People are struggling financially in the COVID-19 economy, and some advisers are taking novel approaches to compensation to help existing clients or attract new ones.
That includes “pay what you can” arrangements, putting clients in lower fee brackets, adjusting rates for people whose income has suffered, and even waiving 401(k) advice fees for several months.
On Thursday, the Department of Labor issued its latest jobs report, with an additional 3.8 million people filing unemployment claims. That brings the total number of new jobless claims to more than 30 million over the past month and a half.
In response to the economic downturn, adviser Carol Fabbri now designates Tuesday as “pay what you can” for new clients. That day is often lighter than others, which makes it more efficient for the new-client fee arrangement, Fabbri said.
“I have them sign up on my calendar online and work payment out on a case-by-case basis,” said Fabbri, founder of Lakewood, Colo.-based Fair Advisors, in an email. “This is such a scary time for so many people that I wanted to support people who are overwhelmed or just want to make the most of some extra free time in their schedules.”
Fabbri said feedback has been positive, though getting word out is more challenging.
Another approach has been offering to lower fees for existing clients who have taken hits to their income.
“I have reassured existing clients that if their income is affected by COVID-19 that I would discount my fee commensurate to how much their income has been affected,” wrote Donovan Brooks, founder of Missouri-based Storyline Financial Planning, which caters to Christians. “If their income has been reduced by 25%, then I would reduce my fee by 25%, until everything has normalized.”
Brooks sent that message to clients about a month ago, and fortunately, he said, no one has had to take him up on the offer.
“The response has given my clients peace of mind and assurance that I’m with them through this thing,” he said. “This is a time when people need quality financial advice, and someone to listen to, more than anything.”
Another way of reducing fees is bumping customers into a lower fee bracket, temporarily, something adviser Tanner Bortnem said he has done for his clients.
“I have great relationships with my clients, and I felt this was the right thing to do for a couple of reasons. First, we are all in this unprecedented time together, and helping lower my cost during it to save them some money … has been a big help to them,” said Bortnem, who recently founded the Flagstaff, Ariz.-based RIA Harmoney Wealth. “Second and more importantly, the less fees I take from my client’s account, the more there is available to purchase stocks at these suppressed prices, which will lead to better gains for my clients.”
Another avenue – and perhaps the most novel approach – is being made by Henderson Wealth Management. That firm is offering to waive 401(k) fees for three months for new clients, if they agree to a one-year contract. That offer, though, applies to the first 10 plans that sign up.
“Henderson Wealth Management … will work for no management fees for the next three months for the first 10 businesses that retain HWM for one year,” the company wrote in an announcement of its offer.
“We recognize businesses are hurting and we’re trying to do our part to help,” company CEO Brett Henderson said in the announcement. “Our top priority is doing what we can to help companies maintain their benefit package through this difficult time.”
That firm did not respond to a request for comment.
Another take
Not all advisers say that waiving or reducing fees is appropriate.
“I do not offer discounts to clients or prospects, and from what I am seeing there are a large percentage of investors out there now looking like a turtle on a fence post,” said Jon Ten Haagen, founder of Huntington, N.Y.-based Ten Haagen Financial Services. “They are frozen in time, and what they need is a voice they can trust [that] is not just selling them a bill of goods.”
Having seen every bear market since 1972, he said that they all end the same way, knowledge that is valuable to clients.
“I am worth the price, because people are getting the proper knowledge they need to make good decisions.”
RIA aggregator adds $4.8 billion in client assets across seven states as demand grows for alternatives to traditional succession models.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Shareholder targets FS KKR Capital's directors over alleged portfolio valuation and dividend missteps.
UBS has a history of costly litigation stemming from the sale of volatile investment products.
New director David Woodcock puts firms on notice over fees, conflicts, and liquidity risk as private credit shows signs of stress.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
