How CPA financial planners can succeed with alternative fee models

By Courtney L. Vien

When Brooke Salvini, CPA/PFS, started her own firm, she decided not to bill clients by using the traditional assets-under-management (AUM) model. The AUM model, she realized, could limit her to accepting only clients whose assets surpassed a certain threshold.

“AUM didn’t resonate with me,” she said in a panel session on alternative billing methods during the 2020 ENGAGE conference, held online Tuesday. “I wanted to find clients that were a good fit and not be restricted by their net worth.” Salvini, principal of Salvini Financial Planning in Avila Beach, Calif., chose to charge clients either per hour or on a retainer basis.

Though AUM can be a good fit for some CPA financial planners, others find that adopting alternative billing methods can expand the number of potential clients they can attract. As panelist Alan Moore, CEO of the XY Planning Network, pointed out, only around 5% of Americans have $500,000 in assets — the typical amount needed for the AUM model. Younger clients, in particular, might earn enough income to require the services of a financial planner, but they lack the assets to work with one using the AUM model, he said.

Moore bills clients using a subscription model. Clients pay different amounts per month, based on their net worth and the complexity of their finances.

Panelist Mark Berg, founding principal of Timothy Financial Counsel in Wheaton, Ill., charges clients hourly rates. The hourly model has the benefit of “flexing with the complexity” of a client’s finances, he said. For instance, when a client experiences a major life event, such as the death of a spouse, he will need to do a lot more work on their behalf and bill them accordingly.

Salvini said she appreciates not having to feel conflicted if a client decides to take money from an account, because it won’t impact her fee if they do so. “I can help clients make the best planning decisions and deploy their wealth in the best way with no conflict,” she said.

The panelists also addressed some common concerns about alternative billing methods. For instance, some financial planners worry that if they charge clients by the hour, clients won’t seek them out for advice unless absolutely necessary so as not to incur higher fees. Salvini said she hadn’t experienced that with her clients.

“If you develop a trusted relationship with clients, they’ll want your input,” she said. “Most of my clients won’t make a financial move without checking in [with me].”

The panelists also offered some words of advice for CPA financial planners considering alternative billing methods:

Choose the best billing model for you and your clients. There’s nothing wrong with the AUM model itself, Moore said, but it may not be the best fit for the type of clients you want to serve. To choose the right billing model, he said, start by thinking about your niche. Ask yourself what problem you’re best at helping clients solve, he suggested.

Choose a model that you can stand behind, whether that’s AUM or an alternative, Moore said. “Clients will buy into it if you have a passion for it,” he said.

You can also adopt different models for different clients. Salvini, for instance, charges some clients an hourly rate but charges a retainer for clients who want her to handle their investments.

Know what your state allows. Different states have different regulations regarding how financial services professionals may bill clients, Berg said. In certain states, for instance, financial planners can’t charge by the hour for some services. Check with your state regulator to see which billing methods are permitted.

Enlist technology. Technology has made it much easier to use certain alternative fee systems. Berg, for instance, uses software called GetMyTime, which syncs with QuickBooks, to track hours spent on a client, while Salvini uses QuickBooks Timer.

Courtney Vien (Courtney.Vien@aicpa-cima.com) is a JofA senior editor.

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