The struggle to pass on rising costs to increasingly fickle investors has a few fee-based advisors looking for alternatives to business as usual.
Nice piece in Investment News on the balancing act between raising fees and avoiding driving clients away.
We have hit on this theme here at A4A again and again. Relatively few successful advisors compete as low-cost providers. They aren't courting clients by offering a few basis points' discount here and there.
They're competing as high-value providers and demonstrating that value for their prospects to see.
An advisor who wants or needs to raise prices can start by selectively eliminating any discounts put in place to woo clients during the recession. The market may not be great, but it's certainly improved enough that normal pricing can recover.
Presumably you've delivered plenty of value over the last few years. If your clients can't see that, they'll probably leave sooner or later no matter how low you cut your fee.
Let them go.
But while innovative fee-for-service or account minimum arrangements may go a long way, they may not be the golden ticket -- so to speak -- for advisors looking to increase revenue.
Consider those $150-per-hour "special projects" fees. Billing 40 hours a week, an advisor could scale that business up to over $300,000 a year and work pretty hard in the process.
That's what $30 million in all-inclusive 1%-a-year AUM would deliver. And the AUM naturally scales, while there are only so many hours in the week.