Wealth firms target the rich with $50,000 financial plans

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When a UBS client began collecting more than $100 million in proceeds from the sale of a business, the client's broker offered to help guide the distribution of his windfall with a financial road map—for a fee of $50,000.

Welcome to the high end of financial planning. Advisors at UBS and some other wealth management firms are now moving into this market and charging wealthier clients the equivalent of a new BMW—or two—for financial advice on everything from estate planning to intergenerational wealth transfer to philanthropic strategy.

Since January, UBS Wealth Management Americas has sold "between 5 and 15" plans priced at that $50,000 UBS maximum, according to the firm's advisor group head, Jason Chandler. That could likely grow to an average of 10 a month as advisors become more accustomed to offering top-dollar plans, he told Reuters in an interview.

"The higher the net worth of a client, the more sophisticated the estate planning element of the plan, and therefore the cost," Chandler said. These big plans may require bringing in outside trust or estate attorneys as well as specialists in family dynamics and wealth transfer.

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Wells Fargo's Abbot Downing allows its advisors to charge as much as the $100,000 dollar range for extra complex plans, according to the firm's managing director of planning, Lisa Featherngill.

Of course, very wealthy families have always had attorneys and accountants to build estate and wealth transfer plans. By moving into that space, firms like UBS hope to profit while offering families a simplified and coordinated one-stop shopping approach.

Plans Generate Fees, and Retain Assets

Comprehensive financial planning services have been of increasing importance to firms like UBS, which earlier this year increased its payout to advisors who sell such plans.

The plans themselves are not huge sources of revenue, but they strengthen the loyalty of clients who are always free to move their assets elsewhere.

"We know that clients are more invested in a plan when they have one with an advisor, so we wanted to make sure that we incentivize advisors to do more plans," Chandler said.

The roughly 7,000 brokers at UBS Wealth Management Americas, known in the industry as "advisors," derive the bulk of their revenue from fees and commissions generated off of the client assets they manage and the securities they sell.

Beginning this year, UBS advisors earn 50 percent of the fees they charge on plans, with an additional 15 percent put into an expense account that advisors can use to invest back into their business. The average plan sold by UBS advisors still hovers in a significantly lower range, at $4,100.

Supersized Plans

The traditional financial plan used to consist of an impressively bound book of charts and graphs illustrating a client's ability to meet retirement goals and pay for college. The new supersized plans are something else: They can take months to create and often involve multiple households and legal entities.

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"As we move into the $20-, $30-, $50-million range, the focus is on looking at what is the best use of their wealth," said Featherngill. That can include charitable strategies and multigeneration asset transfers.

These are plans that go "over and above" the basic level of planning that is included in Abbot Downing's asset management fee, Featherngill said, declining to disclose that fee. The firm serves clients with at least $50 million in investable assets.

The Flip Side of Plans

The whole concept of a written financial plan can backfire on advisors and firms, some critics say.

"If you're putting these specific projections in print, and then the client doesn't meet those projections, as hypothetical as they are, there could be exposure legally," said Brad Stratton, an independent advisor formerly with Bank of America's Merrill Lynch, who is based in Overland Park, Kan.

Merrill, which years ago had a more formal plan program in place, has since moved away from charging for plans. Most advisors at the firm offer basic planning as a free service to their clients who generate a steady revenue stream from investment transactions and other services.

Advisors that do create plans should take caution when presenting them to clients, said New Jersey-based securities lawyer Tom Lewis of Stark & Stark, noting that the formality of such plans could make them ripe for arbitration or other legal concerns.

"They should put a bold disclaimer in the financial plan, saying this is for discussion purposes only, so that there is a clear understanding between the financial advisor and client that it's only for informational purposes," Lewis said.

That may protect the advisor, but clients who plunk down $50,000 for a plan may be looking for a bit more accountability than that.

—By Reuters.