New Take On Financial Planning Makes Big Promises Through Automation, Monthly Fee Structures


A firm called Veritat Advisors promises to handle all the execution, reporting, billing, and all the other operational tasks, including compliance and technology.


Affiliated advisors work with clients and earn a combination of monthly planning fees and asset management fees.


The model is being touted as revolutionary, but the question is how much advisors would be giving up in exchange for all that support.


On the surface, it isn't much. Affiliates keep 80% of what amounts to their "production," which translates into 0.7% of AUM and a $20 to $40 monthly planning fee per client.


As a result, the firm suggests that every $1 million in AUM an advisor brings in a year -- the minimum allowed -- can generate about $10,400 in advisor income.


Considering that an independent advisor with his or her own RIA would generate roughly that 1% in flat asset management fees, that is not a bad deal. Throw in all the support, and the split looks better.


After all, all the advisor does is talk to the clients and win new ones. 


However, established advisors will probably have a hard time giving up 20% of their revenue for service that they've already figured out how to source from elsewhere. Maybe it's a better deal, but maybe it isn't.


Pricing may also be an issue for established clients. The mandated 0.7% management fee may be larger or smaller than what they're currently paying, and while wealthy investors probably won't sweat $20 a month extra, advisors would have to explain the shift.


All in all, this seems geared more toward starting advisors looking to build their business from the ground up.


As it happens, the firm has put a lot of thought into its mentoring program for new planners, so that's definitely in the background here.


And this is for all practical purposes a new market: the "mass affluent" investor that has eluded generations of planners in the past.


For small-scale advisors, Veritat expects each new client to represent at least $100,000 in liquid assets.


Whether there are enough of these upper-middle-class families to make the business model work and whether they'll pay for advice remains to be seen. In theory, it's interesting stuff. 







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