The Real Value Of Retainers

When I set up as an IFA in 1998 I decided to log time and charge for hours worked (either by invoice or by allocating to the investment management fee). The business model was all about earning less now, building up an income stream from loyal clients.

As part of this structure, I charged a retainer fee of £50 per quarter (it has increased today to £75). The IFA I was working through at that time laughed in my face at this concept. He also mocked me for thinking that any client would ever pay a fee by cheque.

Today that retainer fee brings in enough income to pay for two members of staff. And as for paying for fees by cheque…

We are currently looking to recruit a senior adviser. I don’t like using recruiters, because of the commission based model – well, that and the eye watering rates they charge (a previous Adviser Lounge blog refers). I’d much rather candidates approached us directly, thereby demonstrating the very qualities we are looking for. But maybe if recruiters charged a retainer fee I’d be more inclined to see their worth.

Working for clients in this way does require a certain mindset from advisers. We’re not interested in products or transactions. We focus on long term objectives and reviewing progress towards them. We often struggle to find candidates who really ‘get’ the advantages of working in this way,

So what are the benefits of a retainer charging model? Well, for the client:

  • It’s a pretty small amount to know that we are on hand (we have work codes specific to the retainer fee, such as telephone time and travel)
  • They feel part of the Ovation ‘family’ (to borrow a phrase used by a client at one of our recent events)
  • They benefit from lower fees each time they require advice/work
  • The firm can build a proposition around loyal clients
  • The focus of the advice tends to be much longer term. Goal setting, cashflow modelling, and so on

And it’s great for the firm too:

  • If a client requires advice, they will always come to us
  • Regularity of income (93% of the turnover of Ovation comes from existing clients). This means we can plan for the future
  • No ‘boom and bust’ income levels
  • Very strong client relationships – we see every client every year and often become good friends
  • The business has a real value

I’ve often made this point to solicitors. Certain parts of the legal profession (commercial, corporate) receive transactional fees from the regular clients. Each time one of these clients requires more work, the legal firm has to win the business again.

I’ve even tried to persuade the chap who helps me with property maintenance (I am NOT a practical man!). Charge me £10 per month and then take it off the bill when you do some work. You know I’ll always come to you for help, I know you’ll be there when I need you. He’s not taken me up on this yet.

I know there are different types of retainer model (advance payment of fees, for example). Ours is a small amount which doesn’t pay for much specifically. What other models have people tried with success?

Chris’s novel can be found here


6 thoughts on “The Real Value Of Retainers

  • Chris, the retainer model is growing in Australia for all the reasons that you articulate. However, you ‘sound’ in danger of going broke – your retainer price is right when 2/3 of your prospective clients can afford it. We have ample evidence that clients value having ‘access’ to one source as their ‘one throat to choke’ for all matters financial (BTW that’s a broader proposition than just retirement) – value isn’t just ‘doing things’, value is also just ‘being available’ to ensure your clients are on the best possible path to maximise the probability of them achieving the objectives they seek and enjoying greater financial certainty because of your relationship.

    • Thanks for your concern, Jim!

      Your assertion that the retainer fee is right when 1/3 of your clients can’t afford it (to paraphrase) depends on what sort of retainer you are charging and why. Our model is clearly different from the one you describe.

      The rest I agree with!

  • Chris, I endorse your views completely. A retainer based relationship is much more likely to engender loyalty and ongoing work with a customer.
    It is something that more and more lawyers are embracing but a profession that historically has had issues marketing itself will take time to catch on.
    Certainly, my practice (Gregg Latchams) offers itself on a retainer basis and the take up we have is considerable and provides a well rounded, personal service to businesses with us getting to know the customer much better and them us. It’s a win/win situation all round.

  • An interesting article Chris and well timed in terms of the report we (Gregg Latchams) have put out today about the success we have had during the second year of our In House Lawyer service – which is a retainer based service.

    I really do think that people (both individuals and companies) like and feel reassured by the certainty of knowing what their monthly/annual spend will be – this is common with many things, like insurance, mortgage/rent, broadband, mobile phone and so on. So why should that not be the case with legal (and other) services?

    Particularly where lawyers are concerned, there must be something extremely comforting in knowing that you can pick the phone up without the clock ticking and feeling under pressure to wrap the call up. In addition, because of the size of our firm they receive a personal service and as Richard has said, we get to know them and their business well.

    Of course, this model doesn’t work for everyone, but we continue to have great success.

  • Hi Chris

    How did your clients react when you told them you are going to charge them £50/£75 a month, just to be there and any surplus will come off their overall bill at the end of the year? Did you get any resistance?

    • Hi Steven. That’s not quite how it works (the amount doesn’t come off the bill) but the point is that it’s all part of a package of fees. For example, we log all our time. So, when I started doing this in 1998, I would compare my time costed fee for, say, investing £200k and compare it with the 3% or 5.3% others were taking. As you can imagine, my fees were considerably lower! The retainer fee was – is – a commitment fee from the client for the long term relationship.

      Not sure if things are too much different now.

      So do we get resistance? Not really. Not once we explain the full service proposition, what they get and how they pay, the work codes and time logging and how this compares to initial commission/fixed fee. And, most importantly, we attract clients the clients we want, those seeking a long term relationship.


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