It seems that fees charged by financial advisors aren’t as secure as they once were. For starters, the emergence of low-cost digital advice platforms has caused many investors to question the traditional fee model based on assets under management. Then there was the dramatic plunge in U.S. equity prices in March that filled advisors with angst as they saw equity prices—and their firm’s AUM levels—sink like a stone. Finally, greater adoption of the fiduciary model means less commission-based fees. Add it up, and it’s enough to make many advisors rethink their business model.

In a recent report, the financial services industry research firm Aite Group proffered a solution for advisor firms that are rethinking their business models and looking for additional revenue sources.

“Wealth management firms have an opportunity to convert a service they have already been providing for little compensation—financial planning—into a new revenue stream using their newly developed digital advice platforms to deliver advice at scale,” Aite said in its report entitled “Subscription Pricing Models for Digital Advice: Where’s the Sweet Spot?”

The report surveyed 400 advisors and found that less than 20% of advised clients pay a fee for financial planning even though most practices spend as much time on planning as they do on investment management.

Aite noted that financial planning is of high value to clients, especially in times of high stress and uncertainty such as the current pandemic-fueled reality.

“Charging for advice is likely to become a more mainstream idea,” the report said.

Aite’s report also surveyed 2,545 consumers, of which 622 have a household income of at least $100,000. The respondents were classified as senior millennials (29 to 39 years old), Generation Xers (40 to 54 years old) and baby boomers (55 to 73 years old). More than 80% of these folks have at least one investment account.

Aite asked affluent consumers (i.e., those with income of at least $100,000) about their receptiveness to getting online financial coaching and advice, and the upshot is that a majority of affluent Gen X and millennial investors are looking for financial advice and are receptive to both receiving it from a digital service and paying for it. The majority of baby boomers, on the other hand, aren’t on board with that.

Nonetheless, a number of hybrid advice solutions with both human and robo elements have come to market during the past four years and tapped into younger investors’ interest in receiving low-cost digital advice. These platforms run the gamut in terms of investment minimums and pricing structures.

For example, the premium version of Charles Schwab’s robo-advisor Intelligent Portfolio Management platform has a $25,000 minimum balance, charges a one-time $300 initial planning fee and a $30 monthly fee after that for unlimited one-on-one guidance from a certified financial planner.

On the other end of the spectrum, fintech finance company SoFi Wealth has a $1 minimum and no management fee (for accounts less than $10,000 and for SoFi borrowers; 0.25% otherwise) for a managed robo portfolio of index funds for taxable and retirement accounts. Customers also have access to virtual financial planners who hold the CFP designation.

These digital hybrid advice platforms show that there’s a demand for low-cost financial planning advice, particularly among younger investors, and Aite said traditional advisors should take their cue from that and implement their own such programs to capture a share of that audience.

“If I were an RIA, I’d be interested in solutions that build connections to the next generation as part as my business, as well as add revenue in uncertain times regarding the stock market and AUM fees,” Sophie Schmitt, senior analyst at Aite and author the report, said in an interview. “This kind of movement demonstrates interest from younger individuals and generations in receiving advice in a virtual environment and also paying for planning advice via a subscription fee—they’re used to paying subscriptions.

“There’s clearly a need for a change in how advisors are getting compensated,” Schmitt continued. “We see some firms taking apart the AUM fee and dividing it into planning and investment management.”

She noted that trend has been in place in countries such as the U.K. and Australia, where wealth management firms have decoupled the investment management fee from the planning fee.

At the very least, the pandemic has kept people apart and enabled both advisors and their clients to get comfortable with virtual interaction, so the notion of virtual client meetings isn’t a foreign concept anymore. But it might take a little time to iron out the kinks when it comes to subscription-based financial planning services.

“We’ll see the models evolve, and the price points will evolve with the complexity of the scope,” Schmitt said.

She added that subscription-based pricing for advice can be a win-win that opens up a new client segment for traditional advisors by enabling them to serve people who otherwise can’t meet the AUM minimum that a qualified financial advisor requires.


“I think there’s room for different levels of advice where, for example, someone out of college won’t need a ton of holistic planning,” Schmitt said. “They’ll need to know the basics of setting up a savings plan and allocating a little bit to an investment account, while someone approaching retirement will need a lot more advice.”