Trends in Advisor Compensation and Fee Benchmarking

At RPAG’s 20th National Conference, Luke Vandermillen, Jr., Director of Business Development, provided critical insights into the evolving landscape of advisor compensation. This session focused on how trends shape compensation structures and how advisors can leverage RPAG’s fee benchmarking tools to stay competitive and ensure profitability.

Key Compensation Trends in the Advisor Space

Luke emphasized the importance of understanding not just how much advisors are paid, but also when and how to consider flat fee structures versus asset-based compensation. The RPAG platform offers a distinct advantage, with access to real-time, accurate data, allowing advisors to benchmark their fees and services against the industry. Here are some key points from the session:

• Shifts Toward Flat Fees: One major trend is the rise of flat fees, particularly for large and small plans. While asset-based fees remain common, many advisors are moving towards flat fees as plans grow, recognizing that a percentage-based compensation model may not reflect the true effort involved in servicing larger plans.
• Employee Education and Financial Wellness: Luke highlighted that one of the most undervalued services is employee education. Advisors often struggle to charge appropriately for these services, despite the value they bring. The successful advisors he interviewed have started positioning education and wellness services as standalone offerings, helping justify higher fees.
• Leveraging Benchmarking Tools: The PlanFees Prism and Prism365 reports were identified as essential tools for advisors. These resources allow for easy benchmarking of advisor compensation based on plan size and services offered. Advisors who use these tools proactively are better positioned to address fee-related client concerns before they become issues.

Advisor Compensation Data: Key Findings

Drawing from 80,000 plans in the RPAG Advisor Portal, Luke’s analysis revealed:

• A wide range of fees, even within the same plan size segments.
• As plan assets grow, advisor fees tend to shrink, but the work required often increases.
• Identifying your business's most profitable plan size is critical to maintaining a strong bottom line. Many successful advisors focus on the $5 to $10 million plan asset segment, where service demand and margins align most effectively.

Strategies for Advisors to Optimize Compensation

• Play Offense, Not Defense: Successful advisors don’t wait for clients to question fees. Instead, they proactively bring up benchmarking data and make adjustments to keep fees aligned with market trends. By addressing potential fee concerns before they arise, these advisors strengthen client relationships and avoid difficult conversations.
• Create a Strong Value Proposition: Every member of an advisory team must understand and can articulate the firm’s value proposition. This not only differentiates you from competitors but also helps clients see the full scope of the services they are receiving.
• Utilize RPAG Resources: RPAG’s extensive suite of tools like the Advisor Fee Calculator and ready-to-use content in the Resource Center can save advisors significant time while ensuring they remain competitive and efficient.

Embracing the Future of Compensation

Advisors who continue to see revenue growth in the current market have a few things in common: they adopt a thoughtful, strategic approach to pricing, maintain a clear value proposition, and use RPAG’s industry-leading tools to optimize service delivery. By keeping a close eye on trends and utilizing these resources, advisors can continue to thrive, even in an environment of increasing margin compression.

View the presentation here!

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