No-Fee Financial Planning!

George Reilly |

During a recent meeting a prospective client told me he found Safe Harbor while researching "no-fee" financial planners. I hated to correct him but I had to let him know that I thought he meant a fee-only planner and he agreed that was right. I breathed a sigh of relief that he was not looking for free services and we moved on to our discussion of Safe Harbor's practice model and what we could do for him.

But later I reflected on this "no-fee" statement and realized it actually was an issue in the financial services industry with the various compensation methods available to clients. While in reality none of them are truly "no-fee" since there is always a cost to the client, many practice models have compensation structures that may appear to clients that they are not actually paying anything for the services provided when, in reality, they are usually paying quite handsomely for those services but just indirectly. Admittedly there has been an increasing amount of cost transparency over the last decade, particularly with the growth of the fee-only practice model and the various attempts at some fiduciary standard, but it is still not unusual to have clients who simply have no idea how much they are paying to their financial advisors each year. Even when we try to work through those costs with them it can be very difficult to determine their actual costs. As the current saying goes, this is more a feature than a bug of the fee-based or broker-dealer practice models. But the bottom line is that these services are not provided on a no-fee basis.

I sometimes use a spreadsheet that compares our hourly/project fees (and now our subscription/retainer fees) with other fee models and in almost all cases where I use this tool the clients are shocked with the comparison. And I am pretty sure I use reasonably conservative numbers for some of the fee structures. When I was designing the Safe Harbor website my mentor Frank Boucher urged me to post our fee schedule on the site. I was resistant but he pointed out a few things: 1) We had voluntarily chosen to be fiduciaries to our clients and one of the components of that standard is transparency; 2) Posting the fee schedule took the mystery out of the planning process for our prospective clients. They knew we were not "no-fee" planners and had an idea of the approximate cost for the desired services; and 3) It would discourage "tire kickers" who wanted free or very low cost services. As usual Frank was correct, and having our fee schedule on the website, periodically updating it for fee or project type changes, has been very effective for Safe Harbor.

We all know the old saying there is no such thing as a free lunch and the same goes for professional services. If the service provided is valuable there is a cost for that value. We just make sure you know what that will be before you even come in to see us. Oh, by the way, our initial "get acquainted" meetings are actually "no-fee" activities so I guess my prospective client wasn't totally wrong!