The Advisor Model Nobody Else Runs

Every advisory practice has to answer one question. Who is the client?

The retirement industry settled on an answer long ago, and almost nobody questions it. For many advisory firms, the economics revolve around the participant's future wealth, and the retirement plan becomes the means of acquiring that relationship. I built my practice around the opposite answer.

The retirement plan is my client.

The first commitment explains who I serve. The second explains how I am paid. Clients should pay for work performed rather than assets accumulated. Everything in this post follows from those two commitments.

In practice this means I specialize in group sponsored retirement plans, I do not manage individual client assets, I charge a fixed dollar fee, I send an invoice, and I take notes on every participant conversation, recording the exact amount of time spent and what was discussed, so my clients can verify the work behind that invoice. I have never heard of another financial advisor who operates this way, and by the end of this post you will understand why.

I send an invoice

Every professional you hire sends you a bill. Your accountant, your attorney, your plumber. You see a number, you compare it to alternatives, and you decide whether the service is worth it. Retirement plan advice is one of the few professional services where most clients never actually see what they pay, because fees are deducted from plan assets in percentages most clients never convert to dollars.

I invoice in dollars. If any portion of my fee is paid by participants, I invoice that too, so the amount is visible rather than silently extracted from account balances. An invoice creates the one thing the retirement industry has resisted for fifty years, a number a client can act on.

I report what I did and how long it took

Every participant conversation is logged, summarized, and timed. My clients receive periodic updates built from these notes, so they know exactly who I helped, what we discussed, and precisely how long each conversation took. If a month is quiet, they see that too.

This solves a problem plan sponsors rarely think about. Most advisors are paid a percentage of assets whether they talk to participants constantly or never. The fee arrives regardless of activity, so activity goes unmeasured. My reporting ties my fee to demonstrated work. A client reviewing my invoice next to my activity summary can answer the question every fiduciary is supposed to ask, whether the compensation is reasonable for the services actually rendered. Almost no sponsor in America can answer that question today, because almost no advisor gives them the data.

My pricing follows the work

My fixed dollar fee is set according to the time a plan actually requires and the number of participants actively using my help. A plan with heavy participant engagement pays more than a plan where I mostly support the committee (assuming the plans have the same number of participants), and both pay for what they get.

Compare this to asset-based pricing. Under the standard model, a plan's fee rises automatically as the market rises, with no change in service. A plan that doubles from $5 million to $10 million through contributions and market growth doubles the advisor's revenue for identical work. No other profession prices this way. Your accountant does not charge more because your business became more valuable while the tax return stayed the same.

I recommend employers pay the fees

I've written about this at length in “What If Everyone Followed This One Piece of Retirement Plan Advice?” and the logic is worth restating.

When the business pays plan fees directly, the fees become a deductible business expense. When the same fees are deducted from participant accounts instead, they are commonly allocated in proportion to account balances. In a typical small company plan, that means the owners and executives, who usually have the largest balances, personally bear most of the cost without the benefit of the business tax deduction. Paying the fees at the employer level shifts the expense to the business, where it is deductible, keeps participant assets invested and compounding, and often lowers the owners' after-tax cost—all without requiring a single new law.

It also fixes the market. Fees deducted from accounts are invisible, and invisible fees face no competitive pressure. Participants rarely know fees exist, and many employers don't know what to look for, which creates a perfect environment for vendors to overcharge or bury costs in fine print. An employer who writes a check scrutinizes the check. When sponsors start benchmarking fees, questioning revenue sharing arrangements, and choosing flat fee advisors and transparent recordkeepers, vendors relying on hidden costs either adapt or lose business. That scrutiny, multiplied across enough employers, would force the transparency Congress has failed to legislate.

The bottleneck is awareness rather than law. Everything described here is already possible today. Too many employers assume high fees are simply part of the deal, or they were sold overpriced products by vendors with no fiduciary responsibility. And even an employer who ultimately prefers having participants pay comes out ahead by understanding this framework, because the same knowledge ensures the fees participants do pay remain reasonable.

I do not accept rollover business, and the reason runs deeper than fees

Let me be precise about this policy, because it is the one that surprises people most. I am not against rollovers. A rollover often gives a participant far more fund flexibility than any plan menu offers, and for some people that flexibility is exactly right. My objection has two layers.

The first layer is the fee model the industry attaches to the rollover, an asset-based advisory fee charged forever for work that is mostly performed once. A sound portfolio can usually be recommended upfront using funds that are easily duplicated at low cost, and after that it needs periodic review measurable in hours, priced honestly through a fixed retainer or hourly fee that reflects the time actually spent. Charging a percentage of assets in perpetuity for that task disconnects the fee from the work entirely, and the disconnect grows every year the account does.

There is an honest case for ongoing management, and it deserves stating. Some plan menus are genuinely restrictive, and an IRA can open investment approaches a limited lineup cannot support. Where an advisor's strategy is truly unique, ongoing management can make sense. But that case must survive two tests, and it rarely survives either. Most managed portfolios are not unique. They are standard allocations built from funds easily replicated at low cost, and replicable work can be established once and monitored periodically for a fixed dollar fee. And even genuine creativity is often available inside the plan. A robust fund lineup on a capable recordkeeper, and especially a self-directed brokerage window, gives an advisor the same latitude at institutional pricing without moving a dollar. When the plan offers a brokerage option, the IRA's flexibility advantage disappears, and what remains of the rollover case is the advisor's preference for holding the assets.

The second layer runs deeper, and it would survive even if every advisor switched to flat retainers tomorrow. For many retirement plan practices, the economics are driven by wealth management. Even firms with substantial plan businesses often derive much of their long-term profit from managing participant assets or cultivating those relationships, and the retirement plan is one of the most effective ways to meet future individual clients. Once a practice expects to earn meaningful revenue from participants' personal wealth, the identity of the client quietly changes. The plan stops being the destination and becomes the introduction, the means of acquiring the relationship that actually drives the economics of the practice. How the individual relationship is priced is secondary. The incentives shift toward cultivating individual relationships, especially with the participants who have the largest balances, rather than toward making the plan itself as effective as it can be.

Start with the arithmetic that drives it. A $10 million plan at competitive pricing might pay an advisor $10,000 to $15,000 a year, and for that the advisor attends committee meetings, monitors investments, benchmarks fees, and carries fiduciary liability under ERISA. A single participant with a $500,000 balance who rolls into an IRA at a 1 percent asset management fee generates $5,000 a year from one household with no committee, no benchmarking, and no ERISA exposure. A few rollovers a year out of one plan can exceed the entire plan revenue. The specific numbers vary. The ratio does not. Under the standard model, the plan is a loss leader and the rollovers are the product. The advisor is being paid a modest fee to hold a prospecting list.

That structure creates a series of conflicts, and each one deserves to be named. These are incentives built into the business model, present whether or not any individual advisor consciously acts on them.

The advisor knows every participant's balance. No outside competitor has that information. Enrollment meetings and education sessions become sorting mechanisms for identifying which participants are worth cultivating. The employee with $400,000 gets a relationship. The employee with $12,000 gets a slide deck.

The advisor profits when the plan is a bad place to retire from. Institutional share classes, in plan retirement income options, and easy distribution features all give a retiring participant good reasons to stay. Every improvement that makes the plan attractive at retirement weakens the rollover pitch. The advisor's incentive is a plan just good enough to keep the sponsor and just inconvenient enough to leave.

The rollover recommendation contradicts the advisor's own prior advice. The advisor spent years as the plan's fiduciary assuring everyone the menu was prudent and well priced. At separation, the same advisor recommends abandoning that menu for an IRA that typically costs several times more. One of those two representations is wrong.

The participant's costs multiply while the service barely changes. A participant paying 5 basis points or less for an index fund inside the plan can pay significantly more for equivalent exposure in a retail IRA, before the advisory wrap fee is added. The participant moves from institutional pricing to retail pricing and, because fees are deducted rather than invoiced on both sides, feels nothing.

The required documentation has become a formality. PTE 2020-02 requires advisors to document why a rollover serves the participant's best interest, including a comparison of costs and options. The industry answered with template letters citing broader investment choices and personalized service, claims written to be unfalsifiable. My framework makes the investment options claim testable. What specifically will the strategy do that the plan cannot support, can it be replicated with standard funds, and does the plan offer a brokerage window? Almost no rollover justification survives all three questions, which is why the letters never ask them. The total cost comparison, plan versus IRA, rarely appears either, because it almost never favors the rollover.

The rollover forfeits specific benefits that a conflicted advisor has no incentive to mention, and these are checkable facts rather than characterizations. ERISA plan assets carry essentially unlimited federal creditor protection, while IRA protection varies by state and is capped in bankruptcy. A participant who separates from service at age 55 or later can take penalty free withdrawals from the plan, a benefit destroyed by rolling to an IRA where the early withdrawal penalty runs to age 59½. Appreciated employer stock loses net unrealized appreciation treatment the moment it is rolled over, which can convert capital gains taxation on the growth into ordinary income taxation. Stable value funds and certain institutional investment options do not exist outside plans at all. A participant weighing a rollover deserves to hear every one of these, and the advisor whose revenue depends on the rollover is the person least likely to raise them.

The advisor arrives with the employer's implied endorsement. Participants meet the plan advisor at enrollment meetings the employer arranged, so they reasonably assume the employer vetted this person for personal advice. That assumption was never true. The employer hired the advisor for the plan. The advisor then monetizes the borrowed trust at separation, when the participant defaults to the familiar face instead of shopping.

The timing targets people at their most vulnerable. Rollover conversations happen at job loss and retirement, exactly the moments when people are least inclined to comparison shop and most inclined to accept the path of least resistance offered by someone they already know.

The prospecting itself relies on data gathered through plan service. Participant balances and contact information reach the advisor only because of the plan relationship. Using that information for wealth management prospecting has already drawn fiduciary breach litigation against recordkeepers who cross sold retail products to participants, and the same logic applies to advisors doing the same thing with the same data.

The enforcement record confirms all of it. The SEC fined a TIAA subsidiary $97 million after advisors were trained to present themselves as objective fiduciaries while compensation incentives encouraged rollover recommendations. The SEC also charged Federal Prep Advisors after it moved more than $80 million out of the federal Thrift Savings Plan while repeatedly overstating the TSP's fees by roughly a factor of ten and without adequately comparing the total costs of staying in the TSP versus rolling to an IRA. These cases got caught. The incentive structure that produced them is the industry standard.

I removed both layers with one policy. When a retiring participant asks me whether to stay in the plan or roll over, I have no financial stake in the answer, so I can evaluate the real tradeoffs, fund flexibility and fee structure on one side, institutional pricing and plan protections on the other, and give whichever answer the facts support without giving up a dollar to say it.

The real divide in this industry is whether the retirement plan is the business or the marketing channel. For most advisors, the plan is the beginning of a wealth management relationship. For me, the plan is the relationship. If the retirement plan is truly your client, then the retirement plan must also be your business. Everything else follows from that answer.

There is a simple test for which side of the divide a firm sits on. Ask what percentage of its revenue comes from the retirement plans themselves. A firm can advise five hundred plans and still derive most of its profit from managing participant wealth. The plan count is marketing. The revenue split is the answer.

Total focus on group plans is an advantage

Group sponsored retirement plans are among the most complex instruments in personal finance. ERISA fiduciary duties, nondiscrimination testing, Form 5500 reporting, revenue sharing arrangements, share class selection, recordkeeper pricing models, prohibited transaction rules, and Department of Labor enforcement priorities all interact, and each one changes regularly. SECURE 2.0 alone introduced dozens of provisions with staggered effective dates. Keeping current is a full-time commitment.

The standard revenue model pays for a different full-time commitment. Individual asset management is where the industry's profit lives, so an advisor whose income comes from managing individual money rationally allocates attention there. Learning follows revenue. Plan work punishes casual participation, and the industry even has a name for the result. Accommodation plans are the handful of retirement plans a wealth advisor holds to accommodate a business owner client, serviced at whatever standard leftover attention produces. This is arithmetic rather than a judgment about any advisor's character. The incentive structure directs attention away from plans, and the complexity of plans makes divided attention expensive for the client.

I will concede what should be conceded. The retirement plan specialists in organizations like NAPA are genuinely knowledgeable and current. But the specialist tier sits mostly inside large aggregator firms, and those firms have spent recent years building or acquiring wealth management arms precisely to capture participant assets. The industry press calls this convergence and treats it as the dominant strategic trend. The specialists solved the knowledge problem while institutionalizing the very conflict I've described, and asset-based economics push them toward larger plans, because a small plan's assets cannot generate the fee their model requires. That leaves the small plan market, which is most of the plans in America by count, served largely by accommodation advisors with the least specialized knowledge.

Map the market and my position becomes clear. The specialists have the knowledge without the independence. The accommodation advisors have neither. Small plans get the worst of both. I occupy the empty cell, specialist level knowledge, small plan focus, and no wealth capture, and the economics of the industry explain exactly why that cell sits empty. Seventeen years of analyzing Form 5500 filings, roughly ten thousand plans reviewed, and a curated database of excessive fee cases exist because plan work is my entire practice rather than a doorway to something else.

One principle, extended to individual money

Everything I ask of the retirement plan industry applies equally to managing individual money. Advisors should be paid a fixed dollar amount or an hourly rate that reflects time actually spent, invoiced visibly, for plans and for individuals alike. I have never taken an individual client, but if a unique situation arose requiring significant time, I would consider serving that person under a periodic fixed fee scoped to the work. What I would never do is charge a percentage of their assets, because a basic portfolio is easy to set up and does not need constant monitoring. Paying an annual percentage for a portfolio that requires a few hours of attention a year is the single most expensive habit in personal finance, and the industry depends on nobody doing the arithmetic.

The fee-only hourly planners who avoid asset-based fees typically impose minimum hour requirements, so a client with a simple question buys a package whether they need one or not. I would have no minimum. If a situation needs two hours, the client pays for two hours.

This pricing is also why such an arrangement would never recreate the conflict I've spent this post describing. Time tracks complexity, and complexity often tracks wealth, so a participant with a large balance might genuinely need more hours than one with a small balance and would pay accordingly. The fee still follows the work. What disappears is revenue that scales with assets independent of the work. Under the asset-based model, capturing a $2 million participant is worth roughly $20,000 a year for life regardless of hours spent. Under time-based pricing, that same participant is worth whatever hours their situation actually requires, likely a few in most years. The first number funds enrollment meeting cultivation, balance sorting, and an entire sales apparatus. The second cannot fund a prospecting operation at all. Priced by time, there is nothing worth capturing.

The standard everyone could ask for

This model will not be copied by the firms best positioned to copy it. An established practice with hundreds of millions in participant assets, recurring asset-based revenue, and cultivated rollover relationships cannot adopt what I've described by changing a fee schedule. It would have to exit its most profitable business. I am not proposing a different way to price the same business. I am proposing a different business, and the incumbents have little economic incentive to enter it.

Nothing in my model requires new regulation. An invoice, an activity report, pricing tied to work, employer paid fees, and advice priced by time rather than by assets are all available under current law to any advisor willing to offer them. My model asks clients to evaluate me the same way they evaluate every other professional they hire. Most advisors have little incentive to invite that comparison.

Every fiduciary is required to determine whether advisor compensation is reasonable. That question cannot be answered unless the advisor shows what they charged, what they did, and how long it took. Ask for the invoice. Ask for the activity report. If your advisor cannot provide both, ask yourself why.