For most of your financial planning career, you’ve fought hard to ‘bundle’ your advice to clients.
What does ‘bundled advice’ mean?
It means the client gets everything included for one fee; in this case the ongoing 1 per cent of assets under management or the flat fee you charge (whichever version you prefer).
I realise that initial advice is usually offered as a standalone fee-based option, albeit with the belief that a very large percentage of people who take initial advice will go on to implement, and then move to your ongoing review service.
Financial planning firms that are mature, not hungry for new clients, and confident in their approach, will even refuse to serve clients that don’t want the full ongoing service.
If you’re serving the 'at retirement' or 'in retirement’ market, it’s probably the right way to go. You know they’ll eventually use a lot of the services you provide.
The new trend
What I’m seeing in the marketplace is a move back to an unbundling of advice. That is, you can get some advice, but don’t necessarily have to become an ongoing client of the advice firm.
It feels like the next big thing, and it’s not even new.
I know firms have offered standalone and one-off technical advice at times to some clients.
Maybe it’s been a really technical piece of advice (like a defined benefit transfer case).
Or perhaps early in your career, you offered standalone advice because you needed cash coming in and hadn’t worked out how to get people to see the value of your ongoing service.
But what I’m seeing emerging in the market is different from either of these examples.
Planning firms that are focusing on younger client segments are deliberately unbundling their advice.
Why? Because that’s what younger clients want.
As you know, I firmly believe there’s only one way to run a great business and that’s to be totally focused on meeting the customer’s needs.
So, if the client wants/needs one-off advice to get started, you do it. You can work out the rest of the 'how you make it pay' later.
While I love the idea of unbundling in the right circumstances for the right clients, I also see some challenges.
Ongoing revenue is what gives any business stability, and most financial planning firms have got a very solid and secure recurring revenue stream. Happy days.
Bob Veres, the US-based financial journalist and all-round industry legend says the millennial generation “want to know what you know.”
They’re not looking to just come and pay fees to get that information; they want to educate themselves.
As when buying any other product or service, they want to start with online research to get some basic knowledge first.
So how do you create an ongoing revenue stream on that basis?
I know that plenty of advisers in the latter stages of their career may think: “Screw you. If you want my knowledge, then pay me and become a client.”
While I can understand that as a first reaction, I believe it’s short-sighted.
The potential business model of the future
As I’ve said, great businesses have one focus; the client and their issues.
So here’s what the successful financial planning firm offering might look like if you’re positioning yourself to work with the next generation of clients.
(I touched on the rationale for this in my article Three big financial planning themes that still hold true)
Level 1 – Free information
The first offering might be a YouTube channel offering free educational modules on a vast array of financial topics.
Let them 'know what you know' and build your brand and usefulness with your target audience.
Level 2 – Product for prospects
The next offering is a paid-for 'product for prospects', as entrepreneur and author Daniel Priestley calls it.
This might be an online course that prospects can buy at a relatively small cost. It can go deeper than the free content.
The aim is to provide more value, in a repeatable and scalable way, and to identify which prospects from your sales funnel seem hungry for more.
Level 3 – One-off, paid-for advice
From your communication and marketing efforts, some clients will put their hand up to access some paid-for advice.
That can be offered unbundled, to make it safe. There will be no obligation for anyone to become an ongoing client unless they want to.
Level 4 – Membership or subscription service
The final level might be access to your services via a membership or subscription model, which could include a range of service delivery methods:
- Advice via video conference (for example, Zoom or Skype)
- Face-to-face advice (in your office)
- Online advice modules (from your existing library of free and paid-for online content)
Lots of your delivery might actually be saying “I recommend you do ‘X’ in this instance, and have you seen my two YouTube videos on ‘How to do X?’ I’ll send you the link”.
It’s the membership that provides great value for your clients and also starts you building your recurring revenue in this segment of clients.
There might even be levels of membership. For example:
Basic – gets you a financial plan and you can join a weekly webinar for free on a variety of topics. They’re recorded too, so you can access them in the membership community anytime 24/7.
Advanced – gets you an annual review meeting once a year with an adviser. It’s priced affordably and you pay extra for any extra work and advice that comes out of that meeting.
Now you’ve got pathways as your clients grow and an ability to prospect, filter and serve a larger number of clients.
Then 10 years down the road, you might choose to narrow your focus to those clients with money, just as the current older generation of planners have and let the newbies copy what you’ve done.
Alternatively, you can scale what you’ve built, using technology to drive growth and profitability.
The goal here is to become the killer brand. And it’s the brand-building that's the most difficult part of the process, not creating the services.
The search for ‘new’
We know the future is not going to look like the past, and the businesses that succeed in the next decade will be searching for new and innovative ways to service their clients profitably.
I’ve mapped out a rough cut of what that might look like, but it’s only one person’s thinking.
What do you think the future will look like?