A couple of years ago Ron Van Surksum, a financial adviser in Grandville, Mich., was struggling to justify his fee schedule.
Some of his clients had hired him to plan their investments and help organize their financial lives. Others managed their own investments but needed extensive financial planning. Either way, Van Surksum, like many financial advisers, generally charged all of them an annual fee according to their assets.
"My million-dollar clients were paying me 1% a year, and honestly it felt like they were paying me too much," he recalled. "I mean, I know how much work I do with each client. "Then I had clients who weren't paying me as well, at 1%," because they required more attention than their annual fee was worth.
So Van Surksum did what most small businesses — financial advisers or otherwise — are understandably loath to do: He overhauled the price list.
Now he charges clients on the basis of the services they need. He manages assets for a sliding-scale fee and charges as little as $300 for one or two annual financial planning checkups — or, in one case, to help a client decide whether to buy property.
Van Surksum's clients can add or subtract services as needed, and he does not impose a net-worth minimum net worth.
"Every client is different, and every situation is different," he said.
Van Surksum's methods are still rare in the world of financial services. But they are relevant at the moment.
In the wake of the financial crisis, regulators and consumer groups are examining the ways financial advisers and companies charge people for products and services. And clients are asking more pointed questions about those charges.
Currently the financial adviser industry is dominated by those who either charge when clients buy products — some clearly disclosed, some not — or apply an annual fee on assets.
Van Surksum's strategy, known as fee-only financial planning, carries a risk: Consumers are famous for swallowing hidden fees, such as obscure charges on a cable bill, while balking at loudly disclosed charges, like a $5 monthly checking-account fee. Transparency, it turns out, isn't always good for business.
"I've lost a few clients," Van Surksum said. "Some people would rather work on a transaction basis."
Despite those risks, the fallout from the financial crisis has pushed many advisers to create new ways to fairly and profitably work with middle-class consumers. Many of them have been flooded with requests from longtime clients to help a friend or relative in need of financial help. Especially for advisers in smaller communities, it's safer to rebuff a professional referral than to turn away a prized client's distressed nephew.
Derek Kennedy, president of Kennedy Wealth Management in Knoxville, Tenn., said he recently "unbundled" the services he offers to clients, in part so he could avoid demanding that new clients have a minimum amount of investable assets.
"I decided to start charging hourly because it makes me accessible to middle-class folks," Kennedy said.
He now charges some clients a predetermined fee based on how many hours of work he expects they will need. If his estimate is low, he does the extra work free.
Van Surksum used to spend about 20 minutes in most clients' annual meetings explaining that year's fees. Now no explanation is needed.
"You know exactly what you're paying me," he said.
