David R. Evanson

The Career Advisor, Summer, 2004

For planners who operate a fee-only practice, a typical fee arrangement centers on the assets under management. But planners often wonder if they are giving away services for which they should be charging while others, albeit not many, are wondering if they are charging for services that perhaps ought to be included in their AUM fee. Advertisement

It’s worth noting, if only to demonstrate that the concept of unbundling of fees works, that with the Garrett Planning Network (www.garrettplanningnetwork.com), everything gets billed at an hourly rate. No freebies.

But for advisers servicing (or aiming at) higher-net-worth individuals, what will the traffic bear and what’s fair?

At Sullivan, Bruyette, Speros & Blayney, in McLean, Va., principal Eleanor Blayney, CFP, says, “We use a fairly simple rule to determine what services are included in the asset management fee, and what services are not included, and therefore are separately billable.”

In addition to the usual asset management services (development of investment plan, implementation, review/monitor/rebalance, periodic meetings, reporting), she says, “We consider the following analyses or reports essential to the investment management process: balance sheet, cash flow, tax projection, and capital needs analysis. In other words, these are planning analyses which should inform the investment decision process and are therefore included generally without charging a separate additional fee.”

Mark Tibergien, a principal with Moss Adams LLP in Seattle, Wash., concurs with this approach, but goes a bit further by suggesting that services that do not play directly into investment selection are candidates for additional fees.

“The truth is most planners provide services beyond investment selection, but only charge for this one service. For non-investment type work, that is, services separate from the execution of the investment process, it is completely appropriate to charge for those services that include estate planning, business transition planning, special needs analysis and risk management analysis.”

Sometimes, the establishment of fees outside of an AUM fees offers the opportunity to get paid for services that might otherwise be given away, but which are not recurring in nature. Kathy Longo, CFP, a principal with Minneapolis-based Accredited Investors, typically offers all services under a single fee. Still, she says there are some creative opportunities to unbundle fees that are worth considering. These include consultation on philanthropy, consulting to other family members as part of a larger family plan, or simply because a client may want a son or daughter or sibling to have some counsel.

At the lower end of the spectrum she says that clients may need help with bill paying, record and file management, set up with Quicken or set up with an online account aggregation program, so they can look across all of their assets. She adds that sometimes these services can help the planner provide wealth management services more effectively. “Some clients can be hard to help, simply because they are so disorganized. Getting them organized can make your life a lot easier too,” says Longo.

As for fees, she suggests that for administrative help rates might range from $50 to $75 per hour, while that planning work might be charged at rates than range from $150 to $300 per hour.

And if you are going to charge for services outside of an AUM fee, one of the keys to success is not to be sheepish about it. Tibergien says, “Itzzs important when charging these fees that you demonstrate your value, and that you not apologize for what you charge. The things advisers do profoundly impact the lives of their clients, and they are often worthy of more fees than they care to acknowledge.”