Facet Wealth is a financial planning platform for small-account clients, which are rarely profitable for traditional financial advisors, according to WealthManagement.com. The company "buys" small clients from advisors and moves them onto their platform, allowing RIAs to rid themselves of unprofitable client profiles, the publication writes.
A Win for Everyone, Big and Small?
Facet purchases client profiles at a one-time multiple of the revenue earned from them in a year — 25% upfront, 50% after client transition, and 25% at the end of the first year, according to WealthManagement.com. Facet then charges a flat fee, which initially averages out to around 45 basis points, the publication writes. Clients have the same advisor throughout their time on the platform, and if they hit $1 million, they can return to their original advisor if everyone agrees, WealthManagement.com writes.
It has yet to be seen whether advisors will move small clients off their books, or if clients would be happy to be moved to a partner platform, according to the publication. However, since beginning acquisitions in early 2017, Facet Wealth has grown to $23 million in assets under four advisors, WealthManagement.com writes.
The platform relies on computer programs to boost human advisors' services, resulting in an average of between 250 and 300 clients per advisor compared with the traditional average of 75, the publication writes. At the same time, while financial planning has normally been reserved for high-net-worth clients, technology could open it up to a wider audience, Alois Pirker, research director at Aite Group, tells WealthManagement.com.
Their technology processes client data and recommends some of the 30 most common services required by small-asset clients, such as budgeting, saving, and debt management, the publication writes. The plan is then checked by a certified financial planner, as there are still limitations to what technology can do, according to WealthManagement.com.
