Why Fee-Only Financial Planners Should Move Beyond AUM & Hourly

The Constraints of AUM and Hourly Pricing for Fee-Only Planners

While widely used, both AUM and hourly billing models can present significant challenges for modern fee-only financial planning firms:

• Assets Under Management (AUM):

  • Limits Reach: Excludes clients who need planning but don’t have significant investable assets (e.g., young professionals building wealth, clients with complex compensation structures, those focused on debt reduction). You may be turning away ideal clients based solely on AUM.
  • Value Disconnect: Fees fluctuate with market performance, not necessarily with the complexity or value of the advice provided. A client with complex estate planning needs but low AUM might be unprofitable.
  • Perceived Conflict: Although fee-only mitigates this, clients may still perceive a bias towards gathering more assets rather than focusing holistically on their entire financial picture.

• Hourly Billing:

  • Caps Income: Your revenue is directly tied to your time, limiting scalability. You can’t serve more clients or increase revenue without working more hours.
  • Client Uncertainty: Clients dislike unpredictable costs. An open-ended hourly engagement creates anxiety about the final bill.
  • Undervalues Efficiency: Efficient planners who work quickly may end up earning less for the same outcome than less efficient ones.
  • Focus on Time, Not Value: Encourages tracking minutes instead of focusing on delivering transformative financial outcomes.

Recognizing these limitations is the first step towards exploring more strategic financial planning pricing models alternatives that better serve both your firm and your diverse clientele.

Exploring Financial Planning Pricing Models Alternatives

Moving beyond AUM and hourly opens up possibilities to price your services based on the value you deliver and the scope of the work involved. Here are some leading financial planning pricing models alternatives being adopted by innovative fee-only firms:

• Subscription/Retainer Model:

  • How it Works: Clients pay a fixed monthly or annual fee for ongoing access to services, planning updates, and support. The fee is typically based on the complexity of their situation, not AUM or hours.
  • Benefits: Creates predictable recurring revenue for your firm, provides clients with peace of mind and encourages ongoing engagement. Aligns fee with ongoing advice value.
  • Example: A firm offers a “Comprehensive Planning Subscription” for $200-$500/month, including annual plan updates, unlimited questions, and semi-annual review meetings.

• Flat Fee for Specific Services/Projects:

  • How it Works: A fixed price is quoted for a defined scope of work, such as creating a comprehensive financial plan, developing a retirement projection, or analyzing a compensation package.
  • Benefits: Total cost clarity for the client, allows you to price based on the value and complexity of the project, not just the hours spent.
  • Example: A

Comprehensive Financial Plan” project priced at $3,000 - $7,500 depending on complexity, payable upfront or in installments.

• Tiered Service Packages:

  • How it Works: Offer multiple predefined service packages (e.g., Basic, Standard, Premium) with increasing levels of access, service offerings, or complexity covered.
  • Benefits: Provides clear choices for clients, allows you to segment your market, and can encourage clients to choose higher-value options (anchoring effect). Simplifies the sales conversation.
  • Example: A “Basic” package for $300/month covering essential planning, a “Standard” for $600/month adding investment strategy, and a “Premium” for $1,000/month including advanced tax and estate planning.

• Hybrid Models:

  • How it Works: Combine elements of the above. For instance, a retainer for ongoing planning plus a project fee for an initial comprehensive plan.
  • Benefits: Offers flexibility to tailor pricing to unique client needs while maintaining some predictability.
  • Example: An initial comprehensive plan for a $5,000 flat fee, followed by an ongoing retainer of $400/month for implementation support and ongoing advice.

Choosing the Right Alternative for Your Firm

Selecting the best financial planning pricing models alternatives depends on your firm’s niche, target client base, service offerings, and business goals. Consider these factors:

1. Your Ideal Client: Which model best aligns with the preferences and financial situations of the clients you want to serve?
2. Value Delivered: How do you quantify the value of your services beyond just managing assets or spending time? Does a retainer or flat fee better reflect solving complex problems or providing ongoing peace of mind?
3. Predictability: Do you prioritize predictable recurring revenue (retainer) or larger, project-based fees (flat fee)?
4. Service Scope: Are your services primarily ongoing advice (retainer) or distinct projects (flat fee)? Tiered packages can accommodate a mix.
5. Scalability: Can the model allow you to serve more clients or increase revenue without a linear increase in your time?

Thorough client discovery is crucial regardless of the model. Understand their true needs, goals, and the complexity of their situation before quoting a price. This allows you to justify the fee based on the value and scope, not just AUM or hours.

Implementing and Presenting Your New Pricing Models

Switching pricing models requires clear communication and an effective way to present options to prospective clients. Here’s how to approach it:

1. Internal Preparation: Train your team on the new models. Update your service agreements and internal processes.
2. Client Communication (Existing Clients): For existing clients, plan a clear, empathetic transition strategy if necessary. Focus on the benefits to them (e.g., more predictable fees, clearer scope, enhanced service).
3. Client Communication (New Clients): Clearly articulate your new pricing structure during the discovery and proposal process. Explain why you use this model and how it benefits them.
4. Presenting Options: Avoid overwhelming clients with complex spreadsheets or static PDFs. Especially when offering tiered packages or configurable options (like adding specific analyses or meeting frequencies), a modern, interactive presentation is key.

Tools that allow clients to see different packages, understand what’s included, and potentially configure add-ons in real-time can significantly improve the client experience and your closing rates. While comprehensive financial planning software like RightCapital (https://www.rightcapital.com) or eMoney Advisor (https://emoneyadvisor.com) provide robust planning tools, they often don’t specialize in interactive pricing presentation.

For businesses that need a dedicated, modern way to present complex pricing options clearly and interactively, PricingLink (https://pricinglink.com) is specifically designed for this. You can create shareable links (`pricinglink.com/links/*`) that allow clients to explore different tiers, add-ons, and see the price update live, streamlining the quoting process and qualifying leads. PricingLink is laser-focused on the pricing presentation step.

If your needs extend to full proposal generation including e-signatures and comprehensive contracts, you might look at tools like PandaDoc (https://www.pandadoc.com) or Proposify (https://www.proposify.com). However, if your primary goal is to modernize how clients interact with and select your pricing options before the formal proposal, PricingLink offers a powerful and affordable solution.