Change is hard. It can be uncomfortable to shift the way you do things or how you approach a situation. Even a small change like taking a new route to work can seem frustrating. Diverting from the norm might not always be easy, but it can bring about some of the most important and valuable experiences of your life.
Here at ACP, our advisors come from all aspects of the financial industry. Some started careers in sales, investments, and insurance, but, inspired by the drive to provide more value for their clients, they went in search of something more. That leads them to us.
One type of transition we see advisors make a lot is moving from an assets under management (AUM) financial model to our retainer-based model. This is a significant shift, one that requires advisors to adopt a new methodology, alter client-services, and increase their own knowledge in order to get it right.
But we have seen so many advisors find greater success and fulfillment under the retainer-based model. So what is all the hype about, and how can you make the transition successfully? Let’s find out.
Information for this blog post was gathered from our webinar series. This presentation featured ACP advisor Mark Pingree of Fog City Advisors in California. We are going to walk through how his firm made the transition from AUM to retainer, and why it ultimately benefited both the clients and the firm itself.
Is the transition worth it?
One top reason Mark found the transition necessary was to provide increased value to clients. Before moving to a retainer-based practice, Mark and business partner Bill ran a successful AUM firm. But like many of our members, they found that the model was restrictive and limited the type and scope of services their practice could provide their clients.
While they were happy to supply their clients with reliable investment advice, their clients started to come to them with more financial planning questions about taxes, spending, goals, and other high-level planning questions.
Under the AUM model, they were limited to what they could do. The pricing structure didn’t support taking on those more abundant, more holistic financial planning tasks even though they were passionate about that service. This sparked their interest to see what other types of business models existed to help them better serve clients.
The second reason that the retainer-based model served Mark and Bill’s needs was that it allowed them to differentiate themselves within the marketplace. The California area was riddled with AUM advisors and after many networking events, they felt that they didn’t have enough to distinguish themselves from the other advisors around them.
The retainer model also brought higher firm value. They found that adopting the retainer model increased the longevity of their firm and provided more steady revenue from year to year. By providing holistic, comprehensive financial planning, they were able to deepen their relationships with clients and create a more cohesive, open, and transparent atmosphere.
The ingredients for a successful transition
Though ideologically their team was ready for a shift, they needed to have a robust and tangible plan in place to help make that happen. Mark attributes the firm’s success to the guidance, support, tools, and resources they found through ACP. Joining ACP provided the foundation they needed to build and implement this new business model. Mark said that ACP helped in three critical areas:
- Training with the ACP Success Program
- The program provided training on how to structure a business and what it meant to serve clients under a retainer model. Mark said that after the course, he felt that he was prepared to tackle the challenges ahead. He had a game plan. He knew how to address clients and how to build out a new service offering that was sustainable and valuable for the practice as well as the clients they served.
- The methodology
- Transitioning to our retainer model means adopting new ways of working. The consistency of this process, and the resources that came with it, equipped Mark to make that transition. The customizable fee calculator provided tangible ways to set new fees that accurately reflected the service and value delivered. He also thought that the ACP Pyramid helped him structure client meetings as it clearly displayed how to approach the client’s needs from a comprehensive lens.
- The community
- Here at ACP, we are known for our strong and stable community of like-minded advisors. Mark said that the camaraderie, passion, and kindness he found in our community provided the support he needed.
Along with the support from a reliable organization, Mark said that a successful transition meant a commitment to a new type of practicing. No matter how much financial experience you have, practicing under a new model will require you to operate in a different way. Everything will undergo some type of change—from your relationships with clients to the frequency and type of client meetings as well as the work you actually do each and every day.
Practicing holistically is completely different than AUM, and this is a change that advisors need to make intentionally. This also means that advisors need to prioritize their education. Switching to a retainer model means that you are covering so many more areas of your clients’ financial lives. You can’t just focus on investments. You consider their insurance needs, tax planning, estate planning, retirement planning, cash flow, goal setting, and more. This might mean that advisors have to brush up on their tax skills or continue to grow in other vital areas.
When making the transition, give yourself time. Switching from AUM to retainer doesn’t happen overnight, and it won’t come without a few bumps in the road. When times get hard, try to remember the reasons you wanted to make the change in the first place. That “why” will get you through challenging moments.
How your firm can benefit
We see many firms find success in the transition from AUM to our retainer model. Mark’s firm found success in a few notable ways:
- Increased revenue steam year to year
- They found that more clients wanted the comprehensive service offered, which allowed them to increase their revenue while also growing their client base.
- Retained more clients, healthy client pipeline, and saw more referrals
- The retainer model opened up a whole new market for them and refined their client pipeline, providing more long-term security for the firm.
- Retainer work also helped them develop strong relationships with their clients, as they were working with them on their entire financial landscape. The far-reaching scope helped build trust and confidence in their work.
- Steadier income than AUM
- Income from AUM is tied to market performance. When the market is doing well, revenue increases, and the inverse is true when the market goes down. But with a retainer model, your revenue can be planned and analyzed from an annual perspective. This provides greater clarity when planning and budgeting costs/expenses.
- Streamlined processes
- Another benefit of ACP is that we provide advisors with repeatable, scalable processes which Mark found instrumental when applying them to the business. This helped streamline processes, efficiency, and ultimately revenue.
Why choose the retainer model?
By operating under a retainer model, advisors are set up to help serve their clients in the most comprehensive, valuable way possible. It is our goal at ACP to equip advisors with the education, resources, and support they need to grow a profitable business. The retainer model can:
- Enhance the value you provide clients
- Deepen client relationships
- Increase revenue
So many advisors like Mark have found a model that helped their business grow. If you are feeling like you need a change but aren’t sure where to start, have a conversation with one of our team members today. Let us help you build a practice you love.