Setting Planning Fees

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Dec 2, 2009 10:06 pm

New to the forum; brought here by a pricing dilemma.  Your thoughts and feedback greatly appreciated.


I've decided to separate planning fees from investment management fees...but can't decide how to structure the billing for planning services.
 
1) flat rate each year.
2) higher fee in year 1 - it's the case design and implementation that's time consuming - and a reduced rate in future years (since it's mostly updates and less labor intensive than set up).
 
Obviously rates are tiered based on time and complexity.
 
Thoughts?  What have your experiences been?  What would you recommend?
Dec 2, 2009 10:42 pm

Option #2 is what I've seen a number of financial planners use with estate planning cases.

Dec 2, 2009 11:36 pm

$250 is the hourly rate that a good attorney partner recommended I use when deciding the total fee.  BUT he also recommended not telling clients the rate; he claimed they hate that.

 
He said to quote the annual cost and explain that it's determined by the "complexity, expertize and time commitment required".
 
For the investment management side, fees are exactly where you'd expect them to be:  standard ~1.5% <$250k, ~1.25% @ $1MM depending on the equity/bond mix.
 
I'd really rather not blend the investment management fee with financial planning though.  It's a differentiation thing.   
Dec 3, 2009 12:00 am

Ice, there are probably attorneys out there who work on a a kind of loose retainer basis ( like we do, " I'm here for you when you need me" ... just my my impression, I could visualize some lawyers just making up invoices at the end of the month.

Okay, it's better to be a RR with wrap accounts, or whatever, we're blessed. Just couldn't resist pointing out that it has got to be a hustle being and attorney or CPA charging by the hour (no particular virtue to charging hourly fees).

Uh, yeah, we really do need to charge that ten k for managing a million, but one percent is probably high for one million. Many advisors end up subsidizing their small (wrap) accounts with big ones, that's just the marketing mix for many small practices, again, no particular virtue.

FWIW, dividend, I came up with a two k minimum for planning, a flat fee. Not worth doing it for less, because clients feel like you nickel diming them. I mean, everyone understands 1% on 800k, or .75 on 1.5 mil, all inclusive.

Are the deliverables year in and year out really worth charging a side fee? I some b/d firms that want to make a virtue out of separate planning fees, by what's in it for them versus what's in it for you and your clients?

Dec 3, 2009 8:30 am

Dividend - You can use more than one method. 

My flat fee is horrendous though and nobody ever takes me up on it.

Sometimes people will pay the hourly fee, but it's rare.


Dec 3, 2009 10:05 am

Most planners I know charge (for example) $2500 for the initial plan, and a year worth of consultations/calls/reviews.  After year 1, renewals/updates/ongoing consults are like $1,000.

Most also waive planning fees if the client brings on assets to manage (or credits planning fees against AUM fees in year 1).
Dec 4, 2009 12:17 pm

Charge separate fees: 1) fees for advice based on complexity and 2) fees a percentage of AUM.  I did this for years until retiring Dec 2007.

 
OK to charge a fee higher in first year than followon. For example, charge $3,000 year-1 then $2,000 annually thereafter. They pay for financial planning advice so don't confuse with investment advice and asset management. That's why you get %ofAUM.
 
Hold quarterly meetings with themes. For example: Q1 Thorough investment review of all assets (yours and others); Q2 Financial assessment with rework of financial plan; Q3 Life Issues Asssessment with look at risk protection (insurance) and estate planning; Q4 Tax Status Assessment looking at changes made this year that affected their taxes, and estimating tax impact, and steps to take to minimize taxes (disclaimer remind them to consult tax advisor).
 
These are valuable meetings and worth your fee. Clients will gladly pay the fee to get this comprehensive look.  It works ...I know! Visit me:
http://www.valuemarketingsystems.com/AboutUs.html
Dec 4, 2009 12:55 pm

Hey cheapy... BUY AN AD

Dec 4, 2009 3:04 pm

Hey senior members. This is a business networking site where serious professionals can exchange ideas. It's OK to leave business cards.

 
This site is not a park bench where all the old folks hang out and exchange war stories.
 
Let innovation and creativity thrive.
Dec 4, 2009 4:15 pm

Actually it's not... this is a forum not a networking site(in case you are confusing this for your local chamber).

 
We are hear to tell war stories and exchange ideas, no peddle products to each other.. Maybe you didn't read the agreement when you signed up, but it said no advertising...
Dec 4, 2009 4:47 pm

Bill, nobody wants to be "sold" on this site.  There are but a small handful of vendors on this site that actually contribute the right way.  I would suggest you check the posts Fred at TradePMR (FVDA_trade-PMR) or Bill Singer (securities attorney).  They just come to mind.   They actually contribute rather than say "Hey come see my website!".  If people are impressed with your contributions, they will naturally check out your website. 

 
Just some friendly suggestions...
Jan 19, 2010 2:01 pm

1) Flat Planning fee for objective financial plan.  Mine starts at $2200, Max is $9,000, depending on how long the attorney/CPA/record gathering will take.

2) Percentage fee for AUM, per IAR specs.
I never "rebate" planning fees, because I don't want the two roles to be confused.  I also don't want FINRA to have a case against me for operating with a conflict of interest.  The Financial Plan is an objective, stand-alone piece that is highly valued.  The asset management is not objective, but it's derived from my expertise and resources; it also is a better long-term solution than A- or B-share funds and stock trades.
Jan 19, 2010 3:43 pm
beenthere47:

Charge separate fees: 1) fees for advice based on complexity and 2) fees a percentage of AUM.  I did this for years until retiring Dec 2007.

 
OK to charge a fee higher in first year than followon. For example, charge $3,000 year-1 then $2,000 annually thereafter. They pay for financial planning advice so don't confuse with investment advice and asset management. That's why you get %ofAUM.
 
Hold quarterly meetings with themes. For example: Q1 Thorough investment review of all assets (yours and others); Q2 Financial assessment with rework of financial plan; Q3 Life Issues Asssessment with look at risk protection (insurance) and estate planning; Q4 Tax Status Assessment looking at changes made this year that affected their taxes, and estimating tax impact, and steps to take to minimize taxes (disclaimer remind them to consult tax advisor).
 
These are valuable meetings and worth your fee. Clients will gladly pay the fee to get this comprehensive look.  It works ...I know! Visit me:
http://www.valuemarketingsystems.com/AboutUs.html
 
This paragraph is actually one of the better ideas I've heard today.  I think we all struggle with what to talk about with our clients when we meet with them for reviews. 
 
With that said, you need a better website.  It's looks strikingly similar to the many side ads I've, I mean my friends have clicked on that promise to make my, um - their, parts bigger, my waist smaller, or my checkbook bigger.  As I was clicking on your link I was wondering whether or not I'd see your smiling face staring back at me in 1.7 seconds.  Yep. 
 
You're competing, not product to product per se, but for mind space with guys like Matt Oeschli (who has a great website even though he starts talking to me when it opens), Bill Singer, and some others who are well established here.  It would behoove you to steal some ideas from them.   
 
  
Jan 19, 2010 3:48 pm
Spaceman Spiff:
beenthere47:

Charge separate fees: 1) fees for advice based on complexity and 2) fees a percentage of AUM.  I did this for years until retiring Dec 2007.

 
OK to charge a fee higher in first year than followon. For example, charge $3,000 year-1 then $2,000 annually thereafter. They pay for financial planning advice so don't confuse with investment advice and asset management. That's why you get %ofAUM.
 
Hold quarterly meetings with themes. For example: Q1 Thorough investment review of all assets (yours and others); Q2 Financial assessment with rework of financial plan; Q3 Life Issues Asssessment with look at risk protection (insurance) and estate planning; Q4 Tax Status Assessment looking at changes made this year that affected their taxes, and estimating tax impact, and steps to take to minimize taxes (disclaimer remind them to consult tax advisor).
 
These are valuable meetings and worth your fee. Clients will gladly pay the fee to get this comprehensive look.  It works ...I know! Visit me:
http://www.valuemarketingsystems.com/AboutUs.html
 
This paragraph is actually one of the better ideas I've heard today.  I think we all struggle with what to talk about with our clients when we meet with them for reviews.    
 
Its a lot like ours as well:  We do goal planning and tracking in Q1, Retirement income strategies/wealth accumulation in Q2, Estate/insurance/cash reserves in Q3 and tax planning in Q4. 
Jan 19, 2010 3:59 pm

Here's mine:

 
Q1 - Call and offer tax free bond
Q2 - Call and offer dividend paying stock
Q3 - Call and offer LTC/LI review
Q4 - Call and sell at a loss those investments from Q1. 
 
Seriously, I'd love to hear if some others out there have a similar approach to their meetings throughout the year.