I am building a new firm concept that charges a 0% management fee and only collects on internal expenses. Converting my book to my new independent practice with 70mm. Yes, I’m taking a big pay cut

I genuinely wish you all the best. I've met with firm owner who are trying to drive "fee compression" lower client cost. As an industry maybe we should be careful of the race to the bottom. This idea of doing everything as cheaply as possible might sound good on the surface but it can distroy industries and customer service right along with it. We work in a noble industry and deserve to be fairly compensated for our time. You would never see lawyers, doctors, dentist or engineerings talking like this so why should we? Is it really in our clients best interest for us to be paid so little that we have no incentive to truely service them? A fair days pay for a fair days work, works best for all. Just my 2 cents.

As a partner in an RIA, this my third career. First I was an engineer, then a business and management consultant, and then merged that with an RIA to offer a very differentiated business model. All three paths have been very different but with a few common traits and one of those is no matter the business I have been in, I have always faced competition that sold on price, and while at times I have lost clients because of it, ultimately my book of business was healthier for it because I offered people what they were ultimately looking for: value, relationship and performance. We are a fee only RIA, sell absolutely no products, transparent with ALL our fees and our clients are happy that we are successful because they have also benefitted from it, on all counts. And btw, our client count per advisor? Well under 100.

I'm having a hard time imagining how your clients will ultimately benefit with your model. If I were to hazard a guess, I'd say is your ulterior motive is to gather as many assets as possible under your model and then sell to some large institution, assuming it passes muster with all the DOL issues highlighted by many of the other commenters.

All that said, I think being innovative is great but one other thing I have learned in the various biz models is there is a big difference between the leading edge and the bleeding edge. Good luck with that but I think you are heading for tough sledding. Further, no one has even mentioned what happens to your model during the next significant correction. 0% fees will mean nothing to your 1750 clients when they are freaking out and looking for assurance to stay the course. I think it may be a shit show in the waiting.

My clients pay for my service and the firm’s service. I’m worth it and don’t apologize for what I charge as an advisory fee. And, it’s transparent. There is no free lunch. They will hopefully eventually figure out you are just burying the fees. And with DOL you are going to have a hard time jamming clients into A or C shares in retirement accounts where you are subject to ERISA rules.

Sounds like a disaster.

Lol you might get some under served clients from bad brokers but they will come back when you go out of business. 1750 clients per fa? Got news for you man the people that want that level of service are already at vanguard paying .04% a year. Good luck competing with that. If you compete on price you lose.

I'm a firm believer that clients don't mind paying a fee if you provide them the service they need.
Your entire business model is based on attracting and retaining a large amount of clients. How is this model scalable while ensuring your clients' satisfaction?

First off the net fee the clients pay will probably be very close? The internal management fee would most likely come close and in some cases exceed my fee plus the low cost etf models I use. Second if I was competing against you I would show that your marketing was not really zero cost and that u were incentives to place the client into mutual funds which might not be the most appropriate for them. And you are incentivized to jam insurance down their throats. Very deceiving to claim zero fees when u are making a fee .. it all comes from the client just here it’s in higher investment fees.

Basically the only people that actually receive extra benefit are the failed advisors that can't close and need a salary past the three years +- that trainees usually get.

So you're going to offer clients etf models where you make 0? Sounds like a great idea for the charitably inclined.

This is the most ridiculous “idea” of a “new” business model. So you are going to be a commission advisory. You will get blown out of the water by any RIA in your area. Saying you have 0 fees, will require a best interest contract signed by most broker dealers and all when/if DOL rule comes in.

Your 1 million assets paying 10k at one percent to an RIA, is actually paying you 0$ in fees but 12,500k in 12b1 for your “c share” model.

I wish you luck in arbitration!

I think this post is a joke to get us all worked up. There is no way anyone in their right mind would do this as a for-profit endeavor

You can buy a tool at Harbor Freight and then buy one at Snap-on use both for 10 years and tell me which one is in better shape or in your case still around. You can call your new firm Harbor Freight Financial! I bought my fully loaded VW Passat with the big motor not because it was cheapest but because I saw the value in the dealer and salesman and car as a package, also I hope that the salesman who sold it to me made a big fat commission.

FAOP, what you fail to understand is that most of us don’t think of you as competition. You don’t have a “new” idea, you have a very old idea.

You are a product pusher. The exact reason the DOL wants to step in. Not to mention you are obvious going to be running in the red or churning with insurance products to get in the black. It’s easy math. If you have 70MM in assets that will pay you nothing in revenue, where are you getting funds to cover rent, assistant, the salary for the other 12 advisors? Not to mention tech? What BD is going to let you hold assets with them at 0 revenue to hold the assets? If you are an RIA, you can’t collect commissions on annuities in those managed accounts so it would have to be a BD. So you will have to start rolling those assets into insurance products to feed your family, at the detriment to your clients.

You are “commission” based. You just happen to get yours with insurance and annuities instead of investments.

You actually remind me of a guy I met around me that tried to explain to me why his “new” idea of a model was so cutting edge. Come to find out, he had only been in the industry 2 years and he was talking about a super OSJ model. It was “new” to him, but not to people that had been in the industry more than 3 years.

Lastly, over my years in the industry, a million plus client could not care less about a 1% fee. They want value, something you can’t offer to 1750 clients.

I would suggest doing some research on what an advisor is worth to consumers. Vanguard has a good study.
I would not sell yourself short- I never do. Price is only a problem if there isn't value.

Can this thread just die

If you advertise that they have 0 fees then that's completely misleading. Also most firms using a fee based model are using stripped down funds and etfs with no 12b1 or t ta fees or distribution fees.

I’m certainly not arguing that there isn’t any room to reimagine how a client pays for financial advice and I agree that clients have different needs, expectations etc

I’m a little confused on exactly how it’s different. You refer to A La Cart services but it sounds like commission based sales plus salary. You’re offering the client a platform where the advisors are under no pressure to sell your A La Cart offering because of their salary but if they do then isn’t that exactly what already exist?

I think our industries best advisors differentiate themselves by their intellectual capital, ability to execute planning strategies, coordinating with a clients outside counsel, time, effort and energy to help a client achieve their intended outcome. How does your model align with the clients best interest? If I’m a client with 1 million to invest then I’m going to be skeptical not to mention if I’m going to have nearly no possible opportunity to receive proactive guidance or really reactive guidance for that matter why not use one of the many robo solutions available?

By my math 1750 clients per Advisor means each client can get a little more than 1 hour of attention per year. I don’t view attention as purely social I see it as taking the time to understand what a client wants and caring enough to help them reach their financial goals, researching their questions, advancing knowledge analyzing their circumstances etc.

I think this model is going to find it challenging to attract and retain top talent so clients who value advice and will pay for it will look for top talent. Clients who do see value in your platform will likely still expect to have some occasional hand holding and the minute they need it and can’t get it they’ll go elsewhere and I don’t think you’d notice it because you’re spread too thin.

I wish you the best but respectfully I don’t think this is different enough to be the future of our industry unless the goal is to be the last BD iteration between the status quo and total automation.

So basically you're going back to the good ole days before fee based where clients "don't pay the advisor" and only pay the commissions, sorry I mean "expenses" with "rebates" to the advisor and selling it as a "new" way of doing things. And of course that's in the best interest in the of the client. Are you naming the new firm Bear Stearns? 😂😂😂

I've seen this before and it doesn't end well through market turmoil.

Lol this was a total joke. So much passion.. I like it. Let’s all partner up and create a firm.