Evan Simonoff
Evan Simonoff
THE LONG VIEW
es , they ’ ll also be able to prospect for clients among the corporate executives at the companies whose retirement plans they serve .
4 . Firms that specialize in a subset of clients — for instance , dentists , doctors , AI engineers or business owners — many of whom are accustomed to paying and receiving fees for services . Here an advisory business can build a unique knowledge base and leverage that expertise ( for instance , helping dentists make bulk purchases of dental equipment ) in ways that will allow it to provide added value to these clients profitably .
5 . Firms that target the middle class without the scale of those in the third group . This is essentially for clients in the top 40 % to 50 % of the income spectrum , folks with some money who need advice to get to retirement . This market is massive and will remain fertile territory for smaller practitioners .
One trend unlikely to change is that the demand for financial advice will continue to outstrip the number of advisors available . The robo-advisors offered by financial giants like Schwab , Fidelity and Vanguard continue to gather assets , but they aren ’ t displacing human advisors . Moreover , the robos ’ embrace of the AUM pricing model , charging a percentage of assets , has served to validate what human advisors do .
Privately , many advisors have wondered how long clients with , say , $ 5 million in assets would continue to pay $ 35,000 a year ( or 0.7 %) without complaining . So far , the model remains the favorite , though subscription fees are making inroads with younger clients .
“ In many ways , AUM pricing was more of an opaque way of pricing services on a variable basis that didn ’ t tend to ring they will need to have a demographic focus , a market niche or technical expertise to thrive . “ Something has to serve as a hook ,” Tibergien says . Once they “ commit ,” they need to be “ noticeably superior in some important way .”
Among the services most likely to see growing demand from today ’ s ultra-affluent clients is healthcare . “ Our research indicates that healthcare planning has become a top priority for [ ultra-highnet-worth ] investors , with 68 % identifying it as one of their primary concerns ,” says John Bowen , CEO of CEG Insights . “ While some firms have expanded their estate planning teams , successful advisors are forming strategic partnerships with leading health professionals to deliver concierge medicine services .”
Some think entrepreneurial clients will eventually seek advisors who can help them not just manage wealth but also
“ For advisors working with entrepreneurs , developing expertise in startup management , business valuation , succession planning , and business transition strategies is essential .”
— John Bowen , CEO , CEG Insights firms for the ultra-affluent providing highly skilled , sophisticated asset management , concierge medicine access , tax planning and preparation , bill paying , estate planning and cybersecurity . These firms serve clients with more than $ 25 million .
2 . Firms serving the merely affluent , clients with $ 5 million to $ 25 million . These clients may want some of the same services as the ultra-affluent , but since they won ’ t want to pay for everything , they ’ ll want these services à la carte . Giant firms like Mercer and Creative Planning are already offering them .
3 . Firms with large 401 ( k ) platforms , such as Captrust and Edelman Financial Engines . By necessity , these firms will have state-of-the art technology , steady asset flows from monthly contributions and a stream of prospects from workers retiring at client businesses . As these firms build out separate wealth management business- any alarm bells for their clients , especially when expressed in basis points instead of dollars ,” says Mark Tibergien , an industry consultant and the former CEO of Pershing Advisor Solutions . “ I believe in Australia the regulators changed this to require advisors to quote the fee in dollars in advance after the first year of service .”
He notes it ’ s “ not uncommon for some firms to charge a ‘ services ’ fee different from an asset management fee . As an example , some firms may charge a minimum fee for a new financial planning client , then roll this over to an ongoing AUM fee . Others may charge a discrete fixed fee for developing a plan and helping a client organize their financial lives .”
Most advisors are still way too diversified in both the services they offer and the clients that work with . In the years ahead , create it . Again , how one adds business advisory services depends on where they come from . If an advisor has switched careers — coming into the industry after serving as , say , the CFO in a fast food or software company — then expanding into business consulting in those industries can be relatively easy .
But specific industry knowledge isn ’ t the only skill that entrepreneurial clients will want from their advisors , Bowen explains . “ For advisors working with entrepreneurs , developing expertise in startup management , business valuation , succession planning , and business transition strategies is essential ,” he says .
What is clear is that in the future only a very large firm can attempt to be all things to many people . For the rest , the task will be to select a focus and execute on it .
26 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2024 WWW . FA-MAG . COM