The Ongoing Advice Fee

How much should you charge for the ongoing advice fee?

For conducting reviews, providing information and updating your advice whenever required.

Good advisers can justify charging 1% pa of assets under management. Not 0.5% pa which seems to be the norm. Please note, I said good advisers. That means advisers that add value to their clients, not advisers who sort-of-rearrange-stuff every so often.

There’s a big difference.

So, let’s assume you are one of the good advisers (or are working feverishly to become one). Charging 1% pa lets you work with fewer clients more profitably, allowing you to be available to add value to them whenever the opportunity presents itself (e.g. when a key piece of legislation changes that affects them, or when they contact you with big issues that need attention). If you charge 0.5% there is a risk that you still have too many clients or are too busy to deliver maximum value added.

Charging 1% pa also allows you to work harder at reducing the costs of the other players in the relationship: the investment manager/insurance company and the administrator/wrap platform.

You hold the trusted adviser relationship with the client, set the strategy and add the most value, so you should be paid the highest amount of the three key players. In my opinion, the other two are merely suppliers, and whilst it’s good business to build a solid relationship with your suppliers, they are replaceable at any time if they are unable to deliver value on the terms you deem best for your clients.

Remember, the trusted relationship between advisers and clients needs to be genuine partnerships, with both parties working to advance the cause. [click to tweet]

As I mentioned last week for implementation fees, I also know advisers who have decided to charge flat fees or hourly rates for ongoing service, and these are perfectly valid (although, I still don’t like hourly rates). However, if you are good, I still prefer the 1% of assets under management model for most clients as I believe you can still add considerable value, and you have a fee model that generally will be rising faster than inflation.

A summary of the three pricing points:

  • planning fee
  • implementation fee
  • ongoing advice fee

For most clients, this straightforward approach to pricing using planning fees, implementation fees and ongoing fees works just fine and allows you enough room to flex a little on each fee from time to time, as different situations present themselves.

There is also plenty of scope to charge the type of fee that you and your business believe in most strongly at each point (asset based fee, flat fee, or hourly rate).

Over the next few weeks I’ll look at variations & exceptions that cause advisers mental anguish!

by Brett Davidson


2 thoughts on “The Ongoing Advice Fee

  • Why are you advocating a percentage over a flat fee, Brett?
    Also interested to hear how you recommend we determine if an asset is under management (and how we value things like final salary pensions) in that sort of equation?

  • Hi Philip,

    If you are doing the genuine financial planning job focused on delivering lifestyle outcomes for clients I believe a 1% pa ongoing fee is justified (in most cases). This type of service (done well) adds incredibly high value by taking care of the investment management, tax structures and also acting as a coach and confidant that encourage clients to live the best version of their life.

    I’m of the belief advisers should get paid for the value they add, not the time it takes to do a job, nor by using a cost plus model. The 1% pa model is a premium price which is justified if you provide a premium service.

    Once you get into larger assets under management values you might discount away from the full 1% but as I said in my recent article on pricing for high net worth clients I wouldn’t be too quick to discount downwards. You need to consider the four factors I mentioned in that article. Here’s the link:

    Assets under management are assets that you have invested for the client. So I wouldn’t include final salary pensions. For that type of client assuming they want your strategic advice and other coaching skills, a flat fee might well be more appropriate, but this is one of those jobs that is an exception, not the norm for most advisers.

    Pricing a flat fee in this situation can be tricky though because clients sometimes find it hard to understand value that isn’t attached to managing money and advisers also struggle to explain it.

    Hope this is helpful.



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