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Rick Telberg

Four Steps to Getting the Fees You Deserve

Step 1: Don’t delay. CPAs assess the Baby Boomer market. Join the study; get the benchmarks.

October 15, 2007
by Rick Telberg/At Large

It’s funny how CPAs can go to a client and discuss the intimacies of life and death, children and parents, bank accounts and bankruptcy, but when it comes time to talk about fees, the topic is buried, breezed over or brushed off.

It’s easy to understand why. The CPA financial planner is there to talk about making money, not spending it. The focus is on helping the client, not funding the financial planner. The advisor’s fee almost feels like an insignificant afterthought, a voluntary tip for services well rendered, or a topic too mercenary to talk about.

CPAs assess the Baby Boomer future.

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Both parties understand, of course, that the advisor’s service, like everything else good in life, isn’t free. Somewhere, somehow, the CPA financial planner gets paid. That payment can amount to quite a bit of money, and it isn’t necessarily tied to performance. Depending on the fee structure, the CPA financial planner who guides a client to wealth may earn as much as the one who barely helps a client tread water.

Clients are naturally nervous about this, but they’re probably most nervous when they don’t understand what fees they’re paying. They tend to fear an expensive surprise, and they’re often confused about how the CPA financial planner figures out the fee. When it’s bundled with a variety of products, it gets not only more complicated but also less comparable with the fees of other financial planners.

Don’t overestimate the client’s ability to understand your fee structure. According to focus group research conducted by State Street Global Advisors, financial advisors very often think the client understands their fee structure. But the truth is that very few clients really do understand it.

Primarily, this is a matter of trust, which is by far the most important characteristic that clients look for in financial planners.

Secondarily, this is a matter of clarity. The same study found that clients are less concerned about the absolute fee than about understanding what the fee is. Fast-talk turns them off more quickly than issues of commission.

Thirdly, of course, it’s the fee itself. The smart client will compare those fees with those charged by other financial planners. Smarter clients will want to know what they’re getting for their money.
These three issues all say the same thing: Talk about fees with your client.

Dr. James Grubman, a psychologist and consultant on wealth management for high-income families, has had success with a four-step procedure for talking about fees:

  1. Don’t procrastinate. Fees aren’t necessarily the first thing you want to talk about, but plan the moment when you will bring it up, and then do it without fail.
  2. Present the fee structure clearly. This is easier if the structure is simple. Clients don’t want to grapple with shades of gray. Don’t muddle the issue with discussion of what other clients have to pay or what your client might have to pay. Complex structures designed to keep things fair are less effective than structures that are easy to understand. Keep it simple. Explain it. Move on.
  3. Put your fees in context. Provide a chart comparing your fees with your competitors’. This might be a good time to explain what you’re delivering for the fee.
  4. Put it in writing. Don’t let somebody’s bad memory create a nasty surprise. And don’t put it in small print or legalese. Make it clear that you’re not hiding anything.

In short, don’t be afraid to talk about fees. Use it as an opportunity to build trust. If you’re open, honest, specific and unapologetic, your clients will trust you, and that trust is the support system of a productive and long-term relationship.

YOUR TURN: CPAs assess the Baby Boomer market. Join the study; get the answers.

COMMENTS: Questions, rants or raves? Write Rick Telberg.

Copyright © 2007 Bay Street Group LLC. All Rights Reserved. Used by Permission.

About Rick Telberg

Rick Telberg is editor at large/director of online content.

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Disclaimer: Any views expressed in this article do not necessarily reflect the views of the AICPA or CPA2Biz. Official AICPA positions are determined through certain specific committee procedures, due process and deliberation.