The first major step toward progress, for current or would-be advisory clients, is separating the idea that financial advice is synonymous with investment advice or investment management.
So many people still operate under the mental framework that advisors only "do investments". In reality, "doing investments" is very little of what most true advisors really do. Your conversation with Jason sounds like it reflect this.
As the wealth of those 50 and under grows, I expect migration toward the independent RIA space will continue accelerate among both clients and practitioners.
Absolutely agree! It's a matter of people taking a minute to educate themselves. And even when we mention 'holistic', people ask, yeah, but what does holistic financial advice actually look like in real life?
It's hard to get away from the jargon, even when it doesn't feel like jargon. It's a major turnoff for a lot of potential clients. One of the benefits of the social media-ificiation of advice is the chance to show rather than tell. The advisors that can do that well earn never struggle to find clients in need of help.
This is genuinely sad, but also true what you say. The model was built for the corporations and focused on sales. And only fairly recently with the development of technology financial and wealth advisors started going private and then the service changes (often, not always) because then the financial advisor is no longer bound by the requirements and quarterly/annual sales targets, the main focus is on client and helping the client resolve the issues and to create wealth. When you happen to find a qualified, genuine person, you very likely stick for a long period. Beyond financial advisory many other life areas come into play, not solely related to the finances, and it great when your counselor has multidisciplinary qualifications.
I have clients all the time rave about being able to get my expertise on demand by the hour and gushingly ask why more people don’t offer this consulting service. My answer, with a laugh: because it’s a shitty business model. Ask any attorney or CPA how they like charging by the hour. It doesn’t scale and there’s constant client turnover.
Nearly every financial advisor MARKETS their advice and planning - but they aren’t PAID for that. They are paid commissions or AUM fees for selling products (which almost no one actually needs to buy).
Alas, clients actually hate stroking checks for advice. They are genuinely often happier ignoring the much more massive fees buried in their expense ratios. The industry needs to evolve, but it won’t do so until customers demand it. AUM fees and loaded mutual funds make no sense anymore in the world of ETFs and automated portfolio management.
Elizabeth, I think we agree on the problem, but maybe not on what has to change first. Whether a particular fee model scales well for the advisor is a business-model question. Whether the client is getting valuable, objective advice for what they’re paying is a consumer question, and I care a lot more about the second one. :)
I also don’t think consumers have to wait for the industry to evolve. There are already outstanding fee-only fiduciary advisors charging hourly, project, retainer and AUM fees. Sometimes it’s a combination, and without commissions or loaded products. My point is less about declaring one fee structure the big winner and more about making the advice, and the value and the cost, transparent enough that the client can decide whether the relationship is worth paying for. That’s a pretty reasonable bar for any profession that calls itself advice.
I totally agree, and there are great advisors using all sorts of business models. The inverse is true as well of course. That’s the ultimate challenge from a consumer perspective.
The first major step toward progress, for current or would-be advisory clients, is separating the idea that financial advice is synonymous with investment advice or investment management.
So many people still operate under the mental framework that advisors only "do investments". In reality, "doing investments" is very little of what most true advisors really do. Your conversation with Jason sounds like it reflect this.
As the wealth of those 50 and under grows, I expect migration toward the independent RIA space will continue accelerate among both clients and practitioners.
Absolutely agree! It's a matter of people taking a minute to educate themselves. And even when we mention 'holistic', people ask, yeah, but what does holistic financial advice actually look like in real life?
It's hard to get away from the jargon, even when it doesn't feel like jargon. It's a major turnoff for a lot of potential clients. One of the benefits of the social media-ificiation of advice is the chance to show rather than tell. The advisors that can do that well earn never struggle to find clients in need of help.
This is genuinely sad, but also true what you say. The model was built for the corporations and focused on sales. And only fairly recently with the development of technology financial and wealth advisors started going private and then the service changes (often, not always) because then the financial advisor is no longer bound by the requirements and quarterly/annual sales targets, the main focus is on client and helping the client resolve the issues and to create wealth. When you happen to find a qualified, genuine person, you very likely stick for a long period. Beyond financial advisory many other life areas come into play, not solely related to the finances, and it great when your counselor has multidisciplinary qualifications.
Agree -- now it's up to us, as professionals within this 'industry' to make people aware they have options. Really GOOD advice options.
I have clients all the time rave about being able to get my expertise on demand by the hour and gushingly ask why more people don’t offer this consulting service. My answer, with a laugh: because it’s a shitty business model. Ask any attorney or CPA how they like charging by the hour. It doesn’t scale and there’s constant client turnover.
Nearly every financial advisor MARKETS their advice and planning - but they aren’t PAID for that. They are paid commissions or AUM fees for selling products (which almost no one actually needs to buy).
Alas, clients actually hate stroking checks for advice. They are genuinely often happier ignoring the much more massive fees buried in their expense ratios. The industry needs to evolve, but it won’t do so until customers demand it. AUM fees and loaded mutual funds make no sense anymore in the world of ETFs and automated portfolio management.
Elizabeth, I think we agree on the problem, but maybe not on what has to change first. Whether a particular fee model scales well for the advisor is a business-model question. Whether the client is getting valuable, objective advice for what they’re paying is a consumer question, and I care a lot more about the second one. :)
I also don’t think consumers have to wait for the industry to evolve. There are already outstanding fee-only fiduciary advisors charging hourly, project, retainer and AUM fees. Sometimes it’s a combination, and without commissions or loaded products. My point is less about declaring one fee structure the big winner and more about making the advice, and the value and the cost, transparent enough that the client can decide whether the relationship is worth paying for. That’s a pretty reasonable bar for any profession that calls itself advice.
I totally agree, and there are great advisors using all sorts of business models. The inverse is true as well of course. That’s the ultimate challenge from a consumer perspective.