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It's All About the Plan

Unbundling financial planning from investment management  (with a big dose of the warm fuzzies) has paid off for this firm.

Ilana Polyak, 12/17/2009

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For financial planners, asset-gathering is largely seen as the way to grow a business. The more assets, the more fees advisors collect, so it benefits an advisor if a client brings over all of his or her accounts.

But Juli Erhart-Graves, president of Worley Erhart-Graves Financial Advisors in Indianapolis, and her partner, Grace Worley, have been using a different model. They levy an hourly fee for financial-planning services, separating the duties of financial planning and investment management.

"Not everyone needs someone to manage their portfolio, but they might want someone to tell them that they're on the right track," Erhart-Graves says.

When working with a new client, Erhart-Graves and Worley first come up with a financial plan, never assuming that assets will follow. Only about half of the firm's 700 or so clients use the firm's investment-management expertise.

Investments have their own fee schedule. "If we're working with someone and they decide to use our investment-management services, then we'll bill hourly for the financial plan and then as a percentage of assets under management as soon as we start doing investment management," Erhart-Graves says.

Working this way, she says, gives her firm a wider view of her clients' financial lives and an ability to make a wide array of recommendations, including what to do with workplace 401(k)s, insurance, and health-care needs, areas that advisors working on an AUM basis sometimes do not see as their purview.

To be sure, Erhart-Graves would be pleased to see more assets come her way. But she is content to build client relationships around financial planning before the assets follow. "We encourage annual reviews with our clients," she says. "So the following year, we'll meet with someone to review their portfolio, and that's when they might say, 'What about you guys implementing some of the recommendations you've made so I don't have to?'"

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