Assessing how you charge clients in an ever-changing industry

June 07, 2017 by Jen Mysliwicz

A financial advisor assesses how he charges clients for advice.

About the author

Jen Mysliwicz

Strategic account manager

Jen has an extensive background in both the finance and SaaS industries, getting her business degree from Northeastern University in Boston, MA, where she can often be found at either the hippest restaurant or the hottest concert.

With a baby on the way and the looming―and ridiculous―cost of childcare, I recently sat down and did a budgeting exercise and looked at all the things I pay for on a monthly basis. Apparently, I have no problem with spending $110 a month to a gym I barely go to, wine memberships that sounded like a good idea last time in California (Napa, I am looking at you), Netflix, Amazon, Spotify, magazines, apps, and the list goes on.

It seems there is not a subscription I will not sign up for! The question I had for myself was: Why is it that I have a hard time coughing up large sums of money but have no problem signing up on a monthly basis for things I probably do not need and could possibly also get for cheap or free?

Maybe it is because of student loan debt, the rising cost of buying a home, a wedding, and starting a family that has left me feeling more comfortable consuming things in smaller chunks rather than committing to large upfront costs. (Or maybe I am just averse to commitment.) But I got to thinking, would more people work with a financial advisor if they were able to access this service in an easier, more consumable way like subscription services?

Comparing pricing models

For a long time, there has been a debate about surrounding the best way to charge for financial advice: AUM or commission. Commissions have long been looked at with scrutiny, as evidenced by mainstream portrayals like in "The Wolf of Wall Street" and the infamous quote from Wall Street" as said by Gordon Gekko: “greed is good.” However, for those whose needs are not as intensive, a commission-based system may be the most cost-effective option for them.

AUM has long been touted as the better option for investors for there is mutually-beneficial incentive for the advisor to increase the client’s assets as they get paid more as the account grows. However, the case can be made that there can still be conflicts where the advisor has interest in keeping one’s money invested instead of other uses like paying off debts.

There are benefits and drawbacks to both models, but things are changing. Individuals are investing with more knowledge and are consuming information in ways that are different than the past. Because of this, it is possible that a subscription-based model is the new formula for success for advisors, especially with both Generation X and Millennial investors.

Combating fee compression

At Advicent, our mission statement is to enable everyone to understand and impact their financial future. What that means is that we believe every person deserves a world-class financial plan and we provide the technology solutions to firms to allow financial planning to be more accessible. Most firms I speak with are struggling with fee compression, profitability, and how to make financial planning more accessible in the mass affluent market.

I was recently at a conference and was talking with several advisors about how they are changing their practice models in the face of regulation and the need for additional revenue streams. From this, we had an extensive discussion about fees in general, with heavy emphasis on the subscription-based approach.

The big issue here is: how does this model make sense and, more importantly, how does it make the advisor increase compensation and production? With the subscription-based model, an advisor could charge $100 a month for a certain amount services; this could possibly be presented in a tiered approach. For example, a lower-level subscription could entail access to an online account portal, financial content and a quarterly review. However, more features and content become available with a more lucrative subscription.

I believe that for this model to be effective, technology needs to be at the forefront of the advisor’s practice. Advisors need to be able to serve more clients in a more efficient manner. Millennials―the cohort which will be the most likely demographic to appeal to this sort of relationship―will also demand technology, as that is how they are consuming nearly every other service today.

Harnessing collaborative technology at your firm

Collaborative technology will be at the forefront of how advisors will adopt this model. This will be accomplished by servicing more clients through their preferred channels with a scalable platform. In doing so, advisors will be able to meet, and exceed, the unique expectations for each client.

Data aggregation and collaborative fact finders will reduce a lot of the time-consuming work of the advisor, while also providing the advisor with a holistic view of the client’s financial picture. The client is able to get their advisor on the same page at all times by using these tools. Here are a few ways that interactive technology can help your firm connect with clients.

Client communication

The key here is streamlining the time-intensive process and making it more efficient. This is best exemplified by automated collaborative touch points through marketing tools like Advisor Briefcase, WebEx, Alerts, and Insights through client/advisor platforms.

Financial planning

By using scalable financial planning technology, an advisor will be able to work with any client regardless of whether they have simple or complex needs


24/7 access to a financial plan allows the client the ability to see their accounts and plan without having to constantly contact their advisor.

Click here to learn how Advicent technology can help your firm provide higher value to your clients in a rapidly changing industry.