Subscription Model for Financial Services

The movement to subscription-based services is likely to grow further—and spread to financial advice—Millennials, who are favorably inclined toward subscription pricing, assume a more dominant consumer role.

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    Subscription Model for Financial Services

    Subscription Model for Financial Services

    Business-to-consumer subscription businesses garnered more than 11 million U.S. subscribers in 2017 alone, building on its 200 percent annual growth rate since 2011.1 Many of these names are well known to advisors: Dollar Shave Club, Stitch Fix and Blue Apron. Other companies may come as a surprise; for instance, 75 percent of Costco’s operating income comes from annual membership fees.2

    The movement to subscription-based services is likely to grow further—and spread to financial advice—Millennials, who are favorably inclined toward subscription pricing, assume a more dominant consumer role.

    Paying for Financial Advice by Subscription

    In earlier articles, we explored the outsized business opportunity Millennials represent as the inheritors to trillions of dollars of accumulated wealth, and the unique preferences in how they invest (desire for impact investments) and the relationship they want with a financial advisor (collaborative and educational).  In this article, we’ll discuss how a subscription model for financial advice may become an effective way to capture this generation of investors.

    The prevailing pricing models for financial advice—i.e., commissions, AUM-based fees or substantial one-time fee payments—are largely unappealing to Millennials who are more comfortable paying monthly subscription fees for the services and products they desire (e.g., music, entertainment, and increasingly clothes and automobiles).

    A subscription-based pricing model is not about abandoning the traditional approaches to pricing financial advice, but more about providing an additional choice that fits the preferences and circumstances of today’s young investor population.

    The challenge with a subscription fee is finding the right balance between what the marketplace will bear and a practice’s profitability model. Research is limited in this regard, but fees ranging from $150 to $250 per month seem to be the market norm.  Here are some thoughts on guidance you can offer the younger customer for a flat fee in order to build loyalty and trust for the next level of investing when the time is right:

    • Strategies to ameliorate college debt
    • Assistance in structuring a plan to pay down credit card debt
    • Leasing, rather than purchasing, a car
    • Guidance with career choices and negotiating a job offer, as well as stock options, signing bonuses and pensions
    • Investing in a matching 401(k) prior to paying off college debt
    • Assistance with saving for the long-term, while also saving for short-term experiences
    • Flexibility in meeting with busy professionals via Skype, which offers convenience
    • Concise messaging that articulates your value proposition quickly
    • Provide options, especially as Millennials are not loyal to brands
    • Engage in social media and target these individuals
    • A trusted source that understands the family dynamic, countering the services of robo-advisors

    These monthly fees can be billed to a bank account or credit card, depending on your broker/dealer’s commission processing system, providing a predictable cash flow unaffected by market fluctuations.

    To preserve the profitability of a practice, advisors may want to consider limiting the subscription fee option to clients with assets under some determined amount (i.e. $150,000, after which such accounts are converted to an AUM-based fee arrangement).

    Millennials are likely to continue to pay a monthly fee as long as they see value, so expectations need to be set from the start. Monthly contact might not occur, but outline the value they will receive (e.g., allocation advice, rebalancing, etc.).

    To reinforce the value of the services, advisors may want to offer quarterly seminars that educate Millennials about important financial issues and developing good financial habits.

    Advisors are cautioned that individual state regulations may affect how they may structure and offer a subscription fee payment option, and should seek the assistance of competent legal counsel.



    See referenced disclosure (2) at 




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