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 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

One point that I’ll add is that the firms which are best positioned for recovery are now able to recruit and “cherry pick” the best talent in the area from other firms. These employers of choice have healthy margins, scalable processes and procedures, and an appealing company culture and work environment.

Therefore, owners need to be very serious about approaching star employees not only with appropriate retention incentives, but also with a commitment to make changes at the firm to cultivate all employees’ career development.

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

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