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Want More Clients? An Inflexible Pricing Model Might be Holding You Back


Is your pricing model preventing you from taking on new and different clients? How can you be more flexible? AccountingWEB attended AICPA Engage 2020, and we strove to answer that question.

Jul 23rd 2020
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Whether you’re thinking about getting into financial planning or have been in that specialized field for a decade, it’s no secret that working with Millennials is vastly different from assisting their predecessors. To make matters more complicated, COVID-19 changed the way a lot of people are thinking about financial assets. So, is it necessary to rethink your fee model? A panel at the remotely held AICPA Engage 2020 conference sat down to discuss this exact topic.

First, as Adam Moore, CEO of XY Planning, pointed out, only 5 percent of Americans have enough assets that the traditional percentage charge (i.e. you have $1 million in assets, I take 1% as my fee to manage them) really works. Even more interesting, only one-third of Americans have delegated money management to a professional. So, the panel members agreed, the traditional model isn’t working for the majority of potential customers out there. On top of this, you have to take into account that the needs of Millennials and their thought processes and values are starkly different from those of Baby Boomers.

Here’s Alan’s take, and it’s one that a lot of younger accountants can likely relate to: “When I was 25, [I said] I'm going to work with my peers. I want to work with people in their 20s. They don't have $1 million, and they don't have enough money to work. They do have enough income; they are willing to pay you to show value. That was where the monthly subscription model came from that we have been advocating for. [It gives] people the ability to pay you for advice and have it not be tied to whether or not they have assets.”

In other words, if you want to be flexible, you need to have a model that allows clients to pay out of their cash flow.

Mark brought up some other relatable examples as well.

“I remember bringing in a doctor making half $1 million, but they did not have assets. We could not work with them. I remember feeling like, ‘This does not feel like a client problem. This feels like a business model problem.’ The business model is broken. So our advisors charge in a variety of ways. We have fee for service, which is everything that is not AUM. Have retainer project subscription. I always say to advisors, [if you’re thinking about doing a] monthly subscription, who do you work with? If you work with millionaires, keep the AUM model. If you are working with young women in tech that have a bunch of RS use, that is a different fee structure and different business model than if you work with Chick-fil-A franchise operators…we advocated [starting] with your niche. What is the problem that you are the best at helping your client solve? Who has that problem and how much are they willing to pay you based on the value you can provide them? There is no right structure; there is the right structure for you based on how you want to work with your client.”

Depending on who you’re working with, what their needs are, and how much they make (as well as how much they have the potential to make, even if they are not high earners now), be flexible, Alan concludes. And don’t be afraid of charging flat fees per month or per year. Many people simply want to know how much your services are going to cost because they don’t want surprises. They won’t balk at the seemingly high number.

Mark Berg, head of Timothy Financial Counsel, has a somewhat different approach. Going a bit against the grain of the modern accounting pricing model, he prefers to charge by the hour. “As I was trying to determine what would be the best way to match that cost value proposition for that type of demographic, I really felt like hourly made all the sense in the world because it flexes with the complexity or the simplicity of the circumstance. [That] complexity and simplicity can change in the same client within a given year. [Take, for example] a client that I started working with this year; her husband died three months later, and it was a massive impact to her circumstance at a lot of levels. [It] created a lot of work that needed to be done for her benefit, so we have done hourly really since day one and have found it to be an outstanding model.”

To add some flexibility to this model, Mark and his colleagues have different hourly charges, depending on who you’re working with. His fee is highest, due to his wealth of experience and status as the lead partner of the firm. Clients can save money and still benefit from the expertise of a professional by working with one of the under-partners, who also charge less money.

Remember, says Mark, “It is not all transactional. It is very relational, and I [can] show you communications with clients to show how relational it is. We really are building trust, just like I did back when I was in the AUM retainer model. It really is a relationship.”

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