r/CFP

I'm a fee-based advisor with approximately 95%+ of my revenue coming from AUM-fee business. In the past, my standard has been 1.5% of assets under management, and I handle all transaction, manager, platform, and nuisance fees on my end. Please, no judgement about whether you think that's too high, or whatever.

I recognize that as my business has moved upmarket in the past 2 years, this fee level is not only potentially hindering growth, but bordering on absurd. I didn't have the ability to do blended fees based on asset tiers until a little over a year ago, and now that I have my book cleaned up, I'm looking to move to a household-level blended fee, so my lower-tier clients end up coming up a little, and my higher tier clients end up going down (pretty damn significantly, actually).

I'm looking for a gut-check to see if this tiering is reasonable. I do full-scale planning, include a tax planning meeting annually, estate planning, investment management, loss harvesting... all the usual stuff, and then some. I'll also hopefully be introducing a CPA this fall, which will provide tax planning and preparation services free for anyone over $X assets under management (I don't have that number yet). This fee-tiering reduces my billed fees by $84,624, and reduces my personal top-line revenue by $66,006.

Remember that this will be treated progressively, like the tax brackets, to result in an "effective fee" for the client.

$0 - 100,000 - 1.75%

$100,000 - 750,000 - 1.5%

$750,000 - 1,000,000 - 1.25%

$1,000,000 - 2,500,000 - 1%

$2,500,000 - 5,000,000 - .75%

$5,000,000 - 25,000,000 - .5%

For some spot-checks:

$7.3mm - .82%

$6.5mm - .85%

$3mm - 1.11%

$2.45mm - 1.18%

$1.86mm - 1.24%

$753k - 1.53%

$270k - 1.59%

Thoughts? I'm OK being on the expensive side; I feel I'm worth it. I just want to make sure I'm in the realm of reasonable.

EDIT:

There are a few comments about "difficulty building a book" and "not sure if clients will go for that fee," and I realized I did a poor job of being clear in my original post. I already built a $100mm AUM book over 180 households, almost exclusively billed at 1.5%. My book used to be mostly $100k-1mm, but in the past 2 years, I've added mostly households in the $1mm-5mm range, with a few even higher than that. This has dramatically changed the makeup of my book, my revenue, and forced me to really look at how I'm handling fees.

I'm definitely taking note that 6 tiers is too complicated. I'm also taking note that my upper tier may not be scaled down enough, and that my final tier is way to vast. Unfortunately, I'm now overthinking some of this and trying to figure out how to get the target fee I want at different asset levels while still making a clear and simple fee structure. Gonna play around a bit more with this tonight.

I had a client bring his CPA to the meeting. He tried to tell me the client needed to be allocated based on 100 minus your age. I tried explaining that suitability is more complex than that, and he basically told the client he knows better than I do before leaving early for another appointment. What is everyone else's experience with CPAs?

Prospect calls in. Refused to schedule a time and demanded to meet today. When my assistant asked for contact info, he identified himself as “Whale,” and left his phone number.

I didn’t know cell phones work in the ocean.

I’m 4 years removed from college; 2 at a large BD, 2 in banking. Both roles were very similar, essentially building relationships and getting paid more by successfully referring clients to advisors.

I’m tired of not being able to own the relationship, and get more in-depth with my clients. I sit for CFP in November and can’t wait to shop around other job opportunities with my letters, and finally be able work my dream.

However - I fear that the job search won’t be nearly as fruitful as I want. And that with 0 experience as an advisor, the letters won’t carry too much weight for me getting in a good position.

I’d imagine others can relate back from earlier in their careers, or feel as I do in current situation. Any feedback, experience, advice or insights are very appreciated.

Ive reached a point where I need to start trimming my book down to increase capacity. Im looking for any advice from those who have done this. Processes etc.

Edit: I realize this might just be the best place to do this. If anyone is in Utah feel free to reach out. Not looking to sell. Just need someone qualified

So I had a prospect come into my office Thursday who is receiving a $36m settlement. According to what her attorney told her, and what she communicated to me, it’s completely tax free.

I am a solo advisor. They are currently interviewing 5 CFPs, from what I can gather, the other firms are much larger, both AUM, avg client, and team.

Case:

Couple who are recently married. She has one child from former marriage (widow), he has 3 children from former marriage (divorcee).

The settlement process began prior to their marriage last July. Check is being received this summer.

- They walk into my office and he hands me a list of $3m in purchases they’d like to make over the next 2 years. Primarily land and farm equipment.
- they’d like to place $1m into a trust for each of their children
- $29 m left to manage.

Conversation went well - I utilized Sten Morgan’s idea of white boarding. Touched on tax efficient investments, what they should be looking for, estate protection, family dynamics and insurance. What I feel are the more pressing needs.

Husband kept pressing on returns “other advisor said we could average around 10%, what do you have” - I skirted around that topic.

Wife verbalized stress, and fear now that she has this money. So she liked the conversation we had, I don’t think I connected with him.

I made a pretty big mistake in quoting a fee ball park (40 bps) which apparently is significantly higher than other firms (how?!).

I have another appointment scheduled this coming week. But currently dealing with a lot of head trash.
- would be my single largest client but a multiple of 3
- never had a client that had an immediate estate tax issue - pretty green in that area
- I don’t have the team, although I do work with great colleagues in different fields.

What should I focus on? Am I focusing on the right things?

Any thoughts and insights would be super helpful - obviously not looking for a “how to”

Just on-boarded a new client this morning. The have @ $600,000 at a very large RIA and @ $400,000 in two qualified annuities. And $6.5m is cash at banks. All is 100% cash or money market.

The annuities are 15 and 25 years old and are earning very low returns and have been out of surrender a long time.

I will be bringing the annuities and then most likely will be cashing them out to re-allocate.

They asked me why I could do it but the other firm could not. They said the other firm told them they could not do anything with the annuities.

I really have no answer. All they had to do was a process a full liquidation and transfer of funds into the IRAs.

I can hold them in a custodial IRA so it is easy for me to become agent and do what’s needed and maybe the RIA could not hold them, but still the other firm should have been able to help them.

Only possibility is the clients panicked to cash and it looks like fees got turned off so maybe the advisor simply does not care to service them. Still, they are ready to get back in and are willingly paying my fee.

We did discuss market timing and why going to cash is usually not the right thing to do. (Is it ever?).

I discussed a mod-conservative portfolio, with a direct index fund for tax efficiency, and that they could see negative returns but they need to “stay the course” when that happens.

Any ideas on why the other firm could not do this for them?

I've always been a pretty vanilla stock & bond fund / factor investing type of advisor. But with bonds being more correlated to equities recently, I have started looking more into managed futures as a diversifier, especially for retirees.

The historical returns during market crashes are compelling but want to make sure I am understanding pros and cons. So a few questions for you all:

• Do you use managed futures in client portfolios? Why or why not?
• If so, what % allocation is your baseline?
• What funds and why? (KMLM, DBMF, CTA seem to be the popular ETFs, would like to hear who's using these)
• And most importantly, how receptive to this are clients and prospects?

I've also looked at Return Stacking which sounds interesting but their ETFs have as short track record so not sure I'm ready to jump into those, but open to experiences there too.

Sounds ridiculous but. You can do 401K education, talk to participants in groups and in one on ones without handling the 401K.

Approach local HR at a 5-10k plus employer with a location in your town. Pitch group and 1 on 1 education as a benefit to them. HR is constantly flooded with basic questions they aren’t comfortable answering. Be the answer for them.

Start with groups separated by ages. Answer basic questions, but leave meat on the bone for clients that could be ideal for you. In the 20-40 age group this could be “if you are already maxing the 401k, or are looking to find another advanced strategy, be sure to find the 1 on 1 signup sheet…”

From large groups, filter to 1 on 1s, and that’s where you find business.

Went to a manufacturing plant last week, employer preferred only 1 on 1s. Did 50-60 and found 7, 500k plus employees ready to retire. Only one of these folks even knew the difference between pre-tax and Roth.

Thoughts? Anyone else done this?

Curious if anyone does financial plans for their older clients (75+) who have been retired for a long time and are at little to no risk of ever running out of money.

It seems like I spend a lot of the time just talking about risk reduction and estate planning. I had a meeting with an older couple who were almost offended when I asked how much they spend per month. Curious if others do a formal financial plan with software or just keep it basic and have conversations about risk and estate planning…

In terms of years in the business, AUM levels, client count, etc.

I'm a few years in the business, 40 clients paying a financial planning fee, $3.5m in AUM.

If now is not a good time to start an RIA, then I'd likely be looking at transitioning to a new RIA. I'm having a hard time finding which company would be a good fit.

Looking for some perspective on when it makes sense to make the jump.

Edit: about $45k planning fees, charge 0.8%-1.00% on AUM, commission based business, made over $100k last year but that wasn’t all from my book it included work as a manager

They have etfs with caps and buffers

What are the downsides?

Obviously long term return will likely take a bit but by how much I can't tell currently.

It's good at least from a behavioral perspective because they won't worry about the market as much but I do worry that the return won't be enough averaged out over the years

Can you hold these for the long term?

It seems to me that older buffered etfs you had to find a new etfs each year due to option expiration

Any advice would be very helpful

I am a young new advisor and have done fairly well moving money in. After I get the account and we transfer everything in I find that I lack reasons to reach out and keep up contact with them. I feel like over the past month I have been slacking and not contacting my clients as much as I usually would 6 months ago. I have even noticed that my meetings/reviews have been running less than an hr even like 15-30 minutes. It’s like I don’t have much to talk about other than “hey your account is up x% in the last 12 months”lots of them are 150k-300k clients and really don’t have too much complexity in the portfolio/life. Does anyone have any best practices for reaching out to clients or topics they like to cover when calling out of the blue? Best ways to make reviews stretch and make the most out of them? How does everyone maintain good relationships with clients other than calling them every quarter just to say hey.

Thanks

After an abysmal experience recently with smart asset (I know I know)… I’m realizing I need to revamp my marketing

I’m at a BD so I’m heavily restricted in terms of compliance. No website access or SEO, seminars must be pre approved, no custom social media content, etc

***Looking for some advice from other advisors, who built their books of business at wirehouses. How did you deal with the restrictions?***

Here is what I have tried-
***COIs***
I have a few good people like a RE agent and EP firm but I don’t think they’re gonna send me anything. I can’t even get CPAs to have a coffee chat with me to learn more about their practice.

***Table events***
I am not as successful as u/tittyclapper was at these.

***LinkedIn sales nav***
reputable and easy but extremely low contact ratio because I have no custom content

***Networking events***
I have found two that are good once a month the rest of them suck

***Doorknocking***
did this for a while and had a 0.02% success ratio

***Paid lead gen***
screw smartasset and especially their invalidation people. I have talked to the other companies too, and they don’t seem much better.

***401ks***
very knowledgeable in this space but I’ve had no success after about 5000 cold calls.

Really great interview with Sara Grillo on how effective communication in your copy, marketing language and jargon can be a massive differentiator (or downfall).

Saying things like “Personal CFO”, “Boutique firm” and other terms that might make us feel good send the complete opposite signal.

Not something I’ve found XYPN members struggle with as much as my old B/D cohort, but I found her approach very refreshing and easy to listen to!

We all have phrases we use to help clients understand strategies, costs, investment decisions- what are your go tos?

First and foremost, I totally understand how quickly these conversations can turn into “I should talk to an attorney”. I’m not there yet.

I’m at a large RIA and considering a move to another RIA in the same city. I don’t own any of my clients. However, I do have six family members who are clients and account for around $36 million in AUM.

I have a non-solicit agreement. If I left, these family members surely would find out through regular family discussions (eg: mom calls aunt and they’re chatting about the kids and she finds out I got a new job sort of thing).

I obviously want these family members to follow me and I am sure they would (I am the primary contact at my current firm and the only advisor they’ve worked with). The RIA I’m talking to doesn’t know they exist, so that’s not a concern.

Has anyone navigated this? My worries are that even if they do leave on their own accord, the total AUM size would cause my current firm to pursue questioning of whether I contacted them first. The team I currently work with has joint growth goals, and these clients leaving would surely set them back enough for it to be a tangible concern to them.

Idk, just thinking out loud. Also - I’d never contact them about it, the last thing I want is to jeopardize a new chapter in my career by doing something like that.

Maybe the simplest (and only) path is to let them find out, contact me about it, and go from there.

What is a realistic revenue growth rate for more experienced advisors who have been doing this for 15-20 plus years? Google says 10-15%

I calculated my last 5 years and it is 16%. I’m 32 years old with 8 years of experience generating $550K T12. I plugged this into a future value calculator and even at 10% over 33 years, I would be producing more than $12 million a year when I retire. That is kind of crazy, right? Or will we see so much fee compression over the next 10-20 years that number will probably be cut in half.

Ok, this is a strange one for me. A long-term client is going to sell some of his very high end vintage guitars. The value of the guitars are about $500,000. For example, he has a 1953 Gold Top Les Paul he would sell. He went to a guitar show this weekend and a known professional guitarist offered to by one of his guitars for $28,000.

My client created a website and will go to some local shows to display his stuff. He is not needing to sell anything but enjoys being around others who love guitars. The thought is to try it for a couple of years to see if he can make some money buying and selling.

From a planning perspective, my first thought is to keep this as a sole-prop. I am not sure how taxes play into this. I did have him create an LLC as a first step.

I did not realize the value until recently (my fault as he did never explained the full value of his collection and I did not ask the right questions). I told him he needs to insure these guitars. He reached out to an insurance company known for insuring music instraments. They asked his if these were personal or business guitars.

What are your thoughts? Anything else you would ask or recommend?

Advisor with large regional bank for over 10 yrs. Approximately $70million in AUM, $25+ of that in advisory. Over $450,000 in t12 revenue. Want a change, but scared to make the move.

Have you done it? How did it go? What would you advise? Not asking for advice on the non compete or no solicit