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  • Chris Blair

Let's Shake Up the Financial Advisor Industry

Updated: Jun 12

The current financial advisor /customer relationship model is broken and is no longer set up to help consumers for the long term.


The world works differently than it did 20 years ago, and the financial industry needs to work differently too.


Most financial advisors make money on one simple principle, they take a percentage of the money they manage. This is called an assets under management (AUM) billing model.


With the recent financial hiccups of 2000 and 2008 we are seeing that this AUM model may not work in the customers’ favor in the future.

The outdated AUM billing model creates two problems.


First, it creates a bias to one form of investing, securities. If the advisors make a percentage on invested assets they’ll want to invest all of your assets. They could disguise a strategy of diversification as various types of securities; but it is still all money in the market.


And secondly, if you don't have enough money senior advisors may not want to work with you. They have spent their professional careers building a portfolio of clients that they can set on cruise control into their own retirement. This means you could be moved to a greener advisor, someone who is building their own portfolio to retirement. With this type of junior advisor, you can't capitalize on industry experience or historical knowledge. Because AUM has been the driving model throughout the past 20 years, consumers may feel they don't have many other options when it comes to investing. But with the recent financial hiccups of 2000 and 2008 we are seeing that this model isn't sustainable. Firms do see this and some are trying to adapt by offering more add-on services, but these adaptations are still largely built on an AUM foundation.


The financial services industry needs to refocus on the customer. A great financial plan is built from the customers vision for an ideal life.

A great financial plan is built from the customers vision of an ideal life and includes both short- and long-term goals. The focus for a customer needs to include a 360° view -- not simply investments. Investments are just one piece of the puzzle. With a more diversified approach, when the market hits a snag or when life throws a curveball you already know how to adapt and your money isn't all in one place.


A few ways you can avoid the traps of AUM-based financial advisors are;

  • Talk with a financial advisor about where you want to be in the future, but don't let them skip over the immediate issues such as cash reserves, insurance, taxes and debt planning.

  • Ask detailed questions about how asset management, estate planning, taxes, and insurance are working together in your plan.

  • Work with a single resource to build your financial plan. And then utilize a trusted network for the tactical execution of the plan.

  • If you have goals you are serious about, ensure your financial planner has at least three different views on how to achieve those goals.

  • Demand flat fee billing for your financial planning and strategy management.

We welcome questions about your finances and how they affect your present and future. Ask us whatever, whenever.


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Of course, being in the financial industry we have to let you know that this communication is not constituted as financial advice. Investments are not insured by the FDIC or any other government entity. Investment and insurance products are subject to investment risk, including possible loss.

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