Asset Based Pricing is All Wrong

By: Larry Miles

Most advisors charge their clients a fee based on the assets they manage. The logic behind this strategy is straightforward – as the client’s portfolio increases in size, the advisor makes more money and everyone wins.

Unfortunately, an AUM based pricing schedule does not tie the fee a client pays to the value an advisor provides. The real value advisors offer a client is in the form of planning – which may have nothing to do with investment management.   

AdvicePeriod believes there is a better way.

We follow a methodology that allows us to charge a fair fee for the value our advisors add. Here’s how we do it and why you should too.

  • Elastic billing methodology allows us to tie our fee directly to the value we deliver to clients. The more value delivered, the higher the fee. The less value, the lower the fee. Our interests are aligned with our clients.

  • Our fees are fixed – plus a 3% annual escalator – for the services and value we provide. We bill quarterly in advance. Easy for clients to understand and easy for us to execute.

  • Transparency is key. We built a fee calculator that quantifies what we believe different services are worth and we use that calculator in client meetings.

  • Fixed fees insulate our business from market movements that can have a material impact on AUM based fees.

  • Clients love fixed fees. They understand exactly what they’re paying and what they’re paying for.

Many advisors struggle to charge for planning – we can help. Click here to learn how you can charge significant fixed fees to clients, demonstrate the value of your advice, and insulate your income and revenue from market fluctuations.