Keep clients devoted

By Melissa Shin | October 1, 2013 | Last updated on November 17, 2023
5 min read

Offering broad services can breed loyalty.

Case in point: most of Rhonda Sherwood’s clients have been with her for more than 20 years. Why? The Vancouver-based Scotia-McLeod advisor credits her big-picture approach to planning, which includes incorporating tax and estate issues and bringing in experts whenever necessary.

She doesn’t charge extra for this service. “Whether I do the plan or not, my income doesn’t change,” she says. “But doing it helps me understand my clients’ needs and also to build relationships. My clients call me for everything.”

That’s also because Sherwood’s services extend beyond the office.

“A lot of times I bring lawyers to clients’ houses and sit with them,” she says. “Clients are more comfortable when I’m there as their advocate. And I always visit clients for our regular meetings. Going into their homes shows me what’s important to them.” For instance, she uses pictures and other evidence of grandkids to broach estate planning. She’ll say, “I see toys around the house, so obviously you spend a lot of time with them and want to take care of them. Have you ever thought about leaving them money?”

Sherwood adds many grandparents leave money to parents instead, thinking they’ll pass it on. But that doesn’t always happen, so she suggests direct gifts, like putting money in trust for university tuition or buying a first house as well.

To make her model viable, Sherwood needs clients with at least $250,000 to invest, though her advertised minimum is $100,000.

Another advisor who includes tax and estate services in wealth plans is Serena Cheng, a Toronto-based advisor with Richardson GMP. Her fee, a percentage of AUM, includes quarterly meetings, a comprehensive needs assessment and scenario modelling.

But if clients require a detailed analysis from tax and estate experts—a review of wills, family trust creation, corporate restructuring—she usually charges separately “because it wouldn’t be fair to offer a more rigorous service model to one client over another.” Fees typically run between $1,500 and a few thousand.

Cory Daly, president of Daly Financial Group in Regina, Sask., also charges clients for tax and estate plans to underscore the value of what he’s providing. He primarily works with business owners and professionals with net worths of at least $2 million.

Often, after his clients see the complexity and customization of their plans, he says they move their investment accounts over to him.

Explaining those fees

Daly admits prospects are surprised when they see the initial cost of his tax and estate plans. But, he notes, “Wealthy clients appreciate separating advice from product because they don’t want to pay for what they’re not asking for.”

Regardless, if a prospect says his fees are too high, “I reply, ‘Relative to no charge? Absolutely. If you can go down the street and get this technical aspect for free, I would, too. But if you went to a lawyer or accountant, you’d be paying $250 to $400 an hour for some of what I’m providing.’ I also show prospects sample plans so they know what strategies I use.”

When prospects see benefits, fees aren’t an issue. “If someone’s estate liability is $2 million, and I can get her insurance to fund that liability at 30 cents on the dollar, I’ve saved her millions,” he says.

Cheng agrees, saying clients have never objected to the cost. “The reason it usually makes sense for someone to pay is because he’s paying too much in taxes right now. When a person comes to me and we identify a need, he’s going to be saving tens to hundreds of thousands,” she says, adding a $1,500 bill is welcomed by clients when they know they’ll save much more and increase the effect-iveness of their portfolios.

Sherwood goes into detail about the fees coming off her clients’ investments—as well as what she does to earn those fees.

“I say, ‘Here’s how much you have with me, here’s the management fee (in dollars), this portion goes to ScotiaMcLeod and this part goes to me. That’s how I get paid for creating your financial plan, our four annual meetings, phone conversations, and bringing in specialists.’

“Then they say I’m underpaid,” she laughs.

Some advisors fear referring clients to centres of influence means they’ll question your value. Not true, says Daly.

He tells clients, “I’m preparing you to minimize your time with your lawyer and accountant. You’re paying me for the ability to work through the details.” Still, he says, “I don’t want to give clients the impression I can be hired by the hour. That defeats the whole purpose of financial planning.”

What to charge

When Daly quotes clients on tax and estate plans, he presents a flat rate that includes all revisions. To come up with that amount, he estimates his time is worth $150 per hour since he’s a CLU, CFP and CHS, and is working toward his TEP. Then, he multiplies that amount by how many hours he anticipates the plan will take to prepare. “If there’s a business owner with partners or other shareholders, a plan could take 30 or 40 hours,” he says.

Daly notes some U.S. estate professionals charge a percentage of the net estate (he’s seen 20 bps). But for younger clients, estate value is difficult to determine, so the model works primarily for estates in the protection or distribution stages.

Preparation vs. planning

Clients may wonder what you do differently from an accountant. Here’s how to answer.

Tax preparation: You do this once annually to fulfill your income-tax filing obligation. This involves organizing the applicable T-slips and receipts, filling out the return properly, calculating the amount owed or refunded, and filing by the deadline. An accountant can help with this.

Tax planning: This is a year-round task; if you wait until the deadline, it’s too late to plan. Good advisors look at income, cash flow, and ways to relieve, defer and transfer tax. “Working with a financial planner helps solve tax issues before they happen,” says Cory Daly, a Regina-based advisor. Accountants can help interpret tax law, but usually play an administrative as opposed to a planning role.

Same goes for estate planning, Daly says. “Having a will gives an executor powers to act; it doesn’t mean those actions are right. I help people understand outcomes and the ramifications of what they’ve said in their wills.”