Question #3 – Fees

Fees

3) How is your firm compensated by your clients (all sources monetary or otherwise)?

There are various ways a consulting firm can get paid (i.e. hourly fee, retainer, on a project basis, commissioned selling or directed trading commissions).

You will also want to be able to monitor the total fees generated and ensure that they are appropriate based on the value added provided by the consultant and compared to industry norms.

Be aware of fee arrangements that may not be in your best interest. An example of this would be an arrangement that motivates an unscrupulous consultant to generate extra revenue by replacing a manager that is currently out of favour, for temporary reasons, to generate extra revenue. In a retail investment environment, this practice is known as ‘churning’.