FINANCIAL ADVISORS SHIFT TO SUBSCRIPTION MODEL
Financial advisory companies use an assets under management (AUM) model to levy fees to their clients. The structure gauges the success of assets relative to the competition, encompassing the growth/decline because of new money inflow/outflow and capital gains/losses. But millennials do not find the AUM model appealing and the hour-based rate is not effective as well, affecting the overall profitability of businesses.
Therefore, financial institutions designed a way to charge young professionals and the like for availing their services. In the subscription scheme, essentially on retainer, a company sends a monthly bill to their client for rendering their service. Some firms even offer add-on service for an additional charge.
Millennials find the payment structure attractive and useful. This charging basically removes certain conflicts of interest existing in the conventional payment system. Aside from avoiding the waiting time arising from the AUM model, it allows clients to be more comfortable with disclosing their money matters, making them at home with their advisors.
The subscription model has at least three advantages. First, the rate is reasonable and accessible. Second, a client can choose hourly planning if he finds the monthly charge too expensive. And third, it helps young people to be more open and precise in discussing their finances as it encourages them to have more regular sessions with the financial guru.
The main alternative bolsters advisor-client relationship as well. Instead of a financial guide concentrating on the assets his client have or the number of hours they can attain, the advisor can deepen his ties with the client as it establishes a feeling of trust. The model also proffers an easy-to-understand system. Basically, millennials want an advisor who can answer their inquiries at any time.
Millennial clients appreciate the model as it makes them feel connected to their advisor when it comes to sharing their finances or financial difficulties. No one wants to pay a monthly fee or so and not receive the services that come within the subscription.
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