When a financial advisor is working with a team of experts, you may wonder, what is the best way to compensate them for their work?  Of course, your business model needs to provide you with the ability to reach your financial goals, while also taking care of your team of experts.

A few financial advisors will compensate team members directly from the compensation received from clients.  For the rest of you, most of your team members will bill for their services directly to the client. 

The key here is setting client expectations correctly so they don't receive a “surprise” team member bill. Encourage each team member to estimate an average flat fee per client, keeping in mind that some clients will require more time and others will require little.   I’ll give you examples of how both business models work.

The compensation model that works for my firm…

At our firm, our "Professional Services Agreement" with our clients has two separate agreements bundled in it. This agreement spells out how we charge a percentage of assets for money management and also a separate portion, which pays for the checklist of comprehensive financial services. We start by firmly establishing the fixed costs of what all the subject matter experts would be. We then establish a minimum fee of $12,500 per year, which would cover our costs plus give us a reasonable margin.

So, this could hypothetically be described to a client this way, "We handle all your financial affairs for a 1% annual fee on the assets under our care, with a minimum annual fee of $12,500." We then pay all the team members out of our single simple fee, which is up front and fully disclosed to our clients within our agreement. 
 
Another successful compensation model… 

Many advisors require a minimum annual compensation ranging anywhere from $3,000 - $7,000 per year, substantially less than our minimum. So, your job as financial advisor is simply to make sure ALL OF THE CHECKLIST GETS DONE. That means you either recruit outsourced experts who bill the client directly from their own businesses, or you are the "keeper of the checklist" who professional nags the client until they get everything done through their own professionals (CPA, Estate Attorney, etc).

Many financial advisors include the fees for their outsourced financial planning expert and their outsourced tax expert (for income tax projection & tax return review) within their compensation.  I especially like this structure if those two roles are entrusted to one person or firm.

The important thing is that the checklist is getting done and your clients are showing up for the 3 progress meetings every year.  This makes you indispensable as the trusted advisor. 

When you use The Trusted Advisor Toolkit™, there are quick video lessons that teach how information and documents will be passed between your offices for each deliverable, as well as downloadable templates that document the timetable so that nothing gets missed.  If you don’t already have a membership to our system, you can register now at no charge!