As part of an effort to make their mark on the industry, many members of the Financial Planning Association's NexGen group of young advisers have targeted the underserved middle market — those with less than $500,000 in investment assets — as a niche that they want to develop in the future.
Members of NexGen, who can be up to 36 years old, have expressed frustration that many people in their age group can't avail themselves of financial planning services, because of insufficient assets.
"We want to be able to say to friends of ours and [to other] young people that we have an answer," said Courtney Graber, an adviser at recently formed Relevant Financial Planning LLC in Elkhart, Ind., and a member of the Denver-based Financial Planning Association's NexGen group. "It is wonderful to see young people wanting financial advice."
THE PROBLEM
Despite a desire to serve the middle market, many firms whose business model is based on assets under management feel that it isn't economically viable to do so.
Citing his fiduciary responsibility, Aaron Coates, another adviser at Relevant Financial, said that it would be irresponsible to charge someone $200 to tell them to pay off their debt.
"It seems that most of the market is aimed at the high-end mass affluent and the high-net-worth group ... and it is not worth taking the time to go to the mass market," said Robert Ellis, a senior analyst at Celent LLC, a Boston-based consulting firm.
He added that the key to serving the mass market is through technology. Mr. Ellis noted that financial advisers can't spend time serving those who don't provide enough of a value proposition for advisers.
However, some advisers think that the best way to establish the profession is to reach out and serve clients who aren't necessarily affluent.
"We truly cannot be a profession if we are only serving the higher end and ignoring the middle class," said Joe Pitzl, a financial adviser and certified financial planner at GEN Financial Management Inc. in Plymouth, Minn., which manages $90 million in assets.
"For us to become a profession, we need to find a way to do that," he said, adding that young individuals and couples are in a tough spot because their assets aren't large enough to allow them work with an adviser.
Someone who earns $75,000 to $100,000 a year with excess dollars to invest may not be able to find an adviser willing to give them the time of day, Mr. Pitzl said.
One company that provides financial planning to the middle market is Boulevard R, a Healdsburg, Calif.-based interactive website that offers financial plans to individuals for $49 (
InvestmentNews, May 12).
The tool asks the user questions about his or her short-term and near-term goals and creates a plan based that input.
The site's higher-priced option is its Roadmap plan, which includes a one-hour consultation with an independent financial planner, for $199.
'MORAL IMPERATIVE'
"There is a feeling that there is a moral imperative that people need help and don't qualify for professional help on an ongoing basis," said Matt Iverson, chief executive of Boulevard R.
"For us, it has become obvious that it is a significant problem for Americans," he said. "We developed the ability for planners to have an efficient work flow and provide guidance for that consumer to be able to engage with an adviser [familiar] to their certain situation."
Another firm that aims to champion the cause of the middle market is The Garrett Planning Network Inc. of Shawnee Mission, Kan., which has created an international network of independent financial advisers and planners who offer hourly as-needed financial planning and advice to anyone regardless of income.
Many new advisers grew up in households that didn't employ any form of financial planning.
"[Many of us] want to help [financially unsophisticated] people because they are where we come from. None of us are independently wealthy coming into this industry, and there is a call to disseminate education and advice to people who aren't typically targeted," said Jason McGarraugh, a retirement specialist at Neal Financial Group LP in Houston, which manages $100 million.
"The desire of NexGen is to want to work with that market, because it is how they grew up. They want to make a difference," Mr. McGarraugh said.
E-mail Aaron Siegel at [email protected].
