Whether you’re just starting out as a financial planner or are preparing for the next evolution of your career, one thing that you need to figure out is how you want to run your business. Many financial professionals use the traditional business model: managing their clients’ assets directly and charging an investment fee and/or annual planning fee. While this is still a viable model, it’s not the only option.
This financial planning structure isn’t the best option for all clients or for all planners. Many people would prefer to work with someone who specializes in a specific type of planning or wealth management. Younger individuals often want someone who recognizes the unique financial challenges of their generation. Choosing to specialize in a niche can make it easier for potential clients to see what makes you different from other advisors and planners.
In fact, many financial professionals stick with this model simply because “that’s the way it’s always been done.” But that is never a good reason to do (or not do) something. You should only use the traditional model if it actually works well for you, your clients, and your business goals. If it doesn’t, don’t be afraid to shake things up and try (or create) a new model for your financial planning business.
There are many different ways to structure your financial planning business. Here are just a few of the interesting new models we’ve seen. You may decide to adopt one of these for your business or use them as inspiration to create your own unique model.
Traditional investment management firms
This type of business is what many people (especially older generations) think of when they hear the term “financial planning.” It’s a funny connotation, because most of these firms don’t actually offer financial planning advice. Rather, they manage assets and investments and sometimes sell other financial products, such as insurance or mutual funds.
This type of business typically caters to clients who are older and/or who have a significant amount of assets or wealth to invest. Planners in this type of business typically make money by charging fees to manage investments. It may be an annual fee or a percentage of assets, but the basic idea is the same.
Wealth management services
A wealth management firm typically offers a “full-service” alternative to investment management. With this type of business, you could offer your clients true financial planning along with investment management. This model can draw clients from several age demographics, but the ideal client is usually someone who is on the wealthier side.
With this type of firm, you could use planning software to help your client manage their current budget as well as their long-term financial goals. You might offer advice about active and passive investment opportunities and also handle those investments for your clients if they want. With full-service wealth management, you’ll probably meet with your clients several times per year.
Financial planning with a monthly retainer
If you primarily want to offer your clients financial planning advice to help them identify and reach their short- and long-term financial goals, you could consider this model. In this type of firm, you would focus on offering guidance about budgeting, cash flow, retirement savings, and similar subjects.
Many planners with this type of model don’t manage assets, make trades, or provide detailed portfolios. They simply offer guidance and advice to clients who are willing to manage their investments and assets themselves. Instead of charging a traditional AUM fee, these businesses offer clients unlimited communication for a monthly fee.
This modern fee structure offers unique benefits for younger clients who view traditional investment management as an outdated service they can’t afford. It’s attractive to millennials and younger generations who would rather text or email their advisor with occasional questions than attend monthly or quarterly in-person meetings at a fancy office.
While this model is relatively new, it offers advantages for you as a planner, because your income isn’t tied to a volatile investment market. Additionally, you don’t have to join a traditional firm or come up with the capital to pay for a big office building, regular client events, and travel. You can work remotely and take on more clients because the time investment for each one is minimal.
Build a business that works for you.
Success isn’t always about doing things the way they’ve always been done. In fact, innovation is often the key to long-term success and motivation. When you choose to build your business around your values, it’s easier to stay motivated and give your best service to your clients. Don’t be afraid to reject the traditional fee-based investment model for a financial planning structure that works better for you and your clients.
What does your business look like? Did you choose a newer model or even make your own? Let us know your thoughts in the comments.
It can be hard to learn about different financial planning models from textbooks that only focus on the traditional setup. If you want to see real-world sessions from some of the most innovative financial professionals, consider joining Amplified Planning CORE. In this in-depth training program, you can access real planning sessions featuring behind-the-scenes commentary from the planners. It’s a great way to augment standard training curricula. Get all the details to see whether CORE is right for you!