No Asset Minimums? No Problem, One Advisor Says

So you are setting out from the beginning to take a different approach to client selection and compensation?

Yes that’s right, and it speaks to some of the datapoints you raised originally.

In my time as an advisor, I’ve spoken with many young professionals who are seeing their incomes grow at the same time they are starting a family and just thinking more about their long-term financial future. They might be making $150,000 or $200,000 a year, and their wealth is growing strongly, but they are just terrified of making decisions about how to manage their expanding wealth.

The conclusion I have come to is that, even though they aren’t highly affluent yet, these people are more than happy to pay someone to help them achieve peace of mind. As the advisor, we can deliver a lot of value in this segment, too.

Another key recognition I have had is that, for a lot of these folks, it may be a while before they have legitimately complex financial planning needs. Perhaps they just have their house, some debt and their 401(k) portfolio to worry about, but it feels like a highly complex and sensitive time for them.

So, that gives me the conviction that I can serve these people well and get them set up with a good plan, but it won’t necessarily require an immense amount of time per client. That’s why the model I am setting up is really based on quarterly touchpoints, complemented by in-person meetings twice per year.

I will also add that I have a strong conviction that the investment allocation piece of the advisory relationship is very important, but it’s probably going to be less important for long-term financial success compared with the broader financial decisions you make year in and year out. That’s what I am here to help with.

The robo-advisor platforms can do fine for the portfolio, but how do you coordinate retirement savings, your kids’ education, your cash flow and your debts? What do you do with the dollars that you have coming in right now?

Do you worry that you may be giving up additional potential compensation by planting your flag so firmly in this “emerging wealth” niche?

Let’s be honest about the compensation discussion. To begin with, yes, I have friends in the advisor industry who are doing things the traditional way, and they are earning a very good living doing so. That’s great, but I do plan to do things a little differently.

However, to be clear, my model is not only about flat financial planning fees and no asset minimums. I’ve got a blended strategy where I can also take over direct management of your money for an additional fee, and I expect that will be an important part of making this whole vision work.

I will be telling my clients, “If you don’t want me to manage your money and you just prefer to pay me a monthly fee for my guidance, that’s great. You can absolutely do the work of rebalancing and investing according to my guidance.”

However, the other incentive is that, for every $50,000 the client invests directly with me, I will knock down that management fee, so you can basically pay for my guidance and management with soft dollars coming out of investment returns.

You may be surprised, but in talking with folks in this niche, there is a desire for a soft dollar fees. In rational terms, it really shouldn’t matter whether you are paying hard- or soft-dollar fees, all else being equal, but this is really interesting to see that many people prefer the soft dollar. I think it’s a psychological thing, mostly.

What I’m getting at is that, whatever my flat fee ends up being, it is likely that some clients will pay me more than that, but this blended approach gives me a great entry point for people who desperately want that peace of mind but don’t meet the traditional hurdles for accessing planning services.