How to Transition More of Your Book to Fee-Based

Nov 20, 2014

Twenty years ago, as a newly hired regional director for SEI, I spent most of my time working with advisors to help them understand the Feebasedguybenefits of moving from a transactional-based business to an advice-based business. Advisors and I discussed the reasons that the advice-based approach made sense for their businesses. Things like:

  • Closer alignment of the clients’ and the advisors’ interests
  • More consistent revenue stream for the advisors’ business
  • More objective business model, allowing the advisor to be perceived as a trusted professional vs. a product salesperson

In the early years, there was a lot of pushback from advisors wondering if their clients would pay for advice, be willing to pay an ongoing fee and understand the change in business models. Twenty years later, I would argue that their fears were not realized and many of them have enviable businesses.

Been there, done that
With that history, I am amazed (and a little frustrated) that I am often asked to speak to large groups of advisors on the benefits of converting to an advice-based business. Our presentation, “The Why and How of Converting to a Fee Based Practice,” is one of the more requested presentations in our library, yet for me it seems like “been there, done that” and why am I still doing this after all these years? For me, the debate has been over for years; an advice-based model is better for both the client and the advisor.
But then it hit me: The presentation was less about the why, and more about the how.

Now I get it
Let me put this into context. Last week, I was supposed to co-host the “Why and How” presentation with Chris Rice, our director of business transitions, however Chris had to cancel at the last moment, due to unforeseen travel problems. Chris and I have hosted this presentation many times and the format is pretty simple, I make the argument why and Chris takes a very tactical approach to the how. If you have seen our webinar pictures on Twitter (sample picture here and here), you know that we hunker down together in a busy conference room with phones, computers and notes. We are usually pretty focused on our own talking points (and don’t really pay that much attention to the other speaker) as we are preparing for our own presentation.
During the webinar, I asked a very simple poll question: “Do you currently run a fee-based practice? The answers were as follows:

  • 21% said: No, I am completely commission-based but am looking to transition to a fee-based business within the next year.
  • 2% said: No, I do not plan to move to a fee-based business but wanted to educate myself – just in case.
  • 68% said: Yes, but only part of my business is fee-based.
  • 11% said: Yes, I am completely fee-based.

That is when it hit me. I think the “why” is done; we get it and want to move our businesses. Advisors are looking for the tactical; they want to know how to make the transition. When I started in on Chris’ portion of the presentation, it reminded me  that people often tell advisors to go advice based, but very few of them lay out the steps to get there. They don’t go through the three steps:

  1.  Mental preparation
  2. Business preparation
  3. Relationship transition

If you are one of those almost 70% of advisors that have some advice-based business but are looking to transition more of your book, download our most recent toolkit. You’ll find the steps necessary to really transform your business. It won’t be just the why… it will be the “how.” Isn’t that what we are looking for?


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John Anderson

John Anderson

John Anderson is the creator and lead author of Practically Speaking blog and Managing Director of Practice Management Solutions for the SEI Advisor Network.

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