Payday for financial planners

Plenty of clients with plenty of cash and a shortage of advisors. That means clients will have to be even more watchful.

By The Mole, Money Magazine's undercover financial planner

SEATTLE (Money Magazine) -- The future of financial planning looks pretty bright - at least from the perspective of us financial planners.

In a presentation Monday at the annual convention of the Financial Planning Association, Mark Tibergien, principal at the business consulting firm of Moss Adams, LLP, said we will have an "oversupply of clients with liquid assets" and an undersupply of planners. That's about as good as it gets, if you're a planner at least.

The Mole is a certified financial planner and certified public accountant who, in the interest of fairness, thinks you should know what goes on behind the scenes. Have a topic you'd like him to write about? E-mail

Tibergien noted that consumers now have $22 trillion in investable assets and that amount will grow by a whopping $5 trillion over the next five years. That's an opportunity to increase our revenue by $35 billion annually, which translates to 0.7 percent of assets.

Today, the average advisory firm has roughly $150 million under management but the amount is projected to nearly triple to $420 million by 2012. The average advisor's salary and bonus is $133,000, up from $90,000 in 2003, a compound growth rate of 10.2 percent.

Tibergien also called for a "new pricing paradigm." The overwhelming pricing model used by advisors is "assets under management." This means we charge you an annual percentage of the assets we manage for you. Tibergien noted two problems with this model:

It works great while the boomers are accumulating assets, but will result in less income as clients spend those assets in retirement.

Second, the pricing model defines us as wealth managers rather than financial planners - taking a percentage of assets doesn't account for services like tax-planning and risk management.

Unfortunately, Tibergien didn't elaborate on what the new pricing paradigm would be.

But if his forecast is at all accurate, it has implications for you (beyond considering a second career in financial planning.)

If we planners are in short supply and liquid assets are walking in the door, asking for our assistance, we are likely to focus our attention on the "optimal client" - those with the greatest assets. No matter which fee model we use, we can always make more money on the largest accounts.

So if you don't have a huge net worth, it may be hard to find a competent planner willing to work with you. It could mean that the ordinary consumer is even more likely to fall prey to being sold expensive products.

My advice to you is to get educated. Whether you use a planner or do it yourself, always remember it's critical to have a strategy and thoroughly understand it. After all, no one cares more about your money than you do.

Planners' conference falls short on ethics

More from the Mole in Money Magazine:

Financial advice: Get it in writing: When making investment decisions, believe what your adviser writes, not what he speaks.

The wrong kind of advice: When your planner steers you toward expensive investments, stop and ask the right questions.

Why 'trust me' makes me nervous: Planners try to make money for clients, but also for themselves. Anyone who says otherwise is trouble.

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