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Do You Know Your Why? Let Me Share Mine.

I wanted to take this week’s commentary and share a bit of my Why.  In the past week I have had three people ask me why I launched my firm and why this unique flat-fee model.  It dawned on me I have not really explained my reasoning so I wanted to take a few paragraphs to explain.

I have not been a financial planner my whole adult life.  The first decade after finishing grad school at Ohio State was spent in west Michigan as an Assistant City Manager/Economic Development Director for two different cities.  This was the start of me embracing my parent’s philosophy of having a profession where you help others.  The work was rewarding, however, to advance you needed to move every few years.  When I was young and single that was fine, but with a young family my perspective changed.  I grew up in the house my mom grew up in and having that stability was important to pass along to my sons.  Several of my friends were financial advisors and because of my financial background they recruited me.

A decade ago we moved back to the Akron area and I went to work at Merrill Lynch.  After being there five years, and being the only person in the group I started with who was still there, I decided a smaller setting would be a better fit for me.  I then went to work for a small firm with the eventual goal of taking it over.  About a year ago I realized to I needed to create my own firm as a solution to what I feel is a broken system.

The broken system is how clients pay their advisors.  Most financial advisors have an Assets Under management (AUM) model.  Advisors charge an annual percentage of the assets they manage and the average is 1%.  The higher the AUM the higher the revenue.  I believe the system is broken because clients pay based on something out of the control of advisors – the performance of the market.  As an advisor I realize I have as much impact on the market as a meteorologist does on the weather.  I knew there had to be a model out there where clients paid based on the value I bring as a Certified Financial Planner™ and not based on something out of my control.  I just hadn’t figured it out yet.

I want to share a story with you I have only shared with a few people.  It is the proverbial straw that broke me to pursue this unique flat-fee model.  Roughly a year-and-a-half ago a client of the firm I was at called the office.  The client said his father, who was also a client, had expressed interest in withdrawing a portion of his account to donate it to several charities on behalf of a deceased loved one.  This was not one of my clients.  I handled the phone call because the client’s advisor was on a month-long vacation.  When the advisor eventually called in I let him know the request and his response was “I cannot lose those assets!”

I was dumbfounded by that reaction.  To me the advisor was saying the money was the client and not the client himself.  I also wondered who did the advisor think this money belonged to.  However, it dawned on me this reaction shouldn’t be a surprise when advisors are paid based on how much money they manage.

A month later I came across an article of an advisor in another part of the country who created his firm based on a flat-fee model.  This model hit me as the way for me to finally have a real client-centric financial planning firm where clients pay based on my value as a CFP®.  After lots of consideration I knew the only way to have a firm based on this model was to start from the ground up, and that is just what I did earlier this year.

My experience since I launched has been interesting.  Potential clients, including someone I spoke to this morning, walk away saying “I have no idea what I pay now and I need to know.”  The only people upset by my flat-fee approach are other advisors.  Maybe this is why one reporter who interviewed me said he sees me as a disrupter within this industry.  I look at it from the perspective of I know my value as CFP® and I know who my ideal clients are.  It may have taken me nearly a decade, however, I have now created the ideal firm for me to serve clients who understand my value and want to focus on accumulating wealth by controlling their fees.

Ultimately, my Why can be summed up by saying I have challenged the status quo and created a financial planning firm that offers a select number of clients the ability to pay a flat annual fee of $4,800 based directly on my value as a CFP®.  The question now is: Who is forward thinking enough to be a client?

About Dan Johnson, CFP

I am the President and CCO of Forward Thinking Wealth Management, LLC, which is the flat-fee financial planning firm located in Akron, OH, and set up to work virtually with clients across the country. I charge clients a flat fee of $4,800 regardless of asset size. My firm is a solution to what I feel is a broken system where clients pay advisors based on something out of their control - the performance of the market.
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