Can Subscription-based Planning Break Down Barriers To Entry?

Netflix, $9 per month; Disney+, $7 – but what about for financial planning needs? Subscription models have made streaming more affordable than cable; it can do the same for financial planning.

For younger individuals and minorities, the barriers to entry can keep those who are most in need of financial planning out of their grasp – AUM minimums, income requirements – all prevent these groups from receiving financial planning.

Subscription-based planning is a way of lowering that barrier and giving individuals the financial planning they need without hurting a planning practices bottom line.

Many firms and planners have already adopted the subscription model, such as Luis Rosa of Build a Better Financial Future, a Nevada-based firm specializing in younger clients. XY Planning Network and Schwab have also adopted the subscription approach for the masses in addition to their other fee-only options.

“Even planners that were traditionally more asset-based, they’re now starting to implement this,” Rosa said. “They’re not entirely moving away from AUM because it is still a good business model, obviously, but it opens the door to work with multiple generations, too”

There’s a lot of variation in terms of how the fee is calculated in the subscription model, Rosa said. Some advisors calculate it as a percentage of net worth, or income while others do flat fees.

“So what that does is it takes the focus away from assets under management, where the industry has traditionally been compensated that way,” Rosa said.

Younger and more diverse demographics are more likely to need help budgeting, managing debt and reviewing employee benefits, Rosa said.

Rosa said the model is still profitable for firms and planners, as well. For example, Rosa says a planner could adopt a system where the client is charged a $500 up-front fee and then $125 monthly for their services.

Rosa said the system can be tailored to work in a way that is suitable for clients and planning firms.

In addition to utilizing the subscription model, Rosa said hourly or project-based compensation models can give minority clients access to financial planners.

AdvisorNews Managing Editor Cassie Miller may be reached at cassie.miller@Adnewsfeedback.com. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.