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It has long been a criticism of financial planning that it is focused to far up the wealth scale. Financial planning firms at best only start serving the "mass affluent" (typically defined as $100,000 to $1 million in investment assets), and the elite independent firms often have minimums of one or several million dollars. The only exception is typically the younger high income earner, who may not have sufficient assets yet, but earns a few hundred thousand dollars a year, is accumulating assets quickly, and may need significant income tax planning support in the meantime. Yet the statistics show that the average American doesn't even have $100,000 in investment assets, and nearly half of Americans don't pay income taxes at all.

The response from planners is that it's just too difficult to serve clients at those lower wealth and income levels; the business model "doesn't work" and isn't viable/profitable. Yet perhaps the real reason is not that the business model is impossible to design, but simply because it's so hard to get a sufficient volume of clients, due to the sad reality that the value of financial planning hasn't been clearly defined to the public at large, and as a result it's very expensive to "sell" clients on financial planning when there's no real demand from them to "buy" it in the first place.

The inspiration for today's blog comes in part from the recent launch of the CFP Board's new public awareness campaign and their Let's Make A Plan site. The public awareness campaign has been mired in some controversy since it was first announced (as previously discussed on this blog), in part because it was designed to target the mass affluent, which some planners criticized as perpetuated the belief/perception that financial planning is "only" for the affluent (notwithstanding the fact that that actually is the primary segment of the market that financial planners currently serve). On the other hand, many countered by pointing out once again that planners don't have a business model to serve the masses effectively anyway, so why build awareness there? But is it really so impossible to build a business model that serves the masses? What does it take?

Designing A Financial Advisor Business Model For The Mass Affluent

Let's imagine we're going to start a financial planning firm to serve the masses. We're going to charge a very "accessible" price of $100/hour (which, notably, is actually lower than what many hourly planners currently charge under the Garrett Planning Network hourly model). We'll assume the average meeting lasts for 1.5 hours; clients pay $150 for a "financial planning checkup" when they need it. We'll assume a planner can see 4 clients per day on this model (which takes 6 hours of planning time), with the remaining time in the day for office work, catch-up details, etc. This means the planning firm collects $600/day in planning fees, which is $3,000/week, and $150,000/year of gross revenue assuming a 50-week work year.

Of course, we have to pay some expenses. We'll pay the planner $50,000/year, which frankly would be a great starting salary in most areas for a newly minted CFP practitioner who has no responsibilities besides seeing a series of clients day after day to advise them on their needs. In addition, we'll need to pay the cost for some basic office space in which to meet the clients, and some software and supplies; let's generously assume that all of these other expenses, including some part-time administrative help, cost the firm another $40,000. This means at the end of the year, the firm generated $150,000 of revenue, and $60,000 of profits, for a nice and healthy 40% profit margin. And frankly, many firms could probably run a lean office on less than $40,000 of expenses, especially if they kept office rent costs reasonable.

So what's the problem? Here's a business model with a healthy 40% profit margin, a job that a new planner would love to be hired for, and financial planning services for the masses at a remarkably affordable $100/hour.

The problem - the catch - is that in order for this model to be effective, the firm needs to meet with a lot of clients. If the planner sees 4 clients per day, that's 20 per week, and 1,000 clients per year. In a world where many financial planners consider it a "great" year if they take on a dozen new clients, and reach capacity at somewhere around 100-150 client relationships, the idea of bringing in 1,000 clients per year is daunting, to say the least!

The Marketing Challenge And Impossible Client Acquisition Costs

But what this means is that the challenge to serving the masses effectively is not a business model problem, per se. It's a marketing problem. Or more directly, it's a problem with the public's perception of the value of financial planning, such that people don't seek out and demand financial planning services; instead, financial planning must be sold. We have to convince each prospective client, one by one, that financial planning has benefits worth paying for, that it has value, and that the client should do business with the planner. In other words, the problem is not the lack of a business model to serve the masses effectively; the problem is a marketing model to convey the value of financial planning to the masses effectively, and doing so at a cost-effective price point that doesn't bury the business model in too-high client acquisition costs.

Of course, one solution is for the firm to step up on marketing, and use some of the aforementioned 40% profit margin to implement marketing to a large number of prospective clients. In practice, though, it is difficult or nearly impossible for a single small firm to deliver on this. Marketing in volume requires a scale that very large financial services firms have, but the typical independent advisor does not. Thus, once again, the challenge re-emerges that the problem is not a business model to serve the masses, but that a business who serves the masses doesn't have the scale to market to the masses at a reasonable cost of client acquisition.

That's where larger organizations come in. Whether it's the CFP Board's public awareness campaign itself, or the work that Sheryl Garrett does in promoting the value of financial planning to the public at large, the opportunity for such organizations is to build public awareness for the masses; to convey the value of financial planning, with scale, to a broad base of Americans, so that the mass affluent actually seek out the services of a financial planner. This allows financial planning service model to be implemented that serve the masses, because the firms will have to spend less time (and cost) on marketing, so they can spend more time actually serving clients.

Granted, the CFP Board's current focus for the public awareness campaign is still on the "mass affluent" and not the rest of Americans who need financial help, but as the CFP Board's own statistics show, perceptions of the value of financial planning are weak in this segment as well, and we have to start somewhere. If the CFP Board's campaign brings measurable success in the coming years to this segment of the market, I expect and hope we'll see them expand the focus even further, demonstrating the value of financial planning - and therefore, bringing the value of financial planning - to a broader slice of society.

But the bottom line is that when we talk about the challenge of delivering financial planning to the general public, let's stop talking about the business model problem, and start talking about the marketing client acquisition cost and a public perception problem. Because if everyone out there really believed that getting a financial check-up to get their lives on track was worth spending $150/year, and therefore demanded the services of a financial planner, the rest would be... well, easy.

So what do you think? Is the difficulty in serving the mass of Americans a problem of business models, or a marketing and public awareness challenge? If there was wider understanding of the value of financial planning, such that more people demanded and wanted financial planning services, could smaller practices that serve the average American survive and thrive? What can we do to better convey the value of financial planning to the masses, in order to achieve this?

  • John Comer

    Makes sense to me. Six hours of planning time and two hours of administrative time might be difficult to sustain but it would sure be easier if clients saw the need for the service.

    • Michael Kitces

      Perhaps. But on the other hand, if this is done with some scale – i.e., a firm with multiple planners serving thousands of clients – pooled administrative help amortized across several revenue streams becomes very manageable.

  • Michael Garber

    Hi Michael,

    This post is right on target. The challenge here is how to raise public awareness of the value of financial planning. I can’t tell you the number of networking conversations where I’m asked, “what insurance or annuities do you sell?” before getting a look of complete incomprehension that there could even be a business centered around objective advice, not products.

  • Don Martin, CFP

    I have found that unfortunately most middle class consumers have an unfavorable attitude about actually paying for planning. Many are brainwashed to believe there is a way to get financial service products for free or artificially low cost so they don’t want to pay a reasonable fee to a financial planner.
    The grocery store does not force consumers to buy junk food, the liquor store does not force consumers to drink. It is consumers own free will to to engage in deferred gratification, discipline, thrift etc. that makes them succeed. Unfortunately many lack the will power to complete a detailed financial plan or to pay for it.

  • vg

    Spot on! The other issue I could see coming into play is the “turbo-tax” effect. Presumably CPA’s deliver more value by way of expertise than a computer program, but many have the perception that a computer program does just as good a job. In many cases perhaps it’s true. I think that will happen here, too. Reference your previous posts on the value of Suze Orman. Why spend $150 when you can spend $15 on a Suze tome? Our marketing push will have to convince the public not only that they need help, but that a book is not a substitute for a qualified practitioner. And do we really need an advisor to tell us “Save more, Spend less…”, when you can get that from Suze?

  • Kathryn C

    It’s a marketing and a supply/demand problem. Their is plenty of demand, but not enough supply of fee based planners who are willing to commit to this business model, because success depends on scalability, and there’s no promises it will work out. Someone needs to have the silicon valley “start up” mentality to really make this happen.

    • Michael Kitces

      I have to admit, I don’t think the demand is there.

      I know quite a few Garrett Planning Network planners who run a business model like this. They’re managing, but I don’t know any who would say their big problem is so much demand they can’t find any planners to hire to meet with their excess clients.

  • Rob Bennett

    I think that the biggest problem is that the things that work take a long time to pay off. So it is hard to show the value-added in teaching these things.

    The benefit that a doctor provides is tangible. It’s the same with an engineer or a lawyer.

    A good financial planner is more a teacher than anything else. We need good teachers and we need good financial planners. But they both have a hard time making the compelling case that people should turn over significant sums of money to gain access to the expertise they possess.

    It’s always a good idea to visit a financial planner. But it is rarely a compelling idea. Most middle-class people don’t hire lawyers or engineers or doctors either except when they are left with no choice.


  • Jim Pursley

    Remember Sear’s effort to bring financial services under one roof? It failed miserably. The middle classes which frequented Sears’ stores had little interest – apparently – in putting financial services in a logically-arranged package. Maybe Sear’s financial aggregations services failed for other reasons – but they failed. Maybe the array of financial services that run the gamut from internet based cheap asset allocation to the family offices is more logical than we think. A financial planner may fancy him or herself a financial educator, but we’re not trained for the H&R Block or Intuit experiences – zillions of contacts for small $$ each contact. If I were designing a mass marketing strategy for financial advice and counseling (I would NOT call it planning I’d build it around an on line chat session or some electronic way of reaching people very cheaply – maybe even a 900 phone line. In the meanntime, I will continue to work with the firm’s clients, whose incomes and assets are all over the map.

    • vg

      There is a firm here in Denver that tried to do the one or two hour engagement based on a phone call model. As far as I know it’s never gone further than a low-trajectory orbit. When I was a participant for a short time, I found that people didn’t even want to pay $75 for a half hour project fee. But I bet dozens of Suze Orman books for $15 flew off the shelf while I was spending 1/2 an hour typing a proposal to work for another half hour. Perhaps $15-29.95 is the equilibrium price range.

  • Alan Moore

    I think another issue is that many planners spend their entire careers developing expertise in areas that are simply not needed by the mass affluent. It takes an entirely different skill set to help middle income families than it does to help high net worth families. It would be difficult to change your business model midstream, meaning the type of model you are referring to would be implemented by a new financial planner. Being new to the industry would make implementing this business model even more difficult due to lack of name recognition and experience.

  • Michael Baughman


    I agree with you (always a safe bet, btw). If you’re going to serve the mass-affluent market profitably, I believe you have to have tremendous scale in your business. Think about the Dentist, he/she makes a good living. Granted he/she devoted more time and money and sacrifice into their formal education than most planners. But, how well do you really know your Dentist? They do most of the talking in the relationship since you have tools inserted into your mouth 95% of the time. You see them twice per year at the most. I think most financial planners want to develop deep relationships with their clients and hence the need to work with a smaller client base. If you’re going to deep dive with clients, you have to limit the number of clients you work with. There is a big company in Malvern, PA that does a pretty good job serving the mass affluent market. It’s also engrained into our brains early on that we have to see the dentist every six months.

    Since the company retirement plan is the main vehicle for retirement savings for the mass aflluent market, perhaps we need to do a better job of offering education and advice to participants in corporate retirement plans. Just a thought.

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  • Jorick Gaines

    I think it’s both, marketing and awareness as well asa lack of knowledge (ignorance) I know of a solution and would like for you to call me at 510.868.1812

  • Maurice Nistico

    Whilst the sentiment is the same here in Australai, the solution wouldn’t work. For every 1.5 hours in front of a client, we would need to spend a further 3 hours documenting the verbal advice given in a Statement of Advice, and then re meet with the client to walk them through the document. Even at $100 ph that would mean maybe $600 cost to the client which is still affordable for most. However it limits the planner to maybe a max of 8 clients per week. Unviable.

    • Michael Kitces

      Very interesting, and thanks for sharing. I’m just becoming more familiar with the Statement of Advice rules you have in Australia.

      What if the advice pertains only to a limited area – i.e., it’s not “comprehensive” planning advice, it’s just regarding college planning, or tax planning, or a portfolio review. Are the SoA requirements less cumbersome? If there was a strong software package to support it, could you actually develop the SoA recommendations live with the client as you engage in the planning process?

      Thanks so much for sharing the international perspective!

      – Michael

      • Maurice

        Hi Michael
        limited scope would certainly work better. In our firm we effectively do just as you suggest, engage the client using planning software to the point of clients taking a decision, and then tidying up when they leave. Certainly would be a much quicker post meeting if the scope is limited.
        if you were focussing on this type of limited advice business, the problem is as your article suggests, lack of numbers of clients (or lack of ability to attract consistent high numbers of clients with new issues.)
        In Australia the bank planner/industry super fund planner business model is based on this. For many new planners, these roles are a stepping stone before they join firms catering for less clients with more complex needs.

        Kind Regards


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  • Chris

    What do you think about Ric Edelman — seems like he has mastered the service to the mass affluent? Why would more firms not “copy” what he has done with the mass marketing/awareness campaigns?

    In my opinion many small RIA’s can be sutainable off of referrals, because 10-15% growth can be achieved simply by referrals. However, the RIA owner is usually stuck in a “self-employed lifestyle business” which is great for many, but is not scalable.



    • Michael Kitces

      I think Edelman is a great example of what’s possible for broad reach marketing to make serving the mass affluent feasible.

      The caveat is that when more and more firms are doing this, small RIAs will find it increasingly difficult to generate business even by referrals if they don’t otherwise have a niche or means to build relationships with prospects.

      When there are 10-20 advisors doing what Ric Edelman does, fewer and fewer people are going to choose to do business with a small local RIA no one has heard of before. There will always still be small local businesses, but they will find it harder than ever to grow when national firms become genuine competition at the local level.
      – Michael

      • chris

        It seems like there is a lot of opportunity for an RIA that wanted to become one of these national brands. Do you think more do not because they are satisfied with a lifestyle practice, lack of knowledge on how to build this or something else?

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  • Dan Candura

    I think the solution lies in providing financial planning as an employee benefit within large organizations. The employers hire the financial planning firm to provide free or very low cost, objective financial advice to their employees. Advice must not involve the sale of products but would allow the adviser to reach scale and serve the number of clients you describe while also being an expert on the qualified plans and other benefits provided as part of the employee’s compensation package. It needs to occur during the workday and at the worksite to be most effective. Using the numbers in your blog this is affordable for the organization at about one hour of extra pay per month. Advisor comp could be higher than your model if the employer provides some of the administrative and logistical support using existing resources (office space, HR, etc)

    I have been promoting this solution for years and whiile I get lots of positive feedback, few employers want to take on additional cost and potential liability. But, more financially successful workers are more productive, spend less time away from the job, have less stress and are more likely to stay with the employer.this is also something a labor union could provide for its members.

    It is in the workplace that we truly demonstrate that everyone can benefit from a financial plan. Once it is a widespread benefit at large organizations a natural market will grow among those who work for smaller employers.

  • Roger Whitney is currently doing this. It is structured as a monthly coaching model with very strong online tools and interaction to make it scalable. It is owned by LPLand is focused on hiring new advisors. It will be interesting to see how it goes

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  • Michael Kitces

    Indeed, Veritat – now Nestwise – is similar to the Garrett Network in this regard.

    But the issue is really not the tools and model, per se. The monthly coaching model existed long before Nestwise, as have a number of efficiency tools.

    The problem with Nestwise – and Garrett planners, and anyone else trying this model – is NOT how to deliver it profitably. It’s how to get enough clients to fill the time and revenue in the first place.

    In other words, it’s not a profit problem (which is about scalability). It never has been. It’s a revenue problem (which is about marketing and business development).

    Whether Nestwise has a system to help its planners get many dozens or a few hundred clients in a short period of time remains to be seen.

    – Michael

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Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.

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