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The biggest movement is toward holistic financial planning, where advisors have their hands in everything from estate planning, tax planning to saving for a vacation – and, let’s not forget, investing. With competition from robos and a race to the bottom with investment management fees, more wealth managers are looking to holistic planning to set themselves apart.
The next generation of advisors – and clients – will be adamant about the importance of holistic advice, so it’s not slowing down anytime soon.
That presents a challenge: how to quantify the value of our advice across the board. We can quantify the value of investing, but our tools are not aligned with the shifting advisor value proposition.
You might be saying, “Holistic relationships cover a much broader area of services. Why should I have to quantify anything when I’m clearly doing so much more than non-holistic advisors?”
I agree – as an advisor. After all, most of these additional services used to be reserved only for the most affluent of clientele, and now you’re supposed to prove why it’s valuable.
But think about it from the clients’ perspective. They’re coming to us to make the most of their money. That’s why they came to us 20 years ago, that’s why they’re coming to us today. Just because we’re doing more doesn’t change what we’re delivering – planning and investing services. Why should they pay for our services rather than just do it themselves?
A recent example
I had a conversation with a client recently who was a perfect example of this in action. He was a high earner who knew and wanted to work with me, but he had to know it would be worth it first.
He challenged me: If I could cover my fees with tax-saving advice alone, he’d move his assets. We got to work, loaded all his information into our software and immediately identified several opportunities – namely a mega backdoor Roth and 1031 exchange.
During our planning proposal meeting, I showed him how we could save him close to $700,000 through tax planning alone – more than enough to cover our fees. In fact, the lifetime value of the proposed strategies exponentially exceeded our projected fees.
He is now an Altfest client.
So what? I provided tax planning advice. That’s increasingly common among advisors. In fact, you may already provide advice like this.
But without explicitly communicating the value of what you’re doing, the memory quickly fades in your clients’ minds.
The client relationship example I cited above encompasses much more than taxes. But beyond investing, tax planning is one of the easiest areas an advisor can quantify value. Using FP Alpha, I have similarly quantified the value of our advice for other clients in the areas of estate planning, retirement planning, insurance and more.
Position yourself as a revenue driver rather than an expense
There’s a lot of talk in the press about centering your practice around relationships rather than performance. That’s all well and good, but the center of any advisor-client relationship is still hard numbers.
The further we go down this “relationship” road, the further we get from proving value with hard numbers, and that’s a dangerous road for any advisor to go down. If you can’t quantify your value, then what’s to stop your client from breaking up with you at any point for any reason?
Your clients should understand your value so clearly that they view you as a revenue driver rather than an expense.
The possibility of gathering the necessary data to quantify your advice for every client sounds exhausting. Thankfully, the category of software serving holistic advisors is growing, as are its capabilities. In the example I cited above, we quickly identified tax strategies and compiled a proposal. We have also utilized the other solutions, such as estate planning and insurance, which allows us to quantify a wide-ranging relationship into easily presented and understood reports.
We include this “value of advice” number in all of our presentations to prospects, and we’ve seen the number of conversions we are having from prospect to client skyrocket. Thanks to a commitment from our team (and the right tech), we’re providing truly comprehensive services, producing more quantifiable value than ever and raising our prices (and profit margins) higher than they’ve ever been.
If you’re advising holistically and providing more advice opportunities (estate planning, tax planning, insurance cost/risk reduction, etc.), then you should be charging more. It makes perfect sense, and when your profit margins jump, I’ll be the first to say, “Good for you.”
But first you have to show your clients why it’s good for them, too.
Andrew Altfest, CFP® is the president of Altfest Personal Wealth Management and founder and CEO of FP Alpha, the software his firm developed and now offers commercially to other advisors.
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