Easiest way to make tough clients pay FP fees

Most of us have one ‘huge complaint’ about getting started as financial planners i.e. ”people in India are still not ready to pay financial planning fees, there is no demand for financial planning services.” Tell this to any of the established financial planners, they will thrash your opinion and hold you responsible for not being able to make your clients pay. Though I am not established yet, personally I have been fairly successful in collecting fees in the range Rs. 15-25 K from around 25 clients during my stint with Sykes & Ray Financial Planners and I believe the onus of communicating the value of financial planning is on us. If we are passionate, knowledgable and have a strong belief that we can make a difference to clients’ lives, we dont have to wait for the market to mature and people to start calling us or walking into our offices.  
Clients pay us when they see some concrete value in our services, we need to quantify the value in some way. Here is one of the ways to show prospects the value that we bring to table. Most people have a habit of procastinating and they know it – show prospective clients what they might loose by not getting a financial plan done “now”. I have tried it selectively and it has worked well. Try it out yourself, communicate it through mailers, during first time meetings, in public speaking, in your media writings etc – make sure your communication is polished, firm and impactful. Below is a transcript of an article I had written in Business Standard  on similar lines with an example of a 30 year old Rajeev, quantifying what he could loose by not getting his plan done for the next 5 years.  
Trust me many people have miserably gone wrong with money management because of 2 things – one, they are just too lazy/busy to do it themself and second, they have heavily been misguided by their agents/disributors/brokers/bankers. If you are genuinely offering FP services and learn to communicate its value, you will emerge out with cheques!   
Start
‘Stop Procrastinating’ is the 3rd most popular goal on 43things.com which compiles & tracks what people want to achieve in their life. We aspire to achieve difficult things and taming ‘procrastination’ is definitely one of them. For success with money and investments ‘time’ is the most critical factor after proper asset allocation and right products.  
Do make a choice between “do it yourself” or “hire a professional” but not between “I will start now” and “I will start someday”. There is no day in a week called ‘someday’, it has to be ‘now’. Let me explain this to you with an example of 30 year old Rajeev Kumar who decided to have a financial plan in place. He is a typical clueless investor busy with his career; gets a good paycheck, but doesn’t know how to channelize it effectively.  
Imagine if Rajeev had got down to getting his financial plan done ‘someday’ instead of ‘now’. The opportunities lost because of wrong financial decisions are called the ‘opportunity costs’.  

Cost of delaying retirement planning

Rajeev’s current monthly expenses are Rs. 30,000 and needs to build a corpus of 4.25 crores to meet his 20 years of retirement expenses independently. To build up this corpus, Rajeev would have to invest only Rs. 7,700 p.m. in equity oriented investments over the next 30 years. The power of compounding would ensure he achieves his corpus requirement.  
But if he delays this action and starts after 5 years, he would have to shell out Rs. 15,800 p.m. for the remaining 25 years. Rs. 20 L is the additional outflows and the cost of delaying your retirement planning for only 5 years! Why not spend it on a super holiday soon after retiring?  

Cost of choosing a wrong asset class

 The simplest & most effective asset allocation strategy one can follow is ‘debt for short term goals & equity for long term goals’, but it can be the most difficult thing to do if you do not have a plan in place. Rajeev wants to accumulate Rs. 20 lakhs in today’s value to fund his son’s education which would be Rs. 65 lakhs by the time child is 18 and ready for higher studies.  
Rajeev would have to invest Rs. 7,000 pm for the next 18 years in equity oriented investments like mutual funds, blue-chip stocks or ETFs which are likely to give a return of around 14% CAGR. Like most people if Rajeev had invested in Fixed Deposits or lousy traditional insurance products yielding around 8% for this long term goal, he would have to invest Rs. 14,000 p.m. The additional outflows would be Rs. 15 lakhs which is the cost of choosing a wrong asset class! Why not gift it to your son or spend it on his marriage?

Cost of keeping your money idle in savings account

Thanks to lethargic behaviour, hectic life & a lack of clarity on future goals, monthly savings get accumulated over time and stay there safely…cheers to your bank! One fine day, you wake up to realize there is too much money lying idle in account; either you buy a car or a life-size LCD TV. And if you are mindful, fall prey to those touchy advertisements by financial institutions. 
Rajeev had been maintaining a balance of around 3-5 lakhs in his savings account yielding 3.5% which had accumulated over last 6 years since he started earning. Now with a no-brainer if he keeps aside Rs. 1 lakh as emergency fund in SB a/c and invests the remaining 4 lakhs in a Fixed/Corporate Deposit at 8%, he can easily earn an additional Rs. 1.2 lakhs in 5 years. Why not hire a professional financial planner with this extra money?  

Cost of buying wrong insurance products

Rajeev is happy that he has 6 insurance policies and he pays the premiums regularly, but the total cover is only Rs. 15 lakhs and premium outgo is Rs. 75,000. Needless to say all of them are traditional policies with abysmal yields or ULIPs with higher charges. And on other hand his need-based insurance requirement was 75 lakhs. One will know the cost of being under-insured by 60 lakhs only when the ultimate uncertainty strikes and the family faces the heat.  

Cost of getting into bad debt/loans

Borrowing is “spending future uncertain unearned income today”. Many of the debts can simply be avoided by delaying the buying decision. Say you want to go on a vacation to Europe which will cost Rs. 3 lakhs. Now if you can’t hold back your craving for instant gratification you may end up opting for a 3 year Rs. 10,700 EMI option by the tour operator which will eventuality lead to Rs. 3.85 lakhs outflow. Instead if you had delayed this trip by 3 years and invested Rs.8,800 pm @ 10% to build up a corpus your net outflow would have been only Rs. 3-15 lakhs. Why not utilize the savings to fund domestic vacations for first 2 years?  
A ‘financial plan’ gives you a roadmap which helps you take the right decisions and avoid expensive blunders. Act now and start working on your financial plan, there are many better things you can do with the extra money saved or earned. Start somewhere, you will find the next steps automatically. ‘Stop procrastinating’ and take the first steps. By the way first & second most popular goals on 43things.com are “losing weight” and “writing a book”!  
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Let’s not wait for consumers to come to us, let us go to them. This is just one of the ways to communicate value of financial planning. What are the other ways in which you think we can do it and get our practices rolling? How to show the value of 15-30 K fees? Leave a comment below and share your ideas.