Why Flat-Retainer Fees are Doomed to Fail

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The great fee debate continues. I’ve heard a new paradigm coming into the market: advisors who charge no commissions or tiered fees, just a flat, annual retainer.

It’s a nice idea but in reality they’re trading one bias for another – and I’ll explain why. While I see more cons than pros to this approach, I’ll consider both sides.

The advisor fee obsession

I have never ever seen an industry more obsessed with how it gets paid than the financial advisor community. Ask any advisor, whether they be hybrid, fee-only, fee-based or commission only, and every single one of them has a strong opinion about how their way is the best and everyone else is robbing clients blind.

For an industry that prides itself on being sweet, altruistic and focused on “putting the best interests of clients before their own” (ever used that phrase? You all have it plastered on your websites everywhere there’s a half inch of white space) it is very ironic that folks are awfully concerned with the almighty dollar. If they weren’t, then nobody would talk about fees and there wouldn’t be these Socratic debates all over social media, blogs news, and everywhere else financial-advisor related topics are discussed.