SAN DIEGO -- The planning industry is built on a business model that no longer works: That's the perspective of many younger planners joining the industry.

That group includes 28-year-old Alan Moore, a financial planner and co-founder of XY Planning Network, an organization providing support to fee-only advisors that serve Gen X and Gen Y clients. Moore spoke to advisors at the annual NAPFA conference here this week.

Most advisors have clients in their 60s, many of whom are beginning to draw down their accounts and advisors' assets under management. For advisors with AUM-based fee models, that's scary -- another noteworthy topic of discussion among attendees.

As advisors look to stem the flow and build long-term practices, many have gotten the message that it's time to pay attention to Gen Y clients.

But what about actually incorporating a service model for these clients into your business? How can you make this group profitable for your practice?

Moore and fellow planner Sophia Bera, a member of XY Planning Network and founder of a Minneapolis-based practice called Gen Y Planning, have an answer. For advisors with an existing practice and the necessary technology to offer services to younger clients with fewer assets, Moore says planners can be profitable.


Their example considers a practice developing a Gen Y-centric model starting from scratch. Here's how they break it down based on the following assumptions: You have 100 clients with $50,000 worth of investments, with each paying $1,000 upfront and a $150/month retainer fee plus 1% of AUM.


  • $100,000 of upfront fees
  • $180,000/year of recurring revenue
  • $50,000/year of AUM


  • $60,000 salary for a junior advisor to focus on these clients.

Assuming it takes about four years to get from zero to 100 clients, the one-time upfront revenue of $100,000 is spread over that time, Moore says. One additional cost to get started is the necessary technology which, he says, advisors can implement for approximately $10,000.
With $230,000 of recurring revenue, that works out to $170,000 in annual profit. "It's a baseline for a bunch of clients that don't have a bunch of assets," Moore says. But those assets will grow over time, and so will the fees advisors collect on AUM.

Planners who don't consider $150 a month quite enough can probably charge $200 per month, Bera says, and the junior advisor salary figure may vary depending on location and other factors.


Though the numbers might be what makes some planners wary of targeting this market, Moore says it's actually often a staffing issue that creates problems. "The number one reason it fails is that the junior advisor gets stretched too thin," he says.

Being an expert on student loans, buying a home and other Gen Y issues while also having expertise on Social Security strategies and other important topics for an older client base can be too much. "You can't be both at once," he says. "Let them focus on the younger clients."

And if it seems like a lot of fees, "You have to think about what is the service that you're providing," Moore argues. Clients are "getting a financial guide for $150 a month."

Plus, of course, charging just a percentage of AUM makes this group unprofitable for planners. "If they only charge [AUM fees], they make no money," he says. Besides that, Moore says, "AUM has a place in investments, but not planning." And so far, he says, clients haven't balked at the monthly fee.


Without a fee structure and service model such as this in place, many advisors would overlook these clients. Moore argues this configuration allows firms another option that also helps build a connection to the next generation of clients, whether they are the children of existing clients or new clients altogether.

"Here's a way to build a relationship with them as they build their assets and build their wealth," he says.
Advisors shouldn't just want to work with Gen Y clients because they will someday be wealthy, Moore says:

"You want them because they're profitable today."

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