In this episode of YAFPNW, I chatted with Dan Yerger, MBA, CFP®, AIF®, CDFA®, about his extensive work in the financial planning profession and why he’s removing transactions from his fee model.
Dan didn’t start out in the financial planning world — in fact, he started in the U.S. Army. After retiring from the Army, Dan received his MBA with a certification in finance. From there, 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, CO, and officially received his CFP® in 2018. While he evaluated the bank and insurance side 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.
The financial planning process & 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 has decided in 2019 to move away from this model. Instead, he now offers 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.
As he says in the episode, he figures out his fees based on how much time it will take to successfully provide and implement a plan, and applies that to the compensation his firm would like to receive. “The biggest thing I look at is really the complexity,” Dan shares. Clients with $1 million in a single account, for example, are different than someone with three rental properties, a business, and accounts scattered all over. That increases the time, and therefore cost.
Once he has the information he needs to calculate out his rates, Dan provides the numbers to the client and they can determine at that time if the compensation is within their budget. As a result of his fee-based changes, Dan 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 (in some cases) 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.
But more about this compensation model...
Shifting to fee-based model
While Dan shares his process for removing transactional fees from his model, he also shares how he came to his decision in this episode of YAFPNW. During our chat, he talks about the difference between “architects” and “carpenters” and which role he wants to fulfill inside his own practice. As Dan shared, 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.
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 tradeoff 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 says, 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, take a lot 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 shared — and I think that’s something many new planners are struggling with and can relate to.
So, if you want to hear more about Dan’s journey through the profession, what called him to change his fee model, and why he thinks education and continuing education are critical to serving clients better, make sure to listen to our chat!
What You’ll Learn:
- Dan’s background in the Army, IBM, and grad school
- Why Dan is so passionate about pro bono work
- Adopting a consultation and compensation model that works for your clients
- How to calculate time and complexity into a client’s quote
- The ratio of CFP® professionals to people in need of financial planning
- How to successfully change your fee model
- Why transaction fees may not serve you or your clients
- Why ongoing education and a learner’s mind are critical in this profession
- The difference between the “architect” and the “carpenter” (and which one you are)
- The need for discussion of best interests and conflicts among professionals
In this episode of YAFPNW, Dan Yerger, MBA, CFP®, AIF®, CDFA® mentions:
- His affiliate practice with Waddell & Reed
- The FPA’s Pro Bono resources
- Carl Richards
- Michael Kitces, who we chatted with on Ep. 163
- Alan Moore, who we chatted with way back in Ep. 15
- XY Planning Network Podcast
You can keep in touch with Dan by connecting with him on LinkedIn.