Adds Kitces, "Planners need to remember that most of them started out serving middle-income clients, and they did so profitably. That's how most of us begin and build our practices." The main challenge, he says, is continually bringing in the high volume of clients needed to make this business model work.
That lesson isn't lost on Bob and Kathryn Nusbaum, whose firm Middle America Planning in Pittsburgh serves such clients exclusively. "After working with middle-income clients for almost six years, I've gained a healthy respect for how difficult but rewarding it is," says Bob Nusbaum. "We've constantly revised our model to deliver better service to clients and improve our profitability. The major roadblock, of course, is generating sufficient revenue to sustain a viable practice."
Nusbaum says his favorite clients are young individuals, young couples and families with young children, and part of the attraction is simply the desire to help an underserved segment of the population. "Our educational system has failed miserably in providing them with the tools that they need to deal with their money, and the financial services industry has very little interest in them. Yet they're being ignored at exactly the time when they need help the most. The decisions that they will make in their twenties and thirties will provide the foundation for either a life of financial prosperity or a life of struggle, or even misery."
The big question, from an operational standpoint, says Nusbaum, is, "How can I apply a labor-intensive process to serving this group I love working with-and that needs my help-and still turn a profit?" In true entrepreneurial spirit, a must when serving this niche, Nusbaum says next year the firm will roll out what he calls "Money Boot Camp." "It's simply a way to better leverage my time. Initially, I'll meet with five to ten couples at a time to talk about topics that are common to all of them, like goal-setting, spending and debt, investing, saving for retirement and college, and risk protection. I'll then meet with each couple privately for a morning or afternoon to apply what they've learned in the group to their specific situations. The group setting will keep the cost down while providing sufficient revenue to make [the individual attention] profitable."
As Nusbaum develops his business to serve Middle America, others such as Matt Iverson are developing new platforms to guide willing advisors in this direction. Iverson and his father Jon have created an entity called Boulevard R (www.boulevardr.com) that partners with qualified CFPs to create the "Boulevard R Roadmap," a blueprint for middle-income clients that gives them the benefits of an independent financial plan at a reasonable cost.
The beauty of the road map is its efficient work flow process. Clients provide online inputs and are then partnered with advisors who quickly create a quality plan for them. "We take the fat out of the planning process," says Iverson.
Part of the vision was to take advantage of technology, so everything is done online. The company creates an account for each advisor and feeds them the road maps coming in from the clients.
"The clients take about 45 minutes to an hour to aggregate their information by answering a series of questions designed to pull out of them anything they might otherwise leave out," Iverson says. "The planner then logs on to our Web site, downloads the road map as a PDF, and in ten minutes gets a good idea of who the client is."
In short, says Iverson, Boulevard R wants to help planners understand clients' issues and then streamline the process of interacting with and educating them. Though he's not a planner himself, Iverson has a strong background in consumer rights work, and he wanted to create something that would benefit millions of Americans.
"With the road map, we can show people how to move forward-where to start and what to do next."