Anyone else providing subscription-based financial advice?
My firm provides fiduciary financial planning/coaching on a subscription-based basis. Or, for you older folks familiar with the term, a retainer-based basis. Our clients are loving that financial advice and investment management are provided as two separate and distinct services. Clients can choose either or both. Is anyone else using this model?
From what I've seen this is a popular model with many younger advisors including many I've seen as part of the XY Network. Seems to make sense for younger clients and perhaps others as well. What's your plan for clients as they accumulate more significant investment assets?
I work with a fee-only fiduciary investment advisory firm ( a 3(38) advisory firm to be exact.) I would submit this is the only way to go. Commission-based advisors are compensated by transaction. "Fee-based" are a hybrid of commissions and fees. "Fee-only," as the name implies, is where advisors get their compensation solely from their clients. There are no commissions, no 12b-1 fees, no "pay to play," etc.
Fee-only allows the advisor to always be on the same side of the table as the client with full transparency and to truly work in the best interest of the client.
I believe this trend will be very powerful as the financial services sector becomes focused on automated advice models. Robo advisors, ETF's(managed or not) and other focused investment strategies have taken many FAs/RIAs out of the "investment management" business. The role of an advisor(in general terms) is changing at a hyper pace with new technology allowing advisors more time and flexibility in handling their existing clients and prospects. I believe we will see a continued path toward a more a la carte experience between advisor and investor.
Putnam recently published how a recent number of studies show an advisor can increase a portfolio’s annual return from between 1.55% to 4.00%. Also, analysis by CIRANO found that after 15 or more years with an advisor, a household accumulates 273% more assets than a non-advised household.
Would you pay 1% annually to make 1.55% to 4.00% more than you otherwise would have? Would you rather have 273% more assets after 15 years than you otherwise would have? I would.
If you’d like to see the studies, let me know. I’ll be glad to provide them.