Moving to retainer fees isn't just a computational change; it's a cultural one.

Many years ago, my switch from fees based upon a percentage of assets under management to retainer fees had a dramatically positive effect on my practice. Overnight, I could predict my revenues with a high degree of certainty. I no longer had to compute a precise, quarter-end portfolio balance before invoicing clients. And the switch took my fee structure's unintended emphasis off investment management and placed it squarely on the entire advisory relationship.

As attractive as these benefits may be, retainer fees aren't a panacea for all the disadvantages of other fee structures. They bring their own set of challenges, a few of which are illustrated by questions like:

Exactly what services will be included under this new fee structure?

How is the fee computed?

How does one factor into the fee time spent with and/or value received by the client?

Must the retainer fee be "resold" each year or does it renew automatically?

Should every client be charged the same retainer, or should it vary by client?

How does one adjust the fee, either up or down, when necessary?

The answers to these and other questions aren't the same for all advisors charging retainer fees because this fee structure is used across the entire spectrum of independent RIAs-by large and small firms for large and small clients. Variations in its implementation are unavoidable.

Bob Keats, a principal in Keats, Connolly and Associates Inc. of Phoenix, uses retainer fees in his firm's family-office business model. Keats, Connolly has just 70 clients and brings in an average of more than $28,500 per client relationship. The firm also has 18 employees, giving it average revenue of more than $100,000 per employee. Because Keats' firm provides family-office services, clients are getting just about everything imaginable for this fee, including tax preparation, investment management and comprehensive planning plus-no doubt-a plethora of "concierge" services.

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