Financial planning is all about solving people’s problems. ‘Can I afford to buy a lake house?’; ‘Can I create income from my savings?’; or ‘Can I pay for my child’s college education?’ all present choices for one’s money. And whether their questions are regarding a one-time purchase or continuous planning and management of assets, our team wants to be able to help all clients solve their problems confidently for their future.

To be able to serve a wide spectrum of income levels and wealth with their planning challenges, Beratung Advisors offers different fee structures. We offer one-time financial planning engagements, investment management with an advisory fee based on a client’s assets under management (AUM), and we also offer subscription-based financial planning. The subscription model—I believe—will surpass the AUM model as the preferred fee structure in the broader financial services industry in the next 10-15 years.

Lessons in Adaptability and Innovation

By offering a digital financial planning experience, our team has been able to scale our offering tremendously to meet clients’ wants and needs. My perspective as an elder Millennial, America’s largest living generation¹, coupled with the team’s experience working across generations, we see the subscription model best aligns with clients’ expectations for financial planning.

Looking to other industries we can learn valuable lessons of adapting our business models. What Netflix did was change the model so that you no longer need to go to a store to rent a movie, you could get it delivered via the mail. And then as new competitors such as Redbox cropped up, Netflix continued to innovate and invest in their content streaming business. But, even as they gained subscription streamers, they still kept their mail-order business because they had solid, profitable clients that they didn’t want to lose to Redbox.

This example highlights that sometimes you need to create models to serve both sides of the house so that it’s the right pricing and delivery model for each customer type—at least if both are profitable. We view the AUM model like the Blockbuster-style video rental store that you drove to, and the financial planning via fee-based subscription to the Netflix-style streaming service. They both serve a different segment of clients. The AUM model is the most prevalent fee structure in the financial services industry today, while the subscription model exists for the future as generational preferences take effect and business models adjust accordingly, just like the evolution of movie delivery.

Our team similarly strives to meet the expectations of our planning clients and offer financial planning via a fee-based subscription, while still providing the AUM model for clients who prefer it. Offering different fee structures to my clients gives them options and allows me to serve a greater population with financial planning.

The Appeal of the Financial Planning Subscription

Paying for a service via a monthly fee is not a novel concept, it’s not even new to financial services. Think about an insurance policy premium. Yes, you could pay that lump sum once per year, or you could spread the installments to make payment more manageable. It’s often the convenience of a recurring system to manage overall cost that appeals to many clients seeking financial advice for the first time.

About seven out of ten new households we are bringing on are opting to do financial planning as a paid subscription service. These new clients want to start with financial planning because they feel the desperate need for a financial plan. They want to focus on their life challenges and goals, and are looking for guidance on how to do that.

They are first drawn to our firm because they see, via our website, that we do financial planning for a fee. They know they need and want planning, but they are busy with their careers and children, and are trying to make decisions, but are challenged to solve for a long-term solution.

Transparency in the Solution

Those who are new to planning or new to financial advice also want a clear understanding of the undertaking—both in terms of service and payment.

Our website helps me to easily communicate the process we have in place for financial planning. This is based on the seven-step financial planning process, but is adapted to fit the client’s perspective. Because frankly, I don’t want clients intimidated or turned off by something they think is complicated.

Our approach to offering financial planning is simplified down to three phases: engage, enlighten, and empower the client.

Engage. This is an opportunity for both of us to get acquainted. In this first meeting, we will talk maybe 15 percent of the time. My job is to listen to the client. I often present open-ended statements, versus questions, to elicit a deeper response. For example, rather than asking, “Are you doing education planning?” We say, “Tell me what your child’s future look like.” From this exchange, we are able to assess the complexity of the client’s situation and scope the engagement. We know what we can help them solve and we can justify the fee with the number of hours it will take.

Enlighten. As we get underway to address their financial needs and concerns, this is where financial planning technology really helps us scale the engagement. Clients get access to their own portal, so we can collaborate on building their financial picture and they can self-serve. With a digital experience they can view their financial situation in a consolidated, visual way and monitoring their financial situation becomes easier.

Empower. The end deliverable is the financial plan which empowers clients to continue making financial decisions based on their current and evolving situation. Maintenance is an expected next step for the relationship.

Through this process I understand my clients’ needs and they understand there is a price for our time, and the hours it will take to build their financial plan. We strive to have clients who can move through life confident about their financial situation. And hopefully they are pleased enough to become a recurring subscriber!

Source:

1 Fry, Richard. Pew Research Center, “Millennials overtake Baby Boomers as America’s largest generation”, https://www.pewresearch.org/fact-tank/2020/04/28/millennials-overtake-baby-boomers-as-americas-largest-generation/.

DISCLAIMER:

Advisory services offered through LPL Financial, a registered investment advisor and separate entity from Beratung Advisors.

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