Like a hot stock or predictions on the next rate hike, interest in alternative compensation models is rampant. Smart clients are asking more about fees, and pending fiduciary requirements will surely improve fee transparency. At the same time, investment management is becoming commoditized and advisors focusing only on investments are facing significant fee compression. What can an advisor do to remain competitive?
When I started my firm in 2004, I studied the payment models in vogue at the time. It was important to me to be fee-only, and the feasible choices were hourly charges or AUM-based. The choice was not difficult; I can talk too much and didn't think I would be good at cutting it short. I also planned on a holistic life planning practice and didn't want a clock ticking in my client's mind as I asked them about deep dive issues. I chose the AUM model.
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