HOLLYWOOD, FLA. Why are advisors embracing the fee-based practice approach?
The biggest benefit is relations to the client, said Lewis Walker, president of Walker Capital Management Corp. at Pershings INSITE conference. Clients can see were only going to get paid as long as they stay in the game and we keep them happy.
He spoke about the importance of helping clients through significant life events after his doctors found a tumor in his brain early in his career that would later turn out to be malignant. So now, as an advisor, Walker embraces the fee-based system in order to gain more time with clients and look at the bigger picture.
If your value is based on how to beat some index, youre dead, he said.
Walker, along with panelists Karen Lare, senior vice president, brokerage at Waddell & Reed and
Marc Stein, financial advisor at North Ridge Securities Corp., delved into this issue and discussed the befits of creating a fee-only firm.
Here are the top five reasons why advisors will benefit by establishing a fee-only practice, according to the panel.
1. Advisors gain more time. Being a part of a fee-based practice allows advisors to delegate responsibilities to other planners within their firms. I didnt want to be married to the office, said Walker. Now I leave my office for three weeks three times a year and dont have to deal with office issues. He went on to explain that the nature of fee-based advising allows planners more time with their current clients rather than constantly finding new prospects.
2. Better relationship with clients. Being fee-based allows advisors to create long lasting client relationships, says Lare. It also allows advisors to have fewer clients to focus on. She explained that this will give advisors the opportunity to focus on those few clients rather than juggling many.
3. Future clients expect it. Stein explained that older clients have difficulties changing their mindset when advisors adopt the fee-based model but younger clients realize it was what they wanted all along. The new generation and future clients expects this to be the process, he said. The resistance just isnt there.
4. Excellent revenue driver. I wanted to feel like I was building something, not starting over everyday, said Stein about clients assets. Lare agreed, saying that advisors who establish their own fee-based firms can build a practice with reasonable income.
5. Appeal to other firms. A fee-based practice is worth exponentially more than others, said Stein in terms of being acquired by larger firms. I probably wouldnt look to acquire a practice that wasnt fee-based. Fee-based advisors are also at an advantage when it comes to selling their firm as part of a succession plan, whether its an acquisition or something unexpected. You will retire, said Walker. Even if you get taken out on a gurney, you will have to retire.
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