22% of membership and rising are focused on fixed-fee service models. Retainer fixed fees are catching on in the wealth management industry. A recent J.D. Power survey found that 74% of millennials were partial to a one-time fee-for-service model, with 73% stating they preferred a subscription model. Academy members’ interest in the topic mirrors those findings. The perceived value of fixed-fee relationships is reflected in their rising retention rates. In 2020, firms that have worked with Herbers & Company reported a 97.7% retention rate for their clients paying fixed fees. That rate exceeded, for the first time, the retention rate of clients paying AUM fees. It’s important to note that firms offering both AUM and fixed-fee options generally haven’t reported significant “cannibalization” issues.
Advisory firms are keen to grow—to add the services and solutions that scale can unlock, to elevate their valuations, and to prepare for a sale or for internal succession. Smart firms are continually aligning with consumer demand in areas such as fees and service-based cultures. And they recognize that their finite human and financial resources require them to prioritize the initiatives that will most efficiently power their organic growth, as advisory firm valuations continue to climb.
This data from Herbers & Company’s perspective is all good news. Many firms already understand which levers to pull to make growth happen most effectively. It’s a positive sign that the independent space is continuing to evolve and take action in their firms in ways that will benefit clients, firms, and team members and expand organic growth.
Angela Herbers is founder and chief executive of Herbers & Company.