Financial advisors are facing a tricky situation as they raise planning fees, especially when it comes to repricing existing clients. The study by Datos Insights reveals a growing trend of advisors increasing fees, but the approach is nuanced. While new clients are being charged more, maintaining legacy pricing for long-standing relationships is a challenge. This creates a two-tier client book, which may become increasingly difficult to manage as the gap between legacy and current pricing widens.
The study highlights a clear divide between registered investment advisors (RIAs) and non-RIA advisors in terms of fee structures. RIAs are charging more for planning services, with an average annual retainer fee of $7,550, compared to $5,237 for non-RIAs. This premium is even more pronounced for mid-career RIA advisors, who charge an average of $8,392, surpassing both newer and senior advisors.
The subscription model is gaining traction, with RIA advisors using it averaging $990 per month, compared to $190 for non-RIA peers. This model offers stability during market volatility, as evidenced by AdvicePay's Fee-for-Service Industry Trends Report. However, the study also notes that the dominant approach of charging new clients more while maintaining legacy pricing may create a two-tier client book, making it harder to manage as the gap between pricing widens.
The study further reveals that senior advisors are less likely to raise fees for all clients, with only 14% applying blanket increases. This may reflect client accommodation in long-standing relationships or mature pricing, meaning they face less pressure to adjust. Meanwhile, newer advisors without planning fees are constrained by their firm's restrictions, which are more pronounced in broker-dealer environments.
Looking ahead, nearly one in five advisors plan to change their fee structure, with non-RIA advisors leading the way at 27%. The most common destination structures are annual retainer and AUM fees, with a desire for business growth or scaling driving the switch. This shift towards more transparent and explicit planning fees reflects a growing client demand for clarity and alignment with market rates.
