let me tell you what i tell everyone about any subject.
“i dont know, but i’ll find out”
Well investment management is only one part of holistic financial planning right? The investment strategy needs to be co-ordinated with the rest of the plan. Most of the guys here on AF aren’t going to be your target client. Your target client is really busy running their own business and they need someone like you to look after their financial and investment planning. Its your job to be able to clearly articulate what that service model is. And, charge for it.
If you look at all the big RIA firms, what are they doing. They are doing all of the planning, managing the investments, doing the tax work.
They do. But they don’t coordinate with all the other professionals, nor do they look at the bigger picture. And unless they’re on an annual retainer, they don’t normally revisit the plans after the plan is written. That’s where I come in.
^ correct. Most lawyer practice are very transactional oriented.
Like how much are you charging just to prepare the just the corp. tax returns? $3k ? $4k? Are you planning on doing the tax return work, along with managing the investments and financial planning?
To note–I have very limited experience, and I live in a place with relatively few RIAs. But from what I’ve seen, most RIAs are nothing more than sales schmucks who use “comprehensive financial planning” as a tool to generate investment business. Their “financial planning” consists mainly of bad advice on retirement plans, and telling people to go see an attorney or CPA.
As far as tax returns–I don’t know how this is going to shake out. I’d like to continue to work with the CPA firm and eventually buy in as a partner. But if that’s not feasible due to “visionary differences”, then I’ll probably try to partner with another CPA firm where I work as an independent contractor, but use their facilities and software. That’s a conversation for another day.
I have much to add but it’ll have to wait. I’m in Philly trying to locate KMD.
But, two quick things, hourly fees are very uncommon, and no one can define what a fiduciary is outside of retirement plans and even then it’s tricky.
wework office!
Go on…
To me it sounds like your not really sure what the vision is.
So you want to have 30-40 investment clients and now you may want to be a partner eventually?
How many tax clients are you currently looking after? If you have say 200 corp clients, you should be able to sign up 30-40 of those clients as investment clients.
^The financial planning & investment advisory is mine. All mine. Nobody else wants anything to do with it. The partners don’t seem to mind if I do it, as long as it doesn’t negatively impact the CPA firm. And right now I’m a senior manager, but not a partner. (I guess I’m confused about why you’re confused.)
We currently do about 950 personal tax returns and about 350 entities.
^ ok good. So are the partners ok with you talking to the tax clients about growing the investment advisory and planning?
Also, so no written agreements in place then? I mean its pretty sweet, you get all your overhead costs covered by the CPA firm and access to their clients. Do you see that continuing if the CPA partners start see you making bank off their tax clients ?
I always felt that hourly was troublesome. Plus clients are nervous about the bill if they know it’s hourly they’re reluctant to talk to you. You want them coming back for more. Even my HNWs get squirrelly with hourly billing. I made a flat rate schedule based on the expected amount of Time I put in. I have a target hourly rate of $150/hr. I only bill businesses hourly if they insist. I bill separate fee for investment management (as a solicitor). It’s a separate task so I bill separately. Also, I don’t believe clients expect one big umbrella fee. They prefer to know how their money is being spent. It also fits with my promise of no sales pitches during the planning process. I also get commissions from insurance sales.
I use a price menu [Its a real menu ;)]so clients can pick and choose services and build thier custom engagement. That works like a charm because everyone (except my hnws) pick the middle price. The hnws always go for top shelf :). So, my own cash flow is more predictable. My first meeting is always free with a free summary analysis.
Also being paid hourly makes you their employee. I prefer to be seen as a partner. So I don’t have to answer for time spent. I can also go the extra mile if I need to. Like interviewing service providers, lawyers, CPAs, contractors, etc.
There are some tasks that I build into processes and templates where the amount of tim I spend is going down. Just like attorneys use template contracts and clauses. I do this to make my life easier and to build a consistent product. I can alalso take on more clients per hour. While my financial plans are customized, the parts (nut and bolts) are standardized. I’m getting more efficient. If billed hourly, my income would go down too.
See this post about why I think somebody should pay both AUM fees and a financial planning fee, be it hourly or retainer.
https://www.analystforum.com/forums/water-cooler/91370789#comment-91859144
Lol it’s so whack how people don’t buy individual stocks. Financial planning is easy as shit. That should literally be free
if ur just doing financial planning ur overpriced. Ur fee is solely due to trust and your ability to cultivate. Just a simple asset gatherer picking up low hanging fruits with nothing interesting about them.
^ Really Nery?
Ok so what’s your financial planning advice to complex Carl in the other thread? (simple right?)
I know, right? All people need to do is put their savings in double-levered ETFs and walk away until retirement.
give me 1 cool minute
Still waiting.
Did you ever find her? How did that go? (Nevermind. That’s a whole 'nother thread.)
Now that I’m safely out of tax season, I can revisit this.
Yes and no. One of them is extremely hesitant, just because he feels like some people will take offense and take their tax business elsewhere. EG - there’s one client who’s constantly complaining because his broker keeps selling him MLP’s with K-1’s, and he can’t do his return by April 15. Plus, he has a “standard” account with a lot of turnover and capital gains distributions, to the tune of about $160k. (And when I say “an account”, I mean five composite accounts. Plus three 1099’s where his broker put him in REIT’s that issue a 1099-Div. (Non-qualified, so this is taxable at ordinary rates.) Plus the 10-ish K-1’s.
I estimate that I can save him about $25k per year (in taxes alone), get rid of the MLP’s, consolidate the accounts, and finish his tax return by April 15. To me, there’s a tremendous benefit to that, and I think we should at least inform the client that we have the ability to do this for him. If he chooses to reject it, that’s fine.
But the partner is afraid that by offering him these services, he’ll take his tax business elsewhere. FYI - in 2017, we prepared six federal returns and eight state returns. Total bill was $7,500. He paid $24k in investment advisory fees that I know of. I’m sure there are more that I’m not aware of.