According to Financial Planning, registered investment advisory (RIA) firms are increasingly adopting alternative fee structures, moving away from the traditional model of charging 1 percent of assets under management (AUM). Advisors like Carolyn McClanahan, founder of Life Planning Partners, and Dana Anspach, CEO of Sensible Money, have embraced this shift, by implementing fixed fees, subscription fees, and retainer models that more accurately reflect the time and resources devoted to each client.
At a recent Investments & Wealth Institute conference, McClanahan shared how her firm meticulously documents each client's service timeline, a practice that has consistently impressed auditors during exams. The approach enables her firm to set annual fees ranging from $10,000 to $60,000, depending on household complexity, income sources, and organizational needs. This unique method allows McClanahan to provide "family office" services at a fraction of the usual cost.
Similarly, Anspach's Scottsdale-based firm offers comprehensive financial planning at an initial rate of $6,900 to $8,900 for complex cases, followed by a traditional AUM-based fee. Her innovative fee model, termed "Juicing" and "Juicing Plus," focuses on maximizing clients' financial benefits through strategies like Social Security optimization and tax planning. Anspach likens her approach to extracting every bit of value- not from the investment side, but from enhanced financial planning.
A recent industry report from the Investment Adviser Association and compliance firm COMPLY shows that non-AUM fees now represent a significant portion of client charges, with nearly half of RIAs collecting fixed or hourly fees. Christine Gaze of Purpose Consulting Group noted that the rising demand for financial planning has driven the median standalone fee up by 77 percent since 2015, reaching $3,000 in 2022. This trend signals growing client interest in planning services, even as AUM-based fees continue to shrink.
These alternative fee models enable RIAs to expand their client base and better serve high-net-worth individuals who seek diverse services. By providing transparent, value-driven pricing, firms like Life Planning Partners and Sensible Money continue to attract and retain clients who appreciate the depth and flexibility these models offer.
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