The great “what if” here boils down to the value you bring to the life of the client, and whether you articulate that value in a way that keeps resonating. If your stated value-add is to produce a comprehensive financial plan, then what more advantage is there to the client paying $50,000 per year with $5 million in AUM than there is for the client paying $10,000 because they have $1 million? Is it really that much more “comprehensive?” Pat your planning complexities on the back all you wish, but you may find yourself having trouble convincing those in the know in the days to come.
Another issue with the typical financial plan is that the labor is front-loaded, and the subsequent dialogues revolve largely around revisiting the original work. It takes savvy clients about two to three years to figure this out, and when they do, they will start questioning the compensation model.
As we ponder what’s happening and speculate where all this is heading, we find that we’re really left with three choices:
• Keep charging less and join the race to the bottom (good luck with that).
• Provide more substantive and sustainable value that cannot be commoditized and continue charging assets under management fees to compensate.
• Provide more substantive and sustainable value and move to a subscription model that has the potential to adjust upward as client needs warrant it.
If financial planning truly wants to be regarded as a profession, it must examine these accessibility issues that are the result of its dearly held compensation biases. Not everybody needs a physician, but those that are sick do. There are a lot of people out there who need help—and are willing to pay for it—but the model doesn’t invite them in for treatment. We can change that.
Mitch Anthony is the creator of Life-Centered Planning, the author of 12 books for advisors, and the co-founder of ROLadvisor.com and LifeCenteredPlanners.com.