January 2021 Issue: 10 Myths of Hourly Fees for Financial Planning-10 Myths of Hourly Fees for Financial Planning by Mark Berg and Matthew Jackson

10 Myths of Hourly Fees for Financial Planning by Mark Berg and Matthew Jackson

Pdf Summary

The article discusses 10 common myths surrounding hourly fees for financial planning. The first myth addressed is that clients hate hourly fees. The authors argue that, in reality, very few planning firms currently charge by the hour, creating a large untapped market opportunity. The second myth is that planners who charge by the hour won't be accessible. The authors refute this claim, stating that planners who offer unlimited access to all clients are actually less likely to be accessible. Another myth is that hourly fees make the relationship transactional rather than relational. The authors argue that the pricing model does not affect the quality of the relationship, but rather it is a mindset question. <br /><br />The article also tackles the misconception that hourly fees are cost-based rather than value-based. The authors explain that, if done correctly, hourly rates should be based on clients' willingness to pay for the advisor's expertise, experience, and availability, making it a form of value-based pricing. Another myth is that charging by the hour is a lazy way to charge. The authors assert that running an hourly firm requires excellent advising skills and people management. <br /><br />Lastly, the article addresses the misconception that hourly rates create an incentive to waste time. The authors dismiss this claim by highlighting that committing malpractice and documenting it for regulators would have serious consequences. They also emphasize that hourly firms need to earn every dollar, making laziness counterproductive. <br /><br />In conclusion, the authors argue that hourly fees for financial planning can solve many pricing problems and bring financial planning closer to recognition as a true profession. They urge new planners to seriously consider this pricing model, especially in light of increasing uncertainty surrounding fees in the age of robo-advice and sliding asset management margins.

Keywords

common myths

hourly fees

financial planning

clients hate

planning firms

accessibility of planners

relationship transactional

value-based pricing

advising skills

incentive to waste time