AdvicePay Financial Advisor Community Blog

Calculating Financial Planner Fees for Retainer Services

July 17, 2018 By Alan Moore, MS, CFP®
Alan Moore, MS, CFP®

calculate financial planner fees for retainersAs the retainer model for financial planning services is still a relatively new player in the market, it can be challenging to know how to set your fees in a manner that is both reasonable and profitable. You want to ensure that you add serious value to your client at a rate that they feel comfortable, while ensuring that you feel compensated for the expertise you provide. To add further complexity to an already difficult task, the monthly retainer model is often hybridized with other models — in particular AUM — that require a different pricing structure. Before we delve into add-ons, however, let’s first focus on setting a reasonable financial planning fee in the retainer model. To do so, we are going to focus on three key areas — your niche, your time, and your expertise.

1) Your niche

The great precursor to setting your fees is knowing what your potential client base is willing to pay. The simple truth is no matter how good your skills are, people won’t sign up for them if they can’t afford them. You won’t be privy to how much people will be willing to pay unless you have a firm hold on who it is you are targeting. Nurses, for example, will have a very different threshold of affordability than CEOs. The criteria reach further than profession, however. It is also vital to look at the typical net worth of the demographic you are targeting, and price your services accordingly. In addition, it is necessary that you take into account your niche’s disposable income. Is it a group that is typically saddled with large monthly expenses, or are they carefree when it comes to their cash flow? Knowing this can help put you on the right track toward setting rates that satisfy both you and your potential clients.

2) Your time

Of all the resources that you will make use of in your role as a financial planner, your time is the most pivotal. Considering this, calculating the worth of your time should be a crucial factor when settling on your monthly retainer fee. The immediate challenge to this is that you may not know from the outset how much time you will spend on a particular client. As your business progresses alongside this new model, you will get more accurate in terms of your estimations.

A simple way to start with pricing your time is through looking at a time per client per year model:

  • Work out how many hours you will spend on a particular client per year. For example: I will spend 20 hours per year on Sarah.
  • Decide how much you would like to make per hour: I would like to make $150 per hour.
  • Multiply this amount of time per client per year by how much you would like to make per hour:  20 hours on Sarah multiplied by the $150 I would like to make per hour = .$3000 per year.
  • You will now have an estimate for how much you would make per client per year.
  • Divide this amount by 12 months, and you will have a ballpark monthly retainer fee.
  • Monthly retainer fee for Sarah = $250

3) Your expertise

In the model we have just described, your time is billed in what is quite close to a 1:1 ratio — I do one hour’s work for you, you compensate me for that hour. While this is a great way to structure the fees you will charge, it is important that you never underestimate the value you bring. When deciding how much your services are worth, take into account the many years it took to gain the knowledge you currently possess. Take into account the amount of money and time you have put into training. Consider the years you have already spent helping clients with their financial planning. You are not simply billing for the hour you spend on your client today, but also for the many hours you have already spent gaining the expertise you now have.

Here's in-depth look at a financial advisor business plan for retainers.

One of the major benefits of the retainer model is that it allows you to differentiate services. You can charge separately for financial planning and negotiate add-on services should this be necessary. Make sure you do enough research to discover exactly what it is that your clients are after, how much they can afford, and how much your own time is worth. You know you have struck the right balance when you feel well compensated and your clients feel like they have received excellent value for their money.  


Posted by Alan Moore, MS, CFP®

When life hands you limes, make margaritas. Alan’s entrepreneur journey began in 2012 after he was fired from his job as a financial planner and decided to start his own business. With his undergrad and M.S. in Family Financial Planning, Alan quickly put his business-building smarts and experience to work in helping other advisors start, run, and grow their own financial planning firms to serve NexGen clients. In 2016, he launched AdvicePay with partner Michael Kitces to operationalize the fee-for-service business model with technology that makes sense for the specific needs of financial planners. When he’s not starting companies, Alan lives openly as a self-proclaimed CrossFit junkie and dedicated snowboarder, a skill he is already passing along to his four-year-old son.

Topics: Retainer Model