SAN DIEGO - Advisors must start thinking differently about pricing, says TD Ameritrade Institutional President Tom Nally.
"Pricing structures must evolve," Nally said during the keynote address at his firm's annual conference. "Traditional pricing models don't necessarily reflect the value of the advisor."
Planners should review the traditional pricing model of charging clients on a percentage of their assets under management, in the wake of low-cost alternatives from robo advisors, Nally said.
"Clients are looking to you as a financial life coach,” he stressed. “Financial advice has gone way beyond investment management. There's a tremendous amount of value that is not being reflected in current pricing."
WHAT'S THE ALTERNATIVE?
The problem, of course, is finding a reliable alternative to the tried-and-true percentage of AUM model.
"There's a tremendous amount of value that is not being reflected in current pricing," says TD Ameritrade Institutional's Tom Nally.
"We're entering a new world," said Skip Schweiss, managing director of advisor advocacy for TD Ameritrade Institutional, in an interview with Financial Planning after Nally's speech.
Robos charge clients around 25 basis points, and Vanguard is charging 30 basis points and offering access to a CFP if a client has more than $50,000 invested, Schweiss pointed out. He also noted Betterment's new tiered pricing structure that also includes human advice.
"Advisors have to look around at the competition," Schweiss said. "The landscape is shifting."
He acknowledged, however, that a retainer fee, an obvious alternative to the current pricing standard, is problematic.
'CLIENTS HATE WRITING CHECKS'
"Advisors always tell me that clients hate writing checks for fees," Schweiss said.
Some advisors are charging clients basis points on a percentage of their net worth, while others are dividing the traditional 100 basis point fee into 75 basis points for planning and 25 basis points for asset management, Schweiss said.
"We are in the very, very early days of alternative models," Schweiss said.
NEW MARKETING CAMPAIGN
Nally also announced that TD would be launching a major multi-media consumer marketing campaign.
The company plans to take material from its Human Finance Project, which illustrated why advisors chose their profession, and create a consumer-facing marketing and ad campaign, according to a TD spokesman.
Advisors will receive a new RIA Marketing Toolkit with templates and a range of print, digital and video content they can label and use for their own firm. "The thrust of the campaign is to educate consumers on what makes an RIA, why they are different from brokers and other financial advisors, and to promote that fiduciary advantage in the marketplace," the spokesman said.
