The financial advisory industry is currently going through tremendous changes. Getting paid as an advisor used to be easy. Advisors simply either got paid a commission or charged an asset management fee.   

Just as in most businesses, the goal is for advisors to grow their business beyond their current clientele. Many advisors don't view younger people as potential clients because they don't have many assets, but this isn’t the real issue. It is more of a business model problem that prevents advisors from expanding their clientele.

How Fee-for-Service Changes the Business

In order to expand their clientele, advisors need to re-frame their concept of what makes a good client. Rather than evaluating potential clients solely on their assets, advisors should consider their income as well.

Only 5-7% of Americans have over half a million dollars for advisors to manage. This small subset is really limiting when it comes to potential business. However, a much greater opportunity lies with the large percentage of Americans who can be served with a fee-for-service model like the one AdvicePay offers because they can pay from their cash flow.

Revamp the Business Model

The number of people who have the income required to pay a financial advisor’s fee is much larger, actually 8 to 10 times larger, than the number who have the required amount of assets. By moving from AUM to fee-for-service, you are better able to serve these low net worth clients. Rather than paying from their assets, which are not significant enough to be profitable for you, clients pay from their cash flow.

Additionally, you have the growing need to satisfy the fiduciary requirement and always act in your client’s best interests. This is another factor to consider when moving away from the commission-based fee structure.  

Solve the Talent Problem

Not only can fee-for-service be better for your clients, but it can be better for attracting new talent to your firm. Greater talent always attracts greater business growth. With more CFPs (Certified Financial Planners) retiring than graduating, we are facing a shortage of financial planners. Much of this can be attributed to the fact that they don’t feel the work is interesting enough.

Many young people perceive financial planning as focused solely on helping retirees protect their capital. The fee-for-service model changes everything by opening up a vast array of new possibilities.

The fee-for-service allows younger families and couples access to financial planning services. This means financial planners are able to help them build their lives by navigating mortgages, insurance, education savings, and much more.  

Many people understand the importance of receiving financial advice, but don’t realize they actually have the means to do so. Changing to a fee-for-service model from AdvicePay unlocks the potential of expanding to a previously largely untapped potential client market, which has massive game-changing effects.  

You can use AdvicePay’s fee-for-service model to help you save time over the antiquated manual payment processing system while also expanding and retaining clientele with the simple and affordable fee structure.