AdvicePay Financial Advisor Community Blog

Financial Advisor Value Proposition for Retainers

July 03, 2018 By Alan Moore, MS, CFP®
Alan Moore, MS, CFP®

value of financial advisor retainer modelSo, you’ve decided to scale your financial planning business in the direction of a younger market. You have understood the worth of including Gen X and Y’ers in your client scope. With this expansion comes the need to reconfigure your fee structure from an AUM (Assets Under Management) model, based on commission earned off financial growth you have generated for your client, to a fee structure more appropriate to a demographic that does not have a large asset base. You might have realized that the retainer model is the most appropriate for a younger market, as they have monthly cash flow but do not necessarily have assets of their own for you to play with. The next step in your process is to know how to justify the value you bring.

To assist you with this phase of your shift to a retainer model, here are three key areas that will help you explain your fees to your clients. The value you add to their lives will be as clear as the financial boost you can provide for them.

1) Put all your cards on the table

As the financial industry has moved further toward the digital realm, it has been called to adopt the culture of its new home. Part of offering online services is transparency in pricing. While this may be a nerve-wrecking thought for any financial planner who is used to previous models, it is not one you can steer away from. The more transparent the market is in terms of pricing structures, the less favorable a lack of transparency will look. The best way to deal with this is to match the transparency you offer in your pricing with transparency about your value. Playing your cards close to your chest when it comes to illustrating what you can provide will not serve you in the current climate

2) Delineating tangible services

Now for the next question — what is the exact nature of the services that you offer to your clients? The challenge here is to make these services as tangible as possible for your client. For some, it may be difficult to see the exact correlation between the fee and the outcome. Quite simply, you are paid to take the money that comes into your clients’ lives and make sure it performs as well as possible. What will you do to transform their income into a stream that is sustainable through their lives and that allows them to live free from financial worry? You can only begin to tackle this if you have an in-depth understanding of each specific case. Here, an approach that prizes the uniqueness of each case will stand you in good stead.

3) Being certain of your own value and how to communicate it

Once you know what you’re offering, the final challenge is knowing how to communicate your value confidently. You have to be certain of the worth of your services and be able to communicate it with sincerity. Again, in today’s market, full disclosure of what you can offer is as important as disclosure of your pricing structure. 

To further help you, check out our financial advisor business plan for retainers.

In the AUM model, justification for the services offered is part and parcel of the model itself. Your clients will be far more willing to part with a portion of the money they never would have had if you did not make it for them. In the retainer model, however, where your income is based on a monthly fee, pinpointing the service you offer can seem more elusive. You are essentially offering your expertise in the form of advice, something that can be difficult to quantify in a direct ratio. The key to bridging the gap is in your own ability to articulate your indispensability.


Posted by Alan Moore, MS, CFP®

When life hands you limes, make margaritas. Alan’s entrepreneurial 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