Does It Really Matter Whether Clients Pay for Financial Planning?

I would suggest that it isn’t and offer the following reasons why not. First, I’d point out that the very premise of the question is flawed: That is, if a particular service or item isn’t specifically mentioned on the customer’s bill, it was “free.” If you think about it, many of the products or services that we buy in our daily lives come with some item(s) or service(s) that doesn’t appear on the final bill.

When I get my motorcycle serviced at Santa Fe Harley Davidson, they always wash it — and get it a lot cleaner than I ever do. What’s more, over the years, their service people have given me advice about things to do and not to do to my bike that have made it much more enjoyable to ride (if that’s possible). Neither of those items appear on my bill. But they’ve made me a very happy and loyal customer.

Likewise, when I had my operation at the New Mexico Heart Institute a few years ago, my surgeon and his staff were incredibly nice. They spent a lot of time with me explaining what was going to happen, how I was going to feel, what to do about it, what I shouldn’t do when, and what to do when I did the things I shouldn’t do, etc. As you might imagine, there were lot of items on my final bill — but none of the above. Still, if I ever have to have another operation, those are the reasons I’ll go back to the NMHI.

Now, I’m not under any delusion that I’m not paying for any of these “extras.” In fact, that’s just the point. Of course the costs of my great Harley service and my medical support are built into my bills somewhere. But I don’t have to see them itemized on my bill or pay for them directly for them to have a substantial effect on my attitude about those businesses and their services. And I’m sure you could come up with dozens of examples in your life.

Why would the financial planning business be any different? As I mentioned, we know that providing financial plans increases both client and asset retention. Heck, even the Wall Street firms have figured that out. Which means that clients like it and appreciate it. And we know that the financial planning process enables advisors (who are so inclined) to have a much better idea of what the clients’ “best interests” are (regardless of what the CFP Board does or doesn’t do).

So, what possible difference could it make whether “financial planning” is itemized on the client’s bill? Neither are constructing an appropriately allocated portfolio, monitoring that portfolio, rebalancing it, coordinating managed portfolios with nonmanaged portfolios, working with a client’s other advisors (accountant, lawyer, insurance agent, etc.), updating a client’s financial information and so on. And yet, I doubt many would suggest that clients don’t value these services either.