How to Offer Fee-Only Financial Advising in Tiers

Posted By on Jul 5, 2013|3 comments


It’s human nature for us to want to know it all. Even in today’s world where knowledge is very compartmentalized, it’s never easy to admit our shortcomings in unfamiliar areas. Whether individuals, business owners, executives, or other financial advisors, most find it difficult to confess their lack of understanding of personal finance.

A Lesson in Value

I, too, find it hard to admit my shortcomings, especially when talking to experts in other fields. A few weeks ago, I was meeting with a client who is an engineer and loves tinkering around fixing things. He was chastising one of his daughters for not being able to do “simple” car maintenance—like changing the oil and filters.  If I had spoken up, he would have quickly learned that his daughter had enough knowledge to be my mechanic. I don’t know the first thing about lifting up the hood of a car.

When I bought my first car after college, I was determined to understand how it ran. I wanted to be able to fix anything. One Saturday, I pulled out the manuals and read through them. I picked up the oil filter and belts I needed. Ready to complete the maintenance on my own, I laid everything out on the driveway.

Ninety minutes later, I packed up everything I bought. With frustration, I took the car to the local mechanic and handed him everything I bought. For $40, he completed what I needed. The value of my 4.5 hours, even at my measly rate of $23 an hour right out of college, was drastically more than the $40 it cost me to get my car fixed. In fact, if I would have just spent $40 in the first place, I would have saved $64.

I’m not a mechanic. I don’t know how to change the oil in my car. That’s not my specialty. However, as a financial advisor, I know how much my time is worth. This is one example of a value-add financial advisors can create for clients. Just like a mechanic provides great value to me, fee-only financial advisors can provide this same value to experts in other areas, especially by recognizing and segmenting the needs of others into different tiers. This is what a financial advisor named Raag Vamdatt is doing.

A Fresh Take on the Financial Planner’s Business Plan

Raag Vamdatt offers insights for financial advisors at all levels. Vamdatt, a young professional from India, is turning the financial planning world upside down.  His business specializes in catering to Indians worldwide. All of his services are internet-based, which allows him to be virtually anywhere (a niche that sets him apart). He offers a membership-based program, one-time plan preparation, annual trainings and eBooks. In addition to his vast reach, he provides tiered products at different price points to appeal to a wide range of clients.

I believe this tiered pricing plan is especially helpful for people who do not want to admit their shortcomings in grasping personal finance and are just looking to test the waters. Here’s a look at his tiers:

  1. “My Financial Plan” is the top-tier product Vamdatt offers. This premium product sells for approximately $135 and covers:
    •    Road map for achieving financial goals
    •    Investment recommendations
    •    Retiring credit card debt
    •    Life insurance analysis
    •    Retirement planning
    •    Asset allocation
    •    Cash flow analysis
    •    Net worth calculation
    •    Emergency fund creating
    •    Health insurance review
  2. The second tier is training, specifically for income tax. This product is provided as a DVD/CD. The cost is lower than the premier service, providing a stepping stone to the comprehensive plan.
  3. The next level of service is an analysis of a mutual fund or insurance. This $25 service is intended for individuals to purchase more than once, if not frequently.
  4. The entry-level product is an eBook, entitled Personal Finance for the Young Professional. This book allows individuals to take their personal finances into their own hands. This product provides finance expertise for only $5.

Fee-only financial advisors can benefit by offering tiered services.I appreciate Vamdatt’s revenue model. By creating different levels of products, you can engage prospects that just want to “test you out” with little commitment by providing high value at a low cost. Low-tier products are especially beneficial for customers, like me with my first car, who’d like to try it on their own first. As consumers gain confidence in your knowledge, they are more likely to try different products at higher price levels.

Vamdatt shows that financial advisors are not limited to a traditional business model. In today’s market, a high flat fee for a financial plan of between $1,500 and $3,000 or a variable fee of one percent of assets are not the only pricing options. There is room to be creative.

Beyond the Business Model

In addition to his unique services and price points, Vamdatt has gained popularity through his web presence. His website and Facebook platforms are especially active. He also provides great content to viewers on his blog, but I think he would benefit from a higher post frequency, and I would like to see him post at least once a week to update his clients and keep them engaged.

Finally, what Vamdatt says online and how he interacts with his clients is extremely professional. First, he approaches the individual by asking engaging questions: Are they financially prepared for life insurance? Retirement? An emergency? Second, he provides a compelling bottom line:

Continuous monitoring and review are essential to ensure the success of your financial plan. Therefore, it is best to get together once every year to evaluate your progress as per the financial plan and to review the financial plan as well.

While Vamdatt’s advice is intended for individuals seeking financial advice, I think his point applies to fee-only financial advisors—continuous monitoring and review are essential to the success of your business.

Next Steps

  1. Think honestly about your business. How can you develop multiple products and services to engage your clients on different levels?
  2. Ask yourself: just how much value can you provide? When you develop the product, aim to provide ten times the value to the client than the cost.

photo credits:

Value | Tuvel.com

Raag Vamdatt. | https://www.facebook.com/raagvamdatt

 

3 Comments

  1. Interesting thoughts. I’ve been wondering if there is a market for video training for people looking to do more of their financial work themselves. Thanks for the thought-provoking post!

    Post a Reply
  2. He definitely brings a unique perspective to financial planning. I think that his presence on the web and being active in his interaction online is a great source for reaching potential prospects and managing clients. I think this is where the market for financial planning is moving toward.

    Post a Reply
    • You are right! It is unique and the web presence also is an advantage. We have just interviewed Gen Y Financial Planning and they aldo have a unique niche around this same segment.

      Post a Reply

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