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Advisors who collect monthly fees were able to raise their rates by 6% to $265 on average. Those who charge on a quarterly basis increased their fees by 1.6% to $968 on average and those who charge one-off fees for select services increased theirs by 6.7% to $1,578.
Despite those increases, AdvicePay found that barely over 1% of survey respondents listed retaining clients as their top cause for concern in 2023. Instead, nearly 35% said a far bigger anxiety was the need to bring in new business. The results came from 200 advisors polled in January.
Alan Moore, the CEO and co-founder of AdvicePay, said one of the biggest reasons advisors are sometimes reluctant to raise their rates is a fear that they'll scare clients away. Even so, he said he recommends firms try to have small hikes every year.
"I'd rather see a 3% or 4% increase year over year rather than a 20% increase every five years, which is more like a slap in the face," Moore said.
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Moore said he generally recommends advisors increase their fees at a pace faster than inflation, which has been running high in recent years. The U.S. Department of Labor
"Just keeping pace with inflation is table stakes," Moore said. "And obviously, fees will start to go up as advisors start to feel more confident in their services as they provide more value.The first time you sit down with clients and try to do a financial plan, you're likely to suffer from impostor syndrome. But then you start to see the lives you're impacting and how you are helping your clients."
AdvicePay is one of the strongest advocates in the wealth management industry for the fee-for-service business model, which allows advisors to provide investment management, tax planning, budgeting and similar services in an a la carte manner. Clients can choose which options they want, pay the required fees and freely add or drop services at later dates.
The model is often contrasted with many advisors' long-standing practice of charging clients a fee set at a percentage of the assets they have under management. Moore and other advocates of fee-for-services argue it helps ensure financial planners are fairly compensated for new planning options they might add over time.
Moore also said the fee-for-service model allows advisors to serve a larger segment of the population than was often previously possible. Advisors charging assets-under-management fees many times find the math doesn't work out for clients with less than $1 million to invest.
With fee-for-services, clients who can't afford a full-time financial planner can often still find money for tasks they still need help with.
"It really opens up a number of consumers who can pay for advice that we can work with," Moore said. "So I think that's been the biggest thing that we have ever wanted to champion, not that getting paid on a fee for service basis was the right way or the only way or the future of service."
Eric Amzalag, a certified financial planner and the owner of Peak Financial Planning in Woodland Hills, California, said his fee-for-service model gives prospective clients a "try before you buy" way to test out his firm's various services before committing to them.
"The client can pay for a financial plan without having to transfer assets over simply to gain access to financial advice," he said. "This 'try before you buy' relationship allows us to be paid for the time we invest in a clear, transparent way, while also assuaging prospects' concerns that they will be unhappy with the relationship if they were to transfer assets over and therefore choose not to work with our firm."
Amzalag raised his annual fee in January from $3,500 to $5,000. That amount consists of a $2,000 retainer plus a $3,000 balance that's paid off in monthly installments of $250 each.
"By raising our fees from $3,500 to $5,000 for a financial planning relationship, we have been able to commit to onboarding no more than three clients per month so that all clients receive a consistent level of service," Amzalag said. "Were we to keep the fee at the lower range, we might be subject to the temptation to onboard too many clients in any given month, or to give less than our full resources to that new client."
Sean O'Shea, a certified financial planner at HighPoint Planning Partners in Orland Park, Illinois, said his firm has both fee-for-service and assets under management options and will sometimes combine the two for specific clients. He said he used to charge $1,000 for a financial plan but has since increased the cost to $3,000.
It takes a lot of time to develop a financial plan, and that takes time away from existing clients who may be paying 1% on a $500,000 portfolio," he said. "Raising the fee to $3,000 made it more worth the time for myself and staff and keeps more time for existing long-term relationships."
Moore launched AdvicePay publicly in 2018 with
The firm's report from earlier this month found that 83% of the payments it processed last year fell into the fee-for-services category. Moore also pointed to
Moore said he doesn't see the fee-for-services model eventually replacing charges for assets under management. Instead, he thinks fees for services will become more prevalent as older advisors
"I think you're going to see this rise in advisors who want to focus on resource planning, and AUM will become a bolt-on sort of offering versus a core one," Moore said.
