Disclaimer: This content is based on my contributions to an article originally published by Financial Planning magazine. For the complete original article, please visit: Affluent investors favor fee-based — if they understand it.
I was recently featured in Financial Planning magazine discussing the growing trend toward fee-based planning models among affluent investors. The piece highlighted some fascinating insights from Cerulli Associates research showing that 36% of affluent clients now prefer fee-based structures, even though many may not fully understand what they’re asking for.
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Strategic Partnerships
What I find most compelling about this shift is that it reflects a fundamental change in how clients view their relationship with financial advisors.
As I shared with the publication:
“Fee-based planning continues to gain traction because it naturally aligns incentives and reinforces the advisor’s role as a strategic partner, not a product pusher.”
This sentiment was echoed throughout the article by several other industry professionals.
Carlie Ransom from Equal Path Investments made an important distinction about terminology – many investors asking for “fee-based” services actually mean “fee-only,” which eliminates commission-based product sales entirely. This confusion highlights a broader education gap in our industry.
The Trust Factor
One insight that particularly resonated with me came from Cameron Valadez at Planable Wealth, who noted that many investors “just want to work with someone they can trust.” This gets to the heart of what we’re really discussing – fee structures are ultimately about building and maintaining client trust.
The article featured a telling anecdote from Carlie Ransom about a client who said, “I’m worried my current advisor won’t let me spend my money in retirement so that my account balance stays larger to make him more money.” This perfectly illustrates the conflict of interest concerns that are driving the shift away from traditional AUM models.
Personal Observations
What I’ve observed in my practice aligns with the research findings. Affluent clients are becoming increasingly sophisticated about understanding potential conflicts of interest. They’re asking harder questions about how advisors are compensated and whether those compensation structures truly align with their best interests.
Arielle Tucker from Connected Financial Planning touched on an important emotional component, noting that many clients carry “shame around money, fear of being judged, or confusion around financial jargon.” This psychological aspect of fee discussions can’t be overlooked – transparent fee structures help create what she called “a safe space where their interests come first.”
The Industry Inflection Point
I believe we’re at a critical juncture in our industry. As I mentioned in the article, this represents:
“A chance for firms to lead by offering clarity and value beyond just managing investments.”
The firms that embrace transparency early will be better positioned for the future.
Stephan Shipe from Scholar Financial Advising summed it up well when he said the industry is “working against a trend of increasing consumer awareness.”
The writing is on the wall – clients want clarity, they want to understand how they’re paying for advice, and they want to know their advisor’s interests are aligned with theirs.
The shift toward fee-based models isn’t just about pricing structures; it’s about evolving our industry toward greater transparency, better client outcomes, and stronger advisory relationships built on trust rather than product sales.
This excerpt reflects my personal thoughts and contributions to the original Financial Planning magazine article. To read the complete piece with additional expert insights and research findings, please visit the original publication: Affluent investors favor fee-based — if they understand it.