Articles About Practice Management

How advisory firms charge for financial advice has long been a central question in the profession. While many firms have historically relied on commission-based compensation methods – reflecting a sales-driven approach – financial advice has evolved with technological advancements and a greater focus on financial planning, with the Assets Under Management (AUM) fee emerging as the primary compensation model. Now, as financial advicers expand their services beyond traditional planning into more holistic, personalized advice, the very definition of financial advice continues to evolve. As a result, firms must continually reassess how they structure their fees to align with their growing range of services.

For firms evaluating pricing strategies, considering how others in the industry are adapting provides useful insights. Despite ongoing changes in the philosophy of financial advice, new Kitces Research on How Financial Advisors Actually Do Financial Planning finds that 86% of advisory firms still rely on AUM fees as their primary method of charging for advice. While this model remains widespread, firms have adopted different ways of structuring their AUM fees to align with their service models and client needs.

At the same time, AUM-based pricing is not without its criticisms. One common concern is that an advisor managing a $4M portfolio does not necessarily do twice the work of one managing a $2M portfolio, despite the fee being twice as high. However, most firms do not price their services in such a strictly proportional manner. Only firms using a flat fee structure, where a single rate applies to the entire portfolio regardless of size, use this kind of direct fee scaling. Instead, graduated and cliff pricing structures – which apply tiered or blended rates as assets grow – help balance costs across different client segments. These structures can also help advisors remain competitive on pricing, which may explain why 58% of firms use graduated fee structures, making them the most common pricing approach.

Despite its widespread use, AUM-based pricing has its limitations – it exposes firms to market risks and restricts the types of clients they are able to serve. To mitigate this, some firms 'unbundle' their fees, separating investment management, financial planning, and other services into distinct project-based, hourly, or retainer fees instead of covering everything under a single AUM fee. Notably, across nearly all client segments, research finds that the total fees charged by advisors who offer bundled and unbundled services tend to be nearly identical, suggesting that unbundling could be a viable way to make financial advice more accessible to clients with smaller portfolios. Another way firms reduce reliance on AUM fees is by using multiple charging methods, such as combining AUM fees with project-based or retainer fees. In fact, 72% of advisory firms use more than one charging method, allowing for greater flexibility in serving a broader range of clients.

Ultimately, as financial planning becomes more comprehensive and customized, fee structures are evolving to reflect this shift. While the mechanics of charging fees may not always change, the broader conversation around fees has continued to develop. At the same time, a wider range of fee structures could help firms serve a more diverse client base by expanding access to financial advice, which has traditionally remained concentrated in high-net-worth households. In other words, as financial planning becomes increasingly comprehensive, firms have the opportunity not only to refine their pricing models but also to rethink how they define – and deliver – value!Read More...

When it comes to growing a practice for the long term, talent acquisition is just as important as client acquisition. The people who handle the day-to-day work of the firm are crucial to its operations, particularly as firm owners and other leadership focus their time on higher-level strategic initiatives rather than routine operational details. However, developing a strong hiring process can be challenging – and it's easy to overlook its importance until the next hiring need arises. A firm with a clear and well-defined hiring process can attract stronger candidates and evaluate them more effectively, creating a compound effect that strengthens the firm over time.

In this guest post, Eddy Ricci, founding partner of Lead Advisor, explores how firms can refine their hiring processes to attract top talent and how small firms can stand out in a competitive talent market.

Ideally, the interview process is mutual: the firm needs enough information about the candidate to make an informed decision, and the candidate needs enough insight into the firm to do the same. To that end, interviewers can benefit from emphasizing speed (aiming to complete the process within 30 calendar days), connection, and candidness about the firm's strengths and areas for improvement. Additionally, discussing how the firm's core processes, values, and growth opportunities may directly impact the candidate can help candidates better understand what it's like to work at the firm.

A proactive hiring process considers all components of the role, including compensation, team dynamics, and the purpose of the role (especially if it's being refilled). It also plans for a smooth onboarding experience. Ideally, the process is intentional, documented, and repeatable – minimizing internal stress and reducing the time required to make a successful hire. This foundation can be built by creating not only a detailed job description but also an onboarding plan and ensuring the team is aligned and prepared for the new hire.

Once the job is listed and an initial candidate pool is formed, the hiring process can follow three interview stages. The first stage is a brief 'same page' screening to confirm the candidate's qualifications, answer initial questions, and outline the next steps in the process. Some firms may also include a work assessment after this step. The second stage is an in-depth interview, focusing on the candidate's technical skills and alignment with the firm's goals and values. At this point, candidates can also ask detailed questions about their potential role in the firm. The third and final stage is a mutual alignment interview, which addresses any remaining questions and ensures both sides are ready to move forward. By the end of the process, both the candidate and the firm should feel excited about the decision to move forward!

The key point is that firms that craft a repeatable hiring process can create a better candidate experience. A warm, connection-focused, and communicative interview process not only helps firms stand out to candidates but also improves the quality of their evaluations – ultimately increasing the likelihood of finding the perfect mutual fit!

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Almost anyone who has onboarded new employees will attest to the inherent balancing act it requires. New advisory firm employees need to learn ‘just a few' things: who their teammates are and how to work productively with them, who the firm serves, what makes the clientele unique, and how to navigate the daily operations and long-term goals of the firm. New associate advisors face an additional learning challenge as they are asked to internalize the hard and soft skills needed to deliver high-quality advice. In short, there's plenty to learn. Yet, new advisors also need opportunities for responsibility and autonomy to progress and remain engaged. For smaller firms – especially those with little to no experience onboarding new advisors – creating a well-paced financial plan can feel daunting. However, a structured and flexible onboarding plan not only helps an associate advisor ramp up efficiently but also ensures a smooth transition into an autonomous and fulfilling role!

In this article, Senior Financial Planning Nerd Sydney Squires discusses how to construct an associate advisor onboarding plan that guides an associate advisor through their first year, establishes clear checkpoints for progress, yet still allows enough flexibility to grow with the new advisor!

A few key principles can make the onboarding process smoother for both the associate advisor and their manager. First, clarity: both the advisor and manager should be able to clearly define the core financial planning skills that a new hire is expected to develop in their first year. Second, measurable progress: the plan needs objective standards and measurable benchmarks so that everyone can track development and stay accountable.. Third, balanced structure and flexibility: while the plan should serve as a clear ‘guiding star' for the new advisor, it also needs room for adjustments as the advisor's strengths and preferences emerge.

One effective way to structure the onboarding process is to organize the skills that the associate advisor will ideally learn in their first year into key categories. We have provided an onboarding plan template for advisors to download, which breaks up the skills list into two primary categories: 1) client communication skills (e.g., meetings, email communication, and phone calls), and 2) technical skills (e.g., building an initial financial plan). As the onboarding template is filled in over the year, the advisor and manager can review the plan during check-ins to assess progress, identify challenges, and highlight what feels most fulfilling in the role. Additionally, having a one-stop reference sheet with resources – such as compliance guidelines and broker-dealer help desk contacts – can minimize routine questions and streamline the learning curve throughout the onboarding process!

The key point is that while onboarding associate advisors is often a highly individualized process in small firms, a clear, structured onboarding plan ensures managers and associates stay focused on the big picture as the advisor learns and takes on new responsibilities at a sustainable pace. Ultimately, a little planning, a collaborative attitude, and strong communication (with a good sense of humor!) can go a long way in developing confident, competent, and autonomous advisors!

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Financial advicers often market their comprehensive financial services as a way to differentiate themselves from other advisory firms and to stand out in the broader landscape of financial advice. These services may range from 'standard' offerings like retirement planning to less traditional areas like credit card consulting. In a firm's early years, there tends to be more room for experimentation, with advisors adding new services to provide value and attract clients. However, as a firm's capacity grows and its list of services expands, the focus often shifts – from asking how to do more for clients – to "How can I regain control of my time without reducing the value or quality of my services?"

The best roadmap for focusing an advisory firm will reflect how to do more of what clients value and scale back on what they don't use or appreciate. While advisors may make educated guesses about client preferences, this approach has its limits. Advisor often have different skills and perspectives than their clients (because if clients share the same inclinations, they might just be advisors themselves!), and it can be difficult to fully eliminate personal when evaluating clients' needs. One-on-one client calls can offer insights, but they're hard to scale and may unintentionally lead to biased responses.

A more efficient solution is an asynchronous client engagement survey, allowing clients to rate how much they value specific offerings. These surveys help advisors identify what to improve, what to reduce, and what to keep doing because clients enjoy it! Advisors can also gauge interest in potential future services, using that feedback as a compass for what to build next.

Beyond assessing service offerings, client engagement surveys provide advisors with an opportunity to gather feedback about other aspects of the business. Advisors can ask how much value clients feel they receive for their fees, how they perceive about the firm's overall responsiveness, and what the firm should stop or start doing. This detailed feedback can reveal unexpected insights into where clients are truly finding the most value!

In most cases, two weeks is enough time for the clients to complete the survey, with a few reminder emails sent while the survey is open. After the survey closes, advisors can evaluate the responses – what can they do more of? Where can they scale back? And which new business opportunities would clients value most? After some preliminary analysis, it's important to follow-up with clients, expressing appreciation and sharing at least one change the firm will make based on the survey results.

Ultimately, the key point is that client engagement surveys can be a powerful tool for advisors to identify what matters most to clients. They provide valuable insights not only on what to streamline but also on where clients are receiving the greatest value. Beyond improving efficiency, surveys demonstrate that the advisor values client input, strengthening relationships and enhancing satisfaction – which can lead to better retention and more referrals!Read More...

Early in a firm's life cycle, a founder might take on nearly any client (and their fees) just to generate enough revenue to 'keep the lights on'. However, as the firm grows, some of those early clients may no longer be profitable to serve – especially if they generate lower fees than newly onboarded clients. Which leaves the firm founder faced with a difficult decision: Should they continue serving these unprofitable (or less-profitable) clients or 'graduate' them to a different service model?

In this guest post, Tim Goodwin, founder of Goodwin Investment Advisory, shares how his firm approached this challenge. He explains how they identified which clients were no longer profitable, developed an alternative service model to offer these clients, mentally prepared for the transition, and effectively communicated the changes.

Tim's first step was calculating the cost to serve different client segments – grouping clients with similar complexity levels and analyzing both direct costs (e.g., staff time, technology, and custodial fees) and indirect costs (e.g., rent, marketing, and training). These expenses were then divided across each segment, providing a clear view of which clients were paying below the true cost of service.

While many firms may continue serving a certain number of unprofitable clients (such as friends or family members of the advisory team), too many can strain firm resources. These clients require higher-paying clients to 'subsidize' their services and can negatively impact profitability – particularly during market downturns when AUM-based revenues decline. Yet, while it might seem logical to let go of unprofitable clients, in reality, doing so can be emotionally challenging. Many advisors often feel a deep sense of loyalty toward longtime clients who supported the firm in its early days, and the idea of ending those relationships can feel personal – more than just a business decision that might be financially necessary.

To address these various challenges, Tim's firm designed a new service pathway rather than outright 'firing' its unprofitable clients. Clients were given the option to either stay with the firm by paying the firm's new minimum fee ($1,000 per quarter), transition to an on-demand hourly service model that allowed them to make the choice to stay with the firm and opt for the model that best fit their service needs, or leave the firm altogether on their own volition. Importantly, the firm communicated these changes with care to ensure a smooth transition – reaching out via personal phone calls rather than less personal emails. As a result, many clients expressed gratitude for being given a graceful way to either move forward with or leave the firm, appreciating the respect and transparency shown throughout the process. At the same time, the firm saw its profit margin rise from 7% to 23% over the course of two years!

Ultimately, the key point is that refining a firm's client base – while aligning service models with long-term sustainability – can benefit both advisors and clients. With a thoughtful and empathetic transition process, firms can benefit from more engaged client relationships, more manageable workloads, and a thriving, profitable business!

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In order to deliver the best service to their clients, financial advisors often take on responsibilities beyond giving financial advice, including compliance, marketing, team management, and other operational duties. With only so many hours in a day and demands coming from every direction, it can be challenging to prioritize the most important things for growing an advisory firm. As a result, advisors can find themselves busy all day, month, or even year without making meaningful progress on their most important goals.

A key challenge in regaining control of time is identifying exactly where the time is going. Job responsibilities often shift as firms grow and scale, with new tasks added faster than they are delegated, automated, or eliminated. Over time, this can easily lead to overwhelm – or, eventually, even burnout. While this risk can be prevalent in any role, founders and lead advisors may be particularly susceptible due to the sheer number of responsibilities they manage.

To regain control, advisors can begin by tracking their time with various software tools such as Toggl or Harvest. Many of these tools are easy to integrate into daily workflows, requiring minimal effort to log and categorize tasks. Simply recording hours worked and categorizing tasks can help advisors get a clear picture of the total hours they're actually working, where the time is going, and how long each task takes. Over time, patterns may emerge, revealing potential opportunities to reduce inefficiencies such as task-switching and interruptions of deep work periods. Additionally, time-tracking can provide valuable qualitative insights, such as identifying which weeks felt energizing versus overwhelming – and why.

For advisors who tag and categorize their work effectively, time-tracking can yield even deeper insights. For example, they might discover they are spending significantly more time on administrative tasks than expected, suggesting a need for support staff or automation. Comparing activities against benchmarking studies (such as the Kitces Research on Advisor Productivity) can reveal additional areas for improvement. Advisors can also gain further insight using tools like the DRIP matrix (Delegate, Replace, Invest, Produce) to categorize tasks based on their energy requirements and revenue potential, helping to identify which activities to delegate, eliminate, or prioritize. This structured approach provides clarity on which tasks are most energizing and income-producing – and which are not – helping advisors realign their efforts for greater productivity and satisfaction.

Regaining control of one's time is not a quick process. The difference between a productive advisor and one who is struggling often comes down to making small, incremental changes in how their time is managed. However, by using time-tracking software and staying committed to improvement, advisors can gain clear, actionable insights that lead to significant progress over time. And with a positive attitude and determination, even small adjustments can lead to meaningful results!

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Operating a financial advisory firm often requires managing large amounts of data, from prospective client contact details to current clients' investment performance, which can create bottlenecks as advisory firms scale and their data systems multiply. The process can be particularly time-consuming when data is stored across multiple systems (or, worse, on paper) and must be manually transferred between software programs, such as scheduling tools and CRMs. However, automation tools offer advisors a way to connect these disparate systems, improving efficiency and reducing manual workload in firm operations.

In this guest post, Matthew Benson, owner of Sonmore Financial, discusses how he has streamlined his lead management process using the automation tool Zapier. By creating automations, Matthew has saved time for himself and his team while reducing the potential for data entry errors and increasing his firm's overall operational efficiency.

Matthew chose Zapier for its robust library of integrations – connecting tools his firm already used from CRMs to email platforms and scheduling software – as well as for the strong support offered by the company and its broader user community. He started his automation journey with a simple, single-step task: migrating lead data from email into a spreadsheet. This task is not only time-intensive and monotonous but also prone to error. This automation simplified data entry and allowed the firm to send timely follow-ups to leads without manual effort, improving efficiency and client engagement. From there, he moved on to more complex workflows, such as setting up automated text messages, which required a custom API integration due to the capabilities of his texting software.

While automation brings significant benefits, it also takes time and money to implement. Initial setup and ongoing maintenance are essential, particularly as the automated workflows grow more complex. For example, Zapier will notify the user when an automation has failed, which requires the user to diagnose, troubleshoot, and retest. Furthermore, automation tools like Zapier involve monetary costs for ongoing subscription fees, which can vary based on usage, with optional consulting fees for support creating or fixing workflows.

Compliance is another consideration for advisors implementing automations, especially for client-facing communications like text messages and emails. Tools are available to help ensure that communications are securely archived and include necessary disclosures to meet regulatory requirements, promoting transparency and ensuring that firms are prepared for audits.

Ultimately, the key point is that while implementing automations requires upfront and ongoing investments of time and money, the time saved over the long term can be substantial and well worth the investment. By reducing manual data management and improving accuracy, advisors can dedicate more time to high-value, client-facing activities, enhancing both productivity and client service!

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When a financial planning firm is hiring a new employee, it naturally wants to find the best candidate to fill the role. However, some firms may unintentionally limit the applicant pool by using a promotion and selection process that doesn't focus on the most important traits or that introduces biases, which can lead to missing out on candidates who might otherwise have been well-suited for the position. But by taking a structured, inclusive approach to the hiring process, firms can attract a diverse talent pool and increase the likelihood of finding the right person for the job.

Inclusivity starts with a firm's website and marketing materials, which can influence the pool of applicants who apply for an open position. If all of the individuals featured on a firm's site look similar in age, ethnicity, and/or gender, potential applicants (and prospective clients!) who don't identify the same way might feel uncomfortable about joining the firm. Additionally, carefully choosing the requirements and qualifications to include in a job description can attract skilled individuals without excluding those who might not meet non-essential criteria (like having a bachelor's degree). Further, including salary details and growth potential in the job listing, as well as avoiding the use of industry jargon or gendered language, can further broaden the pool of people excited to apply.

When promoting an open position, firms can benefit from advertising beyond their personal networks and local geographic areas. Posting available positions on industry career centers and job boards (e.g., CFP Board Career Center, FPA Job Board), on general interest sites (e.g., Indeed.com, Monster Jobs, LinkedIn), and with groups that target specific populations (e.g., Association of African American Financial Advisors) can improve the chances that the listing will be seen by the widest possible group of potential candidates, thereby strengthening the applicant pool and increasing the chance of a great hire.

Another approach for helping the firm choose the right applicant is to implement a structured interview and selection process, which can mitigate the impact of unconscious bias and increase the odds that new hires will have the necessary skills. Such a process can include standardized work sample exercises to assess the candidate's competencies and an interview process that asks each candidate the same set of questions to ensure a uniform experience for each individual. A standard scoring rubric for work samples and interviews ensures that candidates will be scored on the traits being assessed (and not just by their ability to charm interviewers!).

Ultimately, the key point is that given the time and cost involved in hiring and training new employees, selecting the most qualified individual is a business imperative. Which means that taking the time to create a structured, inclusive hiring process that allows a firm to access the broadest possible pool of potential candidates and evaluate them effectively can be an investment that pays off for a firm for years to come!

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For many financial advisory firms, ownership has traditionally been tied to equity, where advisors take on financial risk in exchange for legal ownership and a share of the firm's success. However, as the cost of equity rises and accessibility becomes more limited, firms face the challenge of inspiring ownership behavior without distributing equity. One way to achieve this is by fostering emotional ownership – a concept where employees, even without equity, demonstrate a deep sense of care, dedication, and responsibility toward the firm's growth. This mindset can extend beyond job responsibilities, reflecting a deep commitment to the firm’s success.

Emotional ownership plays a key role in developing strong future leaders, especially when rewarded. If those who demonstrate emotional ownership are not given the respect, recognition, and opportunities afforded to legal owners, leadership risks fostering frustration and resentment. But by involving non-owners in decision-making, offering clear career paths for continued growth within the firm, and linking staff contributions to firm-wide goals, firms can create a cycle that rewards emotional ownership and encourages further investment in the firm’s long-term success. Team members who feel a sense of emotional ownership can be a tremendous asset to the firm, driving productivity, innovation, and leadership. However, it's important to recognize that not all team members will share this mindset – and that's not necessarily a bad thing. As while those with emotional ownership can be highly motivated and valuable thinking partners, their deep investment in the firm may also lead to many (sometimes dissenting) opinions, creating the challenge of "too many cooks in the kitchen".

To nurture emotional ownership, firms can take several steps. First, non-owners can be encouraged to participate in decision-making, with their contributions linked to firm-wide goals. They can also be provided with clear career paths that help them envision their growth with the firm. This fosters a sense of responsibility and purpose, even without equity. Mentoring legal owners to fully embrace their roles can also guide them toward greater accountability and leadership within the firm. Additionally, fostering accountability across the firm – through regular performance reviews and recognizing contributions – helps motivate both owners and non-owners. Creating a culture of shared success, where the focus is on collective achievement rather than just individual ownership stakes, can further strengthen emotional investment in the firm’s success. Finally, implementing performance-based incentives tied to firm profitability can inspire non-owners to excel, proving that contributions are valued, regardless of equity.

Ultimately, the key point is that by recognizing and involving emotionally invested team members and offering clear paths for growth, firms can develop a strong culture of shared success. Rewarding those with high levels of emotional ownership creates a foundation for long-term collaboration and positions the firm for lasting success!

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Over the past decade, a growing number of advisors have expanded into offering comprehensive financial planning services, reflecting a shift that not only helps them stand out from (increasingly commoditized) portfolio management offerings but also supports clients' broader financial goals. However, comprehensive planning is an intangible service, which can make it challenging for advisors to convey its value – especially when meeting with prospective clients who may be unfamiliar with what 'financial planning' entails. This can be particularly challenging when advisors work with clients who have diverse planning needs.

In this guest post, Taylor Schulte, founder of Define Financial, an independent RIA based in San Diego, CA, shares his approach to overcoming these challenges by selecting a client niche and implementing a 3-step sales process. Together, these strategies have enabled him to clearly demonstrate his value to prospective clients contributing to a remarkable $1 million increase in recurring revenue over just 4 years.

To start, Taylor refined his ideal client profile to focus on those he could best serve: diligent savers over age 50 with a retirement nest egg between $2M and $10M. These clients, typically in or near retirement, face key challenges like reducing taxes, managing investment risk, and maximizing income. With a clear niche, Taylor developed a client-centered sales process focused on value, not on pressure to become a client.

Taylor's process starts even before the first meeting, introducing prospects to the firm and its "Free Retirement Assessment Process". Those interested can then schedule a 20-minute introductory phone call, where Taylor uses a script to determine a potential fit to work together. If both parties agree, they proceed to a 60-minute discovery meeting to explore the prospect's goals and reasons for seeking advice.

After this meeting, Taylor waits 2 weeks before the final review assessment meeting. This timeline not only allows for the prospect to provide their information and Taylor's team to complete the analysis, but also gauges the prospect's commitment to a long-term relationship. In the final 60-minute review, Taylor presents the Retirement Assessment, covering 3 key questions: how to maximize income, lower taxes, and optimize investments in retirement. He also discusses fees and the onboarding process but encourages prospects to "think about it" before deciding – focusing on long-term value over a quick close.

Ultimately, the key point is that developing a structured sales process tailored to the specific needs of a well-defined client niche not only enhances operational efficiency but also builds trust and rapport with prospects. This approach can lead to higher conversion rates while driving substantial revenue growth and profitability. And by aligning services with the priorities of a targeted clientele, advisors can create lasting relationships and build a thriving, sustainable business!

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