AdvicePay Financial Advisor Blog

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What We’re Most Excited About

Here’s a fun paradox for the financial advisor — while you spend your entire day planning other people’s finances, your own billing systems are some of the most challenging parts of your job. Like the therapist who is the most challenging client for other therapists, you need to seek solutions from those who may understand the intricacies of your profession. Central to the issue of why billing for financial advisors is so challenging is the task of finding compliant payment processing solutions. The retainer model is gaining popularity with financial advisors as a means of serving a new set of clientele that is not asset-laden. One of the key obstacles to this model is sourcing a payment processor that regulators are happy with.

As the shift toward a retainer model for financial advisors becomes more popular, broker-dealers have been presented with a new set of challenges. To remain compliant in a retainer model, they have to work with financial advisors to make sure the monthly fees that come out of their customers’ accounts every month transmute into valuable services. As a result, many broker-dealers have been hesitant to touch the retainer model. The reality, however, is that the industry is moving further in the direction of a monthly fee structure. This is particularly true when it comes to dealing with a younger set of clientele, where retainer fees for financial planning that have been extricated from asset management typically become a standalone service. Regulators in many states have already caught on to the trend, and those that haven’t are being pushed to do so. Broker-dealers are finding that they too have to follow suit, and are looking for methods to make the shift seamlessly.

Tapping into a new generation of financial advisor client is an ideal way to scale your business. The retainer model, whereby you bill a monthly fee for investor advisory services, answers the call from a younger set of clientele for financial planning that suits their needs. This group of Gen X and Y’ers is looking for professional advice on financial management, but does not necessarily have a broad enough set of liquid assets to feed the Assets Under Management (AUM) model. You might be sitting in a situation where you’d like to cater to both client types — a combination of the younger and the more mature, the asset heavy and the asset free — or can see the potential in using a combination of both models for certain clients. Whatever your unique situation is, you are more than likely figuring out whether you can have your cake and eat it too — or, as the case may be, have a piece of each type of cake and eat them all.

When it comes to financial planning business models, the monthly retainer is the equivalent of a style icon or musician ahead of their time. While charging recurring fees for investment advice responds creatively to the current needs of a younger financial market, it might feel as though other parts of the industry have not quite caught up. As a result, deciphering how to ensure that your billing remains compliant with local regulation can be challenging. There are good reasons for regulators wanting to be cautious when it comes to billing methods. Their aim is to protect investment advisors’ clients from potential abuse. The struggle comes in when you as an honest, transparent financial advisor are looking to charge for your services and seem to find cul de sacs at every turn.

July Release Notes Summary

What We’re Most Excited About:

In your role as an investment advisor, remaining compliant is more than likely at the top of your to-do list. It’s important  to conduct business in a manner that stays in line with best practices and adheres to the stipulations of industry regulations in your specific location. Adopting a monthly retainer model for your financial planning business does not have to be at odds with your legitimacy. As long as you keep yourself informed of the prerequisites governed by your particular jurisdiction, there are ways you can charge recurring fees and still remain completely compliant.

If you’ve decided to make the switch from a commission-based model to a retainer fees model in your financial advisory business, congratulate yourself. You are clearly up-to-date with the latest trends in your industry and have the gumption to explore new frontiers. Your next step is to figure out who the best targets are for your newly adopted monthly fee structure. The quick answer is younger clientele. A commission-based model works better for more established clients with a large asset base. Retainer fees, on the other hand, work better for Gen X and Y’ers who are looking for financial advice as a stand alone service. Marketing financial planning as a standalone service to customers who have previously interacted with the AUM model can be difficult; however, approaching a completely new set of clientele who are not used to a commissioned-based model is far easier. So where do you start?

As 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.