Don’t Fear the Meter: The Inescapable Future for the Hourly Revenue Model

There’s a numerical table in my Inside Information fee survey, published in 2020, which shows the percentage of 1,037 responding advisory firms who are using each of six different revenue models – AUM, monthly/quarterly retainers, hourly, subscription fees, a combination of the above, or commissions. In all, 2.03% reported that they primarily charge hourly fees for their services.

If the reader is not mathematically inclined, let me help you understand that this is not the majority of planning firms.

Nobody was surprised by this (the same survey showed that 72.90% charge primarily AUM, which is a majority), but that lack of surprise, in itself, should be a bit of a surprise. Financial planning is a profession, right? And all other professionals charge by the hour. Hourly fees are the revenue model that other professions gravitate to eventually, and no other profession asks how much the customer has in the bank (or the brokerage account) before setting a fee.

Is it possible that, as the planning profession matures, all planners will eventually follow the same path that every other profession has followed, and charge on an hourly basis for the advice they give – like lawyers, tax professionals and accountants? Could that be the end point of every profession’s evolutionary process?

Normally when I write these articles, I'm not able to hear the comments of readers as they’re scanning my words around the country. But this time I can hear your voices all the way to my office. Hourly?!?!? Seriously??? There’s no leverage in hourly! Clients hate to know the meter is running! Everybody on my staff would have to track their time all day long, which is a soul-crushing activity! Are you an idiot?