As a planner who straddles the middle- and upper-income markets, he says the difference between the two types of clients can be fairly stark in terms of their expectations and desired deliverables. While wealthy clients who have worked with advisors before may demand and need in-depth services and documentation, middle-income clients may not need or want to pay for some of the same research or paperwork.
"I think some (middle-market) planners really make the mistake of spending hours on projects that aren't billable, especially if they're used to doing comprehensive planning for wealthy clients," says Clintsman. "It's better to weed out those practices, so you can find the highest and best use of your time and best deliverable for the client."
That's because time is of the essence when it comes to creating profit, the Texas planner says. To create greater efficiency, Clintsman not only maps out the hours of each day right down to scheduling time for reading periodicals and answering marketing and charitable requests, but he says he joined The Garrett Financial Network when launching his firm to avoid having to reinvent the wheel. The network supplies affiliated planners with access to contracts, marketing materials, compliance documents and proprietary planning software, which Clintsman says shaved six months off his start-up time.
To further systematize his business, he subscribes to portfolio services to create model portfolios and asset allocation plans, something more and more middle-market planners are doing.
Echoing the belief that systems are paramount to profitability at middle-income firms is Alvin Rogers, managing planner at Financial Decisions Institute, Little Rock, Ark. Four leading Arkansas planners, who believed they could create a profitable business serving middle-income clients, founded the firm four years ago.
"When a client comes in, it's critical for efficiency that we work the system all the way through," Rogers says. A centerpiece of the firm's system is the Risk Capacity Index Calculator program, software that founding partner and CEO of The Arkansas Financial Group, Rick Adkins, created and now markets through Practitioners Publishing Co. in Fort Worth, Texas.
The program allows Rogers and the firm's paraplanner, Mary Thompson, to do client risk analysis, allocate assets in the firm's model portfolios, calculate retirement plan projections and determine life and disability insurance needs and college funding requirements with as few keystrokes as possible. "You input the client's information and get your answers in a straightforward manner, which is precisely what we need," Rogers says.
Unlike planners in the Garrett Planning Network, who do not manage assets, Rogers says that the $11 million in assets that Financial Decisions Institute has collected is creating the greatest profit margin at the firm.
The firm is alone of those contacted for this article in not planning to raise fees in the foreseeable future. Clients pay $75 per hour for planning and 75 basis points for asset management. The average tab for planning runs clients $375 to $450, Rogers says. "Raising fees to, say, $150 an hour, would scare clients earning $50,000 to $60,000 away," the planner contends.
Still, as a nod to the fact that clients have a tendency to want to call their planner from time to time, the firm instituted a $100 annual retainer fee on September 1. "Clients have issues that come up all the time," says Rogers. "Maybe it's a change in their benefits plan at work, a mortgage refi opportunity or deliberations about buying a new car." Clients who don't opt to pay the retainer will pay the $75 hourly fee to have their questions answered. While $100 can seem incredibly inexpensive, Rogers says the firm will track client calls and rejigger the retainer fee going forward based on individual client usage.