Kitces and Carl - Real Talk for Real Financial Advisors The Limits Where Technology Can't Scale Financial Planning Advice: Kitces & Carl Ep 154
Dec 26, 2024
This discussion dives into the balancing act between technology and human interaction in financial planning. It highlights the importance of empathy and critical thinking despite advancements in AI. The conversation raises concerns about how effectively technology can deliver personalized advice. Additionally, the emotional dimensions of financial strategies are explored, emphasizing the irreplaceable value of trust in client relationships. Overall, it paints a picture of how tech can enhance, but not replace, the human element in financial services.
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The 40-30 Rule
- The average advisory firm in the 1990s followed the 40-30 rule: 40% revenue to expenses, 30% overhead, and 30% profit.
- Despite technological advancements, average profit margins have decreased to 25%, and median advisory fees remain at 1%.
Technology's Impact on Advisor Profitability
- Technology advancements haven't increased advisor profitability; instead, advisors reinvest time savings to offer more client services.
- This increased service has led to lower profitability despite technological efficiency gains.
Lifestyle Firms
- Carl Richards mentions advisors running lifestyle firms, working fewer hours while providing excellent service and earning well.
- They question what other advisors do with their time, highlighting a potential disparity in work-life balance within the industry.