Historically, advisors charging a percentage of assets under their management have benefited from significant operational efficiencies, with the ability to directly calculate and deduct fees from client accounts, and without having to wait on action from clients to pay invoices or follow up on delayed payments. However, these efficiencies require one particularly key element: assets to manage. How, then, can an advisor offering investment and financial services get paid for their advice if a client's investment assets can't be neatly consolidated at the advisor's custodian, or if the client has no assets that actually require ongoing management?
With an ever-increasing number of advisors realizing that it's essential to provide comprehensive advice and additional value beyond portfolio management, many are exploring new and/or complimentary fee models that aren't dependent on AUM. Further, and in an increasingly competitive landscape, many advisors are trying to determine how to serve younger generations that don't yet have assets to manage, without turning to product sales or having to work for free in hopes of a future liquidity event. Perhaps the best example of these trends is the rise of the "retainer" model as a means to provide ongoing advice, typically for a prorated annual fee. One-time billing for fee-for-service financial advice can be challenging enough compared to AUM, but ongoing or retainer billing introduces a myriad of complexities, including invoice management and tracking, client payment methods, and compliance concerns.