The Rise of TFPPs And The Evolution Of Broker-Dealers & Custodians, the popular financial planning industry blog, FPA’s Practice Management Solutions survey a few years ago, an AUM-centric model may be fine for those it serves, makes it difficult for clients to properly compare and keep the cost in context, the next major business model in financial planning will be the, for whom the greatest investments they can make may not be in their building portfolios at all, but growing their human capital instead, 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, Turnkey Financial Planning Platform (TFPP), financial advisors are experiencing a crisis of differentiation, focus on a niche where the business can be both highly efficient, and highly differentiated, it’s still a remarkably good business model for those who really, SECURE Act And Tax Extenders Creates Retirement Planning Opportunities And Challenges. So what’s the solution? 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. Whether they win in the court of public opinion seems more assured. XY Planning Network co-founder Michael Kitces. 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. 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. 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’. 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. 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 … As you look for new ways to boost your bottom line, re-centering your business on planning can make a big difference. 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). 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)! Meanwhile, XYPN is suing the SEC over its issuance of the Regulation Best Interest rules. Sorry, your blog cannot share posts by email. XY Planning Network founders Alan Moore (left) and Michael Kitces at the 2019 XYPN Live conference. 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! XY … In fact, arguably much of the challenge facing broker-dealers already can be traced to the evolving business models of financial planners. 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. April 7, 2014 07:01 am 10 Comments CATEGORY: Practice Management. 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. 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. Instead, the long-standing “dirty secret” of financial planning is that the bulk of it is paid “indirectly” through the products or services that are used to implement the plan. 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. ), Quantifying the Value of Financial Planning Advice. Michael Kitces, CFP, a Financial Planning contributing writer, is the head of planning strategy for St. Louis-based Buckingham Wealth Partners; co-founder of the XY Planning … It’s a top priority to not let our standards slip.”. 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! 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! 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). 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. 15; XY Planning Network Podcast; You can keep in touch with Dan by connecting with him on LinkedIn. 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. 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 … The XY Planning Network and its co-founder, financial advisor Michael Kitces, are among the plaintiffs in a federal lawsuit that is attempting to … 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. Last week, platform provider XY Planning Network hosted its national conference, drawing about 500 advisor members and other guests. Last week, platform provider XY Planning Network hosted its national conference, drawing … 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. XYPN says it expects to prepare about 1,000 2019 tax returns for clients of advisors using its network. 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). They can’t do it this alone … . Kitces explained that many of the advisors relying on the network have younger clients (Gen X and Gen Y) who are more focused on issues tied to paying off student loans than portfolio matters. 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”! 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. 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! Copyright © 2020 ALM Media Properties, LLC. What Returns Are Safe Withdrawal Rates REALLY Based Upon? Become a … 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). “We are a turnkey financial platform and are here to provide financial-planning support and services, like tax solutions, to advisors. “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? 163; Alan Moore, who we chatted with way back in Ep. (Disclosure: Michael Kitces is a co-founder and partner in XY Planning Network. That said, XYPN does “offer investment solutions alongside … other back-office services,” he noted. What Can Advisors Do? 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 … 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.”. “We fielded these questions,” Kitces said, “and as one of Inc.’s 5,000 fastest-growing firms are very cognizant about growth and service. The network now has about 1,020 advisor members, it says. 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 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! Free unlimited access to ThinkAdvisor.com which provides advisors, like you, with comprehensive coverage of the products, services and trends necessary to guide your clients in making critical wealth, health and life decisions. The firm's study of several hundred portfolios found that many advisors shifted allocations to investments that outperformed. Attention Premier Members! I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them. XYPN filed its suit in the Southern District of New York. MICHAEL KITCES, CO-FOUNDER, XY PLANNING NETWORK. 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. 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. “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. 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. RECEIVING OUR LATEST RESEARCH AS IT IS RELEASED! By going from a $100 million minimum down to $5 million, the asset manager aims to “broaden” retirement plan access to these funds. 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. 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!). “Our members are at a capacity crossroads. 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. Since my own divorce, I have been committed to helping others navigate this difficult time through education and 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. 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 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. Preserve wealth with help from advanced tax planning and risk management strategies. 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). 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. Specially, members voiced concerns about the firm’s growth pace, if it might need outside capital or possibly risk letting service standards weaken. Winding Trail Financial Planning, LLC was founded as an independent, fee-only, fiduciary financial planning firm in order to provide objective advice to … 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.

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