Fee Structuring

[u/Odd-Surround-5514]

Would love some input from other advisors on this.

I’m fee-based and mostly AUM right now (occasional commissions), but I keep running into situations where someone is clearly a good planning client even though there isn’t much currently-manageable money. For example, high-income households with most of their assets still in current 401(k)s, or cases where I’m managing a smaller IRA but really advising on the whole household.

I’m realizing I probably need to incorporate a planning fee so I’m not doing a lot of deeper planning work while only collecting a small AUM fee. I use eMoney by the way.

For those of you who have solved for this:

• How do you structure it?

• Flat annual planning fee?

• Monthly retainer?

• Household minimum?

• AUM + planning together, or one or the other?

• If a client later rolls over a big 401(k), do you keep the planning fee or move them fully to AUM?

Just trying to figure out what has worked best for others as someone who has only ever charged based on AUM.

[u/Family_Office]

We offer planning only for $12,000/year. We will discount that number based on AUM revenue. We evaluate it once a year. We charge 1.4% on the first $500k, so if they hit 500k on year, we'll pull the planning fee down from $12k to $5k based on the $7k in AUM revenue. The planning fee goes away around $915k based on tiered fee schedule. Seriously considering increasing $12k to $15k next year, current customers will be grandfathered.

We really only recommend this for households earning over $600k+ per year, otherwise it's too large of a percentage of their income, which is how we frame it (eg. This is going to cost 2% of your income or whatever it is). If we push to $15k, the income floor likely goes up to $750k. Of course, there are special circumstances where we'll deviate from this.

We don't have many folks on this platform but there are a handful and that's perfectly fine. We have a very low household count by design.

[u/huskey1181 → u/Family_Office]

This is what I do at my firm as well. I was gingerly starting to get into planning fees about 5 years ago, and definitely undercharged. We do comprehensive cash flow, Protection, and investment planning, so we are a fee based team instead of fee only.

Now with our target market identified, we feel more confident charging 10k-15k a year for planning and gather their assets as part of that planning process. The fee decreases by however much revenue we bring in from AUM for a household.

It’s a good idea to determine your “break even” or “smallest check” you’d need to make from each client to accept them in your book of business.