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Does anyone follow the "Million Dollar Client" model?

Hi There, I am looking into becoming a Financial Planner. I have been doing alot of research, and I have been hearing alot latley about a paticular business model:
Get 100 Clients all worth 1 million+, and then charge them 1% per year
Does anyone follow this? How/Where do you find these clients?
Thanks! Jessica
Reply to
Jessica
Its not that simple, but we do something similar. The practice you speak of is fee-based asset management as opposed to commission based. It is not as simple as round up the money and then sit back and be rich perpetually though.
We do comprehensive financial planning (CFP certified) and provide advice for a fee just like lawyers and CPAs.
We use mostly ETFs and we rebalance the accounts quarterly, semi annually, or annually. The clients allocations are personally tailored to the client based on risk tolerance. We employ modern portfolio theory software and monte carlo analysis to determine proper allocations. We also provide quarterly review meetings, monthly market newletters, and an in-depth annual report on each clients investments. In exchange, we are paid 75 to 100 bps annually (paid quarterly).
Fee-based may not be perfect (people claim we get paid repeatedly for nothing), but it is reassuring to our clients to know that we are not making trades to generate commissions. We also have no incentive to support one fund or investment over another, becuase we do not receive a commission. The important part is to show your client that you provide value over and above the returns on his investment. Anybody, with enough research, can pick the same investments we do and achieve the same success. Its the reporting, analysis, updating, rebalancing, and constant monitoring that make our services worth it.
Reply to
kastnna
Let's turn this around and look at it from the point of your target market. If you had $1M+ to invest, how would you pick a FP to manage your money? I can tell you what I'd do. I'd ask friends, relatives and professional acquaintances about their finances, whether they have a FP looking over their money and how well they've done. After getting such recommendations, I'd then call up this pool of FPs and ask them to present their ideas and track records.
Basically, there are no shortcuts. You don't just pass the FP exams and get issued a portfolio of 100 x 1M clients. You start by working with friends, relatives, professionals you do business with -- perhaps at little or no fees the first year -- and help them grow their portfolios from 4/5 figures to 6/7 figures. Maybe part of your strategy is to offer other services like tax returns that give you a good segue into FP services. After enough years, you will have glowing recommendations from your network that'll land you new clients with bigger initial sums to invest.
Good luck.
Reply to
wyu
In article ,
Two points...
1) how many people have $1-million+ to invest? I get it isn't that many compared to the population as a whole. I doubt that there are enough to go around for each CFP to have 100.
2) I have a rule where I never take advice from someone who is broker (or less wealthy) than I am. What is your net worth? If it isn't $1-million+, how do you expect someone who is in the $1-million+ bracket to take you seriously?
-john-
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John A. Weeks III           952-432-2708            john@johnweeks.com
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Reply to
John A. Weeks III
Roughly 3 million people in the US have investable assets over the $1M mark.
As far as I can see, there are around 400,000 finacial advisors out there now.
So, that comes out to about 7.5 HNW clients per advisor. So, the odds are not on your side. As has been pointed out, those clients are not guaranteed to you - you have to work to get them and prove that you're worth paying $10K+/yr for your services.
In short, if it was that easy, everybody would be doing it!
Reply to
Green Jeans
In article ,
I think you can assume that he has a team of people on staff to do that. He likely has a core of his money in some very, very safe investments that would always be there and produce income no matter what happens to tech stocks or Microsoft.
-john-
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John A. Weeks III           952-432-2708            john@johnweeks.com
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Reply to
John A. Weeks III
I'm above this mark, but I'm not going to hire anyone to do a work that I would probably do myself better than you. Only if you can prove that you can do a better job than me -i.e, you have a better methodology than mine to estimate the intrinsic value of a company (I'm a convinced value investor)- I may consider to hire you and pay the 1 percent fee.
Reply to
Jose Bailen
I am responding, tongue in cheek, to your comment that you never take advice from someone who is less wealthy. Since no one is more wealthy than Gates, he must be floundering in the investment world with no advice but himself.
Reply to
po.ning
Bill Gates and others in his league do not need advice about investing. They are more concerned with advice on the complexities of how to give it away.
Reply to
Don
Jessica,
Posters on these usenet's will bombard you with thoughts on how wasteful Financial Planner's are. Fact is, for better or worse, the majority of the country does seek advice from financial planners (I am using the term Financial planner VERY loosely; not just CFPs). Superior returns are not necessarily the reason either.
Its no different from learning how to repair your own car or representing yourself in court. The principles of investing are not secrets. You COULD take the time to educate yourself and save the expense of paying others, but most people would rather have the time to devote to other things. Time is a scarce resource, just like money. Its those people who will value your services and if you can convince them that you are skilled and diligent, they WILL pay for your services.
Maybe once your successful you can learn medicine in your spare time. Self-surgery ought to save you a fortune : )
Reply to
kastnna
In article ,
I have been had here twice. First, I didn't get the joke, a pretty good one at that. Second, you nailed me on my advice. It looks like Mr Gates is on his own, or he has to use the Pat Robertson method (ie, talk one on one with God).
-john-
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John A. Weeks III           952-432-2708            john@johnweeks.com
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Reply to
John A. Weeks III

The assumption here is that a planners' advice would result in the same financial returns you could otherwise achieve on your own if you bothered to take the time to learn. But, apart from the question of convenience, a common objection is that a financial planners' advice can be biased because of commissions received from the products recommended. A basic fact is that all investment has some risk, whether you do it yourself or let someone do it for you. The real question is: If you let someone to do it for you, does the convenience and time saved outweigh the risk of receiving poor advice? Is there "selection of adviser" risk superimposed on market risk?
Reply to
Don
This is an excellent reply and analysis of the financial planning business. I often use the same analogy of, something like, "most people in this room are capable of changing their own oil if you wanted, and a lot of us did that when we were teenagers. You could to to Auto Zone, buy the oil, and the filter, and the filter wrench, and the special pan to hold the used oil, because you can't just dump it in the backyard anymore, and maybe you'd have to buy car stands to get underneath the engine, because you can't fit anymore either. You could do it if you wanted; it's not rocket science, but who changes their own oil these days? Surely, a lot of people do, but don't most of us just take the car to Jiffy Lube or Pep Boys? This is just like investing. Many people spend the time and effort to manage their own portfolios, because there's nothing so secret about it. Anyone can learn to do it. But the real question is why would you want to go through all that time and effort when you can just hire someone to do it for you? Someone who does it for a lot of other people, and can probably do it faster and, in the end, for less cost than you could do it yourself."
I find people relate to this analogy, and I've developed a few others as well. As you mentioned, success in this business is getting in front of a lot of people to whom you can relate your analogy and convince that you're a dedicated and professional advisor. And this, it seems, is a lot easier said than done for most financial planners (using the term loosely).
Reply to
Chris Fasano
the products recommended.
We don't run our office solely on a commission based plan. We handle insurance (not P&C), annuities, estate planning, etc. and they all have commissions. In those cases you're right, the only thing standing between the client and an overpriced commission is the FP's ethics; which can be suspect. As for our clients' assets (which is the scope of this discussion) we do not receive any commission for asset based transactions (buying, selling, rebalancing, etc.) The 1% fee is it. We sell mostly Vanguard ETFs and iShares.
and time saved outweigh the risk of receiving poor advice?
That's the big question every investor must ask. The "risk of receiveing poor advice" still exists if they go it alone (maybe more so). They are most likely no more experts than a GOOD FP.
WYU, You're right we are getting a little off topic.
But as for a get rich quick scheme, it is not. However, it is not nearly as easy as the OP made it out to be. Our office has three agents (including myself). Between us we have ChFC, CLU, CFP, and an upcoming CPA certs. The office has been in business for 30 years (primarily as Life Insurance reps - yuck!). Almost 3 years ago I was hired because they were moving away from insurance and towards asset based financial planning. As someone earlier posted, we already had a 1200 person client base of life insurance policies that made us much more successful than we otherwise would be. Its easier to work with people with whom you already are friends. We still service the old insurance policies, but we focus all new business towards HNW clients. We have had resounding success. We have not reached the 100 with $1M goal yet, but we're close and well on pace. In our case though, that's 3 agents sharing 100 with an entire office of support helping us. After expenses I take home nowhere near what the OP is implying.
To the original poster, if you were hoping this was an easy path to riches, please think twice. Going into it with that attitude only makes it harder for the rest of us down the road when we have to convince clients that we're worth fee, because they had a bad experience with a less honest FP.
Good luck
Reply to
kastnna
If someone already had a million dollars from a couple decades of patient saving and investing, its like they already know how plan or hired somebody years ago.
This doesnt preclude the "sudden rich"- people who luck out in business, home sales, IPOs, lotteries, inheritances, insurance settlements, etc. I've heard the latter is about 20% of people with money, but that number could off.
Being middle age and a home owner I get these "free dinner" investment invitations several times a year. One sponsor told be they get mailing lists of age and zip code of homeowners, then mail out invitations. Usually a swanky restaurant and not having done one in couple years might turn me. Investment fads do change with time, and Im curious.
Reply to
rick++
If someone already had a million dollars from a couple decades of patient saving and investing, its like they already know how plan or hired somebody years ago.
This doesnt preclude the "sudden rich"- people who luck out in business, home sales, IPOs, lotteries, inheritances, insurance settlements, etc. I've heard the latter is about 20% of people with money, but that number could off.
Being middle age and a home owner I get these "free dinner" investment invitations several times a year. One sponsor told be they get mailing lists of age and zip code of homeowners, then mail out invitations. Usually a swanky restaurant and not having done one in couple years might turn me. Investment fads do change with time, and Im curious.
Reply to
rick++

That is good. But how do inexperienced investors tell the difference between a biased advisory service and an ethical one like yours? If they know little about the business, they are usually at the mercy of chance. They have to study and learn to make informed decisions, and by that time they might as well just study and learn how to select financial products on their own.
Reply to
Don

Yes, avoid the "to good to be true" offers at all costs. It should be a reflex. But it is a trap that is hard to avoid, because the sales pitches can be subtle. Any sane person will realize that at offer of "25% guaranteed" is too good to be true, but may be taken in by the offers of maybe 15% or 12%, or 10% (in the present investing climate). The fact that is hard for many people to learn is that ANY sales pitch offering better-than-average returns necessarily comes with higher-than-average risk.
Reply to
Don

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