Flat Fees Gaining Ground With Advisors Critical of Asset-Based Fee Model

April 7th, 2022, 11:51 AM

Some in the financial advisory industry now are advocating for flat-fee models in lieu of asset based fees.

The asset-based fee model is the dominant fee model across the financial planning industry. According to data compiled by InvestmentNews, more than 90% of financial advisors employ some form of asset-based pricing. Commissions are charged by more than 37 percent of financial advisors, and flat fees, are used by about 26 percent of financial advisors.

Andy Panko, founder of Tenon Financial, is one disciple of flat fee billing. Panko charges an annual fee of $8,400 for individuals and $9,600 for couples. Panko shared that his model "indirectly rules out people with lots of assets and people with a small amount of assets, because at some level the assets do matter."

Sara Grillo, an industry marketing consultant, said the flat fee model is the latest way to express added value. Grillo also opines that "a flat fee is beneficial for a client with a larger portfolio that might be sick of having the fee vary every year, and it is a much more transparent model." While asset-based pricing has inertia on its side, Grillo believes flat fee models are gaining momentum. All that said, flat fees are not going to be as popular with the more senior advisers, but will be more popular with Gen Y and Gen X advisers, according to Grillo.

Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.

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Blog

Flat Fees Gaining Ground With Advisors Critical of Asset-Based Fee Model

April 7th, 2022, 11:51 AM

Some in the financial advisory industry now are advocating for flat-fee models in lieu of asset based fees.

The asset-based fee model is the dominant fee model across the financial planning industry. According to data compiled by InvestmentNews, more than 90% of financial advisors employ some form of asset-based pricing. Commissions are charged by more than 37 percent of financial advisors, and flat fees, are used by about 26 percent of financial advisors.

Andy Panko, founder of Tenon Financial, is one disciple of flat fee billing. Panko charges an annual fee of $8,400 for individuals and $9,600 for couples. Panko shared that his model "indirectly rules out people with lots of assets and people with a small amount of assets, because at some level the assets do matter."

Sara Grillo, an industry marketing consultant, said the flat fee model is the latest way to express added value. Grillo also opines that "a flat fee is beneficial for a client with a larger portfolio that might be sick of having the fee vary every year, and it is a much more transparent model." While asset-based pricing has inertia on its side, Grillo believes flat fee models are gaining momentum. All that said, flat fees are not going to be as popular with the more senior advisers, but will be more popular with Gen Y and Gen X advisers, according to Grillo.

Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.

Return to All