Kitces: Pandemic to Accelerate Shift to AUM-Based Fee Model
May 13, 2020 by Jeff Berman
The financial advisor’s compensation model has been shifting away from commissions and toward recurring fees for several years, and the COVID-19 pandemic stands to make that transition happen even faster, according to Michael Kitces, head of planning strategy at Buckingham Wealth Partners.
“I certainly think this event is going to escalate the movement and the shift in advisor business models” to one based on clients’ assets, he said Wednesday during the Virtual Financial Advisor Summit produced by Broadridge Advisor Solutions and financial advisor marketing firm Advisorist.
The pandemic is “making the future get here faster than anyone expected, which I suppose is ironic because right now it feels like April lasted about 183 days,” he joked.
For Kitces, it is a transition that advisors should fully embrace because the main advantage of having recurring revenue is simple: “When you wake up on January 1 and you’ve got that revenue in place and all you have to do is be awesome for your clients, your mentality changes, your focus changes, the economics of your business change.”