YouSaid · the spoken record

Michael Kitces

lines on the record: 82
first: 2019-02-26
most recent: 2019-02-26
sittings or episodes: 1
sources: podcast

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“But it was enough that paired together with some speaking other stuff I was doing, I was able to take that leap. And now ultimately that morphed into my blog and my blog morphed into a podcast and that morphed into a whole bunch of businesses that I created and like all this other stuff that's come. But it all started with Bob Veras just not even giving me the initial nudge to go forward, but like actually reaching out of hand and lifting me up to make it happen. And so it's part of why I've now been involved with starting up a lot of small businesses in our advisor space just trying to seed good people that I think are doing good things that has a business opportunity and trying to give them the same hand up that Bob gave me.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Bob, just like, you know, you are the guru. Like, am I nuts to try this business idea? You know, do you think there's something here? You've seen my articles and you read a lot of stuff. Do you think I can do it? And he said, not only do I think you can do it, but I'm going to have my web developer make you a site and set up your technology using the same systems I use so that you can get this launched and go do it. And he did it. He did the whole thing. He covered it out of whatever his contractor agreement or whatever it is with his developer. He just stood up my first site and got me launched and then sent an email out to his mailing list saying Michael Kitts is launched this cool newsletter. You like mine on practice management. He's on technical stuff. You're going to love it. Go sign up and got me about 200 subscribers out of the gate and standing up the website and giving me an initial base of subscribers wasn't a huge amount like that was probably 20 or 30,000 dollars a year of revenue.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's a gentleman in the industry named Bob Veras. Some folks in the advisor side will know him. He's published a practice management newsletter for the better part of, I think, almost 30 years now. Fantastic newsletter on financial advisor, business, and practice management. And back in the 2000s, like mid-2000s, I was starting to write articles in trade publications. I was doing like retirement research and stuff on nerdy tax law and putting all that alphabet soup. I was getting to good use. I kind of had this spark on this idea of like, you know, Bob has this really successful business where he writes a newsletter, shares his expertise, and people pay him for it. And it's pretty scalable because it takes the same time to write the newsletter, whether it's for 10 people, 100, or 1,000 or more. Bob's made this work. I think I might try a newsletter business. Bob writes about practice management stuff. I'm going to write about nerdy planning strategies because I was the planning nerd. But it's like, I think I want to do this. And so I went and talked to.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“when you get opportunities to, it's just most of the businesses I'm investing into are the ones that I'm involved with. And I'm actually involved with a few because that's effectively a form of diversification for me.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“that I've been creating our kitsys.com platform, XY planning network, which helps young advisors start a business, a tech company called AdvicePay that I co-founded, as well as a number of others. And the success of building those companies, frankly, is exponentially higher than any other investment accounts to the point that I actually don't contribute to retirement accounts and haven't for many years so that I can keep cash available for business opportunities. I don't necessarily advocate that for everyone. investing in businesses and starting businesses is also extremely risky and depending on whose statistics you look at somewhere between like 80 to 95 percent of them fail so at least acknowledge it's a very high risk path but i just see so many business opportunities in our space and my brain is kind of wired as an entrepreneur and a vision person and so i found pretty quickly that the most effective way to invest was i mean it's sort of the buffet style right like keep cash available to invest in good businesses”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“My money is essentially a roughly three-way split, but the three pieces are not even. The smallest piece actually is just my good old-fashioned investment accounts, managed to save and accumulate a little bit. That's actually managed by our advisory firm. So my dollars are in our company profit sharing plan and gets managed with our advisory firm's investment management process. The second piece actually is a big old pile of cash because it ties to the third piece, which is the primary place I actually invest is myself and my business. I spend most of my 20s reinvesting into my education. That's how I ended out with two master's degrees and a whole bunch of designations after my name. The ROI on getting myself degrees and designations is exponentially better than anything I ever could have done by putting money into a Roth IRA. More power to Roth IRA, but investing yourself is better. And over most of the past 10 years, I've been investing into business.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“percent of the firms you're going to be talking to and there's a pretty good chance you'll find a firm that's going to be a solid first step for you in the industry”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Firms that have recurring revenue, I've got my $100 million under management. January 1st, I got a million dollars of revenue coming in. All I have to do is be awesome financial planner for my clients so they stay. So firms with recurring revenue tend to hire financial planning jobs. Firms with non-recurring revenue tend to hire sales jobs. And so asked to see a sample financial plan, ask what kind of revenue they earn and whether it's recurring if at least 70% of it is recurring, your odds are good, you're getting into a good place, and just find out if they're growing. Firms that are growing tend to create more opportunities as they grow. So you may not know what it's going to look like. There's a saying in Silicon Valley, like if you have a chance to get on a rocket ship, you don't quibble about which seat you're going to get on. You just get on the rocket ship and you figure it out later because growing firms tend to create lots of opportunities for everyone. So what's that sample plan look like? Do they have recurring revenue? And is the firm growing? And if they can check all three of those boxes, you have probably crossed off 80 to 90.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's often hard to tell the difference, particularly if you're younger and newer and coming in, you don't really know the lay of the land yet. And so trying to clarify, like, are you taking a financial sales job or a financial advisor job is really important. The easiest way to tell is.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you're coming in today, and frankly, your CFP certification is not the end point of being an advisor. That's your starting point. Then you're going to need to go get some post-CFP specialization as well. Like if you want to be succeeding in this space in five and ten years when the majority of all advisors will have CFP certification, having it isn't a benefit, not having it as a negative. People will be like, why don't you have it? I thought all advisors had this. And if you want to differentiate, you're going to have to go above and beyond that. investing in yourself substantially above the minimum regulatory requirements is the starting point the other big both advice and caution i'd give to anybody who's coming in the industry today you know we we still have this problem in the industry that huge swaths of people call themselves financial advisors i'm kind of putting that in air quotes here some are actually in the business of financial advice some are in the business of product sales and distribution and”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, a few things I would offer up. The first is the future is not getting paid for your company's products or managed accounts. It's actually getting paid for your advice. The knowledge between your two ears and your ability to deliver it well to clients and engage with them. And so what that means is a starting point is the industry's talent in the aggregate has to come up, frankly. The minimum requirements to be a financial advisor is a two to three hour regulatory exam in a high school diploma, and the diploma is actually optional. And that's all I need to take responsibility for someone's life savings. I think it's an absolutely absurd and ludicrously low bar. And so for any advisor coming in, like, yes, you can get your series exam and go be an advisor. I would not aim for that. I mean, yes, it's a minimum legal requirement. You do have to do at least that part. But I would be looking at something like you have to get your CFP certified.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“log into their investment portals twice a year and then if they do it's usually because they're going to complain about some investment thing and then they're like crap I shouldn't have given you that portal log into so I think it's still a wide open space for more personal financial management tools specifically used for advisors because in the advisor context I don't need to upsell some product or cross-sell a credit card or a bank account or a checking account and all this stuff that obnoxiously throws at people I just have to make something that's so awesome that you want to keep logging in and that helps you stay as a client because you're already paying me a fee to be your advisor like I don't I don't need to upsell you off my software that's just a value add that can be designed to be a pure and fantastic value add”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Advisor did. His name is Edmund Walters. He made a company called eMoney Advisor. It has a beautiful slick portal that advisors can use with their clients that pulls in cash flows and net worth and all the rest. His financial planning software with this portal sells for a fee. That's three times the price of any other financial planning software. And Fidelity bought him for a quarter of a billion dollars. It's been built once, but he's only one provider. And while I think he had a pretty good take on what he built, there's room for more than one provider in the space. And to me, it's still a huge gap that more advisor technology is not building around these kinds of client portals. Because, you know, the truth is we just don't log into these investment portals very much. We actually usually encourage our clients not to, right? Because we don't want them to obsess about the investment stuff. But people log into their bank accounts a couple of times a week sometimes. Mint users log in several times a month. A lot of advisors struggled at their clients.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So to me, the starting point on the non-investing side is frankly more platforms like Mint.com, more platforms where we can just have our own personal financial management dashboard that helps us manage our financial lives. Not the investment stuff, the cash flow stuff, the balance sheet. That's where I spend most of my life. In fact, if I'm working efficiently with an advisor, I should never look at the investment accounts because they're worrying about that. I got to worry about my household cash flow and what's happening with my overall net worth. And I continue to be shocked with how few platforms there are that are really built to do this. You know, mint.com is still out there, but frankly, even as a longtime mint user, it's really clear to me they have spent years iterating on their technology, not to make it better for me as a consumer, but to figure out how to sell me more stuff from their various product sponsors and affiliates.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think this is actually an area in particular where people that are actually designing technology for the end consumer rather than design the technology to get a platform that does more trades would be a welcome refresher to the space.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“tools are really still kind of 10, 20, 30 years ago. Like they made a digital version of a piece of paper of what statements used to look like, but the statements were lousy 20 years ago. And the digital version of them is not that much better. I want actual interactive charts that I can work with and use to understand where I stand and how I didn't from any point to any other point in time in any of the things that I owned. And I just don't see a lot of technology to really do that very effectively and efficiently yet. We're kind of sort of getting there, but I think we actually have a long ways to go just to make the information easier to interact with and more intuitive. And frankly, we have a challenge right now because the primary people that do that are the investment platforms. And they don't really make money to make things simple and easy to understand so that you relax and chill out. They make money by showing green red lines and red headlines that rile up your emotions and freak you out and make you want to do something because then you trade more and that's how they make their money.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“facts the account applications to get them open we couldn't even email a PDF because their process was literally tied to a fax machine two years ago so the actual digitization of the guts of the investment industry you know we've done so much on the training realm and and what's happening with stock indices some good some bad but we've been really slow on just the paperwork, the transfers, the execution process or like i can i can ach my money from one bank to another in a day or i can wire it in the same hour but i can't move my stinking investment securities for a week or few at a time so i think there's a lot of room there to upgrade and improve the guts of what's happening i think there's a lot of room just to just to get better on the performance reporting tools that are in our space just making them easier to use less complex more intuitive for consumers you know i feel like a lot of our investment reporting”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“On the technology side pertaining to investing, I think it still just comes down, well, so our immediate problem is there is still a remarkable number of investment vendors where I can only open an account with a wet ink signature, like an actual physical piece of paper with the wet ink of the pen still on the paper. I can sell my house. I can sell a physical piece of real estate electronically, but I can't open a stink in retirement account at a lot of vendors without a physical piece of paper with a wedding signature on it. So there's a process of just finishing the digitization of account opening account transfers that it's the non-sexy guts underbelly of what happens in the financial services industry. But the fact that ACAT transfers can still take”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“are going about it in different ways, but essentially saying maybe the whole public markets and the aggregate have become too efficient, that the last frontier of investment value creation is going out there into those darker private markets. And arguably, there is less trading, there is less price discovery. There probably is a little bit more opportunity there, but it's also more complex. It's more opaque. There's more risk that you do something wrong, lose a lot of money, and just the overhead costs are higher. So even that is a realm that I suspect firms will tend to do once they're a little bit larger with some economies of scale, just to be able to do the due diligence vetting on a bunch of private equity funds or direct business investments or whatever else it is that advisors decide to do if they're taking their firms or their clients further into private markets.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, unique, scare stuff. And as always happens in that world, right? That also opens the door for scare stuff, scarce crap, overpriced scarc. There's some good and bad that goes with that. Hopefully the advisors are doing a good job on due diligence on what they're putting their clients into. Some maybe do that better than others. But that whole idea of my value proposition is giving you access to stuff you didn't have access to before has always been one of the founding value propositions of investment managers. And so I think that value proposition continues to have opportunity. And frankly, just in the meta level of the investing world, just watching the shift of wealth creation that's occurring in private markets versus public markets, I'm seeing more advisors spending time trying to figure out like, how do we give clients access to all this private market stuff? So we'll be a feeder for a private equity fund. We'll make our own private equity fund. We'll do local real estate investing. We'll do local small business investing. People are.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“And I think there will be some legs to that category for a while to come. You see advisors that are going into what I'll just broadly label the alts category. You can buy your generic stocks and bonds online from any number of digital platforms, but I'm going to give you access to some, you know, you.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, I think we'll see firms try this a bunch of different ways. We can debate investment theory about which of these are going to work or not. But I see the rise of firms that are doing essentially tactical management. They're saying, like, look, you can own a diversified asset allocated portfolio, but maybe your allocation to bonds shouldn't be exactly the same regardless of whether interest rates are two or eight. I kind of feel like maybe that should impact your portfolio. Or like evaluations, you know, if the P ratio stocks goes from like 30 down to 9, maybe you would change your allocation a little. Right. And sort of this acknowledgement, like we can hold diversified assets allocated portfolios, but we can still make cases for reasons why these would shift and tilt and tactically adjust over time. So I see a segment of advisors going there. We'll see who manages to do that and deliver that effectively. But that certainly to me is a category that has been rising for the past couple of years. We see like the rise of tactical ATF managers and so on.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“getting thrown out because they should. And I think what we end out with probably is a smaller active management space in the future because the truth is it was only a smaller active management space actually providing value for their fees in the first place. We're just getting rid of the ones who weren't”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“rents for unreasonably low value. They weren't actually good active managers. They weren't delivering outperformance. They were charging higher fees with very little active share, however you choose to manage it. And they're getting drugged out for charging fees and not adding value. And I don't think that means the active space goes to zero. And there's no doubt, I'm sure there are some good managers that have gotten thrown away with the bad, at least in the short term. But it's like the dynamics of markets itself. You go back. I started my career in the tech boom and the tech crash. And there were plenty of companies that got irrationally bid up, even though they were crap right alongside some good ones. And there were plenty of great companies that got bid down because everything else was getting sold off. And eventually five and ten years later, the wheat and the chaff were separated out and the good company survived and the bad ones went bankrupt as they should have. And I think we're just in that sorting phase right now in the investment management realm. A couple of good companies getting thrown out with some bad. A lot of bad companies.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, yeah, logical extreme. At some point, price discovery breaks down if we lose too many active managers. But even in the retail space, like I could at least theoretically construct a world where like a moderate segment of institutional dollars only just does all the market goes past. Like we could do that and still maintain price discovery, I think. But it just won't happen from the consumer end because there's always a segment of people that want to pay for the opportunity to do better. Caveat to that is A lot of people really don't do better. And to me, what we're really seeing play out right now in the investment landscape, you know, there's all this discussion like indexing is going to 100%. We're going to destroy active management. And all I can see when I look at is like, no, I'm sorry. I think you're not seeing the destruction of active management. You're seeing the destruction of bad active managers. You're just seeing the destruction of a huge swath of the industry that charged unreasonably high.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“I think there are a few things that jump out at me on the investment side. The first is just to recognize there will always be a subset of clients who are willing to pay for the opportunity for outperformance. We can have a long active versus passive debate about whether or how likely it is you're going to be defined the outperformance of the manager who can do it or execute it and so on and so forth, but just consumer psychology. There will always be a group of people who are willing to pay for the opportunity of doing better. Maybe they just like to have a crack at being above average. Maybe they've got dreams that require significant wealth accumulation. They think that's the best way to it, whatever it is, active never goes away. It's a consumer psychology piece to always demand a piece of it.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“service for everybody, but for most individual advisors who are not huge and never going to be huge, like I just want to serve my clients to get paid my dollars. The model is 50 great clients. And if you want a 50 great clients, you just have to differentiate in the way you differentiate is you become really awesome at some particular clientele that has some particular problem, none of which usually has much of anything to do with their investment portfolios.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“great clients you can pick anything ludicrously narrow and specialized in niche and have an incredible opportunity to be successful it's like i've i've seen advisors specializing in you know uk expatriates who have been transferred here to the u.s that's all he does uk expats because if that's your issue and you have to know how like u.s tax laws work with your uk pension which has going through a bunch of new rollover rules you need someone who specialized who knows what the heck they're talking about He's the guy. That's all his clientele and there's actually a lot more than 50 affluent UK expats here in the US. So you can get incredibly focused and specialized and have wildly successful firms. And it's another version of that. You can be huge or you can be focused or you can be a behemoth or you can be a boutique. Firms that already operate at scale have to go broad and wide and try to come up with the scaled low cost.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“If you see an advisor that's got materially more than 100 clients, I guarantee you they haven't talked to a big chunk of them in one or three or five years. You know, historically, we would like sell stuff to anybody we could find. So I knew advisors have like 500 clients. How many of them like some of them you haven't even seen in 10 years? You opened an IRA for them in 2003 and haven't seen them since. I get it. You still get paid a little trail on them, but like that's not a client. That was a person you sold something to once years ago. Most advisors tend to top at it about 100 active clients that they work with, maybe up to 200 or 300 clients if they've just been selling stuff for a long time. But the 80-20 rule tends to hold pretty strongly. 80% of the profits come from the top 20% of the clients. And so even if you're a 200 plus clients, most of your profits and success comes from your top 40 or 50 clients. And so in a world where most advisors as individuals can be wildly successful with 50%.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Not all fishing because I would be too broad. Bass fishermen. He grew up on a lake that had a bass fishing tournament. He's been involved in that community all of his life. I didn't know about it until I heard about him, but apparently there's a ton of money that moves around the bass fishing community, like million dollar prize purses, if you win one of the big tournaments, then all the like bass fishing equipment endorsement deals start rolling in. And he's the guy. He's the guy in the bass fishing community. And so he's like late 30s. I think he has more than $100 million under management as an individual and 90% of his clients are bass fishermen. And he knows all the issues that crop up in that community. Those are the opportunities. The phenomenon that I think is not well understood about, particularly down the advisor level, like how do advisors survive and thrive in this environment? Most advisors can be wildly successful with about 50 great clients. We tend to top out at about 100.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“You can pick them by profession. You can pick them by kind of psychographics and issues they need. My favorite, there's a guy out in the Midwest. His niche is bass fishermen.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So his primary value proposition now, the gate is I can probably get you 30 to $50,000 a year of additional income every year for your life by getting this hospital contract negotiation right for you on day one. So what's 30 grand a year of cash over the next 30 years worth to you?”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Absolutely. What ultimately happens for most advisors is you actually end up slicing them into incredibly narrow cohorts. I know an advisor with an incredibly successful practice in Kentucky. He works with all of the doctors in their 20s and 30s who are starting jobs at three hospitals in his town. That's his entire client base. Young doctors at one of three hospitals in his one town because their big problem actually has nothing to do with the portfolio stuff and all the rest. It's negotiating the hospital contract that they're going to get paid under, which has a whole bunch of weird specialized rules about how units of time get compensated for various things that you do. It's a horrifically complex thing. No doctor who's starting out has any clue how it works. He does.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“efficient automated basis for the next 30 years with the client. So what else are you doing that's useful for them over the next 29.7 years after you get their retirement portfolio set up? And that's where all these other value advice areas are starting to crop up. But again, that means your advisors need CFP certification. Your CFPs need the RACP or RMA designation. You got to start reinvesting into your firm's talent. The advice offering. Now you better make the investor, the investment process efficient because you need the time to have all these value added conversations around Social Security and health insurance and Medicare and continuing care retirement communities and all these other issues that crop up.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is actually a wider range of stuff and is why we see advisors that are going there increasingly starting to specialize in it. And so you can see these offshoots. We've had multiple versions of Social Security timing software crop up as advisors are trying to get deeper on this. The American College, which is one of the first organizations to make professional designations for advisors, literally going back 100 years to a program called the CLU for Professional Life Underwriters, their fastest growing designation program in a century. Was their retirement income specialist program they launched about three years ago? And it's done so well that the investments in wealth institute bought another program called the Retirement Management Advisor to compete against the RICP program from the American College. So all of this focus on like, okay, we get it. The retiring needs NASA allocated a portfolio. Yeah, I got to set that up and do that right. All right. That takes a little bit of an upfront process. Great. That's done. I'm going to do that on a largely technology.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So it starts with things like in the past five years, we've had a half a dozen different social security timing calculator tools start coming out. So advisors can get better social security advice, right? Because if you're working with those clients, a whole bunch of them are going to be somewhere between age 62 and 70, and they have to make a decision about when it takes social security. And it's a high dollar amount, high impact decision for most people. So it started with things like Social Security timing. It's morphing from there into discussions around Medicare, health insurance, health insurance before you're eligible for Medicare, which is a challenge for a lot of people. What do I do between work and 65? How do I make Medicare decisions? Medicare part D prescription drug plans, do I take a Medicare Advantage plan versus a traditional Part B plan, like making all of those decisions, it may expand further into not just things like, hey, should I buy long-term care insurance, which the industry has done a lot?”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So for where it's been so far, the bulk of advisors are focused on baby boomer retirees. And that's simply because if you, as we said earlier, like you do that assets under model, right? Like as the famous thing is like you go where the money is and the AUM model obviously necessitates having a pile of assets and the piles of assets are in the hands of baby boomers just age demographic wise. They're literally at the point where they're done with most of their career accumulating money and they're ready to use it. That's where the money is. That's where we focused. And because we focused on baby boomer retirees, that means the first stage of what we're really seeing as value add services is all around the issues of retirees.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Willing to pay a piece of it for someone to tell me what the heck to do about this challenging financial situation that I'm facing. And so the model of the past 10 years or past 20 years has been 1% of assets. I think what you're going to find is the model of the next 10 and 20 years is 1% of income.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“And everybody else ends out picking up a fee-for-service model instead and pays some version of these flat fees that we're talking about because they literally don't want or need investment advice. They need advice on everything else going on in their financial life, right? I got to navigate my career, my salary, a job change, starting a business, cash flow and spending, my student loans, my credit card debts. I'm getting married. I'm having a kid. I'm buying a house. I'm getting divorced. I'm having a new marriage. I'm having my new kid. I'm starting a business. Like all these massive series of life changes and financial events that hit us, particularly through our 20s, 30s, and 40s, where we need a steady stream of ongoing financial advice because life just tends to change and veer left and right throughout that time period. And I don't have a pile of assets to hand anybody for advice, but I got money in my bank account.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“We do AUM for 5% to 7%, basically no one's doing fee-for-service for 50% of households. And so if I project out what that opportunity looks like in 10 or 15 years, what I see is a world where the people with money probably just continue to pay good old-fashioned AUM fees. The consumer psychology is good, the scalability is good. You got assets you want to hold on to. We all reinvest into our businesses that way to hold on to them. You may actually see that as a niche model. rich people”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“fees, reinvest in your business, all that great stuff. The problem is we don't serve the other 93% of households. Now, to be fair, probably half of them will never engage a financial advisor by any means. They don't have the income or the assets or anything else. They just literally don't have the financial wherewithal to pay an advisor. But you're still left with what we estimate is probably 40 to 50 percent of U.S. households who have the financial wherewithal to pay an advisor. As long as you don't require them to hand over assets, you just charge them a fee. So I call this broadly the fee for service model. That could be annual flat fees like James Osborne does. That could be monthly subscription fees. I'll give you financial planning advice for $100 or $200 a month. That could be an hourly model. Like there's lots of different ways that you can structure fee for service. But the opportunity is fee for service is now what's emerging and on the rise.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“a second opinion about what I'm doing and we respond with well give me your life savings and I'm happy to give you that advice and like no no I just want to ask a question like yeah yeah give me your life savings I'll answer all your questions not what I was looking for so when we really drill down to who we serve we're really built for delegators with at least mass affluence and the monies outside their 401k plan and so the mass affluent is only about a third of households money outside the 401k plan is only about half of that people who actually have a delegator mentality is only about a third of that if you look at the market sizing and so what you come down to is our whole financial advisor business model is built for about five to seven percent of the population that has a pile of money and is willing to hand it over in exchange for advice and so in that group i got a pile of money i'm willing to hand it over and i want advice aum works freaking awesome for all all the pricing psychology and other reasons that we talk about scalability lifting”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“of households where the dollars are available outside of 401k plan. Then the caveat from there is not all consumers necessarily even want an advisor. So Forrester has done some really good research in this over the years. They essentially segment consumers into three groups. On the one end of the spectrum are do-it-yourselfers. They'll go online. They'll do their own thing. Maybe they'll buy a robo advisor after researching 17 of them. Maybe they'll go directly to a brokerage platform. Like they do their own thing. They don't call an advisor in the first place. At the other end of the spectrum are the classic delegators here. Just take my money, do the thing. I don't want to deal with this stuff. And the advisory industry, we call those great clients. And then there's a big group in the middle that are typically called the validators. They may want some advice, like I'd like a second opinion, sort of literally, I would like you to validate what I'm doing. Like here's what I'm thinking about my financial situation, but I'd like an expert's opinion to make sure I'm on track. Those folks tend to have a lot of trouble in the industry today because they say, hey, I'm just looking for.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“What's going to precipitate that is expanding the market for financial advice. So if I look at US in the aggregate today, there's about 120 million households in the U.S., roughly a third of them are what we call the mass affluent, which means they have at least $100,000 of investable assets outside of their primary residence. So about a third of the population is what we in the industry would call prospects. Can't work with the other two-thirds. The count balances aren't high enough to make the math work. I can work with about a third of the population that are mass affluent, have at least $100,000 of investable assets. The problem, though, is about half of those, the money's in a 401k plan. So they're a future prospect, whenever it is they get on a retiring, but for most of us, we can't give advice and directly manage 401k accounts today. We have to wait until they can actually distribute it out to an IRA that we can manage. So we really only have a fair shot at like 15 to 20 percent.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“But it's just brutally hard to charge flat fees. Now that being said, I think it's worth noting. I think what you're going to find 10 to 15 years from now is that flat fees are actually the dominant model.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“Last year was 10,000. This year it's 10,700 to give you the same level of services. It's just brutally difficult to compete head to head against the AUM model that way. Now, it's not freeloading for the AUM model as well. You want to keep your clients as your fees go up. You darn well better be doing more. And we do see that in the advisory industry and the aggregate. The larger the firm, the more affluent the clients tend to be, the more deep the services, the deeper the specialization, the more hand holding. Firms really do, at least on average, value add their way up further as they tend to move up market because of this. So there's probably a little bit of freeloading, but it's actually.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“upside the face with it, which unfortunately is what it tends to feel like when we write checks. We hate writing checks and paying for things. We feel much better when fees are just kind of debited out. We sort of know it's out there someplace. We can look it up if we want to. Now, again, people also abuse that, right? If you make your fees not salient enough, you can also just do some really crappy stuff for a really high cost and nobody realizes what they're paying. It's like I don't advocate. Use this particular force for good and not for evil, please. If you take two advisors who charge that way, all else being equal about how awesome they are, I guarantee you the flat fee will lose relative to the AUM fee even in year one, the moment you try to go out for that renewal, never mind the fact that the $10,000 advisors fee is probably on average going to increase to $10,000 or $11,000 next year thanks to a lift in the market. And the retainer fee advisor has to go and explain, even though the check last year.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So we get this natural lift in a world where every other industry that's ever existed has to actually go back to their people, declare a fee increase and get them to buy in. And that kind of automatic fee increase is just ludicrously powerful from a business scalability perspective and just a pricing power perspective. If I take two advisors, one of them charges a $10,000 fee, like write me a $10,000 check, and the other one charges 1% of a million dollars, same $10,000 fee. I guarantee you the 1% advisor on a million dollar portfolio will have higher retention rates than the one who makes their clients rate $10,000 checks. Assume they're both awesome advisors who give great value of advice. Like I'm not trying to bash anyone's value proposition, just the pricing psychology is we do tend to like our fees to be transparent. I want to be able to see what I'm paying, but you don't have to slap me.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'm a little bit mixed on the flat fee model. And the reason is that what most people have tried to do with the flat fee model so far is to use it as an alternative pricing model to compete with AUM fees in the investment management business. And I just don't think it's viable. It doesn't scale the way that you need it to scale when you do that to compete with an AUM fee. There are a lot of indirect benefits to the AUM model that I think the industry or at least sort of the naysayers to AUM don't fully consider. It is the only business model that I'm aware of anywhere in the history of any industry where your average revenue per client automatically goes up at a real increase above inflation simply by keeping the client because you lived with the return of the markets and the return of the markets is generally a spring meme for inflation.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source
“for over a century. I mean, we're going all the way back to everything is accounted for by hand. We have almost no regulation and human stockbrokers are throwing tickets at each other to today, the modern financial services world with the rise of the robo advisor and the rest. And it's the exact same fee because what the industry tends to do is once we get used to the slice we take from the economy, we tend to figure out how to just do more to validate that service as opposed to literally scaling to the point where our segment and share of the economy goes down. When we look at the retail industry, it has actually scaled to the point that ironically it shrunk its share of GDP with the scale and efficiency that's come from modern technology. Financial services apparently tends to not scale its pricing down. It tends to value add its way up to maintaining the fee structure. And that's not specific to advisors. That's the entire financial services industry and the aggregate.”
2019-02-26 · Invest Like the Best · Michael Kitces – The Past, Present & Future of Financial Advice - [Invest Like the Best, EP.122] · IDENTIFIED FROM THE TRANSCRIPT · source