The Daily Brief
Josh Brown
Josh Brown

How a Twist on a Familiar Fee Model Helps Clients at Ritholtz Wealth Management

A rewards program that lowers fees for clients who stick with the firm and with their financial plan is perhaps one other advisors should consider.

A twist on a familiar fee model appears to be helping clients at Ritholtz Wealth Management and consequently the firm. 

Joshua Brown, the prominent loquacious advisor and CEO of Ritholtz, wrote on his Reformed Broker website on Thursday that the firm’s “Milestone Rewards” program appears to be benefitting clients. 

Clients who invest with the New York City wealth manager for 36 months qualify for the program and get approximately a 15 percent reduction in their annual fee from that quarter and thereafter. The opportunity to lower their fee certainly might cause some clients to pause if they thought about leaving, but Brown wrote that the program was created to encourage better investor behavior. 

Like they do with mutual funds, some investors are fickled and swap advisors after losing sight of their long-term strategy. The rewards program is intended to curb that and, at least anecdotally, it appears to be working, Brown wrote.

Clients in the Milestone Rewards program tend to be larger portfolios. The 25th, 50th and 75th percentile Milestone Rewards clients have portfolio values of $500,000, $900,000 and $2 million, respectively. This compares to the non-Milestone Rewards clients (those who haven’t yet qualified), with 25th, 50th and 75th percentile portfolio values of $300,000, $700,000 and $1.5 million, respectively, according to Brown.

“When we originally came up with the idea of doing this, it was like a bolt of lightning struck the room. It was obvious to Kris, Barry, Michael and I that the clients would love it and that it would be another powerful tool in our behavioral arsenal—but we couldn’t have known for sure,” Brown wrote. “The data we’ve collected on retention and referrals and other metrics we track now makes it clear: Training investors to be the best version of themselves through tangible rewards is a win-win.”

It begs the question of whether other wealth managers should consider rewarding loyal clients?

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