“We’re looking at more direct administration [services], like virtual assistants and paraplanner solutions,” he said. In fact, arguably much of the challenge facing broker-dealers already can be traced to the evolving business models of financial planners. XY Planning Network. XYPN filed its suit in the Southern District of New York. 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. Attention Premier Members! It was founded about five years ago. The organization, which also is suing the Securities and Exchange Commission over Regulation Best Interest, says it has more growth plans on the horizon. 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! 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 … To help meet this need, this past week witnessed the launch of XY Planning Network – a new network for Gen X and Gen Y advisors who wish to work with their Gen X & Y peers offering this kind of monthly retainer model. Last week, platform provider XY Planning Network hosted its national conference, drawing about 500 advisor members and other guests. 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. In our 48th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss why goals-based financial planning puts the proverbial cart before the horse, the importance of exploring the possibilities first, strategies to dig deeper with clients to create frameworks from which realistic and meaningful goals can be developed, and why iterative planning … XY Planning Network founders Alan Moore (left) and Michael Kitces at the 2019 XYPN Live conference. Featured Co-Host: Michael Kitces | Co-Founder of the XY Planning Network, and author of the popular blog www.Kitces.com joins in on occasion to bring his unique perspective to the show XYPN Radio Alan Moore and Michael Kitces 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. Unfortunately, for most new planners entering the industry today, there have only been two paths: taking a job at a firm that requires them to sell insurance and investment products to their peers; or working at a larger firm that serves wealthier clients and has (AUM) minimums that prevent young planners from working with the peers they often wish to serve. In a world where broker-dealers try to make a percentage of the “grid” (of Gross Dealer Concessions) and custodians try to profit from revenue-sharing (with advisors or through the 12(b)-1 fees of the funds they use), TFPPs are operating on a drastically lower cost flat fee service; by focusing on a specific business model and/or niche, TFPPs are creating value for their advisors at a fraction of the cost of larger platforms. MICHAEL KITCES, CO-FOUNDER, XY PLANNING NETWORK. As criminals get smarter you must take extra steps to protect both your clients and your firm. Michael Kitces, who we chatted with on Ep. 163; Alan Moore, who we chatted with way back in Ep. By going from a $100 million minimum down to $5 million, the asset manager aims to “broaden” retirement plan access to these funds. While this is not inherently bad as long as the costs add up reasonably for the services provided and the recommendations are in the clients’ interests, the sad reality is that financial planning can actually be so effective in building trust with clients that it can also be used (or rather, abused) to facilitate the sale of far less appropriate and more costly products as well. XY Planning Network founders Alan Moore (left) and Michael Kitces at the 2019 XYPN Live conference. While this has allowed for the growth of many successful financial planning firms, it also opens the door to the risk that the plan will lead to the sale of inappropriate products, and limits access for financial planning to those who have assets to manage or need to buy insurance or investment products in the first place. 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. The key distinction of the monthly retainer model for Gen X/Y advisors who want to serve their Gen X/Y peers is not only that the cost can be structured in a convenient manner – as a monthly fee for clients that aligns to the monthly-services manner by which most household expenses are paid, from rent/mortgage costs to gym memberships and cable TV or cell phone data subscriptions – but that it is a recurring revenue model that allows young advisors to serve their peers with an ongoing relationship. Michael Kitces is Head of Planning Strategy at Buckingham Wealth Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors. Sorry, your blog cannot share posts by email. 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! Access to other award-winning ALM websites including TreasuryandRisk.com and Law.com. 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. 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 … 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. From this challenge has emerged a new crop of alternative financial planning business models, including income-and-net-worth-based annual retainer models and most notably the rise of the Garrett Planning Network and the hourly fee middle to reach these underserved groups. Sign up now & receive a free copy of The Kitces Report: One-Page Financial Advisor Business Plan Template. The first stage was the shift from getting paid for financial planning through the commission-based sale of investment (and insurance) products, and towards the AUM model. XYPN says it expects to prepare about 1,000 2019 tax returns for clients of advisors using its network. 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! 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”! So what’s the solution? As I’ve written in the past, I believe the next major business model in financial planning will be the monthly retainer model. The 2nd Circuit decision in favor of Reg BI shouldn’t hamper the states, Kitces … Co-founders Alan Moore and Michael Kitces … “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 network now has about 1,020 advisor members, it says. “We fielded these questions,” Kitces said, “and as one of Inc.’s 5,000 fastest-growing firms are very cognizant about growth and service. In fact, arguably the TFPP may itself be a direction and vision towards which many broker-dealers should evolve to survive in the future; just as financial advisors are experiencing a crisis of differentiation, so too are broker-dealers (and even custodians are struggling to avoid commoditization as well), and the solution is the same for all: focus on a niche where the business can be both highly efficient, and highly differentiated! Exclusive discounts on ALM and ThinkAdvisor events. XY Planning is acting because its self-interest aligns with what is truly good for all RIAs and investors, according to Bill Winterberg, of FPPad, a technology consulting firm for advisors. Preserve wealth with help from advanced tax planning and risk management strategies. XY Planning Network is the leading organization of fee-only financial advisors who specialize in working with Gen X & Y clients. How modern organizations are growing brand value, operational efficiency, and business impact with social media. Michael Kitces, co-founder of XY Planning Network, says the group is mulling its options after a federal court struck down the organization’s lawsuit against the SEC rule. 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). In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession. Get the latest best practices, relevant stats and industry trends - quickly and easily. The group also launched some new services to help members of its network grow their practices. 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. Whether they win in the court of public opinion seems more assured. 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!). A Planner's Guide to Consolidated Advisory Fees. Continuing education that actually teaches you something. 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. My passion is helping divorced women take control of their financial situation and create a realistic plan to achieve their goals including rebuilding their wealth, sending kids to college, and planning for retirement. In fact, ultimately the launch of XY Planning Network may just be the next step in a long line of turnkey financial planning platforms that emerge, as advisors increasingly shift away from product- or asset-centric business models, towards ones that seek to get paid for financial planning itself. 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). That said, XYPN does “offer investment solutions alongside … other back-office services,” he noted. 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). Advancing Knowledge in Financial Planning. ), Quantifying the Value of Financial Planning Advice. 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. Kitces’ XY Planning Network in September 2019 filed suit in the U.S. District Court for Southern District of New York, contending that the Securities and Exchange Commission’s Regulation Best Interest rule gives broker-dealers an unfair competitive advantage. It’s a top priority to not let our standards slip.”. “We fielded these questions,” Kitces said, “and as one of, Meanwhile, XYPN is suing the SEC over its issuance of, 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].”, “lets brokers continue to deliver financial planning without being subject to the advice standard,” he explained. 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. Post was not sent - check your email addresses! XY Planning Network (XYPN) follows in the footsteps of the Garrett Planning Network as another advisor network built to bring financial planning to those who wish to work with advisors on a fee-only basis but do not have assets to invest – especially the middle class and those younger consumers whose advice needs revolve around cash flow, debt management, and for whom the greatest investments they can make may not be in their building portfolios at all, but growing their human capital instead! 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. Unfortunately, though, this shift towards AUM-centric business models for delivering financial planning has a significant caveat: it doesn’t reach those who don’t have assets available to manage! “We are making different arguments against Reg BI than what the states are claiming,” Kitces said. About Dwight Dettloff, CFP®, CPA. Meanwhile, XYPN is suing the SEC over its issuance of the Regulation Best Interest rules. Advance your career with an FPA membership. News > Industry XYPN Advisor Network Files Lawsuit Against SEC to Stop Reg BI Similarly, the reality is that some niches and target clientele really do need certain insurance and investment products for which a broker-dealer is appropriate (i.e., not every TFPP has to be fee-only in its structure, though all of the forerunners have been). All Other Questions, “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? Together with XY Planning Network co-founder Michael Kitces, Alan Moore will explore the future of financial planning and how a growing cohort of professionals is joining the movement to make financial advice and service more accessible to the next generation of clients. As financial planning continues its evolution towards getting paid for advice – and not ‘just’ for the sale of insurance/investment products, or the management of investment portfolios – a new type of advisory support structure is emerging: the Turnkey Financial Planning Platform (TFPP). In other words, one virtue of the AUM fee is that it’s automatically  compared to the portfolio from which it comes, which makes even a multi-thousand-dollar fee seem ‘reasonable’ relative to the good stewardship of a portfolio worth 100x that amount; writing a check for some hourly fees (or in the extreme a full-sized annual retainer fee) from a checking account just accentuates all of the other personal expenditures that might have occurred with the money in the checking account instead. 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. We are not a [turnkey asset management platform or] TAMP,” Kitces explained. I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them. Notably, this provides a path not only for younger consumers to finally have access to a financial planner, but also an important new career path for younger advisors who want to grow and develop a business serving their Gen X and Gen Y peers. However, the problem in turn with these models is that their pricing is highly salient – the “write a check to pay all at once” nature of it can result in sticker shock for prospective clients, and makes it difficult for clients to properly compare and keep the cost in context. Not all the Democrats' tax plans are negative for wealthy clients, Levine says, but several available planning opportunities are likely to go away. Specially, members voiced concerns about the firm’s growth pace, if it might need outside capital or possibly risk letting service standards weaken. Whether it’s the “middle class” in general, middle-aged workers who may have some assets but they’re “tied up” in retirement accounts, or younger folks who simply haven’t accumulated much of any assets at all (or worse, are simply trying to pay down debt and keep their net worth from being negative in the first place! In 2004, Kitces helped to co-found NexGen, a community group for younger financial planners and later went on to co-found the XY Planning Network and AdvicePay as well, with the former being recognized as #168 on the Inc. 5000 list of fastest-growing companies in 2018. The TFPP provides the tools, templates, technology, and other support necessary to deliver a particular type of planning to a particular audience with a particular business model; the more specific it is, the more efficiency there can be, the leaner the support business model is, and the more inexpensively it can be delivered to support the growth of financial advisors. 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. Multipliers: How the Best Leaders Make Everyone Smarter, “Top 10 Influential Blog for Financial Advisors”, “#1 Favorite Financial Blog for Advisors”. It's the first time since 2014 that the firm has boosted the revenue its brokers must take in before earning a higher payout rate. Your article was successfully shared with the contacts you provided. 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. Since my own divorce, I have been committed to helping others navigate this difficult time through education and planning. As you look for new ways to boost your bottom line, re-centering your business on planning can make a big difference. In point of fact, the TFPP concept is not entirely new; arguably, the first pioneer in this approach was Sheryl Garrett with the Garrett Planning Network, and the Alliance of Cambridge Advisors (ACA) is another (and XY Planning Network will be a third). XY Planning Network co-founder Michael Kitces. The group recently announced new services for members, such as a three-week intensive sales and marketing program as well as advanced coaching; compliance coaching and reviews of compliance programs; more financial planning and process consulting; and white-label tax services. Become a … MyPlanMap software is featured in Michael Kitces’ “Financial Advisor FinTech Solutions Roadmap” in the “Plan Monitoring” section – Michael Kitces, Founder of Nerd’s Eye View, Pinnacle Advisory Group and XY Planning Attention Members! But plaintiffs in the Reg BI lawsuit, as well as states pursuing their own fiduciary rules, assert that Reg BI is too weak a standard to curb broker conflicts of interest. 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 … And what might change about the platform itself? While the AUM model just “doesn’t work” for much of the middle class and younger folks, it’s still a remarkably good business model for those who really do have the assets and need for an ongoing financial planning relationship (e.g., retiring baby boomers). They can’t do it this alone … . ), similar to how Garrett Planning Network facilitates the same thing for those who wish to do hourly planning. Whether Kitces and Moore win in court remains to be seen. Advance your career and take your firm's production to the next level with FREE practice-management tips. ), an AUM-centric model may be fine for those it serves, but there are many it doesn’t serve at all. To some extent, broker-dealers have managed to shift their models to support fee-based investment advisory business to accommodate this shift, but many broker-dealers still struggle with their legacy infrastructure trying to facilitate what ultimately appears to be a leaner and more focused model. “We’ve been on a deliberate path of reinvesting for sustained growth … since day one,” Kitces explained. All Rights Reserved. These and other issues were discussed during “Ask Me Anything” sessions at last week’s conference, Kitces adds. Specially, members voiced concerns about the firm’s growth pace, if it might need outside capital or possibly risk letting service standards weaken. Michael Kitces, head of planning strategy at Buckingham Wealth Partners and co-founder of XY Planning Network, tweeted Saturday. The XY Planning Network and its co-founder, financial advisor Michael Kitces, are among the plaintiffs in a federal lawsuit that is attempting to … Team XYPN comes from all walks of life, but we have one thing in common: we're passionate about making a positive impact on the financial planning industry. 15; XY Planning Network Podcast; You can keep in touch with Dan by connecting with him on LinkedIn. 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! “We are a turnkey financial platform and are here to provide financial-planning support and services, like tax solutions, to advisors. Simply put, financial planning does provide advice regarding a wide range of insurance and investment products, and many/most people do need and/or want help and assistance in implementing them; that’s not going to end anytime soon (and thus neither will the business models that support them)! “Our members are at a capacity crossroads. Its case is separate from that of several states. Practice management advice and tools relevant for your business.​, advisors getting the latest Nerd's Eye View blog, Sign up now and get a free sample issue of The Kitces Report on "Quantifying the Value of Financial Planning Advice" as well!​, The Estate Planning Council of Birmingham. My passion is serving young professionals, entrepreneurs, and small business owners. The firm's study of several hundred portfolios found that many advisors shifted allocations to investments that outperformed.