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Advice-Only Fees Gain Traction as Advisors Opt Out of Managing Client Portfolios

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Article originally appeared on InvestmentNews

The trend toward increasing commoditization of investment management, boosted by broad-scale adoption of robo-advice platforms and dirt-cheap ETFs, continues to drive innovation among financial planners looking for new market opportunities.

While it might go against the grain of popular thinking in wealth management, the concept of charging clients for advice only, without any portfolio management services, is gaining appeal.

Daniel Galli, owner of Daniel J. Galli & Associates, first tested the waters a few years ago by offering an advice-only option for prospects who have most of their money inside a retirement plan or have someone else already managing their investments.

[…]

Cody Garrett, founder of Measure Twice Financial, describes himself as an “outspoken cheerleader” for advice-only planning.

His practice is specifically tailored for do-it-yourself investors who are comfortable with the portfolio management side but need help with the planning around everything from when to take Social Security and Roth IRA conversions to more complex estate planning needs.

[…]

Knut Rostad, president of the Institute for the Fiduciary Standard, said separating investment management from financial planning services “is absolutely a step forward.”

“Drawing a line between investment management and all other financial advice makes sense to me,” he said. “Both implicitly and explicitly, it focuses on the value the adviser is bringing to the client. That is all positive.”

Rostad is most enthusiastic about the way some advisers are moving away from fees linked to investments because “it should increase investor understanding about what they’re paying and for what services,” he said.

While transparency might be among the reasons proponents like Rostad support fees that are disconnected from client assets, the asset-based pricing model still dominates the wealth management space.

[…]

Read the full article at InvestmentNews

Dan Moisand

 

Dan Moisand is a nationally recognized fiduciary fee-only financial planner, an Institute Real Fiduciary™ Advisor and Chair-elect of the CFP Board.

The Institute has enshrined the ‘Moisand Rule’ on fiduciary practices. It is basic and is more important today than ever: “You have to avoid conflicts. If I avoid a conflict, I don’t worry about it.”

Watch the video of Moisand speaking here.

Bob Veres

 

Bob Veres is a long term observer of financial planning. His Newsletter, “Inside information” Is a staple of leading planners. In the May edition he writes about fiduciary and the Institute.

"But a much bigger point is that the fiduciary standard—as Knut Rostad of the Institute for the Fiduciary Standard has pointed out—has been determined by the Supreme Court (1963 ruling) to be at the very heart of the Investment Advisers Act of 1940. It is the foundation of what it means to be an RIA registered with the SEC instead of a tipster or a tout."

- Bob Veres, Parting Thoughts ... The SEC's Own Compliance Culture