Wealth Planning News
Vol. II, No. 4
Nothing about GRATs, NIMCRUTs, or FLPs in this issue. Just a conversation that helps you to understand what we do.
An Extraordinary Lawyer recently spoke with us about planning issues. In terms of knowledge, experience, and technical ability to save transfer taxes and even income taxes using sophisticated planning techniques, this lawyer has to be in the top 1 percent of planning lawyers in America.
He has years of experience with clients, and as a continuing legal education instructor for other lawyers. If other lawyers holding themselves out as being “estate planners” deal with their topic at the level of junior high science, this lawyer could deal with it at the level of college physics.
He is familiar with some of the techniques we use. He also knows the amount of work involved in that type of planning, the specialized knowledge, and the years of experience necessary to blend techniques together. He also knows the benefits of this sophisticated planning for clients. But he also knows the level of responsibility assumed by planners who do sophisticated planning.
Our lawyer friend does only ordinary planning for his clients. He charges fees that are in line with what other less talented and less experienced lawyers charge for similar ordinary planning. He barely makes a living being ordinary. He confessed that he could do more for clients. So why does he perform ordinary work for his clients, instead of extraordinary work that could do wonders for the clients and their loved ones?
Here is his answer: He is afraid to tell clients what else they could be doing unless they ask him to do more. We pointed out that few of them would ever ask him to do more because the clients don’t really know they can do more. He admitted we were right, his clients don’t ask for more planning.
Then he gave us his real reasons for not doing a better job for his clients. His first reason is fear: He is afraid to charge the fees required for sophisticated planning. “I’m afraid I would lose clients if I brought up sophisticated planning and quoted the fees needed for it.”
His second reason is lack of adequate compensation for the extra work and extra responsibility involved with doing sophisticated planning. “Any lawyer a couple of years out of school, and with no extensive training or even a background of experience with the many legal issues involved in doing sophisticated planning will work for so much an hour. Clients expect all lawyers to work by the hour, and all for about the same amount per hour. So I am busy full time doing work that does not make me assume extra responsibilities, since I wouldn’t really make any more income if I did that type of work.”
So here is the planner’s dilemma: Be ordinary and keep clients who will never know what they could have done better. Or bring up sophisticated ideas and lose clients.
The Planner's Solution
Our friend's logic is faulty. He is guilty of making several false assumptions:
First, he falsely assumes that his choice of what to charge is limited to hourly fees.
Second, he falsely assumes that he cannot charge more for his services than amounts less experienced lawyers charge.
In This Issue
The Planner's Solution
We pointed out that professionals in every field of endeavor charge according to the value to the client or patient, and the responsibility.
A skilled surgeon provides value to patients, and charges more for procedures that require a high degree of skill and training, than another physician might charge for the same amount of time spent on office visits by patients who have colds, or need physical examinations.
A real estate broker charges fees based on the amount involved in the real estate transaction.
A broker or other financial professional earns more on large investment transactions than on small ones. A financial advisor charges a flat fee based on the value of client assets under management.
A trust department charges flat fees based on the value of the trust estate.
Applicable legal ethics do not require only hourly charges by lawyers, but allow lawyers to take into consideration the value to the client and the expertise and experience of the lawyer, and responsibility assumed by the lawyer.
We told this lawyer we faced similar fears. We found it takes courage to try to be extraordinary in any part of life. In our experience only about five to ten percent of prospective clients are guided only by potential costs. The other 90 to 95 percent respond to hopes, dreams, desires and needs and will accept a reasonable fee for more and better work.
We suggested that the most important thing this lawyer could do would be to overcome his fear of charging a fair fee. He should give up those prospective clients who shop only on the basis of fees, and who expect him to work for the same amounts they could pay someone with less skill. Instead, he should focus on people who care enough to work hard with him to learn the potential benefits of doing what the law allows and the incredible costs of not taking advantage of what the law allows, and care enough to pay for the benefits they will receive.
We reminded our friend of a client we had who told us he could have sold his commercial building himself but hired a broker because the deal involved a $2 million building and he feared that if he sold it himself he might have to accept as little as $1.6 million. So he paid a professional real estate broker a fee of $140,000 to sell the building. He figures the broker saved him $260,000 (the difference between $1.6 and $2 million minus the $140,000 fee).
We told our lawyer friend that if clients would pay $140,000 to save $260,000 they shouldn’t hesitate to pay him a lower reasonable fee to save even for them and their loved ones. But he first has to work up the courage to tell his clients what he can help them do. He must let clients do the basic planning, but at least give them the choice to do more. Most of those who need more will choose to do more for themselves and those they love.
How does all this apply to you? We will level with you about what you can do for yourself and your loved ones, and why the costs will be worth the effort. If you are a potential client, forgive us for being honest with you. You see it took years for us to learn about what you can do, and to get the guts to tell you what you can do. You will probably be pleasantly surprised at the low fees we charge for extraordinary benefits.
Call us for a free consultation to find out what you can do, and the fees in your case.