Win More Clients With THIS Pricing Model

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“I’ve interviewed three firms: one said I didn’t meet their minimum, the other had a huge fee for just managing my investments, and the last claimed most of their work is done for free but they use some select products. Even I’m not that dumb. Is your whole industry so arrogant and f*&$ing confusing?”

Sound familiar?

Our profession (financial planning and investment management) is open to the rich. And if you’re not rich, the price you’ll pay is getting ripped off with huge commissions. Even finding an hourly planner will have you guessing if they’re inflating the time spent to reach a certain price.

So how do we help those who aren’t “rich” and don’t meet the standard minimums?

Tiered-retainer pricing

I worked for AUM-priced firms for 6 years before launching my fee-only RIA and over time it struck me that the people who needed our help the most weren’t able to access it. Sure, there was free advice to people looking to get out of debt, but what about the middle-market who had financial discipline but had yet to reach a “suitable” level of wealth (as deemed by financial planning firms).

Now that’s all set to change with firms who charge on retainer. While it’s not a new concept (ACP members have been doing it for years), it’s now hitting the mainstream with potential clients and advisors alike. Advisors can very accurately calculate their business revenue and not have to worry about market movements, and potential clients can easily understand how much they’ll pay.

But it isn’t a one-size-fits-all model.

I tried having a single retainer price for my clients when I opened a couple of years ago and quickly found that some clients were getting a lot of value for a small price. When I adjusted that to a tiered structure, I started to get fairly compensated for my time.

So how does a tiered-retainer structure work?

  • In order to set your base price, you have to know your ideal client and what price would be fair to them. As I work with teachers, if I set my base price at $5,000 year, I would be starving right now; but for medical professionals, that price is very reasonable.
  • Set a base price that you’re comfortable receiving even if no client were to qualify for higher pricing.
  • As you design your model, consider having a lower monthly retainer in exchange for an initial set-up fee to compensate you for setting up the initial plan (i.e. $999 initial fee, $129 monthly fee)
  • Understand how you are going to tier your model. Is it based on assets, a formula, an estimate of hours taken, or a metric that you devise? Once you’ve figured that out, make it as easy as possible for your clients to understand where they would fall.
  • Promote the heck out of this model. More of the services we use are on a monthly-subscription model. Once your target clients understand they can get financial advice on this model as well, I think we’ll see the tides turn as to who uses a financial planner.

While you don’t have to use the pricing structure exclusively (you can still do AUM where appropriate), having a retainer pricing structure in place will allow more clients to find themselves eligible for your services. That’s good for everyone.

Dave Grant, CFP®, is the founder of Finance For Teachers a fee-only RIA in Cary, IL. Dave exclusively serves teachers in Illinois by helping them to organize their financial lives and live a fulfilled life. He is also a columnist at Financial Planning magazine, a ghost writer for various companies, and the founder of NAPFA Genesis, a networking group for over 300 young, fee-only planners.