No written agreements. Yes, the CPA firm pays for the office, computer, internet, phone, fax, etc. And as noted before, I have very limited access to the clients.
If rhe money starts rolling in, I don’t mind cutting the bosses in on the deal. I can either pay them rent to use their office, or I can take a reduced salary.
Well, if I were in your position, I would think about what points I would want in a written agreement along with your future at this firm (i.e. path to partner) and then go from there. I would want a written agreement in place so everything is really clear to all parties involved. I would certainly want to address the one partner’s concern that clients may want to take their business elsewhere.
Typically, if one firm is looking after the tax, investments, insurance, planning, it actually makes it more difficult for a client to leave.
Perhaps, once an agreement is in place, you could send out a mailer to all the tax clients and offer a free seminar on investments and planning. (Only those who are interested would attend).
It’s been three months. No more waiting.
I still haven’t really answered the question yet. But it hasn’t been a problem, because we’ve been so behind with tax stuff it’s unreal.
But this is the basic framework that I’m trying to provide: I am a financial planner. My primary product, and the cornerstone of everything that I do revolves around a financial plan. I can also manage assets for my financial planning clients. I can also prepare tax returns for my financial planning clients. But if you’re engaging me just to prepare a tax return, then that’s not a good fit for me. If all you want is asset management with no plan, then that’s not a good fit for me. (I’d make an exception for people with >$1m in assets and who sign a waiver saying that they don’t want any financial planning.)
What I’ve read and heard is that people generally don’t like paying hourly fees. When you charge hourly fees, they start watching the clock, and are hesitant to engage you because they know they’re charged for every e-mail and phone call. So I’m leaning toward charging a yearly retainer fee and an AUM fee. But I’m still open to ideas.
And to answer MIke’s question:
A few weeks ago, the sht hit the fan around here. Partner #1 (the one I like) fired some shots at Partner #2 (who I don’t like). #2 owes #1 a lot of money, but can’t seem to ever come to work. Between April 15 and July 15 (~90 days), he was present for less than 30 days. And on days he was here, he only works for about half a day.
Anyway, it seems that at the end of the year, there are going to be some changes. I feel like they’re going back to siloed practices with shared facilities and a few shared employees. And if that happens, I’ll probably get a chance to buy #1 out eventually.
If I get my way, that’s what’ll happen. Then I can “sell” the clients I don’t want to #2 while keeping the clients that I do want. I’ll pay my share of the rent/software/salaries to #1, I’ll pay all of my own costs (travel, education, “my” software), and I’ll keep whatever’s left over. But if this happens, it’s still a long way off.
Oh–and another development:
I used to be “attached” to another group at Cambridge. I was a Cambridge advisor, but I had to go through the local branch for all the compliance & correspondence and what not. Therefore, my business card had their logo and their address & phone.
I think this led to a lot of confusion for the clients, because my business card had a different address and phone than where I actually was. Plus, the two owners of that firm are in their 60’s, and their website really sucks. Plus, their technology really sucks. No client logins or portals, no financial planning software, etc. Plus, they were “typical” registered reps, who focused on product sales and investment advice, and not on “real” financial planning. Not saying I disliked them, but I wanted a different business model, and I wanted to engage the younger crowd, and they want to stick with the older “traditional” methods.
So as of August 1, I am now my own “branch” of Cambridge. I have my own business card with my address & phone. I am developing a website that should have all these fun “toys” for clients to play with. I think having my own website will help legitimize the business so that people see it as a “real” business, and not as some kind of side gig that their accountant is trying to do.
I have lots of plans to follow, such as a menu of services, remote access, etc. I think the menu is a big deal because it shows clients what we can do and what they’re paying for. It also helps cement exactly what they’re getting and what they’re NOT getting. It seems that one fairly common theme that I hear from advisors is that their client asks for more than they’re paying for. EG - Client only wants to pay for asset management services and not full-service financial planning. Then they come in and say, “How can I set up trusts for my kids and grandkids?” Sorry Mr. Client–you didn’t want full-service planning. I offered it to you and you said “No”.
So, if the client asks “How can I set up trusts for my kids and grandkids?”, you’ll just say no, I don’t want to tell you? Is there some way where you can give them that information but earn money from setting up the trust?
^That’s the biggest problem I think I’m going to run into. I tell people “you need full-service financial planning, not just tax prep” and they say, “Well, I don’t want to pay for full-service planning. I don’t see the value.” Then they turn around and ask “How can I [insert financial planning question here]?” I’m trying to figure out how to say, “That’s covered in the full service financial planning fee that you didn’t want to pay. So either pay up or ask somebody else.” Obviously I don’t want to be that obtuse about it, but that’s pretty much the sum of it.
In the past, I’ve been guilty of telling them what they want to know and letting them walk out and pay somebody else to implement my advice. But I don’t know how to change that. That is, how to prove that I know my sht and I’m worth the fee–but you gotta pay first.
I don’t think you can realistically charge people for answering questions when they are already talking to you. I mean, you can, I guess. It just seems super stingy. In all other kinds of sales, information is “free”, and it is meant to convince people to buy a tangible product - financial products, car repairs, mattresses, and so on. Face time with the customer is a privilege, as it is an opportunity to pitch these products to them.
It seems more natural to offer a trust service, in which you charge some modest fee. However, information about these products that you offer is usually free.
That’s like going to a family doctor, asking about a condition that usually only a cardiologist would know about and be like, before I answer, let’s me bill you for a year’s worth of cardiology questions.
People do things outside of their job description all the time.
Bad analogy.
I AM the family doctor, and the health insurance premium is the annual financial planning fee.
So a better analogy would be “I refuse to pay for health insurance, yet I still want to visit my doctor and get blood work and a cancer screen–all for a $30 copay.” No. You either pay for the health insurance (or an annual financial planning fee) or you’ll pay $250 for this visit. Plus the $800 for lab work. Then you’ll pay another $300 for me to interpret the lab work.
No advice is ever “free”. Which is exactly my point. By paying a financial planning fee, you’re paying me to be objective and comprehensive (more or less).
EG - You don’t go to a tax accountant and ask him whether or not you need more property & casualty insurance in your business. You ask the tax accountant tax questions (which he uses as an opportunity to sell more tax prep) and you ask the insurance guy about insurance (which he uses as an opportunity to sell insurance). But a good planner who is both a tax accountant and an insurance salesman (that’s me) can say that having both additional insurance and an extra LLC is unnecessary. If you get the insurance, you don’t need the LLC.
Can’t do it. Compliance won’t let me. And if I can’t monetize it, why should I put myself at risk for offering advice about it?
Yeah, you COULD go to a trust service and ask them if you need their product. But then you’re asking the barber if you need a haircut–and we know the answer to that question.
Greenman, sorry to be the one to break this to you, but I don’t think some client is going to walk into your office and treat you as if you are a doctor.
A good salesman is an educator first and foremost.
Well, how much would you be charging for a personal tax return prep, and a corporate tax prep? (I’d probably focus more on just the corp returns, as they would be probably a lot higher revenues).
Just curious, if you look at all the other big RIA guys in Dallas, Houston etc, are those guys charging a retainer fee (for planning services) and AUM fee ?
That’s like going to a mechanic and saying, “How much to fix my car? No–don’t look at it. Just quote a price.” No–I can’t quote a price until I look under the hood. But as a general rule, tax prep for a really basic return starts at $300 for the simplest possible personal return and goes up to infinity.
Yes, corporate tax work is a little more profitable, but I hope to refer out anything really complex. That accomplishes two things: 1.) It frees up my time to do what I enjoy doing, which is planning (and not prep), and 2.) Since other CPA’s eat that up, it’ll earn me some brownie points with other CPA’s. I might accidentally get a referral out of it.
I’ve looked at some of the big RIA’s, both locally and in the bigger metro areas. Pretty much everybody claims to offer, “customized and comprehensive financial advice”. But they’re pretty nonspecific about how they charge, other than the AUM fee. And it’s hard to tell if they are just paying lip service or are actually providing “comprehensive” advice.
IMHO, at least locally, most of the RIA’s seem to be extremely centered around portfolio management. I think their “comprehensive advice” generally means “let me refer you to a CPA or attorney for the hard questions.” (Again–this is conjecture.)
I don’t know man. I have no idea about this business, but it sounds like greenie wants to sell a service to himself vs what the customers want. If customers aren’t currently paying for this type of service, then that’s your answer. Again, I have no knowledge of this space but this thread just seems weird
This is definitely true. But I think people aren’t paying for it because they’ve never been exposed to it. As mentioned before, most people expect “free” advice which they pay for when they buy a product. That’s the way the financial services industry has worked for the past thousand years.
But I do think that, by and large, the days of charging 1% to put somebody in a basket of mutual funds is coming to an end. I think the younger generation is too mistrustful of the industry and can find a robo-advisor that will do virtually the same thing for 0.3%. And I think that truly comprehensive planning is quickly becoming a “real” profession. Hence the rise of NAPFA and the other associations that cater to “real” financial advisors–not just mutual fund and insurance salesmen.
For the proto-typical Edward Jones advisor, the “answer a seven-question risk tolerance questionnaire and out pops a portfolio” days are about to be over. They’ll need to either learn to give real advice, or Betterment will push them out of business.
I’ve seen an Accountant who had charged a minimum fee for a basic personal return, then, for each added tax slip etc, an additional fee would be charged. I’ve sen others charge a flat fee, but I get it you don’t want to end up spending a whole bunch of time for a flat or lower fee on a really complex return.
The point of me asking the question about how the RIA guys work is simple; you need to be competitive from a price perspective because its just very difficult for the average investor to be able to distinguish between the financial planning services offered through RIAs. Clients may or may not actually have a plan in place - right. So when your talking to the prospect and setting up the meeting, ask them to bring in a copy of their current plan, IPS, insurance review, estate plan - so you can review/talk about it. If they show up with no documents, well then its pretty simple.
I’ve set a minimum AUM threshold, charge the standard rate for the investment and planning services, and include the planning fee. Yes, I do also offer a flat rate, fee for service if someone just wants a plan only and wants to implement on their own, and manage their own investments. But that’s a very small market in my opinion.
You want to work with clients who are easy to work with, can see the value of the investment and planning advice that you are delivering on, will participate in that process with you and will follow advice.
Changing the market or behavior is really an uphill climb unless the value proposition is obvious. This doesn’t seem obvious to me… Maybe spend some time thinking how to make it obvious. It’s hard when the cost is obscured