WCI #380: Michael Kitces on the State of Financial Planning
White Coat Investor Podcast
Exploring Financial Planning Models and Client Relationships
Different financial planning models cater to varying client needs, with advisors adapting their approaches accordingly. Some clients prefer minimal engagement, seeking occasional advice, making hourly or subscription models suitable for them. In contrast, clients looking for comprehensive portfolio management benefit from Assets Under Management (AUM) fees, ensuring alignment of interests as advisors share in the risk inherent to investment outcomes. Advisors who neglect performance-based fees due to industry history can lead to risky behaviors detrimental to clients during market downturns. Subscription-based models are gaining traction, allowing for ongoing advisory relationships without the necessity of large asset portfolios, making them attractive to clients seeking consistent support. While hourly models can be appealing, they struggle to maintain sustainability and scale, prompting many advisors to shift towards subscription or AUM structures for deeper, more meaningful client relations. Advisors inherently drawn to service and assistance often find fulfillment in long-term client connections, reinforcing the importance of understanding client preferences and tailoring financial planning services to meet diverse demands.
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