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The Real Value Of Retainers

When I set up as an IFA in 1998 I decided to log time and charge for hours worked (either by invoice or by allocating to the investment management fee). The business model was all about earning less now, building up an income stream from loyal clients.

As part of this structure, I charged a retainer fee of £50 per quarter (it has increased today to £75). The IFA I was working through at that time laughed in my face at this concept. He also mocked me for thinking that any client would ever pay a fee by cheque.

Today that retainer fee brings in enough income to pay for two members of staff. And as for paying for fees by cheque…

We are currently looking to recruit a senior adviser. I don’t like using recruiters, because of the commission based model – well, that and the eye watering rates they charge (a previous Adviser Lounge blog refers). I’d much rather candidates approached us directly, thereby demonstrating the very qualities we are looking for. But maybe if recruiters charged a retainer fee I’d be more inclined to see their worth.

Working for clients in this way does require a certain mindset from advisers. We’re not interested in products or transactions. We focus on long term objectives and reviewing progress towards them. We often struggle to find candidates who really ‘get’ the advantages of working in this way,

So what are the benefits of a retainer charging model? Well, for the client:

  1. It’s a pretty small amount to know that we are on hand (we have work codes specific to the retainer fee, such as telephone time and travel)

  2. They feel part of the Ovation ‘family’ (to borrow a phrase used by a client at one of our recent events)

  3. They benefit from lower fees each time they require advice/work

  4. The firm can build a proposition around loyal clients

  5. The focus of the advice tends to be much longer term. Goal setting, cashflow modelling, and so on

And it’s great for the firm too:

  1. If a client requires advice, they will always come to us

  2. Regularity of income (93% of the turnover of Ovation comes from existing clients). This means we can plan for the future

  3. No ‘boom and bust’ income levels

  4. Very strong client relationships – we see every client every year and often become good friends

  5. The business has a real value

I’ve often made this point to solicitors. Certain parts of the legal profession (commercial, corporate) receive transactional fees from the regular clients. Each time one of these clients requires more work, the legal firm has to win the business again.

I’ve even tried to persuade the chap who helps me with property maintenance (I am NOT a practical man!). Charge me £10 per month and then take it off the bill when you do some work. You know I’ll always come to you for help, I know you’ll be there when I need you. He’s not taken me up on this yet.

I know there are different types of retainer model (advance payment of fees, for example). Ours is a small amount which doesn’t pay for much specifically. What other models have people tried with success?

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