The trend toward charging subscription fees continues to gain speed among registered investment advisors, particularly those specializing in helping younger clients.
Before long, that payment model will expand across the entire advisor landscape, according to Anders Jones, founder and CEO of Facet, an eight-year-old fintech advisory.
"In 10 years, more than 50% of financial advisors will be paid by flat-fee subscription instead of by AUM," Jones argues in an interview with ThinkAdvisor.
Facet charges a flat annual subscription fee that is not tied to assets under management. Fees range from $2,400 to $6,000, depending on account complexity and service level.
Facet, a virtual firm that pairs each client with a certified financial planner, aims to help improve clients' finances today, not just save for a retirement that might be 20 or 30 years away. Right now, its niche is the up-and-coming generation: average age, 45.
In the interview with Jones, 36, who before launching Facet spent 12 years as an early stage investor and partner at Argyle Ventures, details an ambitious vision for Facet to build "the next Fidelity … We have experienced folks around the table helping us do it."
Here are highlights of our conversation:
THINKADVISOR: Tell me about Facet's striking growth rate.
ANDERS JONES: We started with about 3,000 clients in early 2020, and today we're at 14,000. It's been a pretty big run.
We began with around $2 million of revenue. Right now we're just under $40 million. We'll most likely grow another 30% this year.
What differentiates your mass affluent clientele?
Eighty percent of our clients have never worked with a financial advisor before. So we're not stealing clients or market share from other advisors. We're going after a fundamentally new market that's looking for advisors.
Talk about the firm's funding.
We've raised more than $200 million of venture capital. [Private equity firm] Warburg Pincus is our primary investor.
They believe in our big vision of building the next Fidelity. There's a massive company to be built here, and we have experienced folks around the table helping us do it.
What motivated you to start Facet?
We saw a huge opportunity for a different way to deliver and charge for financial advice.
We found a big market out there that wanted help but couldn't work within the existing industry structure. That's who we've gone after.
What's the most important thing that other advisors can learn from your success?
Question the sacred cows of the industry. The AUM pricing model works great for high-net-worth clients. But if you want to help the mass affluent, you have to rethink pricing and business models.
Build your business in a scalable way: The way we've been able to scale is to build one repeatable process.
What was your inspiration to launch Facet?
When the first robo-advisors were getting a lot of attention, it seemed there was a movement toward a next generation of financial advice, more tech-driven.
Then, the [Labor Department's] fiduciary rule was defeated. The industry pushback [had been] if you do this, you're going to end up with 8 million households that will lose their advisor relationships because the advisors can't afford to service them and act in their best interest at the same time.
That was the big "aha!" moment. There was a big opportunity there — with the industry very publicly saying that they [would be unable to] act in the best interest of their clients.
