Journal of Financial Planning / Next Generation Planner: April 2021
By Matt Fizell, CFP®
Financial Planner and Operations Manager, Guiding Wealth
Host, You’re a Financial Planner…Now What?
Dan Yerger, MBA, CFP®, AIF®, CDFA®, didn’t start out in the financial planning world—in fact, he started in the U.S. Army. After retiring from the U.S. Army, Dan received his MBA in finance. He worked at IBM while attending grad school and became interested in financial planning when he had to do a financial plan for his parents. Despite working as civil servants for over 25 years and qualifying for a “good” pension, Dan quickly realized his parents’ retirement plan didn’t account for increases in the cost of living, and that their retirement was at stake because of it. After that, he knew he wanted to help people with their financial planning needs.
Fast forward a few years, and Dan now operates his own financial planning practice in Longmont, Colo., and officially received his CFP® certification in 2018. While he evaluated the banking and insurance sides of financial planning, Dan felt called to start an independent practice, and founded one affiliated with Waddell Reed in 2015.
Since then, he has served a uniquely wide range of clients—and even a number of pro bono clients. On my episode with Dan, we chatted about his extensive work in the financial planning profession and why he’s removing transactions from his fee model.
The Financial Planning Process and Determining Pro Bono Needs
As most new planners do, Dan struggled to find his own preferred compensation model within his practice. While he initially held a traditional fee-based model with transaction rates, he decided in 2019 to move away from this model to a fee-based financial planning and investment management service. He determines fees on a case-by-case basis and offers a free initial consult, which he uses to determine the client’s needs and complexity.
He figures out his fees based on how much time it will take to successfully provide and implement a plan, and then applies that to the compensation his firm would like to receive.
“The biggest thing I look at is really the complexity,” Dan said.
Clients with $1 million in a single account, for example, are different than someone with three rental properties, a business and multiple accounts. Working with the latter increases the time and, therefore, the cost.
Once he has the information he needs to calculate his rates, Dan provides the numbers to the client, so they can determine if the compensation is within their budget. As a result of his fee-based changes, he has only accepted clients on a financial planning and investment management basis.
On top of his fee-based services, Dan also offers pro bono support to clients who need help finding resources or who are just getting back on their feet after a major financial setback. Following the FPA’s model for pro bono work, he sometimes offers a financial planning services agreement fully discounted. His reasoning? If these clients are brave enough to ask for help, the least he can do is offer them support.
Shifting to a Fee-Based Model
How did Dan come to the decision to change his compensation model? During our chat, he talked about the difference between “architects” and “carpenters” and which role he wants to fulfill inside his own practice. It’s possible for him to design a financial plan and walk a client through it (architect), then work with somebody much more specialized in those areas (carpenters) to handle the actual execution, Dan said.
And while he knows that every planner is entitled to his or her own experience, he finds that charging a transaction fee for investments puts a restraint on what he can do for his clients. Planners using this model may have to assess the cost-benefit trade-off for their client instead of just doing what is best for their overall financial plan. For him, removing transaction fees allows him to work in the best interests of his clients. It goes beyond documenting or disclosing any conflicts of interests, Dan said, and extends into how we act each day in our clients’ actual best interests. For this reason, he feels satisfied with his transition to a fee-based model but welcomes discussion with planners with alternate methods.
At the end of the day, his new fee model also allows Dan to work with a team of experts—taking much of the execution of insurance plans, product underwriting, etc., off his plate—and better serve his clients by providing the best financial plan he can.
“I don’t have to be the architect and the carpenter for what I’m building,” Dan said, which he noted other new planners might also struggle with and can relate to.
Editor’s note: Find the full episode with Dan on our podcast page.