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. Sign up now & receive a free copy of The Kitces Report: One-Page Financial Advisor Business Plan Template. XY Planning Network co-founder Michael Kitces. About Dwight Dettloff, CFP®, CPA. 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). Notably, the goal of the XY Planning Network is not “just” to bring financial planning to the underserved Gen X and Gen Y at an affordable cost, but also to support a new career path for entrepreneurial young advisors who want to build an advisory firm by working with their own natural network in the first place: their Gen X and Gen Y peers. Plus, XYPN is not looking to bring in outside capital and aims to keep its independence. In fact, arguably much of the challenge facing broker-dealers already can be traced to the evolving business models of financial planners. For much of its history, this “payment gap” for financial planning was filled in with the commissions paid on insurance and investment products (and limited partnership as well, in the early years). The blogger also wrote about the matter extensively online this week, explaining: “Ultimately, though, the purpose of the XYPN lawsuit against the SEC is not to undermine the ability of broker-dealers to engage as such; instead, the issue is simply that Congress has repeatedly prescribed that the delivery of financial advice must be delivered under a fiduciary standard of care, either by lifting the standards for brokers when providing such advice, or by requiring such advice to be delivered as a registered investment adviser in the first place.”, 5 Worst States for COVID-19 Hospitalization Rates, Why Raymond James' Purchase of $35B Retirement Plan Firm Is a 'Strategic Fit', Bitwise Launches First Cryptocurrency Index Fund, Harry Dent: Market Crash Coming in 2-3 Years; Economy ‘Already Dead’. My passion is serving young professionals, entrepreneurs, and small business owners. Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, is the Head of Planning Strategy for Buckingham Wealth Partners, a private wealth management firm located in … What Can Advisors Do? 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. Meanwhile, XYPN is suing the SEC over its issuance of the Regulation Best Interest rules. Copyright © 2020 ALM Media Properties, LLC. 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 … 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. But the group’s growth is not a threat to its current members services or independence, insists co-founder, planner and blogger Michael Kitces. 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 has launched its own compliance archiving solution. The video for this month’s live Office Hours, Best Practices in Hiring: Making Sure Your Next Employee is the Right One Who Stays, has been posted in the Members Section! 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. So what’s the solution? About Michael Kitces, CFP Michael E. Kitces, MSFS, MTAX, CFP®, CLU, ChFC, RHU, REBC, CASL, is a co-founder of the XY Planning Network, the practitioner editor of the Journal of Financial Planning, and the publisher of the e-newsletter The Kitces Report and the popular financial planning industry blog Nerd’s Eye View. “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.”, The blogger also wrote about the matter extensively, Ultimately, though, the purpose of the XYPN lawsuit against the SEC is not to undermine the ability of broker-dealers to engage as such; instead, the issue is simply that Congress has repeatedly prescribed that the delivery of financial advice, be delivered under a fiduciary standard of care, either by lifting the standards for brokers when providing such advice, or by requiring such advice to be delivered as a registered investment adviser in the first place.”, suing the Securities and Exchange Commission, How Did Advisor Portfolios Perform After COVID-19 Hit? 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!). As I’ve written in the past, I believe the next major business model in financial planning will be the monthly retainer model. “We fielded these questions,” Kitces said, “and as one of Inc.’s 5,000 fastest-growing firms are very cognizant about growth and service. Hourly fees are often transactional – when you have a problem, you purchase the professional hours necessary to get help solving the problem – while an ongoing monthly fee is relationship-oriented; advisors are compensated not for coming up with problems to solve, or impressing upon their clients that their problems are ‘worth’ paying for a one-off solution, but instead are compensated for providing good service and ongoing advice that retains clients (and retains their ongoing monthly fee relationship). By going from a $100 million minimum down to $5 million, the asset manager aims to “broaden” retirement plan access to these funds. Preserve wealth with help from advanced tax planning and risk management strategies. Staff support is the next wave of solutions … along with a wide range of coaching and consulting services around [work] processes and consulting, which are remotely based.”. Its case is separate from that of several states. 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. 15; XY Planning Network Podcast; You can keep in touch with Dan by connecting with him on LinkedIn. 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. And as the industry is shifting towards providing more planning services to clients, don’t get left behind! We are not a [turnkey asset management platform or] TAMP,” Kitces explained. That doesn’t necessarily mean that broker-dealers and custodians, or the associated product-based or AUM-based business models, are going to go away anytime soon. The firm's study of several hundred portfolios found that many advisors shifted allocations to investments that outperformed. “Our members are at a capacity crossroads. 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. MICHAEL KITCES, CO-FOUNDER, XY PLANNING NETWORK. For most of its history, “getting paid” for financial planning has really been about giving away financial planning at little or no cost and making it up from the income generated by implementing the recommendations of the financial plan, first through the sale of insurance and investment products, and more recently by providing ongoing investment management services. 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”! 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! In turn, given the unique needs for advisors who operate under this monthly retainer business model – from a CRM with the workflows to manage a monthly-fee clientele, to the payment mechanism necessary to collect monthly retainer fees without running afoul of SEC custody rules – 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 (not to mention being with a community of other advisors going through the same challenges! “We are a turnkey financial platform and are here to provide financial-planning support and services, like tax solutions, to advisors. The 2nd Circuit decision in favor of Reg BI shouldn’t hamper the states, Kitces … Whether Kitces and Moore win in court remains to be seen. As financial planners continue the slow and steady evolution away from getting paid for financial planning through the implementation of insurance and/or investments and towards being paid for the advice itself, the emergence of new models not only threatens existing advisory firm models, but also the business models of firms that support financial advisors: broker-dealers and custodians. The XY Planning Network and its co-founder, financial advisor Michael Kitces, are among the plaintiffs in a federal lawsuit that is attempting to … 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! 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. ), an AUM-centric model may be fine for those it serves, but there are many it doesn’t serve at all. I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them. Whether they win in the court of public opinion seems more assured. RECEIVING OUR LATEST RESEARCH AS IT IS RELEASED! The network now has about 1,020 advisor members, it says. Attention Premier Members! Michael Kitces, head of planning strategy at Buckingham Wealth Partners and co-founder of XY Planning Network, tweeted Saturday. The Pandemic Hits the Housing Market. (Disclosure: Michael Kitces is a co-founder and partner in XY Planning Network. 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