Call it a coming of age for independent advisors: As they become more experienced and figure out whom they want for their clients, they learn better ways to charge for their services. For many advisors, that has meant looking beyond asset-based fees to other pricing methods.

For much of the last decade, many observers questioned whether asset-based fees would retain their popularity with clients when the market headed south or sideways. Little more than a year after that happened, there is no burgeoning client revolt against asset-based fees. But many advisors worry that this fee structure encourages clients to measure their value in terms of investment performance. Conse-quently, some are taking proactive measures to alter their fee structure and, with it, their value proposition.

Advisor Linda Yows Leitz believes her new fee structure more accurately measures the value she provides to clients. She started as a financial advisor almost nine years ago and charged almost strictly by commission. By the late '90s, she was using a combination of fees and commissions. But about a year ago, Leitz, co-owner of Pinnacle Financial Concepts in Colorado Springs, Colo., analyzed her client base and pared it by more than half. She decided to target mostly upper-middle-income people and began charging only flat fees. "It can be project retainers, where we define what you and I agree I will do. If you want something outside of that, we need to renegotiate. Most like the open retainer, and that means I look at all areas, and it doesn't matter how many times you call or how much time you spend with me."

Leitz previously had done some hourly work, but she found two things in particular that she didn't like: One, some clients wouldn't contact her because they didn't want to pay for her time during short phone calls. Two, she would be able to answer some questions quickly because of her experience, so she didn't feel she was being compensated fairly.

But some advisors swear by hourly fees. After many years as an advisor, Sheryl Garrett, founder of The Garrett Planning Network in Overland Park, Kan., decided they were the best choice to reach the consumer masses. "I wanted to be done with a project, and with a retainer, you're never actually done," she says. "The majority of clients I wanted to work with didn't need my advice every quarter. It was overkill." Garrett charges $180 an hour and concentrates on providing "the nuts and bolts of financial advice," which include things like retirement projections and portfolio reviews. Many of her clients are "do-it-yourselfers" who are looking for validation of their own decisions or young couples starting out who can't afford typical advisory fees.

"About half the folks I meet with will see me again within 12 months. They think of a long-term advisor like you'd think of your dentist. They see you only periodically and only when they have needs. You have to schedule in advance, and if you have an emergency, you can probably get in more quickly," says Garrett, who markets her methods through her network, which has 83 members who pay $6,000 to join and $1,000 annually after the first year to continue participation.

Other advisors are using a combination of charges. James L. Budros, a principal of Budros & Ruhlin in Columbus, Ohio, says his firm charges financial plan development fees in addition to asset-based fees. The plan development fee ranges from $5,000 to $30,000 over two years and is charged to clients who want financial planning services. That charge is in addition to asset management, which starts at 85 basis points for the first $1 million of investments. There is no separate plan development fee after the second year.

"For us, it's not a financial plan; it's financial planning. That connotes a process and continuum. So as a result, we charge for it. We engage clients for a lifetime of financial planning and investment management. And it's seldom that they change from comprehensive planning to just investment management," says Budros. His firm's typical client is 60 years old, and its average portfolio is $2 million.

Joe Kopczynski, president and CEO of Universal Advisory Services (UAS) in Albuquerque, N.M., says five years ago, he re-evaluated what work the firm was doing and what clients expect. His conclusion was that his clients wanted UAS to improve or defend their net worth. As a result, the firm began charging the majority based on a percentage of net worth, although it kept some planning-only charges and investment-management fees, which continue to be a percentage of assets under management. Since the overhaul in its fee structure, most new clients have signed on for family-office services and have net worths between $5 million and $90 million. Family-office fees now account for about 42% of revenue, he adds.

Although the vast majority of advisors still generate income from commissions, firms that charge fees usually are more profitable, says Mark Tibergien, a partner in Seattle-based Moss Adams LLP. But what kind of fees?

"By going the pure assets-under-supervision route, you have huge upside potential, but when the market comes down, you have to re-examine how you are managing costs. A combination of fees for advice and fees for assets under management is a good, balanced approach for achieving profitability," says Tibergien, who conducts annual compensation and staffing studies of the industry for the Financial Planning Association.

Still, what to charge clients has been a difficult issue with which advisors have had to grapple. "What I find is a crisis of confidence in how people charge for their services," Tibergien comments. "I think that many people in this business intuitively understand they should charge for their services differently, but it's a challenging time to be changing their methodology. Many would like to be able to charge for planning and advice outside investment management, but in many cases, they are not comfortable they can justify their fees or their clients will accept the fees."

Pricing is a fundamental part of any advisor's business strategy, and how you charge depends on what market you are serving and how it responds to your fees, he adds. "I think the key is there is no pattern. This is a dilemma for many people, to define their pricing strategy. Ultra-high-net-worth individuals are comfortable with paying professional fees, and they recognize it as a cost of wealth. With people who have extremely high net worth, a retainer makes sense because it tends to be more of a full-time arrangement. For the middle market, a retainer doesn't make sense and asset-management fees may not make sense, so hourly is the way to go."

Other advisors agree they have refined the way they charge as they have grown to understand their clients, their market and their own goals. The result is that among advisors, fee structures vary greatly.

Sherry Hazan-Cohen, president of Dream Achieve in Plano, Texas, and founder of the Dream Achieve Network, says she works with many middle-class clients who want hourly fees with no minimum. They often are looking for advice on particular issues, such as when they can retire, she says, and her hourly work on such a project typically costs about $900.

About 40% of her clients are charged hourly and 60% by annual retainer, which starts at $3,600 for a couple for the first year. Subsequent fees are 50% to 60% of the first-year charge, depending on how complex a client's situation is. For her retainer clients, she prepares comprehensive values-based financial plans in conjunction with a psychologist. "With my clients, I get very involved from the beginning," she says. "I have a very extensive questionnaire we go through. I have a psychologist on retainer, and he has his own questionnaire that he administers to my clients. His fee is built in. He scores it, and he does his analysis, and we meet with the client together."

Advisors aiming for a wealthy clientele that wants family-office services often find all-inclusive flat fees are the way to go. "We sat down and looked at our best clients, why they were happier," says Robert F. Keats of Keats, Connelly & Associates Inc. of Phoenix. "We found the ones that were happiest with us and for whom we created the most value were the ones we did everything for, and we did it for a flat fee."

By focusing on those clients, the firm now is handling clients with higher net worths, with an average of about $3 million. "The major business benefit is the ability to predict our income," Keats says. "On January 1, we know we have everyone on retainer and we know our income for the whole year within a few percentage points."

Robert B. Walsh, president of Lighthouse Financial Advisors in Jersey City, N.J., also says he has found a retainer works best with his clients. Walsh ran a CPA practice before focusing on financial planning and found many clients didn't like hourly fees. Clients wouldn't call, he says, because they didn't want to be charged. Walsh adds he participates in the Cambridge Advisors network and got generic ideas on establishing his retainer fees from the group.

Like Walsh, Greg Hilton of Hilton & Associates in Chicago is a CPA who decided to move into financial planning. But he charges only by the hour. Fees based on a percentage of assets can yield as much as $500 an hour, a charge he thinks is too high, says Hilton, also an attorney. "Clients think the retainer appeals to them, that they can use all the services they want, day and night. But if a client comes in with another issue, what's the incentive to work on that issue? There is none; there's an opportunity cost." He believes hourly rates can generate a good income for advisors and lead to more and quicker attention for clients.

Some advisors favor more involved pricing methods. Louis Stanasolovich, president and CEO of Legend Financial Advisors in Pittsburgh, admits his firm's fee structure is complicated. "For financial planning, we still charge on an hourly basis, and we break that down into five categories, one for the advisor's time, one for the senior assistant planner's time, one for the planner's time, administrative time and clerical time," he says. The firm also charges a 1% fee for assets under management. Legend charges a flat fee for family-office services, which are aimed at larger clients, those with assets in the eight-figure range, he adds.

A big change in its fees came about a year ago, when Legend realized it was low-balling its charges for financial planning services in an effort to attract asset-management business. After a review, it raised its fees for financial planning. "I would say a couple of years ago, our financial planning revenue was shrinking as a percentage of overall revenues; it was down to 10%. But now it's grown to about 17% of revenues," Stanasolovich says.

He thinks the financial advisory business as a whole eventually may move away from asset-based fees. "I think there are clients out there looking for more sophisticated advice, although many people judge the value of the relationship still by the performance of the assets. I'm not so sure we're going to get away from that any time soon," he says. "On the other hand, the more services you offer, it makes it harder for clients to leave over time."