Professional retirement plan advisers do a ton of good work
every day, collectively helping millions of Americans achieve better retirement
savings outcomes. Margins are not fat at
most advisory shops, so to be able to continue to do the “good work,” advisers
need to keep an eye on their revenue, which translates into getting paid for
their time. Sure, there are additional
factors in determining fair compensation, such as fiduciary exposure, model
portfolio management, and level of expertise, but the biggest factor is time.
A seasoned adviser can estimate the time demands of a plan
client based upon a detailed service agreement or through past experience with
similar clients. But, sometimes, things
don’t go as anticipated. The scope of
the work may change, or a plan may be unusually needy of attention. Sometimes the extra workload is temporary,
Without tracking your time, how do you know whether a
particular client relationship is financially viable? Spending double the anticipated number of
hours on a plan is effectively taking a 50% pay cut. Without knowing approximately how much time is
devoted to serving a plan, how can you assess the reasonableness of your own
fee? Too low? Too high? Just right?On
the other hand
obsessing over time can be counterproductive.
It takes time to track time, and software for this purpose can be
expensive. Excessive focus on time can
change the dynamic of a client relationship.
Clients are very sharp, and can sense cut-backs in the attention they
are receiving. Conversely, if you start explicitly
billing for your time, the client may develop concern that your normal chit
chat has devolved into a billing opportunity.