Road to Independence

Well, everything should be in place to manage client assets very soon. I’ve chosen the RIA custodian, provided them with all of the necessary paperwork, and now I am waiting on them to overnight a package to get me started. Of course, I will need to be trained on their systems, paperwork, and such, but I can now see the light at the end of the tunnel. More on this later.

Up to this point, I have been collecting fees for financial planning engagements. Moving forward, I expect to retain these clients by providing ongoing advice, under an annual agreement with a retainer type fee structure. The challenge here is that the planning process can be very labor intensive.

Therefore, I can only accept two or three new planning clients per month. I have been charging $2,000-$5,000 each and when you do the math, using $3,000 as an average, it’s difficult to generate enough revenue with this as my primary source of income. I will either have to become more efficient – something I fully intend to do – and/or increase my fees, something I probably need to do. I believe the fees are a function of the level of client wealth and the advice you’re providing. Clients are willing to pay a fee, provided they receive value.

Let’s talk about providing value in financial planning for a moment. In the past I have been with organizations where planning was simply talking with the client, getting a rough idea of their wealth, and presenting some isolated strategy, such as a series of rolling GRATs to assist them in gifting assets. This is obviously a solution in the planning process, but in and of itself, I don’t believe it constitutes planning.

Planning to me is a comprehensive process involving a series of steps, whereby after a thorough analysis of a client’s situation, you recommend certain strategies. Often, products are involved but that should never be the intent of the process. Therein lays the difference between a planner and a product-pushing salesman who calls himself a planner. I’ve had a number of clients tell me that they had a plan done with a particular company (that will remain anonymous) and it seemed like all they were doing was trying to sell them a product.

This is a fairly common practice. To me, the planning tool is critical. The right tool will provide a clear picture of the situation both to you and to the client. It clarifies, simplifies, and solidifies your position with the client. Some clients care about the tool and some don’t. But all clients care about the advice they receive. I couldn’t imagine going to a doctor who was still using 50-year-old technology when a much better, more recent tool was available.

So, my question for all of you is this: What financial planning tool(s) do you use? Sign on or send me an e-mail and let me know.

Thanks for reading and I look forward to hearing from you.

This entry was posted on Thursday, May 31st, 2007 at 4:19 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.