AdvicePay Financial Advisor Community Blog

How to justify the advisor retainer model to clients

July 10, 2018 By Alan Moore, MS, CFP®
Alan Moore, MS, CFP®

financial advisor business planning servicesWriting a financial planning business model that adheres to the trends of a changing market can be a daunting task, primarily because the industry is in the midst of a paradigm shift. In the Assets Under Management (AUM) model that previously dominated the terrain of personal finances, the finance professional’s services were far easier to quantify.

In its time, the AUM model was revolutionary. It was the first financial services business model not founded solely on sales and product creation. Based on managing and growing a client’s liquid asset base, the AUM model came with an inherent pricing structure — I make money for you, and in return, you give me a percentage of that money. Financial planning was added on to this model as a fun extra, and until recently, not seen as a standalone service.

The next generation of financial services client.

While the AUM model has successfully dominated for a number of years, new requirements in the marketplace are screaming to be recognized. The industry is now beginning to answer the call of younger clientele seeking financial services who do not necessarily have a pre-existing liquid asset base. But what is it that these Gen X and Y’ers are searching for in a financial services professional?

What do they want?

The answer is financial planning, not simply as an add-on to pre-existing services, but as a standalone function. This younger generation has a very specific set of shared criteria. While in some cases they earn substantial incomes, they may not have the assets of their forefathers. They are also used to a world where they can compare their options online, and are happy to pay smaller monthly installments instead of big upfront costs. In addition, Gen X and Y’ers are saddled with more debt than any of their predecessors. They need solutions to their financial management questions, and those solutions have to fit within their precarious lifestyles.

The retainer model — and how to justify it to your clients.

If you are at the point where you are writing a financial advisor business plan for your services, the retainer model should be at the center of your radar. In this model, your client pays you a monthly subscription fee for financial planning services. Affording a monthly fee is generally doable for younger clientele. They are willing to pay this if you are willing to be entirely transparent about the value you will add to their lives. Keep in mind that paying an advisor monthly doesn’t mean you need to be offering a monthly service - we like to frame the service as an annual service billed monthly/quarterly. Services you can offer make up the comprehensive planning relationship and can include:

  • Cash flow review
  • Debt management
  • Student loans
  • Retirement planning and progress towards goals
  • Education planning
  • Tax planning
  • Insurance planning
  • Investment recommendations/implementation
  • Career planning

The above is a list of what you do for your clients, but ultimately the justification for what you can charge is based on the value your clients receive from the relationship.

By forming a relationship with your clients based on a financial planning model that takes their current financial status into account, you are well on your way to forming long-term relationships with clients whom you may be able to retain for years to come. If you are inclined to move with the trends of an evolving industry, adopting the monthly retainer model for the financial services you offer is the most fruitful option. This model facilitates scaling your business in a measured, sustainable way, and allows you to set up a client base that will find you indispensable to their lives.


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, Marketing