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Transitioning to a Fee-Based Financial Planning Practice

This MDRT presentation offers tips for telling potential clients about your new fee-based practice.

By Peter D. Maller, MBA, CFP

The following is excerpted from the Million Dollar Round Table Presentation Transitioning to a Fee-Based Financial Planning Practice from the June 2002 MDRT Annual Meeting.

When people don’t pay for something, they don’t value it. Fees link activity with revenue. They link our efforts with results. They link programs with sales. We should charge a fee to create a financial plan for a client. We should get a commission to implement that plan. Our closing ratio will not go down when we charge fees. It’s all in our minds. We should diversify our revenue sources as any business owner should. We should have fee income, insurance income and investment income. If a client pays a fee, he is both financially qualified and committed. Fees give us an enviable marketing position relative to competitors and other advisors. Fees enhance our image as professionals. Advisors respect us and treat us as peers.

How to go about it
Once you’ve decided to switch to a fee-based practice, the next phase will be informing potential clients of the move. You want to be direct and honest about your new structure and decide if that client is the right client for you. Here is an approach I use when first meeting with a potential client:

Planning done properly is time-intensive. Most of our clients end up feeling that we must have lost money working for them because we gave them so much time and service.

Thank you for taking the time to meet with me today. Before I tell you about the work I do, let me tell you a few things about my business organization and me. I work strictly on a confidential basis with successful business owners like you. Our clients are generally referred to us through a personal introduction or a personal letter of introduction from an existing client or his tax counsel. Specifically, my work consists of analyzing my client’s assets, paying close attention to three areas: the accumulation, conservation and the ultimate distribution of those assets. More specifically, I’m involved in financial, estate, business, tax and investment planning. My practice is limited annually to 20 new clients, primarily because it takes 50 percent of my time each year to properly serve my existing clients. Through our organization, I have access to some of the most specialized financial expertise in the country.

Let me briefly outline my service and as I do so, I’ll ask you several questions. Through this exchange, a mutual evaluation will be possible. You can determine if my work applies to your situation, and frankly, it will allow me to decide if I think the work should be done.

(Pull out a legal pad.) If I may ask, have you done much planning to date?

Here are some additional questions to consider:

  • When were your wills and trusts last updated or reviewed?
  • What type of trust has your counsel drafted?
  • Is it one document or two? (testamentary or intervivos)
  • Does your spouse have a similar arrangement?
  • Were either of you previously married?
  • How many children do you have? Are they boys or girls and what’s the range of their ages? (Also be sure to ask about grandchildren if that seems to be a possibility.)
  • If we took all of your liquid investments—bank accounts, stocks, bonds—what would be a ballpark value?
  • What process do you use to make your investment decisions?
  • May I presume that your home is titled jointly with your wife?
  • What would be its approximate value? Do you have any mortgages?
  • Do you have any other real estate?
  • Roughly how much insurance is there on your life? Are you the owner of those policies? Who is named as beneficiary for the insurance? What is the purpose of the insurance and how did you decide on the amount?
  • Lastly, have you implemented any formal gifting plan? How do you select which assets to gift? Who or what entity is the recipient of the gifts? Are you utilizing your annual exclusions such as unified credits and generation-skipping exemptions?

Questions for business owners:

  • Is your business a C or an S-corporation?
  • Is there one series (class, if C-corporation) of stock or more than one? (Any nonvoting stock?)
  • Are you the sole shareholder? Is the stock in your name?
  • What’s the business worth? (That’s a loaded question, obviously, and how you ask it depends on your purpose. Be conservative.)
  • What would happen to the business if something happened to you? Do any family members work in the business?
  • If they have a buy/selliu agreement, when was it drafted, updated and last reviewed? If something happens to you, would the company buy back your stock, or would the other shareholders buy it?
  • Do you have any retirement or deferred compensation plans? What would be the approximate value? Whom have you named as beneficiary?

Every objection has a proper response
Even after you’ve interviewed a client extensively about his financial plan, you may encounter some resistance to your fee-based structure. Amy Leavitt, the principal of Leavitt Associates, which is affiliated with Sagemark Consulting/Lincoln Financial Advisors, offers the following responses to the most common objections:

I can’t afford your fee, it is too high
Our fee is substantial. It reflects the tremendous amount of work, time and energy we put in on your behalf; and frankly, Mr. Prospect, you have a lot of value to plan for.

Planning done properly is time-intensive. Most of our clients end up feeling that we must have lost money working for them because we gave them so much time and service. I want you to feel that you got more than your money’s worth because that’s the only way I’ll earn your referrals.

How did you arrive at your fee?
We know how many new clients we can take on each year, that is, at what rate we can grow and still provide top-quality service to our clients. We know how many existing clients we do annual plan updates for. I know my operating expenses, and the profit margin I need to stay in business. I simply do this math and back into the fee.

Don’t you have a conflict of interest charging both fees and commissions?
There are three types of financial planners. First, there are commission-only planners. Obviously, I didn’t want to be one of them because they have to sell you something in order to stay in business.

There are fee-only planners, and I didn’t want to be one of them for two reasons: First, their fees tend to be exorbitant, and second, they’re generally paid consultants whose engagement terminates when they drop a report off on your desk. They don’t have any incentive to see that the plan gets implemented.

I chose to structure my practice on a fee-and-commission basis because I’m compensated equitably for each of the tasks I do. I’m paid a fee to design and create your plan, and I’m paid a commission to work with you to implement that plan. I’m paid to work with you to make sure your goals are met, through the implementation process.

Can’t my attorney or accountant do this work?
Typically, all of my clients have very good advisors. They have tax attorneys, CPAs and investment and insurance people. But what we have found is that it’s no one’s job to go up in a helicopter and look at your entire financial situation at one time, on a cross-disciplinary basis. This is not just from a legal, tax or financial perspective, but looking at your objectives across the board—short-term, mid-term and long-term. We work with your current advisors; we don’t replace anybody.

Used with permission. All rights reserved.

Peter D. Maller, MBA, CFP, of Heritage Financial Consultants, LLC, is a five-year MDRT member with one COT and one TOT qualification. He can be reached by email at

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