Fees for financial planning are on the rise at the same time more people are looking for help managing their finances, according to a survey by Envestnet | MoneyGuide released today.
“Financial planning services are on the rise, with many advisors charging a fee for their services, and these fees have steadily increased over the last five years,” said the company’s white paper, “State of Financial Planning and Fees: The Bigger Picture.”
The financial planning and advice industry increased its share of GDP in the United States by an average of 1.8% per year for the last five years, which is faster than the overall economy. “Advisors today are providing more holistic advice and financial planning services to a larger client base,” according to Envestnet | MoneyGuide, which provides web-based financial and retirement planning software.
Since 2015, flat fees charged by financial planners increased by almost 50%—they currently average $2,482 a year—and hourly fees went up almost 25%, to an average $257. On the other hand, those who charge a percentage of assets under management have maintained a steady fee rate averaging 1% of AUM since 2015, according to the survey of 1,600 advisors taken in September.
The number of advisors’ clients who have a full financial plan increased to 55%, up from 48% in 2015. Additionally, the percent of advisors providing comprehensive planning services has grown 39% since 2017, the survey said.
“Financial planning has taken its rightful spot as the centerpiece of wealth management, as it is a critical piece of the financial wellness puzzle,” said Tony Leal, president of Envestnet | MoneyGuide, in a statement. “From saving to spending, budgeting, borrowing and more, clients want to discuss their entire financial picture with advisors—and advisors are being able to charge more for these services."
Three-fourths of advisors now charge some type of planning fee. Of the 38% of advisors who now charge a separate fee for a financial plan, almost two-thirds charge a flat fee, nearly one in five charge an hourly fee, and 8% charge a subscription fee.
But these percentages may shift. Twenty-nine percent of advisors who charge some type of fee said they are considering implementing a different fee model in the future. For example, of those advisors, 44% are now considering implementing a subscription model in the next 12 months, the survey showed.
Those advisors who provide comprehensive financial plans will find them to be key differentiators and drivers of business growth, said Joe Miller, chief operating officer at Envestnet | MoneyGuide, in a statement. “Almost every advisor we surveyed who provides financial planning services also receives referrals from their clients—on average, these advisors receive six referrals per year from their client base."