Financial advisors could be shortchanging themselves by not employing a variety of pricing structures for the services they provide, according to Vanessa Oligino, TD Ameritrade Institutional’s director of business performance solutions.

Oligino, who consults with registered investment advisors on their growth and efficiency, said they should be looking at their pricing structures regularly to ensure these are still aligned with their firms’ business strategies and future plans.

“They should be looking at all aspects of their business on a regular basis and saying, ‘OK, do I have the right people in place? Do I have the right technology in place? Where can we become more efficient? And is our pricing strategy aligned with our business strategy and where we are headed?’” Oligino said.

TD Ameritrade has created a guide that addresses firms’ pricing regimes. The guide offers sample prices and a list of questions designed to help advisors reassess their own. It poses questions, such as “Has your advice offer to clients evolved or grown with the maturity of your firm? And has your pricing structure changed in step with your advice offer?”

These questions, Oligino explained, can speak to an advisor, who, for example, once offered five core services to clients and now offers 10 with the same prices.

“Maybe the firm added more talent to deliver those services and implemented technology,” she said. If so, firms should look at their profitability and ask themselves if their client relationships are still profitable. If not, they may need to increase prices to incorporate everything the firms have done since the relationships started.

The bottom line, Oligino said, is that if you are adding value in different ways, you might need to re-examine what you’re charging. If an advisor is charging an asset-based fee to a client who, for example, is going through a divorce, and the advisor is spending time with the attorney and gathering documentation to help, that is work they are not getting compensated for. “That is really above and beyond the core offering. So if you are doing custom work like that, you might think of implementing some sort of project fee or a flat fee,” she said.

As for what’s fair compensation for that type of work, Oligino said there really isn’t one best pricing model for advisors. “One of the things we suggest is to think about your core competency, where you add value the most,” she said, explaining that if your focus is financial planning, your fee structure probably shouldn’t be built around asset-based fees. “That’s de-emphasizing the value of the financial planning, and that’s actually your core competency.”

She said advisors adhere to their pricing structure because they are not assessing it consistently. “The typical thing we hear is that they do fear client attrition, even though our research shows that’s not happening. It’s a bit of a myth,” Oligino said.

Another reason advisors don’t change is that a 1% asset-based fee is easy to communicate, she said.

Advisors need to know their cost for serving each client when considering a fee change, she said. For example, they could bucket their clients into categories depending on how complex the demands are, and figure out the average costs and profit margin for clients in each group, she said.

Each group should then be expected to generate a certain amount of revenue in order to recoup cost and remain profitable to the company, Oligino said.