Demand for financial planning continues to grow, as more and more investor clients are looking for holistic advice to guide them forward in the new normal. In 2020, amid the pandemic-induced uncertainty and nonstop volatility, financial plans were still being created and updated.

The pandemic accentuated the need for basic financial knowledge around budgeting, savings, and risk management that an individual can now readily access. According to our latest survey on the state of the industry according to advisors, more than half (55%) of advisors’ clients had a financial plan in 2020, up from 48 percent in 2015. This is a significant milestone.

In addition, advisors providing comprehensive planning grew 39 percent from 2017. For a closer look at the findings, download our white paper, “State of Financial Planning and Fees: The Bigger Picture.”

The survey is more proof that advisors today are providing more holistic advice to a larger client base. Financial planning has taken its rightful spot as the centerpiece of wealth management, as indeed it is a critical piece of the financial wellness puzzle – and there is definitely room to grow.

Advisors Can Choose The Model That Fits

Given this, of course we weren’t surprised last summer during the virtual LPL Focus advisor conference, when LPL Financial’s Andy Kalbaugh tweeted: “To plan, or not to plan? That was the question – but that was the wrong question all along. The real question is where will you take it from here?”

This is the No. 1 question advisors should be asking themselves in 2021. Advisors today can choose to incorporate and build out a financial planning component within their practice in the way that makes most sense for their own clientele and business model. Going forward, we believe the most successful financial advisors will be those who make financial planning the cornerstone of their practice.

After all, clients today want to discuss their entire financial picture with their advisor. In addition to wanting solid investment advice, clients are seeking advisors who can help them achieve financial wellness. Advisors who offer planning services are able to deepen relationships with current clients, while also attracting a broader clientele and diversifying revenues.

Clients Are Willing To Pay For A Financial Wellness Roadmap

From saving to spending, budgeting, borrowing, goals, investing, insurance, and more, clients want to be able to discuss their entire financial picture with advisors, and advisors are able to charge more for these services. We are seeing an increase in the number of clients with a financial plan, along with a steady rise of fees. Our survey found three out of four advisors charge some type of planning fee.

Advisors charging a fee, commission, or via AUM for financial planning has jumped to 72 percent, up 8 percent from 2017. Of the 38 percent of advisors who charge a separate fee for a financial plan, almost two thirds (65%) charge a flat fee and almost one in five (18%) charge an hourly fee.

Interestingly, eight percent charge a subscription fee. Additionally, 29 percent of advisors who charge some type of fee are considering implementing a different fee model in the future. For example, of those advisors, 44 percent are now considering implementing a subscription model in the next 12 months. This is a big part of where we see the industry headed.

Financial planning fees are also on the rise. Since 2015, we have seen an increase in the fees charged. Flat fees went up by almost 50 percent, averaging $2,482, and hourly fees went up almost 25 percent, to $257. On the other hand, those who charge as a part of AUM have maintained a fee rate steady around 1% since 2015. This suggests that there is a demand for advisors to offer and expand their financial planning services as clients are willing to pay for it.

Advisors should engage clients in a discussion on financial planning, or they risk losing them. It is as simple as walking them through a sample plan, or portal demo. Just as a doctor puts a patient at ease by providing information and communicating it well, an advisor should be proactively speaking with clients about the benefits of a financial plan.

The information, analysis and opinions expressed herein are for informational purposes only and do not necessarily reflect the views of Envestnet. These views reflect the judgment of the author as of the date of writing and are subject to change at any time without notice. Nothing contained in this piece is intended to constitute legal, tax, accounting, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type.

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