As a financial advisor you know that clients come to you for a variety of reasons. They may be getting close to retiring, have inherited some money, or perhaps they are finally making enough to think about being strategic with their investments. They likely have something already in their portfolio, whether it’s a 401K from their job, life insurance, or something else. But, they’ve decided to seek out a financial advisor. What is the thing they want most? ADVICE. They want you to tell them if what they have is okay and what else they should be doing.
Traditionally, in your role as a financial advisor, you have given them what they want and need most for free. You offer them some suggestions and hope that they transfer their assets to your business. You offer some investments that will pay you. But, what if their money is fine where it is? What if they really do not have enough liquid assets to make it worth your time to create a plan? What if at the end of hours and hours of work, remodeling their franchise or adding to their business is the best investment they can make with their money?
Retainer based advising is where you get paid to give advice. Your most valuable asset is leveraged. Because you are a good person, you probably have already been giving them honest advice, even when it does not pay your bills. Instead of creating a plan and hoping that what your client needs is something you can make money off of, you charge a fee to create the plan. You charge a fee for your clients to ask you questions. Now your clients feel comfortable asking questions about all of their assets, not just the ones that are invested through your firm.
Professionals in other fields have been using a retainer-based model all along. If you seek advice from a lawyer, doctor, or other types of consultant they likely will be willing to have a brief initial meeting with you, but then to get specific advice in their field they will expect to be paid upfront. Think about it, when you visit your doctor for your annual exam, you first pay your co-pay (hopefully insurance covers the rest) and then you talk to them about any concerns, they evaluate your health through bloodwork and exams and then they point you into the direction you need to go. Whether it’s medication, exercise or keep up the good work. You would not go to your annual exam and withhold payment until your doctor has told you to go on blood pressure medication and then the doctor would be paid through the drug store where you pick up the medication!
Retainer based financial advisors receive payment for their most valuable asset. Instead of receiving payment based on what products they sell or how many assets are transferred, retainer-based financial advisors collect a fee and then create a plan for their clients.
Think about the clients in your practice. Make a list of two to three clients that could benefit from your advice more than your products. Think about what advice you can offer that does not benefit your bottom line.