Fee-Only Advisor Model VS. Brokerage Model

The Fee-Only Advisor Model: What it is and Why You Should Use it

If you’ve been in the financial advisor field for a few years, it’s likely that you’ve been exposed to multiple methods of doing business. Most advisors who work for larger firms use the brokerage model, which pretty much boils down to advisors making a commission off every product they sell. This, in my opinion, is one of the reasons why advisors have gotten a bad rap as ‘salespeople’ and why many of them are not trusted by their clients.

As a response to some of this backlash, some advisors have developed a hybrid model that incorporates both commissions and a fee-based structure, depending on which product is sold. While this is a step in the right direction, but it can be very confusing for clients (and for the advisors themselves.)

What I’ve come to realize through my many years in the business is that a fee-only structure is truly the best way to provide value to your clients while maintaining your integrity as you grow a seven-figure business. I’ve been using this structure since I started True Measure and have found it to be highly successful.

What is the Fee-Only Model?

A fee-only model involves no commission on the part of the advisor no matter what products they sell or recommend. It’s based on giving advice and the advisor is paid for the time they spend meeting with clients, researching the proper financial channels for each client, and making recommendations on financial decisions. Advisors get paid a flat fee regardless of how many or what type of financial products they sell.

Those who use a fee-only model can bill for hourly consulting, charge flat retainer fees, or charge based on assets under management. How you choose to bill is based on your unique situation and the type of clients you have.

Advantages of Fee-Only

There are numerous advantages to the fee-only model and why it’s instrumental to building a business you can be proud of. Here are the top three.

No more ‘hamster wheel’ Anyone who has been in commissioned sales knows how frustrating the ‘hamster wheel’ can be. You make sales only to find that your quotas continually increase and you have to generate more and more sales just to keep your head above water. It’s exhausting and it’s not healthy for you or your clients. When you run a fee-only model, the constant stress to produce more sales goes away and the stress is instantly reduced.

More trust with clients It’s difficult for a client to truly trust you when they know you’re making a commission off every product you sell them. When clients pay a flat fee for financial advice, they no longer view every recommendation with a skeptical eye. They know you have their best interests at heart and that you will advise them to make choices that are wisest for them—not choices that are best for your bank account.

Focus on value instead of sales. The brokerage model sets up advisors to focus on sales first. Value sometimes comes after the fact if they have any time left over, but most brokerage-model advisors consistently have their eye on the ball—and that ball is their quota. When you are fee-only, the only focus becomes how happy your clients are with your advice and guidance. This allows you to put all your eggs in the ‘value’ basket and craft your business around what gives those you work with the most value.

If you want to start and grow a seven-figure entrepreneurial advisory business, it’s imperative you choose the model that will best assist you. The fee-only model helps you focus on what’s most important: the client. When you focus on the client, trust and value both increase and business growth—the right kind of business growth—quickly follows.

To learn more about how to start your Fee-Only Advisor Model check out our course here.