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Financial Planning > Tax Planning

Making the Switch to Retainer-Based Planning

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The time is right for financial advisors to make the switch to retainer-based planning, as this fee model is fast overtaking the industry. Making the switch to retainer-based financial planning can help a firm gain a foothold with high-net-worth clients. This method of planning makes regulatory compliance straightforward and reduces the risk of sanctions.

Retainer-based planning accelerates the outcomes of a business while eliminating possible conflicts of interest that might interfere with a company’s business model. This particular financial planning model provides ideal outcomes for clients, elevates the size of a practice and overall creates efficiency for a financing planning firm.

For more reasons why you should consider switching to retainer-based planning, check out my previous article. But now, let’s talk about what clients of a retainer-based firm can expect.

Eliminating Conflicts of Interest

With retainer-based financial planning, the client pays an upfront sum for services rendered over a specified time period to eliminate conflicts. In contrast, commission-based planning and assets under management (AUM) fee structures come with obvious conflicts of interest.

For example, a client may seek advice about when to place a business on the market. Commission-based advisors may have a vested interest in seeing the sale completed sooner so they can sell more products. Likewise, an advisor compensated through the AUM model has a conflict because selling the business sooner gets the proceeds under management faster. With retainer-based compensation, the timing of the sale remains fee-neutral.

Conflict can also arise under an AUM fee structure, even when it is not there. For example, an AUM-based advisor may caution against a potential investment property purchase that would reduce AUM. They may rightly believe the property is overpriced. The advisor may then point to a basket of well-diversified, high-yielding real estate investment trusts (REITs) as a more profitable and less risky way to invest in real estate. However, it could appear to the client that the REITs are recommended to maintain a higher AUM.

When advisors work in accordance to a retainer-based fee model, it reduces the chances of a conflict of interest. In this example, the advisor’s compensation remains identical whether the client opts to buy the investment property, invest in REITs or partake in a completely different investment.

Providing Long-Term Value to Clients

Retainer-based models assist advisors in landing new business, they provide greater value to clients. For example, I once took on a client who had a $4 million rollover and a small investment account with another firm. I recommended that he roll over his funds with my firm, which we would manage for a $5,000 annual retainer. The other firm’s 1% AUM fee would have cost him $40,000 per year without providing higher returns. Naturally, he chose to roll over with us.

The majority of working people and business owners lack significant investable assets outside of their 401(k)s or businesses. As a result, many are forced to create a plan alone because planning fees are too high for a small amount of money. This results in the exclusion of many lucrative investments as well as the best strategies for hedging against personal or economic risks.

Because revenue comes from a flat retainer that can range anywhere from $50 per month to several thousand, clients can gain the financial insight and planning they need at a price they can afford. Additionally, there is no need for clients to move money managed by companies like Vanguard. Clients can keep investments at these firms and receive financial planning elsewhere for additional matters, such as business financial planning, estate planning and tax advice.

When’s the Right Time to Make the Switch?

Because financial advisors face increasing regulatory scrutiny, especially when compensated on commission, switching to retainer-based planning as soon as possible makes sense. For those working on a commission or AUM model, making the switch can take time.

In my case, I needed to discuss the change with my staff. Once I explained the benefits of retainer-based financial planning, my colleagues embraced the idea. I took my time making sure the process worked before I introduced it, and then I implemented the change first for new clients only. I started seeing my ideas come to life and realized it isn’t as complicated as I initially thought.

As I fine-tuned my retainer-based approach, I introduced it to existing clients who would most benefit from it. Over time, I converted the entire practice to retainer-based planning and we have been thriving ever since. The most important rule to remember is to not rush the process. Otherwise, it’ll never work.

With retainer-based financial planning fast becoming the industry direction, it is already past time to create a transition plan. Once the plan is in place, a firm is free to advise clients in the most effective manner possible while serving a larger segment of the market. The structure also eliminates regulatory headaches. Retainer-based financial planning not only removes conflicts of interest, but also opens the door to offering unique insights that clients will most value.

Fred Hubler (Mr. Retainer) is a financial advisor with more than 25 years of professional experience in the financial services and technology industry. He is the Founder of Retainer-Based Academy, located in Phoenixville, Pennsylvania. To learn more about Retainer-based Academy, please visit


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