Are Subscription Fees the Future of the Advice Industry?
The announcement late last week by Charles Schwab that it was moving to a flat monthly fee for its Schwab Intelligent Portfolios service, from an assets-under-management fee, has resonated through the industry.
Late last year, Dynamic posed a question about revenue model alternatives to the assets-under-management model. You can find that original post here. While Schwab is not the first to adopt a subscription fee model, they are the first major player in the industry to take this step. Is it now only a matter of time before others follow suit?
What can independent firms and advisors do to keep pace with a rapidly evolving industry? Some might see this as a signal of future fee compression. Others may see this as an opportunity. And others still, will recognize that no matter the perspective, that it is necessary to ensure their business can evolve with the industry.
For those that see this as a signal of fee compression, this is a possible outcome. What can advisors do? One thing that advisors can do is take greater control of their costs. In an increasing number of cases, this means outsourcing. See one of our more recent posts about outsourcing, here.
For advisors and firms that see this as an opportunity, why might they see it this way? One strategy is to continue to differentiate yourself and your practice with the types of clients on which your practice is focused, or the niche you have established. This focus or segmentation will enable you to continue to serve your clients (and their specialized needs) at a personalized level. Additionally, one could gradually adopt a subscription fee model of their own for certain business segments.
Others will recognize that this is yet another reason wealth managers need to continuously evolve their business. Those firms who are better prepared to evolve, and take the steps to do so, will likely find themselves in a better position in the future than those who do not prepare or take action.
If you have questions or concerns about how to evolve your business in this ever-changing environment, contact Dynamic for a complimentary, confidential consultation.
About Dynamic Wealth Advisors
Dynamic is recognized as a premier provider of essential resources to professional wealth management practices. Its turnkey practice platform includes asset management and enables wealth advisors to save money and focus on clients while positioning themselves for success and growth. With myVirtualPractice, a suite of wealth management practice solutions, Dynamic hands the professional wealth advisor the keys to a comprehensive, custom-built virtual office and practice complete with staff, back/middle office, accounting/billing, compliance and even a Virtual Assistant. The wealth advisor need only add clients and a laptop, and they are up-and-running instantly. For many breakaways and independent wealth advisors, being part of a nationwide community of like-minded professionals is one of the most valuable components of their affiliation with Dynamic.