Comments on: The Problem With Retainers http://thefasttrackblog.com/2009/08/03/the-problem-with-retainers/ Angie Herbers’s latest Investment Advisor articles Sun, 21 Feb 2010 03:32:21 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: Rob Typher http://thefasttrackblog.com/2009/08/03/the-problem-with-retainers/comment-page-1/#comment-10145 Rob Typher Sun, 21 Feb 2010 03:32:21 +0000 http://thefasttrackblog.com/?p=89#comment-10145 I too have contemplated incorporating a retainer in my currently AUM fee. It seems logical to assign the retainer portion to financial planning other than managing investments, and then of course the AUM would be assigned to investment management. Although I consider my financial planning services (outside of investments) to be a real value, I am afraid to assign a quarterly value to them. My clients definitely like the fact that I have "skin in the game" with their assets, but at the same time I don't feel they value my planning skills as much as they should. And therein lies the question: Do the fail to assign a value to these skills because I do? I too have contemplated incorporating a retainer in my currently AUM fee. It seems logical to assign the retainer portion to financial planning other than managing investments, and then of course the AUM would be assigned to investment management.

Although I consider my financial planning services (outside of investments) to be a real value, I am afraid to assign a quarterly value to them. My clients definitely like the fact that I have “skin in the game” with their assets, but at the same time I don’t feel they value my planning skills as much as they should. And therein lies the question: Do the fail to assign a value to these skills because I do?

]]> By: Harry Scheyer http://thefasttrackblog.com/2009/08/03/the-problem-with-retainers/comment-page-1/#comment-9492 Harry Scheyer Fri, 22 Jan 2010 16:44:11 +0000 http://thefasttrackblog.com/?p=89#comment-9492 Hi Angela, I have been using retainers very successfully for many years. I believe retainers for financial planning clients versus primary investment management clients are the professional way to go for the basic reason that our value proposition has really nothing to do what the market does on the short term. It sends the wrong message that might make your clients comfortable but in reality is a major distortation. The distoration is all the money they overpaid advisors who never realized the appreciation in clients portfiolios when the markets where overvalued ! Once clients understand this distortation I think fair and appropriate retainers based on longterm assets, goals and complexity is what would make what we do more of a profession. Retainers are about matching our true value propositon to the compensation . Unfortuantely for most client too many advisors are really asset gathers in financial planninng clothing. As long as there clients that think that their advisor is alignment with them because they charge AUM fees this myth will persist mainly to the benefit of the AUM advisor- which seems to be real concern in your article. Would be interested in your reply. Thanks Hi Angela,

I have been using retainers very successfully for many years. I believe retainers for financial planning clients versus primary investment management clients are the professional way to go for the basic reason that our value proposition has really nothing to do what the market does on the short term. It sends the wrong message that might make your clients comfortable but in reality is a major distortation. The distoration is all the money they overpaid advisors who never realized the appreciation in clients portfiolios when the markets where overvalued ! Once clients understand this distortation I think fair and appropriate retainers based on longterm assets, goals and complexity is what would make what we do more of a profession. Retainers are about matching our true value propositon to the compensation . Unfortuantely for most client too many advisors are really asset gathers in financial planninng clothing. As long as there clients that think that their advisor is alignment with them because they charge AUM fees this myth will persist mainly to the benefit of the AUM advisor- which seems to be real concern in your article. Would be interested in your reply. Thanks

]]> By: George Hara http://thefasttrackblog.com/2009/08/03/the-problem-with-retainers/comment-page-1/#comment-9490 George Hara Fri, 22 Jan 2010 15:59:30 +0000 http://thefasttrackblog.com/?p=89#comment-9490 How is the AUM structured 'independently' from the portfolio managed? Is it calculated quarterly or is there a trend line allowing the client to observe when the amount was gathered and reported. In any reporting, similar to back dating of stock options it becomes an issue. One date for each reporting period should be consistently used. The 50/50 arbitrary or would it be 30/70 so more skin is in the game? How is the AUM structured ‘independently’ from the portfolio managed? Is it calculated quarterly or is there a trend line allowing the client to observe when the amount was gathered and reported. In any reporting, similar to back dating of stock options it becomes an issue. One date for each reporting period should be consistently used. The 50/50 arbitrary or would it be 30/70 so more skin is in the game?

]]> By: John Liechty http://thefasttrackblog.com/2009/08/03/the-problem-with-retainers/comment-page-1/#comment-8278 John Liechty Fri, 18 Dec 2009 13:40:26 +0000 http://thefasttrackblog.com/?p=89#comment-8278 Interesting article. I believe Ms. Herber missed a typo that materially changes the meaning of a statement in her last paragraph. The sentence that reads: "That way, advisors’ revenues are entirely at the mercy of the markets, but they still have enough skin in the game that clients pay noticeably lower fees when their portfolios are down." I believe "are entirely" should read "are not". Otherwise, the statement is inconsistent with the thesis of her article. Interesting article. I believe Ms. Herber missed a typo that materially changes the meaning of a statement in her last paragraph. The sentence that reads: “That way, advisors’ revenues are entirely at the mercy of the markets, but they still have enough skin in the game that clients pay noticeably lower fees when their portfolios are down.” I believe “are entirely” should read “are not”. Otherwise, the statement is inconsistent with the thesis of her article.

]]> By: Shaun http://thefasttrackblog.com/2009/08/03/the-problem-with-retainers/comment-page-1/#comment-7314 Shaun Mon, 23 Nov 2009 16:42:06 +0000 http://thefasttrackblog.com/?p=89#comment-7314 Angie, I'd be interested in hearing more about the split retainer/AUM fee structure too. I've been contemplating doing this for some time, but haven't found a lot of research on similar fee structures. Any suggestions on where I could find this data would be a tremendous help. Thanks, Shaun Angie,

I’d be interested in hearing more about the split retainer/AUM fee structure too. I’ve been contemplating doing this for some time, but haven’t found a lot of research on similar fee structures. Any suggestions on where I could find this data would be a tremendous help.

Thanks,

Shaun

]]> By: John Comer http://thefasttrackblog.com/2009/08/03/the-problem-with-retainers/comment-page-1/#comment-7237 John Comer Sat, 21 Nov 2009 15:57:25 +0000 http://thefasttrackblog.com/?p=89#comment-7237 Angie, Interesting blog. Do you know if anyone is doing more extensive research on your perception? I could easily see some clients feeling that the advisor is not sharing in the pain. I wonder if that is the most common reaction of clients. One take-away from this article for me is the importance of talking about your fees with clients on a regular basis. If you have had four annual conversations with your clients about how their portfolio has gone up and your fee has stayed the same, I would expect fewer of the clients to complain when their portfolio goes down, the advisor is doing more work and the fee stays the same. John Angie,

Interesting blog. Do you know if anyone is doing more extensive research on your perception? I could easily see some clients feeling that the advisor is not sharing in the pain. I wonder if that is the most common reaction of clients.

One take-away from this article for me is the importance of talking about your fees with clients on a regular basis. If you have had four annual conversations with your clients about how their portfolio has gone up and your fee has stayed the same, I would expect fewer of the clients to complain when their portfolio goes down, the advisor is doing more work and the fee stays the same.

John

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