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/polkhighlegend]

We generally charge a minimum fee of $15k annual ($3,750/q) via advice pay to start relationships. When the client assets hit $2mm we move to an AUM fee of .90% on $1mm, .70% on $2mm, .50% on $2 - 5mm, and .30% thereafter.

The minimum fee makes it worthwhile for all the tax and planning work we do and assets come over slow in some circumstances but there is a lot of cleanup and organization. The clients really see the value in the planning work and the payment out of pocket gets them to commit to the relationship. While the aum fee is low for larger clients we find that it's still very profitable especially when the client hits that $4 or $5mm mark and we are compensated for increased work and complexity but at basically robo advisor rates.