Hourly pricing model has benefits — and pitfalls

Twenty years ago, people couldn't believe what Sheryl Garrett wanted to do, but today they can't argue with her success.
JUN 09, 2018

Twenty years ago, when Sheryl Garrett launched a financial advisory practice that charged clients by the hour, "people thought it was insane," she recalls. Although some might still question the hourly pricing model for financial advice, it would be difficult to deny the success of what has become the Garrett Planning Network, which includes more than 250 advisers subscribing to the hourly fee structure. "When I first started, I was getting as many calls from other advisers as I was from prospective clients," said Ms. Garrett, who now acts as a coach, mentor and spokeswoman for her business. She stopped working with individual clients in 2005 but said most hourly planners are still charging what she was charging back then — $240 per hour. "You want your hourly fee to be divisible by 60," she said, pointing out that charging hourly fees often means billing like an attorney. "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. Like most models that deviate from asset-based pricing, hourly fees have the advantage that people don't have to be rich to be clients. A potential downside, Ms. Garrett admits, is that client relationships aren't as long-lasting. "There are a lot of introductory meetings at first, and that's the scary part," she said. "I did have a handful of folks who came and used my services once." The standard Garrett Planning formula typically begins with two hours for the initial consultation and review, and another hour to write up the report. (More: Why the AUM fee model is so dominant) The one thing Ms. Garrett tells anyone embracing hourly fees is to avoid quoting the hourly rate to clients. "When someone asks about your hourly rate, they really want to know how much it will cost them," she said. "The ultimate cost will be different depending on what the client needs."

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.