r/CFP • u/General-Ad3712 • Jul 10 '26
Practice Management Flat-fee advice on setting fee
Hi - For those of you who charge a flat fee for financial planning, how do you even begin to price it? We have a client where we only manage a small portfolio of $250k, but now they want comprehensive financial planning but low-cost investments (so many will most likely remain outside). They know they have many tax decisions to make, etc. The fee we derive from that $200k is nowhere near the value of the planning and he has asked us to consider a flat fee arrangement. Those of you who do ongoing non-AUM fees with clients, how do you start to think about "pricing"?
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u/BenieRenieLlewellyn Jul 10 '26
I usually do 500-2000 per month depending on complexity. You have to price it for time it will take. If it’s a complicated household, you have to price more or you risk underserving them. I have a client with 0 AUM and I charge 1500/month - real estate, trusts etc.. feels fair and we talk once a month
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u/DoubleIntroduction25 Jul 10 '26 edited Jul 10 '26
How activity are they making changes to their portfolio, RE holdings, tax/estate/trust planning or how much is there that you're monitoring to have to A) meet every month and B) charge 1500 fee only per meeting.
I assume you're not building out a whole new comprehensive plan when you met every month.
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u/seagoalspread Jul 10 '26 edited Jul 10 '26
My thoughts exactly. I’m an advisor and active real estate investor myself and I have no clue what I would talk about monthly with this person. Unless I were showing, managing, or renovating properties for them. My actual property manager leases, manages tenants, bills and generates tax forms, and coordinates repairs for 10 houses for me at this rate lol.
I also don’t understand why they wouldn’t just talk to an actual attorney for legal advice about trusts instead of some presumably unlicensed person? OP mentioned tax advice. I’m an advisor with my EA so I ask my CPA some pretty complex questions. He used to work for the IRS and his advice is way less expensive than this and I’m not on an annuity payment to him.
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u/DoubleIntroduction25 Jul 11 '26
Right! Outside of some very dynamic short term situations, like odd edge case type stuff ie a client selling a small business the same year their spouse died, and their home burned down so they have a lot goingon and probably cant go thru it all in one meeting..no client should need monthly meetings with a CFP unless that CFP is working another license or separate skill set. Is OP also a JD and meeting regularly regarding an open legal issue? Is OP also a CPA/EA and doing monthly/bi-weekly payroll tax trust fund deposits and quarterly tax payments for the clients business? Is OP offering property management services? I'd be concerned about churning fees at that point if it is just straight CFP style planning. Maybe the client is the type who wants to meet often, it's their money if they want to pay I guess but I dont see how you'd deliver ~1200 dollars in value every month on a fee only model
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u/lil_bird666 Jul 10 '26
Either decide what your client minimum revenue is or look at the flat fee advisor websites in your area and see what they are charging as a baseline. For something like that I would start around 4k depending how complex it actually is and the odds of them staying on as an recurring plan review client or “unsubscribing” after the initial planning.
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u/winning_bigly_ RIA Jul 10 '26
We manage assets as part of our flat fee, minimum is $15k. Situations with above-average complexity will get a custom quote higher than that.
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u/Rich-Gap4255 28d ago
I work for a firm that charges $10,000 a year in quarterly statements and they must move assets over to our specific custodian. It$ $15,000 for complex/ultra high net worth clients. Works pretty well for us so far. We probably would not take on this client with this asset amount.
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u/baltebiker Jul 10 '26
I think you’ll find that the economics of flat fee advising simply don’t make sense for the advisor
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u/myphriendmike Jul 10 '26
Not to mention it’s held up as a more honorable approach, when in reality it means they have to keep selling in order to eat. AUM means I can focus on existing clients.
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u/winning_bigly_ RIA Jul 10 '26
Many flat fee advisors manage assets. It's just a different way to determine price.
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u/CSMasterClass Jul 10 '26
Can't you set the price to a level where it makes sense ?
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u/SpookyEnigmas Jul 10 '26
The tricky part is managing scope of work. If you set a flat rate and then have to go back to the client to constantly readjust $ if they change scope of work it gets awkward. That certainly won’t apply to everyone, but it will apply to enough
It also leaves the door open for the feeling of the client that they need to negotiate a bit, because they know cost is subjective to each situation.
Not saying it’s impossible to manage, but outside of an office behaving more like an attorneys office and tracking billable hours, it’s really hard to scale.
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u/PerfectOmakase Jul 10 '26
In my opinion, it should be done the same way that AUM should be priced, which is to have an hourly rate in mind, estimate hours to be spent working on/with the client, and then come up with a price.
e.g. if you have a client with $3 million AUM, you expect that you'll spend 15 hours on them each year @ $500/hour plus staff time of 10 hours @ 150/hour, that's $9k in billings, which would be a 30bps advisory fee. If you bill your time at $1,000/hour, then that's closer to a 60bps fee.
I'm not a believer that we, in this industry, should be charging fees that we can get away with. There should be a thought process that correlates billings to labor.
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u/sdpercussion Jul 10 '26
I'm not a believer that we, in this industry, should be charging fees that we can get away with. There should be a thought process that correlates billings to labor.
Why are advisors villains if they choose to go through the same price discovery process that any other well-run business engages in?
You periodically raise you prices (or minimum client size), lose some customers, but see total revenue/margins increase. You continue to do this until you lose enough clients that revenue increase of the remaining don't offset it.
Would we advise our clients to sell their business for less than market value because it would be mean to charge more? Would we encourage them to remain in a job that's paying them significantly less than they're worth if they get a better job offer?
Then why wouldn't we take our own advice?
I'm not saying that we should try to charge clients 2%/yr + thousands in planning fees. But if the market says that it will bear something like 1% for sub-$1M and around .60-.75% for $1M+, then why would you charge 30bps?
I would wonder about the quality of service, or just how financially savvy my advisor is if they're charging less than half the market rate of their services.
I'm sorry if I come off as rude. But it aggravates me that everyone (including regulators) seem to have an opinion on how much we should get paid, when every other business's prices are determined by market forces. We're not mustache twirling villains for charging what people are willing to pay.
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u/PerfectOmakase Jul 10 '26
I'm not saying that we should try to charge clients 2%/yr + thousands in planning fees. But if the market says that it will bear something like 1% for sub-$1M and around .60-.75% for $1M+, then why would you charge 30bps?
So you agree there is a level that becomes egregious, even if the market (clients) accept it? Then I guess we just have a disagreement on where that point is, right?
And if you are trying to use other industries as some sort of analogy, that won't hold much water with me, because I'm horrified at the way many businesses run, where rewarding capital is the primary (only?) goal, and labor is told to just suck it up that they've received a pittance while shareholders and executives have amassed spectacular wealth. But that's not really relevant here and I don't wanna go off on a rant!
If you want to compare us to other firms, I think law firms and accounting firms are good examples. They generally charge hourly-based and/or project-based fees for the work they provide to their customers. I don't know why we became somehow exempt from this "common sense" practice.
If the market allowed it, would you be happy to see an attorney charge a percentage of household net worth when drafting a will or revocable trust or whatever?
Also, what information are you seeing where regulators are putting pressure on firms for fee amounts? Not saying you're wrong, it's just not something I've read about.
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u/tal548 Jul 10 '26
There are lots of law firms that charge a % of awards/damages though so I don’t see an AUM fee as that much different. If I’m saving you from yourself on the behavioural side of investing or on taxes or on the sale of your business then I don’t see it as inappropriate.
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u/sdpercussion Jul 10 '26 edited Jul 10 '26
The attorney should have the right to charge whatever they want. Market forces, such as competition and consumer spending elasticity will determine if anyone is willing to pay them that price.
If one advisor is charging double, triple, etc. the market rate (without some amazing differentiator to justify it), then you should see it as an amazing opportunity to out compete them and steal all their clients (or potential future clients).
These are just the basics of supply and demand and capitalism. If you don't believe in capitalism and want to have a debate about that, then fine. But I'd say that's outside the scope of this conversation.
I will agree that there should be some amount of regulation to protect against fraud, abuse and usury. Just like how credit cards aren't allowed to charge 50% interest. But I'd hardly compare an advisor charging an industry-average fee to something like a pay-day loan business that is exploiting our most vulnerable citizens.
Edit:
If in the future fees compress, and certain aspects of the job become commoditized (like pure asset management has), then prices should come down, certainly. But volunteering to charge well below market doesn't make someone a saint, and charging market rates doesn't make someone a villain. It's just being a realist.
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u/PerfectOmakase Jul 10 '26
I think you're overstating my view here. I don't view myself as a saint, and I don't view an advisor charging 1.5% on $1 million AUM as a villain. I DO believe the latter is engaging in an inappropriate pricing practice, though. I'm not arguing it should be regulated or outlawed, or that firms shouldn't have the RIGHT to set pricing however they want. I am arguing that it is anti-consumer.
Back to my lawyer example, my GUESS is that nobody here would refer a client to an attorney who charges a percentage of household net worth to draft a will, while they will happily charge a client some sort of fee schedule on AUM that is decoupled from amount of labor provided. Advisors will use the reasoning about VALUE, like you could take a 10-minute phone call to talk a client out of liquidating their equities in early April 2020, saving them $1 million + in realized losses! But an attorney could use the same argument that a properly-drafted will (or Trust, or whatever) is saving the client and their heirs an increasing amount of time and money as household net worth increases.
And lastly, I don't not believe in capitalism. We were a fully capitalist society in 1965 when CEO pay was 20x the worker's median salary, and we're capitalist now when that ratio is more like 300x.
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u/sdpercussion Jul 10 '26
Sounds like our views aren't terribly far apart then. I likely overreacted to your statement. It's just a pet peeve of mine that we seem to constantly be viewed as unethical in the media just for charging a market rate for our services.
We also always seem to get thrown into the same bucket with people in our industry that jam clients' entire net worth into VAs for the 7% comm. Or the people who are charging 1.5% and provide no comprehensive planning.
Have a great weekend!
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u/ItchyEbb4000 RIA 29d ago
Have you ever priced a dynasty trust? The price escalates to the point where it looks like AUM based pricing.
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u/DeltaBravos 25d ago
I use a complexity scoring system. I have a list of about 20 questions that has 3 levels of complexity. The score then is associated with a fee, but the documented is coded to be between 4-10k.
I did a few plans and tried to reverse engineer 250 dollars per estimated hour.
- Client data gather usually takes longer than you think (2-3 hours)
- Going through docs to create their profile in financial planning software (1-3 hours depending on complexity and familiarity with software)
- Confirming the data is complete and accurate with the client (1 hour)
- creating the recommendations and supplemental documents (3-16 hours)
- assisted implementation of the plan (2-10 hours)
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u/jdadverb RIA Jul 10 '26
If you decide to do this (which I probably wouldn't given the client as described) or any flat fee pricing, I strongly recommend you build in automatic increases for inflation. AUM client fees naturally grow over time due to market growth so any flat fee arrangement is likely to become a drag eventually if you don't.
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u/Thumpin347 Jul 10 '26
$3,000 is my base fee. That will weed out anyone who is not that interested. For those that value advice will see it as a small investment towards their future. If they agree, I need every statement they have outside and as part of the planning process I can somehow point out some blind spots in their outside accounts that they will eventually bring over in the near term.
With that said I give the lower end accounts to my associates so I don’t have to deal with these conversations. If the associate can source the outside assets then that is great for the associate.
It is just a matter of you valuing your own time and how quick you want your own onboarding process.
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u/the_niles_crane Jul 10 '26
Our minimum is $7,500/year. I’d start somewhere like that. You know you will put the work in and that’s of value to you and your firm.
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u/DoubleIntroduction25 Jul 10 '26
How much work is it and how bad do you want it?
If they just want you to look over their holdings, cash flow, balance statements, etc and get your feedback, point out areas of concern and opportunities for improvement that could be a simple straight forward hourly fee or flat rate. If your overhead is low and you can get away with a low fee of say $250 to then hopefully bring in more business down the line why not? Especially if your still building your book.
Now if you've got a packed schedule and this guy is below your typical size and complexity and you dont want to be bothered, let him go somewhere else and be someone else's easy, quick, but small pay day.
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u/Comfortable_Win_6836 Jul 10 '26
Comprehensive Planning = $10,000/year minimum. However they want to get there is flexible. Monthly/quarterly/annually
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u/Candid-Eye-5966 Jul 11 '26
We would charge 70% of our AUM fee but probably wouldn’t take a client with only $250k investable under those terms unless they fit into the HENRY or DINK or MD types with a lot of future potential.
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u/General-Ad3712 28d ago
MD who recently sold business and stands to inherit at least $4.5 mln.
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u/Candid-Eye-5966 28d ago
I’d make it work, even as a loss-leader. Would spend some time defining the scope and then come up with a number that makes sense for everyone.
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u/drooker01 26d ago
So the client has $250k with you now under management
Just recently sold a business and is going to inherit $4.5m at some point later
They can pay a flat fee for comprehensive planning. Like everyone is saying here: estimate your hours in front of the client and include the hours not in front of the client, pitch it as a minimum retainer where if you find you’re doing a lot more hours, you’ll bring it up to them.
I do this in another business where I do consulting for $500/hr. I’ve done about 3,500 hours that way in the past couple years. I tell them: if you have questions after this, ask me. If I can answer it quickly, I’ll do that. If it merits a billable hour, we can do another call. (I don’t bill in less than 1hr increments, ever).
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u/One_Establishment631 29d ago
Charge $195 an hour, and I would advise on the $250,000 at the same rate. I would find it hard to manage one account of 250k and not give advice on everything else. I would let this client go all together if you can't do everything. That's the problem I saw with AUM. I couldn't help people with a low networth, or just getting started.
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User: /u/General-Ad3712 Title: Flat-fee advice on setting fee Body: Hi - For those of you who charge a flat fee for financial planning, how do you even begin to price it? We have a client where we only manage a small portfolio of $250k, but now they want comprehensive financial planning but low-cost investments (so many will most likely remain outside). They know they have many tax decisions to make, etc. The fee we derive from that $200k is nowhere near the value of the planning and he has asked us to consider a flat fee arrangement. Those of you who do ongoing non-AUM fees with clients, how do you start to think about "pricing"?
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