2019 Icon: Sheryl Garrett

It was about 10 years ago when Sheryl Garrett first predicted that within 20 years, hourly pricing would become the most popular way of charging for financial advice.

Today, with hourly pricing still representing a tiny fraction of advisory fee models, she admits the forecast was too optimistic.

“I’m like a value investor; I tend to be a little bit early,” she joked.

“At this point I don’t see hourly pricing taking over in the next 10 years, but I believe it will happen within my lifetime,” she said. “I do see more firms offering hourly fees as an option, which could lead to them offering it exclusively. I still see hourly fees as the next big wave of service to clients in financial planning.”

For Ms. Garrett, 56, providing financial planning advice by the hour is not just something she pontificates on and sometimes jokes about. Charging by the hour, or even by the minute, is a drum Ms. Garrett has been banging for more than two decades.

She made her campaign official in 2000 with the launch of the Garrett Planning Network, a subscription-based organization of more than 250 registered investment advisers who are committed to hourly-based planning services for the masses.

She believes it is the best way to provide financial planning to people who don’t already have a lot of money.

“My professional mantra is to help make competent, objective financial advice accessible to all people,” Ms. Garrett said, stressing the underlying theme of her network.

Ms. Garrett’s dedication to serving clients who may not have the financial wherewithal to pay an adviser 1% or more of their assets every year for financial advice earned her a shoutout from President Barack Obama during a speech in 2015 in favor of the Department of Labor’s fiduciary rule for retirement advice.

“There are a lot of hardworking men and women in this field, and [they] got into this field to help people,” Mr. Obama said. “They’re folks like financial adviser Sheryl Garrett.”

The Garrett Planning Network, based in Eureka Springs, Ark., is a membership organization that offers education and assistance in setting up hourly-fee planning practices.

The membership fees, ranging from $210 to $800 per month, are based on the level of services registered investment advisers receive from the network.

FIDUCIARY OATH

To join, advisers must be fee-only; offer advice on an hourly, as-needed basis; be willing to provide advice to individuals from all walks of life; be either a CFP certificant or licensed CFA with a personal financial specialist credential; and adhere to a fiduciary oath.

Leading up to her metamorphosis into the national voice of hourly-fee planning, Ms. Garrett spent about a decade cutting her teeth in the financial services industry. That journey started in the mid-1980s at IDS, a precursor to Ameriprise Financial, where she was handed a phone book after her training and told to make 100 cold calls a day.

“I never came close to making 100 calls a day,” she said. “I don’t think I made 100 calls in two years.”

Ms. Garrett only lasted a few years at IDS, and over her first 11 years in financial services, she recalls “trying to leave the business three times. But I just couldn’t get away.”

Meanwhile, she kept taking jobs at firms that got her closer to the pure fee-only model, where client assets and income and station in life don’t matter.

“There’s a different way to go about delivering financial advice,” she said. “Our relationship with a dentist or doctor or attorney might look similar to the way I worked with clients.”

She opened her own firm, Garrett Financial Planning, on April Fool’s Day 1998.

“I found an enormous opportunity with this untapped market of do-it-yourselfers and validators who didn’t need or want a fulltime financial adviser,” she said. “I don’t believe most people need a full-time financial planner or need somebody to watch their portfolio on an ongoing basis, and I loved the concept of billing for my time. It’s one of the easiest ways to explain fees.”

In terms of taking it to the next level, Ms. Garrett credits the direction of Bob Veres, owner of Inside Information, a consulting firm for the planning industry.

“I remember the conversation very well,” said Mr. Veres, of the brief meeting at an industry conference 20 years ago. “Sheryl said she wanted to run something by me, and then she talked for a few minutes about her vision of financial planning offices that operated like dentists’ offices or health clinics, where people could come in for a checkup and wellness exam and pay for the visit, and come in whenever they were feeling financially unhealthy.”

‘TERRIFIC IDEA’

Mr. Veres recalls telling Ms. Garrett it was a “terrific idea,” which was all the validation Ms. Garrett needed.

“She basically introduced the idea [of hourly fees], when the profession was transitioning from commissions to [asset-based] fees, that financial planners could have alternative fee models and still make a living,” Mr. Veres said. “Somehow, it seems that nobody thought of that before.”

Ms. Garrett stopped working with individual clients in 2005 to spread the hourly-fee gospel fulltime through the Garrett Planning Network.

When she was working with clients, the fee was $240 per hour, which was designed to be divisible by 60 minutes.

“If I don’t want to take on the aspect of a project, like filling out a form online for a client, I explain that it will cost them $4 per minute for something they could do themselves,” she said.

The idea of letting clients manage their fees is just a byproduct of the larger benefit, according to Ms. Garrett.

“Ninety percent of the population doesn’t need investment management, but they do need access to financial planning,” she said. “The service offering is attractive to clients; it’s the industry that finds it peculiar.”

Mark Tibergien, CEO of Pershing Advisor Solutions, has long challenged the logic of charging clients based on their assets under management, which he compares to a medical doctor charging clients based on their weight.

“Currently, asset-based pricing is based on the value that the client brings, but Sheryl has changed that dynamic,” he said. “When she started out, she was a voice in the wilderness, and I think people spiritually bought into her argument but were struggling with it economically.”

The economic struggle for advisers boils down to pitting the relatively predictable income stream of 1% of whatever client assets are managed against the more random reality of collecting hourly fees from clients who might have more debt than assets and might only need a few hours of your time.

In 2011, Ms. Garrett co-founded, along with Justin Nichols, an RIA known as Garrett Investment Advisors to enable advisers to operate their own brands while the RIA handles most of the business operations. The RIA has grown to 30 advisers providing mostly hourly-fee services to approximately 800 clients.

In January, Ms. Garrett sold her 50% ownership in the RIA and stepped down as CEO and chief compliance officer “due to personal circumstances and wanting to focus on the network more and spend more time with my family,” she said.

That family includes an 8-year-old daughter and a spouse, Shawnda, who in August 2016 was diagnosed with stage 4 colon cancer.

Ms. Garrett described Shawnda’s battle with cancer, which has included surgery and chemotherapy, as “a major wake-up call to focus more of my energies on things that really matter in my life. It’s called managing cancer, and it’s something that likely will be a regular part of our lives.”

But even as she closes ranks to a certain degree in Eureka Springs, where the couple also owns and operates the Wild Plum Cabins vacation rental properties, Ms. Garrett is far from stepping away from her career-long passion.

NEXT UP: INDIA

Next on the agenda is a version of Garrett Planning Network in India, where regulators are starting to draw hard lines between commissions and fees in financial services.

The India launch, slated for the early spring, will be orchestrated through Partha Iyengar, co-founder and CEO of Bombay-based Life & Money, one of only about 20 fee-only advisers in a country of 1.2 billion people.

According to Mr. Iyengar, who has been a disciple of Ms. Garrett since 2010, India has approximately 2.5 million financial service professionals and more than 80% of the business is commission-based.

The collaboration between Ms. Garrett and Mr. Iyengar will focus heavily on recruiting women to lead the fee-only movement in the new network.

Mr. Iyengar said the two main categories of focus for recruiting will be women who have been in the industry for less than five years and women who have been out of the workforce for a few years.

“We want to build a network just like Sheryl Garrett did,” he said. “India just started charging for planning 10 years ago, but there are 440 million millennials here and I believe hourly fees will happen here in five years.”

Beyond that, Ms. Garrett said the financial planning industry should get used to her banging the hourly-fee drum.

“I see myself evolving, but I don’t ever see myself retiring,” she said. “I plan on being a loud mouth in this industry for a long, long time. I think the traditional industry looks at me like a splinter that will work its way out. They aren’t worried about losing customers to us.

“But the customers we’re bringing in are the people who haven’t gotten attention in financial planning,” she said. “We’re still extremely rare, but that means this is an untapped opportunity. And I do believe hourly fees will be the most common way financial advice is provided in the future.”

Related Topics: Icons & Innovators