee based on the work involved” would be calculated. (Unfortunately, at the time of this writing, I had not received a response to my inquiries in a follow up email.) If, as numerous critics (including me) have pointed out, the flat fee is calculated on what the advisor would have received under an AUM fee, then it would seem to be a distinction without a real difference. If, on the other hand, it’s based on a set hourly fee (as would seem to be the implication here), in my book that would qualify as a financial planning fee.

However, that really doesn’t answer the question of whether he has actually “separated” financial planning from asset management, does it? To do that, he would have to not offer any advice about where the funds are invested, the allocation, or the rebalancing of the $2 million in the 401(k). If he is offering such advice, then in reality, he’s still providing AUM advice, and simply charging for it differently. Other advisors solve this problem by charging a fee on “assets under advisement.”

This issue is important if we are to understand the “alternative” business models that some advisors are advocating these days—and how much they truly differ from the “traditional” (for the past 25 years or so) financial planning RIA model, based on offering a combination of financial planning and asset management paid for through AUM fees.

The contention of “flat fee” advocates is that their model is substantially different enough to eliminate many of the “conflicts” inherent in the AUM model, achieved primarily by “separating” financial planning from asset management.

The above advisor put it this way: “Fee-Only Financial Planning has become so cloudy due to the AUM model, it has become its own worst enemy… …Financial Planners who use AUM as a measurement of their practice and the client fee, it makes AUM and asset management the priority. Asset management becomes the focal point because its performance is easily measured and immediately becomes the topic to every conversation. The perception that clients are willing to pay for asset management and not financial planning is [due to the fact that] they don’t understand what financial planning is. This is the fault of the financial planner, who should be stressing and focusing on financial planning, not what the ‘return’ was this past month, quarter, year.”

From the perspective of a retail investor who does understand financial planning, I have to say that this last paragraph represents a total misconception of the reality of the “client’s” perspective.

The bottom line for most advisory clients is that we want to meet our financial goals and obligations, and live a “comfortable” lifestyle while we get there.

Most of us understand that we need professional help to do this—and most of us who have been exposed to financial planning fully understand that it’s a valuable tool to get us where we want to go (including the determination of just “where” that is).

But financial planning is only one tool—and the reality is that, for most of us, it’s not the most valuable tool. We can talk all day long about the need to save, to have insurance, to live prudently, and to have realistic goals (Jim Schwartz’s “Enough”) for our retirement, and our dependents. But once we get past our “resistance” to saving, our financial futures largely depend upon growing those “savings.”

So I’m sorry if this bursts some financial planners’ bubbles here, but you can’t sell us financial planning without investment management: It’s not the key piece, and we know it.

What I don’t understand is why you don’t know it.

As I’ve written before, as far as I can tell, in the 40-year history of the “profession,” no one has ever collected “fees” for financial planning without including investment advice of some kind or another (and until I hear otherwise from the above advisor, I’m sticking to it). And it’s not because we consumers don’t “understand” financial planning: it’s because we understand that financial planning is only one line item in our equation to reach our financial goals: and it’s not the bottom line.