As the financial planning industry is continuously evolving, which has been amplified in response to the pandemic and a rapidly growing number of clients in the X and Y generations, the monthly retainer model has become the preferred fee structure for financial services. We have already seen that the adoption of financial planning among advisors is rising (increasing from 33% in 2013 to 72% in 2020) and will continue to trend upwards in the coming years. We’ve compiled the top three reasons you should consider adopting the fee-for-service model and how it can grow your practice.
At its core, the fee-for-service model is very straight-forward and client-friendly. It is simple for you to manage on a business level -- there are no extra fees or charges, no complicated calculations, and all clients are treated exactly the same. It also creates a streamlined experience for your clients as they can make a payment once a month via their bank account or credit card. Having the ability to communicate fees as an upfront charge and then a monthly fee for ongoing services will make more sense to your client rather than taking them through a lengthy explanation of how you have calculated your fee structure based on income or their portfolio. The monthly subscription model is already a very popular way for most companies to offer services and collect payments. Many clients enjoy the predictability of this model since a fixed amount comes out of their cash flow every month to cover the costs of planning services. The simplicity that comes with charging a monthly fee allows you to create a transparent fee structure and get paid fairly.
2. Flexibility and Creativity
Not only is the fee-for-service model straightforward, but it also gives way to let you have the flexibility and creativity in the way you deliver your services. With the fee-for-service model, you’re able to adapt and mold your services on a per-client basis. Being able to create pricing models for people that focus on a specific career stage, generation, family status, or any other type of planning need, allows you to build your niche and stay true to your client base. This also allows you to build up a more stable group of clients which in turn, provides you more client referrals as your business grows.
3. Efficient and Adaptive
Another reason why the fee-for-service model will help you grow your business is that it enables financial advisors to be more efficient and adapt with either ever-changing shifts in the market or major events in clients’ lives. It also enables advisors to directly address their client’s concerns in a personalized manner whenever they need help or have immediate questions.
The fee-for-service model also lets you, as an advisor, to create a customized “fiscal roadmap” or calendar to schedule your services more efficiently. Establishing a services calendar helps outline what you are actually doing for your clients and gives them a more tangible path to achieving their ideal financial trajectory. Your client’s expectations are made clear on what you will deliver over the course of the year and you are also able to get very granular in terms of planning out various services and tasks.
Check out our blog, "Conveying the Value of Financial Planning to Prospects."
The fee-for-service model is designed to make your and your client’s life much easier. It also ideal for an advisor who is just getting their business up and running as it provides a consistent and steady stream of revenue. At its core, it is truly the easiest and most simplistic way for an advisor to find success.
Posted by Lana Dalton
Lana is a Happiness Champion (aka Relationship Manager) at AdvicePay and loves helping enterprise users implement and optimize the AdvicePay platform. After graduating from the University of Washington in Seattle, Lana spent the past three years working in the tech industry, helping organizations implement software, create training content, and establish onboarding processes. When she’s not helping our enterprise users, you can find Lana trail running, backcountry skiing, and cooking different types of cuisine.