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Fidato Wealth and Facet Wealth – a case study in migrating clients’ who no longer fit the profile of a fiduciary firm
Ian McKenna posted a blog entry in In|Vest West 2018How should an advisor with a fiduciary duty to their clients’ address client’s who no longer fit within the optimal client profile of the advisor firm? Facet Wealth has created a novel way to help advisor firms with clients who are no longer in their core customer segment by buying part of a firm’s book so the vendor can focus on growing their core target audience. Facet was established early 2016 when co-founder Anders Jones was motivated to find a solution to help the 8 million households who would potentially lose their advisor had the DOL rule proceeded. Using proprietary technology including artificial intelligence the firm aims to reduce costs and make advisors more efficient. They targeting mass affluent customers rather than high net worth. Advisors working for Facet are not asked to sell but their bonus is based on client satisfaction and similar measures. The firm currently have nine advisors and expect to be at twelve by the end of the year. They have low hundreds of clients who have fully transitioned and around another 1,000 in process of transition. The firm does not have a bricks and mortar presence but works virtually. Fidato Wealth are an example of a firm who have transferred clients to Facet. During the last year Fidato identified that their ideal client is an individual who is not retired yet, in the 50-60 year bracket with a net wealth of over $1,000,000, and business owners within three years of an exit event. In assessing their optimal clients’, the firm also recognised that as a fiduciary they had a duty to identify to clients when they were no longer the right advisor for them. They have migrated two groups of clients away over the last year. The first were moved across to a retail branch of TD Ameritrade as they had not yet come across Facet at that time. Fidato recognised that each advisor can only handle so many households, they also looked at if they should create an in-house robo but felt that would take away and dilute the brand. The second group of clients they transitioned away they moved to Facet, a dedicated CFP who will provide them with a full financial plan. The latter group of clients who were transitioned away actually saved money on their fees. Facet see their target audience as the 33-million mass affluent households in the US, defined as $100,000 to $1,000,000 investable assets, excluding home equity. They have also identified that there are approximately 8 million households in the US who have a relationship with an advisor where that relationship is not profitable for the advisor. If a client grows above $1,000,000 Facet will send them back to the firm they came from. Facet use Pershing, Schwab and TD as custodians and are adding Fidelity. Fidato found their clients were happier that, while moving away, they were able to stay with the same custodian. Facet have already entered into about 20 partnerships and raised $33 million of funding in September. While an advisor who hold physical meetings typically have 75 clients, Facet advisors look after 300 each. The philosophy is to use technology including AI to reduce the three hours of admin an advisor typically undertakes for every one hour they spend with clients down to virtually zero through the use of their proprietary technology. This form of part-sale partnership is certainly a fascinating model and would appear a far better option than simply turning away unprofitable clients.