Two decades ago, when he left Waddell & Reed Financial Advisors to start his own firm, Mark Suszan made a mistake.
"I undercharged initially," he says. "When you go from a commission basis to a fee one, you think you have to give away the farm to attract clients. You don't," says Suszan, whose firm Mark A. Suszan in Franklin, Mich., has $160 million in assets under management and is affiliated with Raymond James Financial.
He has discovered since then that fee flexibility is a tremendous tool for an independent financial advisor.
Brian Amidei ranks fee flexibility as one of the biggest boons to his advisory practice following his departure from Merrill Lynch in 2011 after its merger with BofA
He is managing partner of HighTower Advisors in Palm Desert, Calif., managing $400 million for 120 clients.
"We have a tremendous amount of flexibility on all the different things we can do for flat fees," Amidei says.
'SET IN STONE'
At wirehouses, advisors must often get approval from managers for any type of discounts for clients, and even then restrictions apply. Employers also limit the wealth planning services for which the advisors may charge and the amounts they may charge.
At his former wirehouse, the amount advisors could charge clients for financial planning was "set in stone," Amidei says.
By contrast, at his firm, he establishes and regularly tweaks a wide variety of additional services for clients, Amidei says.
He offers fee discounts to significant clients, using his own judgment, rather than following a rule that applies to everyone.
Amidei charges some clients an hourly fee for working on their accounts and charges some for supplying more frequent updates tracking the money flow in all their accounts, all in one place.
REVENUE OPPORTUNITIES
Erik Strid, too, cites lack of fee flexibility as the "primary reason" he left Wells Fargo Advisors in 2014, after 11 years. When he left with his father, Gerald, and younger brother, Paul, Strid launched Concentus Wealth Advisors in King of Prussia, Pa., where he is a principal of the independent RIA, which manages $415 million in assets.
The move "opened up revenue opportunities," with high-net worth clients, including those who don't have all their assets with him, he says.
One of his clients has a brother-in-law who is a wirehouse advisor. As a result, the client feels a familial tug to keep assets with the relative.
But Strid includes those assets in his planning and advice and charges the client accordingly, which would have been impossible at his old employer, he says.
Strid also charges all clients a flat-dollar planning fee, which wirehouses may allow their advisors to do. But, at his own firm, unlike when he was at the wirehouse, he can set the flat fees as he sees fit, rather than using a one-size-fits-all approach.
Strid continues to explore other fee structures because he sees it as a business builder. "There is going to be a great more complexity in the future," he says.
Miriam Rozen is a reporter for Texas Lawyer who writes about financial planning and services.
This story is part of a 30-day series on going independent.
