headshot of LPL Financial exec Andy Kalbaugh LPL’s Andy Kalbaugh

Amid challenges that include the COVID-19 pandemic, increased competition and growing pressure on advisory fees, LPL Financial advisors should start charging a separate fee for their planning services if they are not yet doing so, executives at the firm suggested at the firm’s first virtual Focus conference.

By charging for planning, advisors can build and grow relationships with their clients and increase revenues, while better differentiating themselves from rivals, Andy Kalbaugh, managing director and divisional president, national sales and consulting at the firm, said Wednesday during the Focus Live session “Financial Planning: How Much?”

“We used to talk about this topic in terms of to plan or not to plan — that was the question,” he said, putting a spin on a classic line from William Shakespeare’s play “Hamlet.”

“But it’s really not anymore — you’re all planners now,” he told attendees. “As an industry, we probably made it a little more difficult than it needed to be,” he conceded.

However, “we simplified things, and technology’s made it much, much easier,” he said, adding: “At a time when it’s getting harder and harder to differentiate, planning can solve complex issues and it can help you really stand out in the crowd.”

“There’s been a slight misalignment [on] the value that advisors deliver and how they’re compensated,” Matt Enyedi, managing director, national sales and consulting at LPL Financial, interjected.

“While advisors are delivering planning at some level to all of their clients … the reality is very few are actually charging for planning explicitly,” he pointed out. Instead, many times, they are just including that service as part of the advisor fee or it is being waived if the client hires them to manage their assets, Enyedi noted.

“My concern is this: Advisory fees, as we’re seeing, are beginning to come under pressure, and asset management becoming increasingly difficult to differentiate with,” Enyedi told attendees.

As a result, the advice that advisors are providing through planning is “what’s really driving the value in the client relationship — but you don’t charge for it,” Enyedi said, adding: “I think the real question becomes to charge or not to charge.”

“If advisory fees continue to be under pressure, incorporating a planning fee in combination with an advisory fee” helps advisors in two key ways, Enyedi said.

First, it “allows the client to better understand the distinction between what you do for them,” and second, it “potentially protects and diversifies your revenue going forward,” he noted.

What stands to help advisors is that technology to deliver plans has been improved and so has the system used to charge and collect fees thanks to LPL’s recent adoption of the fee payment processing tool AdvicePay, Kalbaugh said.

Now, advisors can not only deliver a plan using an hourly fee, but through a subscription model, Kalbaugh noted. And, “unlike in the past, when the client had to write a check, they now can pay” via Automated Clearing House or credit card, “simplifying your life,” he said.

That is a “game changer” because, first, “it clarifies that planning, like managing assets,” is “not a one-time thing,” Enyedi said, adding: “It’s going on and on forever in the relationship — as the client’s life changes, as milestones are met. As new goals are laid out, you’re constantly changing the plan and the subscription-based approach compensation lines really well with that.”

That also “opens up new markets for your clients and for you to serve,” including that “next-gen opportunity” among clients’ kids and other younger investors, Enyedi said.

Typically, a next-generation client’s assets may not be enough to meet an advisor’s minimum-subscription fee initially, Enyedi noted. However, “they can grow their assets while being your customer, [so] we’ve got to go find them and they need our help.”

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