Fear Of Fees

Be clear. Don't undercharge. Don't apologize.

These are some of the profession's rules of thumb for setting and communicating fees. But we've uncovered several other interesting practices. One is that some advisors are raising planning fees at the same time they feel pressure on their asset-based fees.

Gianola, who doesn't have assets under management, has bumped up her retainer fees by 20% to 30% "and had no complaints," she says. She's not surprised, she adds, that asset-under-management-based planners are having to recast their fees and charge a little more for planning and a little less for investments, considering the current stock market contraction. "Right now the industry is set up to emphasize and charge based on investments, which can be a dangerous thing," says Gianola.

Paula Hogan, president of Hogan Financial Management, Milwaukee, recently raised her initial planning consultation fee to $3,000 from $2,500. The reason for the increase, she says, was a huge increase in demand, and the time it takes to do relatively comprehensive plans. She also gives prospects the option of hiring her for $250 per hour. These fees are in addition to her asset-management fees, which start at 1% for the first $1 million in assets and go down as assets increase.

In a renegade move, Hogan recently posted all of her fees on her Web site (www.hoganfinancial.com). "I'm a fan of transparency," she adds. "If I'm not comfortable talking about my own fees, how can I effectively communicate them to clients? And if can't communicate them, what does that say about me?"

The experience will also teach clients and prospects to ask intelligently about what and how others, such as estate attorneys or even competitors, charge. "I'm not getting any fee resistance," says Hogan.

Is Your Own House In Order?

Hogan, who currently manages about $35 million in client assets in addition to her robust financial planning trade, is not complaining about business. But what is becoming apparent, she says, is that some planners really are suffering financially, both on the personal and professional fronts, as a result of the market slump.

"There are a bunch of planners out there whose income has gone down, sometimes dramatically. It's hard for them to get in front of clients and radiate optimism when they're wondering how you're going to pay a home or business mortgage," she adds.

While playing psychologist has become particularly important for advisors who have clients or prospects who have lost significant money or become particularly risk-adverse, it's equally important that they learn to detect their own weaknesses. After all, a great financial plan won't do a client much good if his or her advisor has to declare bankruptcy.

The trend for some planners to self-destruct isn't terribly surprising, since many tend to be fairly outgoing sorts, who enjoy dialogue and external rewards, says Tibergien, This explains why they might be tempted to spend more time helping clients than helping themselves and their own businesses. But the trend, even on a small level, only serves to underscore how important it is for advisors to measure the productivity and profitability of their own practices and benchmark them against relevant industry standards. For starters, try the Financial Planning Association's survey of compensation and practices, which Tibergien prepares.