How to Leverage Retainer Fee Structure as a Financial Advisor

Choosing a fee structure is one of the most important decisions for your business. Clients want to pay fees that reflect the level and quality of services they receive, while you want to feel fairly compensated for your effort and expertise. A retainer fee model can satisfy both parties and potentially help you attract new clients to your business. Thirty-seven percent of advisors report using a subscription or retainer fee model, according to a 2024 Kitces report titled “How Financial Planners Actually Do Financial Planning.”¹ Here’s a closer look at how retainer fees for financial advisors work.

SmartAsset’s Advisor Marketing Platform (AMP) offers financial advisors services like client lead generation, automated marketing and more. Learn about SmartAsset AMP today.

Traditional Advisory Fee Models

You’re probably most familiar with the assets under management (AUM) fee structure, in which you calculate fees as a percentage of the assets you manage. A typical financial advisor fee is 1% of AUM, though some advisors may charge a discounted rate as AUM increases.

The AUM fee model is straightforward and widely adopted; 92% of advisory teams use this approach, according to Kitces. New clients might even expect you to follow this pricing structure. There are some potential flaws, however.

Basing fees on AUM may concentrate your revenue in a handful of your highest-net-worth clients. And in an increasingly competitive advisor landscape, you may feel more pressure to justify the fees you charge to attract and retain clients.

Alternatives to the AUM model include:

• Hourly/project fees
• Commissions
• Subscription or retainer-based fees
• Fixed or a la carte fees for individual services

Each of these fee structures has advantages and disadvantages.

Hourly fees, for example, are transparent and relatively easy for clients to understand. You could run into issues, however, if you underestimate your billing hours, which could result in a larger bill for the client. Forty-two percent of advisors surveyed by Kitces charge hourly or project fees.

Charging flat fees for individual services is straightforward, but it’s not always conducive to nurturing lasting relationships. A client who comes to you with a specific need may have little incentive to engage in ongoing financial planning services once their need is met and your fee is paid.

Commission fees can create conflicts of interest if you recommend investment products to clients that are not in their best interests. A la carte fees, meanwhile, may be suitable for one-off services or clients you see less frequently, but it may be challenging to establish a fair value for those services.

These types of drawbacks can make a retainer fee model more appealing to advisors who are looking for consistent, stable revenues.

Client Acquisition Simplified: For RIAs

• Ideal for RIAs looking to scale.
• Validated referrals to help build your pipeline efficiently.
• Save time + optimize your close rate with high-touch, pre-built campaigns.

CFP®, CEO

Joe Anderson

Pure Financial Advisors

We have seen a remarkable return on investment and comparatively low client acquisition costs even as we’ve multiplied our spend over the years.

Pure Financial Advisors reports $1B in new AUM from SmartAsset investor referrals.

Target New Clients This Year

I am a registered fiduciary*

Book Your Free DemoNot sure? Learn more about AMP.

How Do Retainer Fees for Financial Advisors Work?

Thirty-seven percent of advisors reported using a retainer or subscription fee structure, according to Kitces. Among teams that charge retainer fees, the typical annual fee was $4,500 in 2024; that’s the rate charged by 50% of firms surveyed. At the lowest end, advisors charged $2,500 for subscription fees. At the higher end, fees topped out at $9,200.

Advisors who charge retainer fees don’t always apply them the same way across their entire book of business. Kitces found that:

• 17% of advisors set a standard fee for all clients
• 28% use fee tiers
• 55% charge specific retainer fees for each client

Overall, subscription and retainer fees account for 32% of reporting firms’ revenue. Only 17% of firms that charge retainer fees rely on them exclusively as a source of revenue.

Build a Better RIA

Drive growth with automation, not headcount using the all-in-one advisor marketing platform.

Get Started

Benefits of Retainer Fees for Financial Advisors

The retainer model offers several benefits for advisors who are looking for a unique way to approach fees:

• Retainer income is predictable, as you can bill clients monthly, quarterly or annually.
• Clients may also prefer the predictability this gives them, since the fee remains the same.
• A retainer model allows you to tailor your services to the needs of individual clients, without tying performance outcomes to your fees.
• Unlike commission-based fee structures, a retainer model can eliminate conflicts of interest and ensure that your clients are getting advice that aligns with their needs and goals.
• Simple pricing may also help improve retention rates among clients who value transparency and want reassurance that you’re in their corner when they need you.

Is the retainer fee model perfect? No, but that’s true of any pricing structure.

For instance, you may find yourself having to justify the retainer fees you charge to new or existing clients. Or you may have clients who question the value they’re getting in exchange for the fee they’re paying. Those are considerations if you’re thinking of transitioning to a retainer fee structure.

Regulatory Rules for Advisory Retainer Fees

Before implementing a retainer fee model, it’s important to familiarize yourself with the regulatory guidelines governing them.

The SEC requires registered investment advisors who charge retainer fees to submit an audited balance sheet with Part 2 of Form ADV when: ²

• They receive a prepayment of fees equaling $1,200 or more, AND
• The fee is received for services more than six months in advance

This rule exists to protect consumers against the possibility of paying advance fees only to have their advisory firm go out of business before services are rendered.

States can impose restrictions on retainer fees for financial advisors. Utah, for instance, prohibits nonrefundable retainer fees for advisors. Any fees you charge your clients must be reasonable, following the law.

Reviewing federal and state regulatory guidelines can help you remain compliant with the rules before offering a retainer fee structure to your clients.

Tips for Charging Retainer Fees

If you’re considering including retainer fees in your pricing structure, proper planning can facilitate a smooth implementation. Here are a few tips for adding retainer fees to your pricing:

• Determine what fee range is reasonable and appropriate to charge your clients, based on their AUM and the services you typically provide.
• Decide how you’ll bill for the fee and what compliance reporting requirements might be triggered, depending on the billing frequency.
• Review your book of business to assess which clients may benefit the most (or least) from a retainer fee structure.
• Be prepared to communicate the value a retainer model can offer to clients.
• Set clear expectations with each client about what they can expect from you going forward.

Frequently Asked Questions (FAQs)

Bottom Line

If you’re used to the AUM fee structure or earning fees from commissions, moving to a retainer model can take some getting used to. Over time, however, you may find that this approach to fees benefits both you and your clients.

Tips for Growing Your Advisory Business

• Successful advisors recognize the importance of establishing brand recognition and having an online presence. Social media, email and digital ads are some of the ways you might market your business on the web. If you’re looking for a less time-intensive solution, you may consider partnering with an advisor marketing platform. SmartAsset AMP (Advisor Marketing Platform) is a holistic marketing service financial advisors can use for client lead generation and automated marketing. Sign up for a free demo to explore how SmartAsset AMP can help you expand your practice’s marketing operation. Get started today.
• How often should financial advisors increase their fees? It’s an important question to ask if you’re focused on growth. It’s helpful to review your fee schedule every two to three years to evaluate whether your pricing allows you to remain competitive while also generating profits.

Photo credit: ©iStock.com/shapecharge, ©iStock.com/Natee Meepian, ©iStock.com/Jacob Wackerhausen