Tell me why your firm is shifting away from asset-based fees?

It was a simple question and I knew I didn’t do it justice when it was asked.

In fact, I didn’t realise it’s significant until afterwards.

I blurted out a quick response which didn’t properly answer it.

I’ve thought about it since. In fact, I’ve thought a lot about it.

For active clients, changing how you charge is a big change. It’s not a small issue nor can you afford to blunder in your explanation as to why are you making such a change.

You’re tampering with something that the majority of your happy clients probably haven’t believed needed tampering with. You’re potentially disturbing a solid relationship, introducing a cause for your clients to reflect, re-consider and maybe even create a bit of suspicion about your motives or your past practices. Worse case, it could mark time for a change for the worse in the relationship.  

Why would you do it?

You’d better have a good explanation. Well what is it? What are your reasons? Please explain.

Back to the original question:

“What do you tell existing happy clients when they ask why our firm is now changing away from asset-based fees to retainers and job fees?”

Here’s some possible responses for you to consider your own approach:

“Fundamentally, the fee you pay has to provide value to you. Our shift away from asset-based fees for clients like yourself is more consistent with our objectives to ensure you are on the best path to achieve your unmet goals whilst managing all your financial issues. You have to be confident that whatever we do is transparent and not aligned to anything other than your objectives. That’s why we believe this is a better approach.” 


“Formerly we had a number of inconsistencies in our charging which needed addressing. Clients with larger assets under management were subsidising the fees for clients with smaller assets under management who often required similar or more attention and service – it wasn’t fair. Some clients with no significant assets required significant assistance. Sometimes we found ourselves doing a lot of work believing assets were going to eventually be managed, but that didn’t occur. As we have developed our services to our advice clients, our fees were becoming too inconsistent and more reflective of our firm’s origins years ago rather than today’s reality with clients like yourself”


“Advice clients refer to us for a number of broad financial issues beyond their assets under management – having a fee that still represents value for our clients to whom we provide a broad range of services regardless of the amount of assets under management is fairer and better enables us to provide the services that advice clients like yourself have come to expect”


“There are an ever-increasing number of better priced financial products that have not been designed with an embedded fee payable back to the adviser. In the past, asset-based fees were pretty much embedded in every product design. This is a throw-back to the older product distribution days. These cheaper products are more suitable for clients like yourself as our fee is only aligned to give you more financial certainty not more or less financial products”


“We can’t control markets which inevitably increases or decreases your amount of assets under management, but we can control the amount of services we need to  provide and the value we aim to deliver to you. Being tied to fees associated with the amount of assets under management meant that we were in effect unable to control the price we charged. We were feeling lopsided – one the one hand we could determine the services we provided, whereas on the other we couldn’t properly determine the fee we could charge. Our new approach for clients like youself makes is a better reflection of our work.”


“Whilst asset management is crucial, it isn’t our core expertise Our role is to maximise the probability of you achieving your desired outcomes. We prefer to oversee the asset management using the right experts that suit each client’s individual objectives. We find the best fees for the best price and pass these fees onto our clients as a house builder will pass on the fees for each of their suppliers.”


“Our fees should only alter based upon the value we deliver not the assets we manage. Value means different things to each of our advice clients.  We’ve made the decision to shift to a fee model that has to represent value to every advice client every year otherwise we can’t expect any payment. We should live and die on the value of our advice which isn’t an assets under management fee”.

Of course, if your client only wants asset management, then charge an assets under management fee. But then they aren’t advice clients, but an assets-under-management client

Advice clients seek greater financial certainty in their lives – charge them for the value you add as your firm delivers greater financial certainty.

What do you reckon?


About Jim Stackpool

For nearly 30 years Jim has influenced, coached, and consulted to advisory firms across Australia. As founder of Certainty Advice Group, he leads a like-minded team of professional advisory firms seeking to create greater certainty for their clients. As an author, blogger, columnist, and keynote speaker, Jim is regularly called upon for his professional insights into the advice industry. His latest book Seeking Certainty is available now.

WordPress Image Lightbox Plugin