AdvicePay Financial Advisor Community Blog

Who Can You Best Serve Under the Fee-For-Service Model?

April 22, 2019 By Lucy Robeson, CFP®
Lucy Robeson, CFP®

If you’ve decided to enhance your business by adding the fee-for-service model to your financial advisory firm, congratulations! You are staying up-to-date with the latest industry trends and are taking the initiative to explore new frontiers, which will allow you to serve clients you can’t today under your current fee structure.

Your next step is to figure out who the best targets are for your newly adopted fee structure. Who is best suited to pay a flat fee every month for ongoing advice and planning? The quick answer is younger clients.

The AUM model works best for more established clients with a large asset base, as they need assets so you can bill them in the first place. Conversely, regular, ongoing fees paid through AdvicePay via credit cards, debit cards, or checking accounts are best suited to Gen X and Gen Y clients who are looking for advice but don't have the asset levels to fit into an AUM fee structure. In fact, it’s likely that most of the assets these younger clients do have are in a 401(k) account or another employer-sponsored retirement account where you are unable to debit fees.

Approaching a new set of clients who have previously been ignored in this industry is a great place to start implementing this model and provides you with an opportunity to say yes to prospects you were unable to serve before.

Let’s look at two examples.

High Earners in the Accumulation Phase

Many young people make good money and are starting to accumulate investable assets. Take a new doctor, for example. They are making well over six figures and likely have a similar amount of student loan debt. They are busy working long hours at odd times. Their time is limited but they are cash flow rich. They want and need to delegate their financial lives to a professional, need good financial advice, and have the means to pay you. They have a surplus of cash each month that allows them to save and quickly accumulate assets over time, meaning with good advice they will soon look like your more typical clients. While they don’t have the assets yet to fit your AUM model, it doesn’t mean they aren’t great clients! By implementing the fee-for-service model, you can work with them today by charging a flat monthly fee. You quality advice will accelerate their financial success, allowing them to more quickly pay off their loans, save money, and invest for the future.

Adult Children of Your Existing Clients

In my experience working in an RIA, our AUM clients would often ask how we could help their adult children who were starting their first full-time jobs and needed advice related to budgeting, saving, and contributing and investing within their 401(k) accounts. We didn’t have a model to best serve them, but with the fee-for-service model, you can implement one. You can begin working with these clients, providing them with sound advice for a fee that matches your services and their financial situations. With this model in place, you can serve these adult children of existing clients, growing your client base and providing valuable advice to more people, while increasing trust and further developing the relationship with your existing clients. In fact, some parents will pay the fees for their adult children! I’ve seen this work best when the parents pay a portion of the fees and the adult children also pay a portion. This ensures that price isn’t a barrier to getting great advice, while also getting buy-in and commitment from everyone.

Overall, the fee-for-service model is a great way to enhance your current business. It allows you to say yes to clients you couldn’t otherwise. Your advice will accelerate their success and help them avoid making costly financial mistakes. As your current clients continue to age and draw down on their portfolios, you can grow and expand your client pool as you begin working with Gen X and Gen Y clients who need your advice and are ready to pay for it!


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Posted by Lucy Robeson, CFP®

Lucy is excited to help AdvicePay users make the most of our platform to help expand their businesses. She is a CERTIFIED FINANCIAL PLANNER™ professional and has extensive experience in comprehensive financial planning, directing firm operations, and (unrelated) swimming with bull sharks while living in Fiji. Lucy is passionate about promoting the fee-for-service business model and helping financial planners understand how and why to adopt it into their businesses. When she’s not working, you can find Lucy on the tennis court, hiking in the mountains, and cheering on the Virginia Tech Hokies.

Topics: Practice Management