Starting a financial planning firm from scratch wasn’t an easy decision. In the end, I felt compelled to try to fill a void in the marketplace and better serve my clients.

The Foundation

When I left the house to attend college, my dad gave me a book called The Richest Man in Babylon, by George S. Clason. If you haven’t read it, I highly recommend it. The book is short and easy to read and the message is simple but priceless – the way to accumulate wealth is to pay yourself first and let your money work for you. Growing up I had always been interested in business and investing, but this was the first time I considered a career in personal finance.

A year or two later I read a book called Why Smart People Do Stupid Things with Money, by Bert Whitehead (also a great read). This book introduced me to the concept of “fee-only” financial planning. In an industry full of products and salesmen, the fee-only financial planner takes the role of the impartial advisor, working on the same side of the table as his clients and putting their interests ahead of his own.

This was a revelation to me. It made so much sense that in a world as complex as personal finance (which includes investments, insurance, retirement, taxes, estate planning and more) customers deserved the same level of care, what’s known as a fiduciary duty, that they were receiving in other specialized professional fields, such as law, accounting, and medicine.

The Problem

As I’ve worked in the field over the years, I’ve seen the fee-only movement gaining momentum, with many financial advisors transitioning from commissions to charging clients a percentage of assets they manage, typically around 1%. This method of compensation is much more transparent and more closely aligns advisors’ incentives with their clients’ than the old method. However, I found it curious that firms professed to offer holistic financial planning, yet were only compensated for investment management.

In deciding how to structure my own firm, I saw three issues with this business model:

Limits who can served. There are many investors approaching retirement or with complex financial lives who could greatly benefit from financial advice and have the ability to pay for it – yet don’t have a liquid portfolio for an advisor to manage and pull his fee from. Why turn them away simply because they have few assets to manage? I think anyone who has a need and the ability to pay should have access to high-quality advice, regardless of how many assets they have available to be managed.
Interests are not aligned. Advisors compensated on a percentage of assets would much rather you put more money into your investment account than pay off debt, buy a rental property, or go on an extravagant vacation. Every dollar you take from your accounts is money out of their pocket. I believe that creating an environment that is as conflict-free as possible gives clients the best chance of receiving advice that is truly in their best interest.
Puts all the attention on investment performance. Charging for one aspect of financial planning inevitably leads to a focus on that service. Many advisors who charge based on the assets they manage spend the majority of their marketing and retention efforts on trying to convince customers that they have a secret formula, magic bullet, or crystal ball. While prudent investing is a vital component to any financial plan, I personally have seen that the time and energy spent trying to “beat the market” could be much better spent on educating and planning other areas of clients’ financial lives.

The Solution

For these reasons, instead of charging based on assets under management, I designed my firm around an annual fixed fee, billed quarterly or monthly, and based on the complexity of each client’s situation.

This model allows me to work with a wider range of clients, further minimizes conflicts of interest, and allows me to be truly holistic in my approach, focusing on whichever aspect of a client’s financial life I can add the most value to at that moment.

I believe this model is the future of financial planning, as a profession. In the past, financial planning was a means to an end. The insurance agent did it in order to sell an insurance policy and get paid a commission. The investment manager did it in order to gather assets to manage so he could charge his fee. By contrast, this new model focuses completely on you and your needs, rather than a product.

SwitchPoint Financial Planning

In the end, I created SwitchPoint Financial Planning to provide holistic, unbiased advice that helps people simplify their lives and reach their financial goals. Whether you’re a long-time saver looking to make the transition to retirement or a seasoned business owner wondering how to minimize taxes and leave a legacy, our firm can help free you from the burden of managing your own finances on a day-to-day basis and give you peace of mind knowing you have a plan in place for your future.

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