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Examples of categories of new entrants
We will now look at some of the new
entrants which we have divided for convenience of presentation into 7
categories. For bthose readers who do not wish to plow through all 7 categories we encourage you to focus on the first 2, which are most aligned with our own philosophy.
1-1- 1- Financial planning
advice only
This is one of
our favorite categories, since it addresses a fundamental need of many retail
investors, how to find low cost, one-time independent financial advice.
These entrants are aimed at DIY investors who
are looking for basic asset allocation / general financial advice which the
investor then uses to manage his/her own portfolio. These entrants have limited
costs since they generally offer no personalized advice in person, but
basically put investors in contact with pre-screened financial planners who provide advice (but no
actual investing) by phone or online.
Here are a few
examples of entrants in this category; in general, see the article by Emily Glazer in the Wall Street
Journal or as a PDF doc.22xx-
Glazer 2013 online investing- LearnVest.pdf.
LearnVest provides since 2012 budget
and financial (mainly asset allocation) advice through phone and online access
to one of a small number of financial
planners identified on the site at low monthly fees together with a one-time
set up fee which varies according to the level and length of support. The
entry-level plan for $69 provides a phone consultation, customized budget
breakdown and to-do list, and three months of unlimited email support. The
middle offering for $229 provides an initial phone consult, five-year financial
plan, one follow-up phone call to review progress, and six months of unlimited
e-mail support. The last plan for $349 adds in three phone check-ins and one
year of unlimited email support.
LearnVest
emphasizes that it provides access to CFP-qualified financial planners,
but plays no role in the subsequent investment process:
No Conflicts- We only sell financial advice. Our sole responsibility is
to our clients….We do not hold assets or place
trades for our clients. We do offer you detailed
portfolio analysis, and help you implement our recommendation with the provider
of your choice. In other words, we don't select the securities for you, but we
will develop an asset allocation strategy that meets your needs, and give you
step-by-step guidance on how to put it into motion in a smart, efficient way.
Here is how Emily Glazer et Tara Bernard describe this new entrant:
On
Wednesday, female-focused personal-finance website LearnVest.com for the first
time plans to roll out three new services that will allow its roughly 700,000
monthly visitors to develop financial plans with certified financial planners
for as low as $229–a fraction of the cost of many similar services. The
financial advice business is a complex and competitive market that has suffered
its share of past online failures. But by using Web technology and phone
consults, the New York start-up hopes to democratize an industry that has been
seen by many as costly and intimidating. A two-year-old start-up that has
raised $25 million in venture capital from Facebook investor Accel Partners and
other firms, LearnVest had previously restricted itself to offering women
online tools and courses on money management. Glazer or PDF
doc.22xx Glazer 2013 online investing- LearnVest.pdf
In the New York Times Bernard reports “A
start-up aims to bring financial planning to the masses” or as a PDF doc.22xx- Bernard NYT
2013 Learvest and
others.pdf : LearnVest is looking to
disrupt the ‘advice’ industry by arguing that “financial advice shouldn’t be a
luxury”; they are trying to deliver that advice by a combination of ”technology
and bona fide certified financial planners” at an affordable price. Instead of
charging the usual $1,000-3,000 for a financial plan “LearnVest charges $399
upfront fee and $19 a month, or $608 annually”.
What is different here, from some other technology based online companies in
the same general space, is LearnVest’s focus on financial planning first. They
analyze the clients’ spending and generate a customized financial plan
including: debt elimination, savings plan for child’s education and retirement
saving targets. The service also includes ongoing feedback mechanism to
monitor/notify if client falls off the wagon; they also specify an overall
target asset allocation to stocks and bonds without naming specific funds at
this time. The firm hopes to “revolutionize financial planning for the masses”.
The company is a Registered Investment Advisor. (By putting the horse(financial
planning) before the cart (investment management) where it belongs, they got
the priorities the right way around, and I hope they succeed in creating better
outcomes and perhaps even change the ‘advice’ industry).
MyFinancialAdvice.com
is an adviser search service
offered by a company which is a
federally registered investment advisory firm that can provide investment
advice. The company offers to connect clients by web and phone to
pre-screened financial advisors for inexpensive flat-fee advice. Advice can
cover investing, financial planning, taxes, mortgage, insurance and employee
benefits. The company has pre-selected various advisers with at least 3 years
of relevant work experience, required licenses and a clean regulatory history.
Advisors only provide their services by email and phone. According to Glazer,
the advisers charge on an hourly basis and charge between $100 and $300 per
hour.
The Garrett Planning
Network is similar
to MyFinancialAdvice.com. It also offers access to a network of financial
advisers.
Founded
in 2000, the Garrett Planning Network has grown into a national network of
hundreds of hourly-based, Fee-Only financial planners. Members of the Garrett
Planning Network provide their advisory services on an hourly, fee-only basis.
Members do not accept sales commissions or any compensation other than directly
from their clients. Clients pay only for the time an advisor works with or for
them. Garrett Planning Network members’ fees are based on the actual time
involved in meeting with a client in person or via the phone, researching and
analyzing that client’s current situation, and providing specific
recommendations and implementation assistance (if appropriate). Hourly rates
vary by Garrett member. Members, however, provide prospective clients with firm
quotes of their estimated fees at the end of an initial no-obligation Get
Acquainted session.
Glazer
describes MyFinancialAdvice.com and The Garrett Planning Network as follows:
Other
services, such as The Garrett Planning Network Inc. and myfinancialadvice.com offer access to
certified financial planners who charge $100 to $300 per hour, says Eleanor
Blayney, a certified financial planner and the consumer advocate of the CFP
Board, which grants the certified financial planner designation. Susan
John, a certified financial planner and national chair of the National
Association of Personal Finance
Advisors, says normally it takes anywhere from five to 40 hours to
produce a financial plan, depending on whether a client’s documents such as tax
returns and insurance policies are in order.….Ron
Peremel, founder and chief executive officer of myfinancialadvice.com, says the
biggest difference with the LearnVest offerings is that his company is a
federally registered investment advisory firm that can provide investment
advice. Sheryl Garrett, founder of
The Garrett Planning Network, expects LearnVest’s offerings to thrive within
its community of women, but she says many people will be more comfortable
dealing with a financial planner in person. Glazer or as a PDF doc.22xx- Glazer 2013 online investing-
LearnVest.pdf.
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