The share of clients receiving comprehensive planning services from their financial advisors has grown from a third to a half in the past five years, according to a new report by Cerulli Associates.
Competition from low-cost digital providers,
The trend includes greater adoption of planning services among younger advisors and women advisors, according to the Boston-based consulting firm’s April 6
Planning and the
“The differentiator is the scale of the broker-dealer and their needs,” says Marina Shtyrkov, a research analyst in Cerulli’s intermediary practice.
Planning services can help advisors stand out from low-fee robo advisors, and standalone planning fees display their value to clients. About 36% of advisors collect standalone planning fees ranging from $100 to $4,000 or more, with disparities in charging the fees among the industry’s many channels. The resulting revenue makes up only 4% of their revenue, though.
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Only 17% of wirehouse advisors use planning fees, compared to 28% at retail bank BDs, 30% at insurance BDs, 38% of those at national or regional brokerages, 40% at indie RIAs, 45% at IBDs and 51% at hybrid RIAs, according to Cerulli.
Clients often engage more proactively in the planning process when they pay fees for it, and the practice also addresses some of the profit imbalance among large and small clients, Cerulli notes. However, some clients may resist the average fee of $1,223 in the independent space and yearly inflationary increases.
Data entry represents another area of tension for advisors. Some BDs have started hiring third-party firms to help their advisors with the volume of data collection and aggregation that comes with building a new comprehensive plan for a client.
The issue is a “thorn in the sides” of advisors, according to one BD planning executive quoted anonymously by Cerulli. “They want the end product and they don’t always have the time.”
Rather than dreading the task or looking to farm it out, some advisors are beginning to incorporate it into tech-enhanced processes called “co-planning” and “scenario planning,” says Raef Lee, a managing director at SEI Advisor Network, an asset manager, custodian and practice management consulting firm.
The days of an advisor laboring to put together a tome-size binder for a client are coming to an end. New software tools allow advisors and clients to work together, running possible choices such as retirement year through various models.
Advisors can also get clients’ help with the data entry, Lee says.
“Ideally, it would come from the end user, because they’re the ones who really know the data. But you want it in a way that the investor doesn’t feel like it’s a chore,” he says. “You have to make it feel that the advisor hasn’t given you a task to do, but it’s built into the interaction with the advisor.”
In addition to tapping new tech tools, BDs are also investing in home-office teams to help advisors with the planning process. Cerulli divides firms’ approaches into so-called specialist and generalist categories, or a combination of the two.
For example, one BD has appointed a team of CFPs for general inquiries and a specialist team with a CPA and an estate and business planning expert for high-net-worth cases. Other firms seek to focus on the highly complex cases or take a more high-volume approach.
The “breadth and depth of relevant resources” help BDs stand out to prospective advisors as full-bore planning gains in popularity, according to the Cerulli study.
Women and millennial advisors represent an important target group for firms’ efforts, according to the study. While 50% of all advisors’ clients receive planning services, 63% of female advisors’ clients and 56% of millennial advisors’ clients receive them, the survey shows.
Firms have changed their career tracks, in part as a response to the popularity of planning and the demographic trends, Shtyrkov says.
“They have the option of pursuing a more business development focus or a more comprehensive planning focus,” she says. “That allows women or younger advisors who have a proclivity toward this area to specialize.”
