White Papers
Fee-Driven Financial Planning Gains Ground - Study

The white paper tracks trends in financial planning, the rise of fees and the structure of charges that wealth managers have brought out since 2015.
The number of wealth management clients who have a financial plan
has risen over the past five years, suggesting that the chorus of
calls for the industry to be planning-led rather than driven by
product offerings might be bearing fruit.
Envestnet |
Moneyguide, the wealth management systems and technology
group, has published a white paper, based on a poll of more than
1,600 advisors in September, that suggests financial planning
services are expanding. Many advisors are charging fees for this
service and fees have increased.
More than half (55 per cent) of advisors' clients have a
financial plan in 2020, up from 48 per cent in 2015. In addition,
advisors providing comprehensive planning grew by 39 per cent
from 2017, the survey said. Three out of four advisors charge
some type of planning fee. The number of advisors charging a fee,
commission, or via assets under management for financial planning
has jumped to 72 per cent, rising by 8 per cent from 2017. Of the
38 per cent of advisors who charge a separate fee for a financial
plan, almost two thirds (65 per cent) charge a flat fee and
almost one in five (18 per cent) charge an hourly fee. Some 8 per
cent charge a subscription fee.
The findings chime with examples of how registered investment
advisors, as a business model in the US, have been expanding,
playing to demand for fee-based advice and independence from
selling pressure from larger institutions. This is not unique to
the US - the UK market, for example, has seen such a shift in how
wealth managers charge for their services following regulatory
changes about nine years ago.
Additionally, 29 per cent of advisors who charge some type of fee
are thinking of adopting a different fee model in the future. For
example, of those advisors, 44 per cent are now considering
implementing a subscription model in the next 12 months.
Financial planning fees are rising. Since 2015, flat fees have
almost doubled, averaging $2,482, and hourly fees rose by almost
25 per cent, to $257. On the other hand, those whose charges are
linked to AuM have maintained a steady fee rate of around 1 per
cent since 2015.
"According to our research, more advisors are offering
comprehensive financial plans in 2020 than three years ago," Tony
Leal, president of Envestnet | MoneyGuide, said. "While we are
encouraged by this data, we are not surprised. Today, financial
planning has taken its rightful spot as the center-piece of
wealth management, as it is a critical piece of the financial
wellness puzzle. From saving to spending, budgeting, borrowing,
and more, clients want to discuss their entire financial picture
with advisors – and this survey finds advisors are being able to
charge more for these services."
The paper is entitled State of Financial Planning and Fees:
The Bigger Picture.