A Planner's Guide to Consolidated Advisory Fees. In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. The Rise of TFPPs And The Evolution Of Broker-Dealers & Custodians, the popular financial planning industry blog, FPA’s Practice Management Solutions survey a few years ago, an AUM-centric model may be fine for those it serves, makes it difficult for clients to properly compare and keep the cost in context, the next major business model in financial planning will be the, for whom the greatest investments they can make may not be in their building portfolios at all, but growing their human capital instead, the purpose of XY Planning Network is to provide the tools, templates, and access to technology necessary to let advisors operate the model on a near turn-key basis, Turnkey Financial Planning Platform (TFPP), financial advisors are experiencing a crisis of differentiation, focus on a niche where the business can be both highly efficient, and highly differentiated, it’s still a remarkably good business model for those who really, SECURE Act And Tax Extenders Creates Retirement Planning Opportunities And Challenges. Michael Kitces is Head of Planning Strategy at Buckingham Wealth Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors. “We see that as fundamentally anticompetitive and in violation of the Investment [Company] Act and Dodd-Frank and are challenging the SEC on that basis.”. Kitces’ XY Planning Network in September 2019 filed suit in the U.S. District Court for Southern District of New York, contending that the Securities and Exchange Commission’s Regulation Best Interest rule gives broker-dealers an unfair competitive advantage. Get the latest best practices, relevant stats and industry trends - quickly and easily. As you look for new ways to boost your bottom line, re-centering your business on planning can make a big difference. XY Planning Network will not be pursuing its case against the SEC’s Regulation Best Interest in the U.S. Supreme Court, co-founder Michael Kitces announced during a … April 7, 2014 07:01 am 10 Comments CATEGORY: Practice Management. “We’ve been on a deliberate path of reinvesting for sustained growth … since day one,” Kitces explained. About Dwight Dettloff, CFP®, CPA. The group recently announced new services for members, such as a three-week intensive sales and marketing program as well as advanced coaching; compliance coaching and reviews of compliance programs; more financial planning and process consulting; and white-label tax services. Financial planning has long had a challenge of being paid as such. All Rights Reserved. Just as with the AUM model, this allows advisors to grow their business and income over time by growing a base of clients who pay an ongoing fee for the relationship service (perhaps even supplemented by AUM in the future as those clients eventually do begin to grow their assets and net worth!). To help meet this need, this past week witnessed the launch of XY Planning Network – a new network for Gen X and Gen Y advisors who wish to work with their Gen X & Y peers offering this kind of monthly retainer model. Although the distinctions between a monthly retainer versus an annual retainer or an hourly fee are nuanced, they are nonetheless significant and have the potential to help financial planners finally get paid for what they actually do, especially for those consumers who don’t have the AUM or don’t need those financial services products through which financial planning has traditionally been indirectly paid! What Returns Are Safe Withdrawal Rates REALLY Based Upon? The 2nd Circuit decision in favor of Reg BI shouldn’t hamper the states, Kitces … Pivoting Quickly To A “Work From Home” Model: What Advisory Firms Need To Know, 12 Tips To Survive Your First 12 Months As An Independent Financial Advisor, The New 1% Advisory Fee: 1% Of Income, Instead Of 1% Of Assets, Analyzing The CARES Act: From Rebate Checks To Small Business Relief For The Coronavirus Pandemic. Post was not sent - check your email addresses! In 2004, Kitces helped to co-found NexGen, a community group for younger financial planners and later went on to co-found the XY Planning Network and AdvicePay as well, with the former being recognized as #168 on the Inc. 5000 list of fastest-growing companies in 2018. XYPN says it expects to prepare about 1,000 2019 tax returns for clients of advisors using its network. Exclusive discounts on ALM and ThinkAdvisor events. All Other Questions,
Preserve wealth with help from advanced tax planning and risk management strategies. Our November CE Quizzes are now available in the Members Section. Or Reach Michael Directly: Join 41,901 advisors who get our latest research as it’s released, and recieve our popular “One-Page Financial Advisor Business Plan Template”! They can’t do it this alone … . In other words, one virtue of the AUM fee is that it’s automatically compared to the portfolio from which it comes, which makes even a multi-thousand-dollar fee seem ‘reasonable’ relative to the good stewardship of a portfolio worth 100x that amount; writing a check for some hourly fees (or in the extreme a full-sized annual retainer fee) from a checking account just accentuates all of the other personal expenditures that might have occurred with the money in the checking account instead. “We fielded these questions,” Kitces said, “and as one of, Meanwhile, XYPN is suing the SEC over its issuance of, Asked why the firm chose to make this legal move, Kitces said: “At, the end of the day, we think Reg BI is just fundamentally not consistent with the Investment Company Act of 1940 and Dodd-Frank [legislation].”, “lets brokers continue to deliver financial planning without being subject to the advice standard,” he explained. This has led to an explosive rise in the growth of custodians and the Turn-key Asset Management Platform (TAMP), and a squeeze on broker-dealers as the pace of growth in commission-based products declined (and also got squeezed), which in turn has put tremendous pressure on broker-dealer profit margins. These and other issues were discussed during “Ask Me Anything” sessions at last week’s conference, Kitces adds. Copyright © 2020 ALM Media Properties, LLC. It’s worth noting that this isn’t necessarily to suggest that financial planning will eschew its product- and implementation-based roots anytime soon. The organization, which also is suing the Securities and Exchange Commission over Regulation Best Interest, says it has more growth plans on the horizon. ), Quantifying the Value of Financial Planning Advice. We are not a [turnkey asset management platform or] TAMP,” Kitces explained. Become a … Similarly, the reality is that some niches and target clientele really do need certain insurance and investment products for which a broker-dealer is appropriate (i.e., not every TFPP has to be fee-only in its structure, though all of the forerunners have been). Continuing education that actually teaches you something. How modern organizations are growing brand value, operational efficiency, and business impact with social media. In fact, arguably the TFPP may itself be a direction and vision towards which many broker-dealers should evolve to survive in the future; just as financial advisors are experiencing a crisis of differentiation, so too are broker-dealers (and even custodians are struggling to avoid commoditization as well), and the solution is the same for all: focus on a niche where the business can be both highly efficient, and highly differentiated! Practice management advice and tools relevant for your business., advisors getting the latest Nerd's Eye View blog, Sign up now and get a free sample issue of The Kitces Report on "Quantifying the Value of Financial Planning Advice" as well!, The Estate Planning Council of Birmingham. Despite the labor intensive nature of building financial plans, the median comprehensive planning fee from FPA’s Practice Management Solutions survey a few years ago was still only $2,250, despite the fact that 40% of planners reported spending more than 15 hours to construct a plan (and 75% of those surveyed were taking at least two weeks to deliver the plan back to the client). “Our members are at a capacity crossroads. Simply put, if your clients think that their financial planning fee ‘costs’ them the equivalent of a nice dinner out, a big-screen TV, or even a family vacation, a lot of them aren’t going to choose to pay for financial planning over those far more tangibly enjoyable products and experiences! By going from a $100 million minimum down to $5 million, the asset manager aims to “broaden” retirement plan access to these funds. Advance your career and take your firm's production to the next level with FREE practice-management tips. While this has allowed for the growth of many successful financial planning firms, it also opens the door to the risk that the plan will lead to the sale of inappropriate products, and limits access for financial planning to those who have assets to manage or need to buy insurance or investment products in the first place. XY Planning is acting because its self-interest aligns with what is truly good for all RIAs and investors, according to Bill Winterberg, of FPPad, a technology consulting firm for advisors. Not all the Democrats' tax plans are negative for wealthy clients, Levine says, but several available planning opportunities are likely to go away. In response to both this conflict of interest, and more generally the aging baby boomer demographic and its ongoing accumulation of assets for retirement, the focus has shifted in the past decade or two towards the assets under management model, where again planning is often paid for ‘indirectly’ through AUM fees, but can be done in a manner that’s viable and profitable for the firm, and generally with less potential conflicts of interest regarding planning recommendations than the sale of products for commissions. It's the first time since 2014 that the firm has boosted the revenue its brokers must take in before earning a higher payout rate. Notably, this provides a path not only for younger consumers to finally have access to a financial planner, but also an important new career path for younger advisors who want to grow and develop a business serving their Gen X and Gen Y peers. Nonetheless, the slow but inexorable transition towards actually getting paid for financial planning itself means the business models for financial advisors are changing, and so too are their needs for a very different kind of support service and infrastructure to help them be successful. Whether they win in the court of public opinion seems more assured. But plaintiffs in the Reg BI lawsuit, as well as states pursuing their own fiduciary rules, assert that Reg BI is too weak a standard to curb broker conflicts of interest.
Instead, the long-standing “dirty secret” of financial planning is that the bulk of it is paid “indirectly” through the products or services that are used to implement the plan. And what might change about the platform itself? Since my own divorce, I have been committed to helping others navigate this difficult time through education and planning. Sorry, your blog cannot share posts by email. 163; Alan Moore, who we chatted with way back in Ep. Nonetheless, the bottom line is that as financial planners do continue the slow and steady evolution towards trying to get paid for financial planning advice itself – reducing or total eschewing their reliance on traditional insurance and investment products – an opportunity is emerging to both reach new audiences that the traditional models don’t, open the door for young advisors to serve them without a sales/product agenda, and there will be a growing need for TFPP solutions that support advisors as they build such business. In the case of the TFPP, though, the focus is – as the name suggests – not just on making the asset managment process turnkey, but the whole financial planning business. In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. Specially, members voiced concerns about the firm’s growth pace, if it might need outside capital or possibly risk letting service standards weaken. XY Planning Network (XYPN) follows in the footsteps of the Garrett Planning Network as another advisor network built to bring financial planning to those who wish to work with advisors on a fee-only basis but do not have assets to invest – especially the middle class and those younger consumers whose advice needs revolve around cash flow, debt management, and for whom the greatest investments they can make may not be in their building portfolios at all, but growing their human capital instead! In a world where broker-dealers try to make a percentage of the “grid” (of Gross Dealer Concessions) and custodians try to profit from revenue-sharing (with advisors or through the 12(b)-1 fees of the funds they use), TFPPs are operating on a drastically lower cost flat fee service; by focusing on a specific business model and/or niche, TFPPs are creating value for their advisors at a fraction of the cost of larger platforms. Asked why the firm chose to make this legal move, Kitces said: “At the end of the day, we think Reg BI is just fundamentally not consistent with the Investment Company Act of 1940 and Dodd-Frank [legislation].”, In addition, Reg BI “lets brokers continue to deliver financial planning without being subject to the advice standard,” he explained. Attention Members! Meet Our Team - XY Planning … The first stage was the shift from getting paid for financial planning through the commission-based sale of investment (and insurance) products, and towards the AUM model. The XY Planning Network and its co-founder, financial advisor Michael Kitces, are among the plaintiffs in a federal lawsuit that is attempting to … The key distinction of the monthly retainer model for Gen X/Y advisors who want to serve their Gen X/Y peers is not only that the cost can be structured in a convenient manner – as a monthly fee for clients that aligns to the monthly-services manner by which most household expenses are paid, from rent/mortgage costs to gym memberships and cable TV or cell phone data subscriptions – but that it is a recurring revenue model that allows young advisors to serve their peers with an ongoing relationship. XY Planning Network co-founder Michael Kitces. Last week, platform provider XY Planning Network hosted its national conference, drawing about 500 advisor members and other guests. My passion is helping divorced women take control of their financial situation and create a realistic plan to achieve their goals including rebuilding their wealth, sending kids to college, and planning for retirement. For all those reasons, we’re incredibly excited about the launch of the XY Planning Network, and hope that it does at least a little something to help make financial planning more accessible, as both a vital service for consumers, and a viable long-term career for today’s young advisors. , Kitces adds long had a challenge of being paid as such not -... 500 advisor Members and other guests Buckingham wealth Partners, a turnkey wealth management services provider thousands... Been on a deliberate path of reinvesting for sustained growth … since day one, ” Kitces explained Members. Planning Advice, I have been committed to helping others navigate this time. On a deliberate path of reinvesting for sustained growth … since day one, Kitces! 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