Business Models of the Future

Suggests that there will not be uniformity of service, but businesses will be "variations on a few basic themes" that are designed to fit the services offered by a specific practitioner. Four basic models are discussed:

Advisor as Physician

This is modeled on clinics: clients come in for check-ups or help with a specific issue and pay when services are rendered. Extending the analogy, the advisor develops a plan of treatments that, like a prescription, is taken to a vendor (investment banker) to fulfill.

One practitioner using this model bills services at $3 per minute, and reports having 60% billable hours, while another has an undisclosed flat fee per two-hour "session" with clients.

These are tailored toward the middle market rather than the wealthy client, and attract clients who do not want to have someone provide comprehensive services, yet want to have professional assistance managing their financial affairs. It is also noted that, with networking, these firms can receive significant referrals: businesses who are geared to serve wealthier clients will refer less qualified individuals to these firms.

Advisor as Wealth Manager

This model, geared toward the wealthier client who recognizes the need for ongoing assistance from an advisor who is familiar with their case history, provides comprehensive services.

This service is an ongoing relationship with the customer, with regular visits over the course of the year, as opposed to walk-in and on-demand consultations, and there is considerable labor done in-between the visits for advisors to manage, plan, and monitor the clients' assets - taking more of a "big picture" and long term approach.

Billing for this service model is based on a percentage of the customer's assets under management (hence, their compensation increases as the assets under management grow).

A common model for these services is to consider clients as being in one of three stages:

  1. Accumulation Stage - Building up savings, managing debt, improving liquidity
  2. Conservation Stage - Achieving full financial independence (drawing on wealth rather than taking on debt for major expenses) and preserving rather than increasing value
  3. Distribution Stage - Managing funds in retirement, planning for the disposal of the estate

The Ensemble Firm

Traditionally, these firms consisted of a team of professionals who were dedicated full-time to managing the assets of a single super-wealthy family (billionaire-class) and carried forward from generation to generation. Such firms still exist, but others specialize in serving several smaller clients (whose assets are paltry, in the mere tens of millions) rather than a single whale.

The clients are clients of the firm, rather than any individual employee, and the firm includes several advisors who specialize in specific areas (tax planning, insurance, investments, etc.). These firms also offer a broader range of services, often performing varied administrative roles to assist the client in their personal and business affairs.

Billing for these firms is typically based on a fixed retainer, billing a flat fee on a quarterly basis, sometimes with performance bonuses.

There are in favor of and against this business model, but the number of clients in the target market is rather small, making the point largely moot: a new practitioner won't start this kind of firm, but may be employed by one or, in some instances, grow their clients into this model.

The Outsourced or Virtual Office

EN: This seems to be mostly gimmicky - a way for the author to appear to be "on the cutting edge" by talking about the Internet, but it is fundamentally the same as the "Wealth Manger" model. The main difference is that the Internet is used as a way to communicate with clients and to engage the assistance of specialists in servicing accounts.

The author's perspective is that there are many "psychological and self-imposed" barriers to the virtual workplace - both for clients who feel the need to go to a physical location and sit face-to-face with a person and for practitioners who are accustomed to office space. He expects that these barriers will erode over time.