In the first part of our post, we ran through the cheap and basic. Today, we’ll cover more comprehensive planning models.
Ideally, comprehensive financial planning services for today’s young professionals should be implemented with a more clearly defined niche; it could be tied to a particular large employer in the area, a certain type of business or industry that’s popular (e.g., computer programmers in Silicon Valley, or young doctors at the area hospitals), or simply a common planning scenario (e.g., parents starting a family and having their first child).
The key is that by having a niche, you will be able to clearly demonstrate yourself as an expert in the particular type of clients you (wish to) work with; otherwise, you will struggle to bring in clients competing with every other local young insurance agent or mutual fund salesperson. In addition, having a clear niche makes you more referable to prospective clients.
Notably, this business model could be attached to the preceding one, with a retainer to provide an initial baseline of income. However, the reality is that if there is already opportunity to generate revenue by implementing recommendations for clients, there isn’t necessarily a need to charge clients upfront or on an ongoing basis as well. Instead, that may lead to ultimately charging them more than is necessary, or cause them to balk at an upfront retainer fee and not engage in the planning work that would have led to more revenue-implementing solutions that the clients needed anyway.
In other words, it’s not just how much you charge, but also making good decisions about how you charge, and the saliency of your pricing model, that ensures the success of the business.
Wealth Management for the Emerging Affluent
The greatest irony to the number of RIA firms that have $1 million investment management minimums is that virtually all of them started with much lower minimums, and were able to serve those clients profitably enough to not only be successful and survive as a business, but thrive and grow to the point where the firm could establish higher minimums. Thus, the core value of this business model is simply to get “back to basics”—providing wealth management in the form of comprehensive financial planning plus investment management services to today’s emerging affluent, who might “merely” have $100,000 to $500,000 of assets to manage, rather than a million or few.