Subscription-based financial advice is beginning to take hold in Canada

Subscription-based models charge investors an upfront fee for creating an initial financial plan, followed by a monthly fee for ongoing advice.

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Some financial advisors are adopting a new, innovative subscription-based model that allows Canadians to pay for financial advice that may be particularly attractive to medium-sized and young professional investors.

With the new model, investors pay a regular monthly or quarterly fee for services such as financial planning. Advisors who have adopted this model say it becomes increasingly important as clients seek advisors who can meet their budgets and accommodate a flexible billing cycle – especially at a time when investors are increasingly considering how to pay for financial advice.

“The landscape is changing. Being able to go in the market and say we charge that way is a differentiator right now, ”said David O’Leary, founder and principal of Toronto-based Kind Wealth, a paid financial planning company that offers a subscription-based model in the form of a monthly redemption fee. “And now [the client] knows that we are objective, independent, and motivated to stick with you to ensure you achieve your goals. And that’s a big part of the reason why people contact us in the first place. “

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Many Canadians pay for financial advice through trailer fees or commissions that are included in the mutual funds that advisors sell to their clients. In recent years, many advisors have increasingly adopted a fee or asset-based model in which they charge investors a percentage of the wealth advisors they manage as payment for their services. (As a result, many advisors who offer either of these two methods enforce a minimum account size in order to take on clients.) A smaller segment offers a service fee approach, where clients pay a flat rate for a particular service, such as financial planning.

“The percentage of assets model ensures that consultants only work with the richest 3 to 5 percent of Canadians,” says O’Leary. “If you make a percentage of the investment, you can’t make money with the average Canadian with only $ 10,000 or $ 50,000 to invest.”

Mr. O’Leary started Kind Wealth with the underwriting model in 2017 to attract investors who don’t cross the threshold of traditional investment services and who are looking for financial planning options tailored to their specific needs, such as: B. Retirement, starting a business and traveling.

The clients who visit his company usually don’t know how much they paid their previous advisor and want to know how much they are paying for financial planning, he says. And customers who had previously done business with a paid consultant complained that they heard from the service provider a few times a year at most.

Instead, subscription-based models charge investors an upfront fee for creating an initial financial plan, followed by a monthly fee for ongoing advice. This regular fee is similar to the way consumers pay for utilities like electricity or streaming services like Netflix or Spotify.

While this approach is still in its infancy in Canada, it has grown significantly in the US as even large financial services institutions have adopted it.

In April, San Francisco-based Charles Schwab Corp. the introduction of a subscription service known. For a one-time upfront fee of $ 300 (for new customers) and a flat $ 30 per month, a financial planner provides customers with a detailed financial plan, automated investments, and unlimited advice. Previously, the service charged clients an annual fee of 0.28 percent of assets.

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Seun Adeyemi, president, chief financial planner and mortgage specialist at SA Capital Advisors Inc. in Toronto, began offering the subscription option after seeing increased interest in the model among investors south of the border.

He says subscriptions are particularly appealing to mid-sized and young professional Canadians who need financial advice but don’t have significant fixed assets or are unable to pay the high fees associated with traditional financial services.

“It’s easier for clients who don’t have a lot of assets,” says Adeyemi. “Canadians have more debt than income. They want to cut their bills. … The same trend will occur in finance [services] Industry. It’s only a matter of time.”

He believes the subscription model will catch on with larger financial institutions in the next five to ten years as investors turn to cheaper options like discount brokers and robo-advisors. In return, advisors to larger financial services companies will encourage their employers to introduce new ways for Canadians to pay for financial advice, Adeyemi says.

“As soon as the consultants push for it, the dealers have no choice but to adapt their business models,” he says. “When consumers leave the big retailers because they want transparency and advisors are proving their worth, advisors will be leaving and managing their assets elsewhere.”

Sandi Martin, partner, chief operating officer and financial planner at Spring Planning Inc., says the subscription model is a good option for investors looking for flexible, regular advice but may not work for all clients.

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Rather, she says her company’s approach to service works best for her customers as they typically need long-term advice on a variety of life milestones. Spring’s financial planners create a financial plan for clients at the beginning of the relationship and then conduct annual reviews to discuss performance and evaluate any adjustments needed.

“The subscription model may not work because our customers typically come to us at a time when they ask a big question, such as: For example, whether they are ready to retire or whether they are using their company in the right way, ”says Ms. Martin. “The way we are currently burdening customers is based on a year-long collaboration with us. This way works [because] We don’t often charge our customers. “

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