Why Pay for Your Financial Plan Before Becoming a Client?

Why Pay for Your Financial Plan Before Becoming a Client?

In this episode of ‘Heart of Your Retirement,’ Nicole and Zena discuss a frequently asked question in their office: Why should you pay for a financial plan before becoming a client? They explore the reasoning behind this practice, emphasizing quality over quantity, transparency, accountability, and the creation of a strong advisor-client relationship. By paying for a financial plan, clients receive a comprehensive, unbiased strategy tailored to their needs, without the pressure of product-based compensation.

The episode also highlights the value of experience and expertise in financial planning, comparing it to hiring an architect for a complex project. Overall, paying for a financial plan ensures clients receive the best advice and paves the way for a successful, long-term partnership.

Show Notes: Why Pay for Your Financial Plan Before Becoming a Client?

Zena: Welcome back to Heart of Your Retirement. So Nicole, today we’ve got a question that we want to talk about that has come up in the office off and on all the time, quite a bit. It’s a great one that we love and I never get tired of talking about it. So the question is, why do I need to pay for my financial plan before becoming a client?

Zena: In our office, before we take on our clients, because we’re not a revolving door, we make sure that they’re ideal and that our expertise matches and it’s quality, not quantity. Before anybody can become a client, they have to go through a financial plan and they have to pay for it. Of course, if they become a client, we have a discount on the second payment. But really, this is the question that comes up and a lot of you will be thinking and asking, why am I paying for a financial plan if I’m already wanting or thinking about becoming a client?

So honestly, this is a question that you’re asking because perhaps you’ve been offered a free financial plan before. Maybe you’re meeting with an advisor, you’re looking to hire a new advisor and they offer you a financial plan and it’s free. So this is why we want to talk about why we’re charging for a financial plan. It’s not just us. This is becoming popular.

Nicole: More of the norm, I would say. Actually, this is the norm. This is something that you’ll probably start to see lots of advisors starting to have fees for their financial plans. There are lots of excellent reasons and honestly, by the end of this conversation, we hope that you feel that paying for a financial plan actually signals some pretty positive things.

Nicole: So one of the big things, and Zena has already touched on it here, there is a truth about free financial plans. Before I get into it, I just want to say this is a bit of a generalization and Zena and I were talking about this before we hopped onto this podcast, trying to make sure that we frame this right for you guys. But generally, when you get a free financial plan, it kind of dictates where the best interest goes. Usually when it’s free, product is what comes first before the client’s best interest.

What I mean by that is when there’s no fee for the financial plan, products is the way. And what I mean by products, I mean investments, I mean insurance policies, certain products that come to play within a financial planning strategy, but that is the only way the advisor gets paid. So of course, they are incentivized to sell you a product in order to feed their family, if we want to put it that way.

Zena: Especially if they put 10 hours into a plan. Our specialty is retirement income and optimizing that and taxes. If it takes 10 hours to do that, how are you compensated? And if you’re not compensated directly for a fee, then in the back of your head it’s, “Okay, so now I really need to get this client to sign on so that I can sell them these products to get back my time.”

Nicole: Exactly. And the time thing is super important too. Again, this isn’t meant to say people who don’t charge financial planning fees are evil, but just by virtue of what has to happen. So Zena is saying this time thing, so you are almost forced to rush through it because the time isn’t quantified by a fee. Therefore, you’re rushing to get it done, which then again, in turn, doesn’t give you the best planning, doesn’t give you the best plan because there is a bit of a time crunch because they’re thinking, “Well, if I’m not getting paid, I’ve got to get this done quickly so I can, I need them to sign on. I need them to sign right now.”

Zena: So that we can make even, even if it’s a transparent 1% advisor fee paid monthly, that needs to start. But it takes 30 days to start. And so I need this client to sign on right away because they haven’t paid for a financial plan and I need to get paid for my 10 hours. In our office, we have multiple resources. We have people behind the scenes that are helping us with knowledge and years of experience. So we have payroll.

Nicole: So yeah, it is, it just goes back to this accountability piece, right? A paid plan, there is accountability to us advisors. If you are paying us to do something for you, to do thinking for you, to do strategies for you, that also incentivizes the accountability on our end.

Zena: Oh, for sure. I mean, when there’s an exchange happening, there’s so much more than just that dollar. And it actually isn’t about the money. I mean, we love money.

Nicole: Yeah. Who doesn’t? I mean, come on.

Zena: But that’s what it is. This is actually a symbol of something bigger. It is. And that is an agreement because of course there is a written agreement in there and the transparent fee for service that you see is on paper. You know exactly what it is. And all the expectations are laid out. So now there is a responsibility, there’s almost like a contract.

Nicole: Look at us go.

Zena: And so this is where that has to happen. And then also what it does is now you have a decision. So you’re going to get this plan and it’s not just a paper and a spreadsheet. I mean, I love that. That’s how nerdy I get. I love it. But what it is, is it’s a plan and coaching. And so you can have as many pages as you want of what a financial plan is. You can have the proof in the pudding. But essentially you could also just have the one page, here’s your next action step. And it’s so simple and easy and it’s about laying things out. And it’s the coaching.

So you get that without the commitment of now having to decide that, oh, I’m now handing over all of my assets and investments to this person without ever having worked with them. So what it does for us too is that you are trying us out and we’re trying you out.

Nicole: Absolutely.

Zena: Can we follow through with these things? Is there communication? Is there a great relationship? Is there that trust factor in your gut? Yes, I can work with this person for the rest of my life now and my family can work with this person if we choose.

Nicole: Yep, absolutely. And so Zena has even gone into our next point here. It’s, what are you actually paying for? Because I mean, that is important. So it’s, I’m paying for the plan, but what am I getting for the plan? And so Zena has already mentioned, there is, and this is where, you’ll hear us say it a million times on this podcast, but we nerd out hard. We like the spreadsheets, we like the data, we like plugging the numbers in, but the actual presentation of a tangible financial plan is only one little baby in the big, big circle, as you always say. And I think it’s just this, as you’ve already said it, it’s the thought leadership, all of the experiences behind the plan that you’re truly paying for.

Zena: Oh my gosh, yes. Every other person’s experience and everything we know inside a textbook, outside of a textbook, every education piece is now your gold. We get to navigate that out for you. And investments are not the plan. That is just a tool. And we have to have the flight plan in first and know. I get excited because I’m thinking, when we know, okay, in retirement, so if you’re retiring in a year and we know, okay, for the first three years, we know exactly how much you’re going to be taking out within reason. I know it’s not the holy grail, it’ll change a bit. It’s fluid, but we know how much you’re going to be taking out. We know how much your taxes are. And so that dictates the investment piece.

You cannot know how to invest anything without having a flight plan and knowing, okay, give or take a bit, what is this purpose? What is, how much am I going to need? How do we, when someone says, how are you going to navigate how the world’s going with the economy? Well, we have a defense plan because we actually know what we’re going to have to pull out of when and where.

Nicole: Totally. And what you always say, I love the way you explain it in meetings. It’s just, which buckets do we need to pull from where and from when? So we’re not making a big mistake down the road. Because I think that’s part of it too, right? So it’s not only, here’s some strategies, here’s options, here’s pulling from the experiences and scenarios we’ve already seen. But it’s, there’s a big piece of it that’s also, we don’t want you to make mistakes or we don’t want there to be big life-altering things that happen to you. So we plan on purpose to make sure that those things don’t happen.

Zena: And so the plan answers questions like, how much can you spend? When can I retire? How do taxes, what do the taxes look like? Those are all things we answer.

Nicole: Yep.

Zena: And that helps navigate how we invest after. And so I think knowing that it’s also the confidence and peace of mind. And so that relationship has to happen and that fee-for-service financial plan has to happen to answer all those questions before we can decide, okay, now let’s sit down and decide how, what, how we need to invest.

Nicole: And you’re hitting something so important too. And I think this actually does go back to our point number one, where paying for a plan means that we have the ability to say wait, we have the ability to say don’t do anything right now. It’s not, there’s no incentive for us to make you do something. So if we really see that waiting or holding on something is the best thing, then we tell you to do that.

Zena: There’s no urgency of having to have you become a client in any office if you have paid for a financial plan.

Nicole: Exactly.

Zena: And you’re paying for also a trial run.

Nicole: Yeah, for real.

Zena: That I had already mentioned, right. You’re both kind of navigating and seeing how well you work together. And at the end, if you decide that maybe you don’t want to work with that person, not a problem. You still have your flight plan that you can take with you and navigate. And you’ve answered all the questions that you need answered. And then you can take a breath in a moment and start your looking for an advisor, whatever. It’s important.

Nicole: It’s so important and this kind of goes back to, and we’ve kind of, this is another point that we want to touch on, is just this. Paying for a plan does actually change the relationship. And this is some psychology here. This isn’t just me and Zena trying to preach to you. This is actual human behavior where, if we tie, and this is any industry, this isn’t just financial planning, I would say, but if we tie value to something or we’re paying for something, we just automatically value it more.

Zena: Yeah, because you show up. It’s why we have a trainer.

Nicole: Right, exactly. It’s skin in the game. If there’s no skin in the game, it’s hard. And again, for clients, but also for advisors. Both of us show up in a different way when the service is paid for.

Zena: I’m going to, this is not unprofessional, but I’m going to get a bit real here. Freebies. So we do take on, I want to call them volunteer and free work for people that really need it. And I’m going to use the example of maybe a family member. When you’ve taken on a family member and it’s free, or I don’t know, personal experience. They’re usually pushed back on my calendar a bit. So if something comes up and it’s not on purpose, you want the best, but it’s, oh, you know what, I’m just going to get to that tomorrow. And then the guilt gets you and tomorrow you do it because you feel so horrendous you put it off. But that mentality, you’re right. You can’t tell me that doesn’t happen when there hasn’t been an exchange of money. And I worry about that, right? If there isn’t a good working relationship, once you get someone in the door and you sign them up and you’re, yep, we’ll finish nailing those couple of items on the financial plan, those little catch-up items. Yeah, they might get lost because the contract’s over. That’s right. And now you’re, oh, you know, I didn’t get paid. They’re not, you’re not going to get paid. Let’s just get the investments in and I’ll deal with it later.

Nicole: No, that’s exactly right. James Clear, the guy who wrote Atomic Habits, talks a bit about this and it’s to that exact point where he says he calls it a commitment device. So whether you’re paying for a premium product, whether you’re, a service, a product, it doesn’t really matter what it is, but he just says in our brains, there’s something that clicks on and he calls it this commitment device, and he basically says it’s our brain’s way of locking in future behavior because we know that we’ve invested something that means something to us. So it is, it’s just, I love that. It’s cool. And he’s right. I mean, it’s for both sides. And I just don’t want to kind of drive that home too. Both sides show up differently, I agree, when there’s something of value tied to it.

Zena: Yeah. So this might not be for everyone. Honestly. If you don’t see value in it and you’re not willing to upfront that cost, then that’s not for you. And because you don’t ever want to have that, the other thing is we’re not here to try and convince anybody to do it either. Because you don’t want somebody that doesn’t see the value in it and won’t be able to follow through.

Nicole: Well, and I think that’s what it, in a way too, that’s what the price does, or the cost of a financial plan does. It makes you take a step back and really evaluate, do I actually need this service right now? Because if it’s free, you’re like, eh, let’s just do it. Why not? And whether you’re committed or not, it doesn’t matter. But I think it’s honestly a gut check. It makes you really think, do I need the services of Zena and Nicole right now? Or is this something I can hold off on? Or is this something that I’m truly committed to getting?

Zena: How common is it to have someone come back three or four?

Nicole: Oh my goodness, so common. Yes.

Zena: We have our conversation. We do our fee and we tell them the fee. And we just say, listen, you can think about it. We have room right now. And then they send a note and they’re, you know what, we’re okay right now, we won’t. And it was probably the fee that stopped.

Nicole: Yep.

Zena: Guess who. Three, four years later, it’s, hey, listen, I really need this now.

Nicole: Yep, exactly.

Zena: And I want to pay for it now.

Nicole: Exactly. And to your point, it’s there might be times in your life where you’re, you know, it’s just, I don’t know if I need it yet. I’m okay, right? Once you figure out what the service is, you’re, sounds great. It’s no shade on either side. It’s just saying, oh, you know what, maybe not yet. But to your point, it’s at some point, one of our clients actually said this to us. She said, you know, for years and years and years, it was a whisper. And then finally it was a shout. It was someone shouting in my ear saying, I need to get this done, or I need help, I think is what it was. And so that could be it too. For years you’ve just been thinking about it, but it wasn’t quite right yet, and then all of a sudden it was.

Zena: Yeah. So I think the big takeaway is that there’s no conflict of interest. There’s no trying to sell a product or insurance in getting hours paid for back. And that’s an important piece to us. And I think that’s, and transparency of cost in there is important. And then the other piece is, is that we’re seeing, is this a relationship that we can actually work with? And you’re still getting gold after.

Nicole: Yep.
Zena: But then you’re actually doing a trial run of what it will be like to work with someone for the rest of their lives. Right. And give, before you give your entire savings to them. So you’re not paying for a plan to become a client. I think basically you’re paying for a plan so you don’t become the wrong type of client for sure. And there’s not a disconnect later down the road. That’s right. And expectations are clear and you have a clear path of the things that you need to do to accomplish what you need to accomplish.

Nicole: Yep. It’s in a way too, it’s kind of, once you’ve done your due diligence as we’ve talked about here, but it’s a promise to yourself too. If you’re willing to invest something, it’s probably because you’re ready to. You want to do it. It’s something that you value. It’s something that’s important to you.

Zena: So it’s not a cost, it’s that foundation.

Nicole: That’s right.

Zena: And you used, before we started it, we had better conversations before we record. This always happens. All the good stuff is way more interesting. But use the analogy of an architect.

Nicole: That’s right.

Zena: Right. It’s sure.

Nicole: And she’s, now go. So the architect, and it’s, and again, we were just thinking about because it’s important for us to convey to you guys what a financial plan really means. And so the architect thing is, you don’t pay for the picture of a house with an architect. You pay for the years of education, the years of experience, the pattern recognition they have, the seeing, building multiple other buildings and seeing what went wrong, what went right, and then bringing that into your house or your building. And so it’s, that’s what you’re paying for.

Zena: The foundational piece and everything you need. That’s right. Yeah. I love that. Yeah. Okay.

Nicole: Okay.

Zena: Well, so hopefully this helps you. We’ve answered that question that we get all the time and we just do it naturally in meetings. Yeah. And then it was, oh, we should probably share with everybody out there. This is why you need to pay for a financial plan before you become an investment client and have somebody manage your money. That’s right. Thanks.

Nicole: Thank you so much.