Information for Advisors Archives | Retainer Based Academy

November 19, 2019November 19, 2019

Fees are Going the Way of the Dinosaur: Extinct

Admit it, we all want to get something for nothing. We live in a world where we shop at Target, scan an item and see if we can get it for less on Amazon. We want to value going to the local, small business to purchase a toy for a birthday party, but the reality is we are frustrated that they need to charge $5 more because the mom and pop shop does not have the buying power that Target and Amazon do. We hope that our clients value our advice, but the reality is they feel the same way that we do, they want to pay as little as possible.

In a low cost, high-value world, how can you compete? Previously, you charged clients 1-2% to do asset allocation. However, your clients are watching a football game and see you-know-who saying they have no fees and they also want you to have no fees to transfer their assets. Your firm is never going to have the amount of assets under management that Vanguard, Fidelity, and the other guys with commercials during football games do. So, if your clients are asking for low-cost investments, what is your next step?

My wife and I have been together for nearly 15 years, she has seen my business struggle and thrive. She always says that things are best for my business when the economy is not great. When the markets are up, clients happily go invest in these low-cost investments and their portfolios go up. But, when the markets go down, they realize just how important our expertise is.

So, you can’t compete with low-cost investments, especially when the market is thriving. Nevertheless, you enjoy what you do and have great advice. Yet, you need to pay your office staff, bills and eat! Instead of charging fees to move assets or obtain new assets, it’s time to adopt a retainer-based model where you will charge clients an upfront fee (retainer) to give them advice. Yes, they may in time move assets under your management, but for now, you will develop a plan for them and help guide them.

For more information about becoming a retainer-based financial advisor click here.

November 6, 2019November 6, 2019

How to Stop Giving Away Your Most Valuable Asset

As a financial advisor you know that clients come to you for a variety of reasons. They may be getting close to retiring, have inherited some money, or perhaps they are finally making enough to think about being strategic with their investments. They likely have something already in their portfolio, whether it’s a 401K from their job, life insurance, or something else. But, they’ve decided to seek out a financial advisor. What is the thing they want most? ADVICE. They want you to tell them if what they have is okay and what else they should be doing.

Traditionally, in your role as a financial advisor, you have given them what they want and need most for free. You offer them some suggestions and hope that they transfer their assets to your business. You offer some investments that will pay you. But, what if their money is fine where it is? What if they really do not have enough liquid assets to make it worth your time to create a plan? What if at the end of hours and hours of work, remodeling their franchise or adding to their business is the best investment they can make with their money?

Retainer based advising is where you get paid to give advice. Your most valuable asset is leveraged. Because you are a good person, you probably have already been giving them honest advice, even when it does not pay your bills. Instead of creating a plan and hoping that what your client needs is something you can make money off of, you charge a fee to create the plan. You charge a fee for your clients to ask you questions. Now your clients feel comfortable asking questions about all of their assets, not just the ones that are invested through your firm.

Professionals in other fields have been using a retainer-based model all along. If you seek advice from a lawyer, doctor, or other types of consultant they likely will be willing to have a brief initial meeting with you, but then to get specific advice in their field they will expect to be paid upfront. Think about it, when you visit your doctor for your annual exam, you first pay your co-pay (hopefully insurance covers the rest) and then you talk to them about any concerns, they evaluate your health through bloodwork and exams and then they point you into the direction you need to go. Whether it’s medication, exercise or keep up the good work. You would not go to your annual exam and withhold payment until your doctor has told you to go on blood pressure medication and then the doctor would be paid through the drug store where you pick up the medication!

Retainer based financial advisors receive payment for their most valuable asset. Instead of receiving payment based on what products they sell or how many assets are transferred, retainer-based financial advisors collect a fee and then create a plan for their clients.

Think about the clients in your practice. Make a list of two to three clients that could benefit from your advice more than your products. Think about what advice you can offer that does not benefit your bottom line.

August 17, 2019August 17, 2019

How to Make More Money as a Financial Advisor

We all have different reasons we became financial advisors. You may be at a point where you want to know how to make more money as a financial advisor. At some level we want to help people and that is a very important element of our job. But helping people can’t be enough. We need to be able to make a living and if done correctly, become financially independent.

If we teach others and advise them on how to manage their money, we need to follow our own advice in our lives. We help people build wealth, and I treat myself the same way I treat my clients.

10,000 Hours

At some point we all started as glorified sales people. Hopefully, through constant learning and “real-life” experiences, we booked our 10,000 hours. In Outliers (a must-read) Malcolm Gladwell explained that it takes that much time to become an expert.

However, being an expert does not make you more money. Frankly, the entire competition is doing the same thing. Plus it’s harder to make money today than ever before.

Why is it harder to Make Money as a Financial Advisor Today?

The reason it’s harder to make money as a financial advisor today is that the best paying solutions we could offer our clients are also the hardest to sell. In some cases, the best paying solutions are also the hardest to find (I’m looking at you alternative investments).

Add to that, clients tend to start meetings with “I hate annuities” before they even get an understanding of what a VA might do for them.

For those of us who manage money for a fee, when the market goes down the service calls go up. So frankly, we get paid less when we work more due to the normal cycle of the stock market.

How to Earn More Income as a Financial Advisor

So what’s the answer then? Well, one way is to run a more efficient practice so that less money goes to overhead. Another way is to create a value proposition to the client that also creates value for you as a financial advisor. Lastly, having a client profile that you will “go deep” in will help you compete against other “generalist” type of advisors.

What could this look like? For us, we decided that since we are in Vanguard’s backyard we were not going to compete on fees for traditional asset management. Years ago we become specialists in alternative asset classes, things that Vanguard would never have a mutual fund containing. And then 4 years ago, I evolved my practice one more level.

We decided going forward that we would be a flat retainer based planning practice. We would not allow products or assets to be purchased from us for the first 6 months. All families who hire us get assigned a CFP (not me) that helps move them through a preset “workflow” I developed with my team. We have three workflows. Executive, retirement and business owner. Each customized for the issues they would need to be addressed in their “financial life”. Clients want to know you have a plan. We show them the plan before they ever spend a dollar with us.

Value of Retainer Planning for the Client

Retainer based planning has several big value propositions for your clients.

They value the advice, since they paid for it. If you have kids and they “hear” what another adult says even when you were saying it first. That is the same “behavior” in this type of engagement. Because they are paying for the advice, they tend to hear you better. Especially if your advice is not self serving (ie a product or solution you sell).
they actually spend the time updating the portal and getting us the documents we require. Clients want their money’s worth. We tell them our advice is limited by the information they give us. Guess what? They give us more information and we have better solutions for them.
They want their money’s worth, so they send us things that they need us to work on. We have a saying we share with clients. “If you have a sentence with a dollar sign and question mark, send it to us”
This way of working with clients attracts much higher net worth. Our minimum retainer is $5K. Someone would not be in a position to find value in that, unless they knew (and had) problems that are worth solving for $5K.
The higher the net worth, the bigger the opportunities

This new relationship of a high networth family, allows our time to be valued and valuable. We look at all elements of the clients financial life and see how they can improve it. Whether the answer is something we can provide, or something they can get somewhere else, we show the client all the options.

Getting Clients to Listen

It is paradoxical. But charging clients for advice is the best way for them to actually listen to you, which also allows YOUR solutions to be considered in a fair and non-salesy way.

The hardest part about working with clients is getting them to listen. Clients sometimes think they know best and decide to make changes to their accounts. You may advise them not to, but they do it anyway. The best thing about retainer based advice is that clients are more likely to listen to you when you tell them to just “trust the process.” When they pay for you to tell them what to do, they listen more! I call it the retainer-miracle.

We get deeper in the clients financial life and therefore uncover real problems and then give the client the option to solve the problems without an agenda of “buy my product”.

Doing it this way attracts the right clients (those who have problems and want to pay you to solve them) and that is how you make more money.

Make More Money as a Financial Advisor

If you want to make more money as a financial advisor, implement the retainer based model.

Your practice will run more efficiently. That helps increase profitability. More profit means more money in your pocket.

Your clients will listen to you. That means you can get them the returns they are looking for. It also means that you can help them find options they may not have considered before.

Your income will be stable because your retainers are paid on a regular schedule. Commissions vary year to year and product to product, eliminate the variables.

You become more referable. IE our COI’s all understand we do not handle clients assets for the first 6 months of a retainer based engagement. That means our cpa/lawyer referral partners are more likely to refer us. Traditionally, they had the risk of referring to a FA and then the week of the asset transfer a black swan event happens (brexit for example). The assets go down under the new advisor and the cpa or lawyer gets the phone call “That guy you referred lost me money”. By being retainer based and not handling any assets for 6 months, a relationship built on planning and advice is well established and there is no “blow back” risk to the referring partner. Win/Win.

If you have questions about implementing the model, send us a message and we’ll be happy to answer!