This gap between supposed service and documentation of service created a barrier to large firms, including major enterprise RIAs and hybrid firms associated with broker-dealers, in moving toward offering more subscription, hourly and retainer fee service for clients. While commissions and AUM fees are easy to collect, flat fees have until recently required a manual effort of collecting paper checks and accounting for them.
It’s also created a problem for advisors moving away from investments as their central value proposition. Outside of a proposal or a set of investment recommendations, many firms have struggled to place a tangible value on the significant amount of intangibles they regularly deliver to clients.
Though AdvicePay’s initial release solved the problem of how to collect fees, until today it did not bridge the gap between those fees and the actual demonstration of advisor activity on behalf of clients.
“A lot of enterprises have had advisors able to do things in a large, scalable way, but lack systems to facilitate scaled advice the same way they can handle scaled products,” said Kitces. “At the end of the day, these companies need to be able to make sure appropriate advice was given, but few had systems or technology to do this. It was all manual processes, Excel spreadsheets, and it was staff- and labor-intensive.”
Now, with the technology in place to deliver flat-fee based advice at scale, the business model of financial advice may change across the industry, bringing with it more technology oriented toward the fee-based advisor.
“The more we launch technology that facilitates these processes, the more the industry’s culture changes and the more demand we see from consumers,” said Kitces. “The more the culture changes, the more demand we see for new technology. It starts to feed on itself.”