Journal of Financial Planning: September 2016
The financial services world, and more specifically the financial planning profession, has jumped on board the next generation train and it’s likely there is no turning back. The endless—and seemingly increasing—stream of media and industry coverage about empowering next gen advisers and serving next gen clients, not to mention the money being thrown at next gen technology, continues to confirm that efforts to tackle this giant opportunity are, in fact, here to stay.
As the industry adjusts its focus onto next gen advisers and clients, at BerganKDV Wealth Management, we’ve been doing our small part—like many—to learn how our firm can begin to serve next gen clients profitably today, and more importantly, well into the future. Our journey launching our intrapreneurial next gen service model, Lifewise, has been filled with speed bumps and wrong turns, but we believe it has positioned us to effectively serve the clients who are undoubtedly the future of our industry.
Today, I’d like to share a number of those lessons learned—of which almost all have been learned the hard way—with the hope of saving readers from making many of the same mistakes we have made in our endeavor. I hope these lessons can serve as blueprints for helping other firms and young advisers cater to the next generation of clients who so desperately need our guidance on everything from student loans to insurance planning and cash flow management. So, here goes.
Launch Quick and Learn Fast
It’s been said that a battle plan rarely survives beyond first contact with the enemy, and this sage battlefield advice certainly holds true for advisers. One of the biggest mistakes we’ve made in launching our next gen service offering was our hyper focus on perfecting every detail from day one.
Financial planners are admirably driven to provide the best advice and service to clients, however, when it comes to developing a new venture, it often becomes critical to embrace the entrepreneur’s popular rallying cry, “Fail fast and fail often!” It becomes hard, but nonetheless critical, to remove the lens of perfection and to focus more on progress and speed of execution with a new venture.
For example, we spent countless hours estimating the time and cost necessary to serve next gen clients in our model and researching other advisers’ next gen pricing grids. All this effort was an attempt to arrive at the perfect model for charging clients an appropriate fee that would allow us to service them profitably. Upon settling on the pricing model we would use, it inevitably changed—multiple times. As feedback rolled in and as the real world met the model we’d designed, it helped shape what things would ultimately look like.
In the end this all seems so incredibly simple, but it is remarkably difficult to do. The point is not to diminish the value of thinking through and planning for the various aspects of your next gen service offering, rather to recognize that perfection should not be the prerequisite to launching. We’ve made countless tweaks to our website, marketing efforts, and niche focus, and it is all but inevitable that you will too. So instead of trying to hone in on perfection from day one, rapidly create a plan, launch quickly, and be ready to learn and adapt fast as candid feedback from prospects, customers, and trusted centers-of-influence floods in.
Strive to Keep Things Insanely Simple
It’s almost counterintuitive in the hyper-connected and choice-filled world we live in to think that simple is better, but the power of simplicity when starting a new venture should not be overlooked. It is far easier to add a feature, a new aspect of your service model, a custom field in your CRM, or even a great client perk than it is to remove one at a later date—especially once a client or staff member has come to expect it.
To combat the inevitable creep of complexity in designing a service model or while imagining what your next gen firm or solution might look like, it helps to keep one simple, yet difficult fact in mind: none of our clients actually want financial planning. It’s sobering, but true. That fact should not devalue the actual process of the planning we do, but rather serve as a reminder that quality financial planning is a means to an end, not an end in itself.
All people really want are the immeasurable benefits that come with the powerful process of financial planning, and coming to this realization has become incredibly powerful for us. It has helped focus our service model development on only the essentials for delivering extreme value to clients and has helped clarify our messaging around the important benefits, and away from the often easy-to-highlight features.
While we were not guilty of overcomplicating things in every aspect of launching Lifewise, there were certainly areas in which we were zealots not of simplicity, but of its evil sibling, complexity. After all, it’s fairly easy to fall victim.
Here’s an example: when we first started developing the concept for Lifewise, we mocked up a handful of various service models. We had a model for everyone. From basic investing, planning “lite,” regular planning, turbo-charged planning, and more. If you name it, we had likely thought of it. The pricing scheme was full of ranges that required at least a first call before being able to quote the pricing, adding confusion to prospective clients, and potentially slowing down the sales cycle.
We ultimately landed on three different pay models (see the infobox below for details). Our shift in mentality took us from, “How do we add more features?” to “How can we take away features to simplify the lives of our clients?” This is not in an effort to water down the value of the financial planning delivered, but rather to look for ways to simplify the delivery of that value.
Refine and Perfect Your Distribution
There is likely no more critical aspect to the success of a new venture or business, especially when looking to serve next gen clients, than your ability to distribute it to the world—and more specifically, to your niche. We’ve learned this both empirically and while witnessing the remarkable battle that is playing out in the robo space as Betterment and Wealthfront vie to take on the eight-hundred-pound gorilla, Schwab.
An apt analogy in the robo world pits Betterment as the Tesla and Schwab’s Intelligent Portfolios as the Ford Fusion. One is sleek, sexy, and hip, while the other is impressive in its own right, but ultimately built on the chassis of older technology. The difference is moot, however, as Schwab’s robo platform has amassed more than $5 billion in roughly a year, while it’s taken Betterment nearly a half decade to amass an equal amount. Schwab’s brand, marketing, and distribution capabilities make its arguably lesser product a non-issue, only further stressing the relevance of finding ways to leverage your firm’s existing brand, distribution, and marketing efforts to bring your next gen venture to life.
Now certainly none of those reading this are likely to be able to match Schwab’s capabilities when it comes to marketing and brand dollars, but that’s not the point. The point is simply that when launching a next gen service model inside a firm, you have a distinct advantage many of the brave next gen entrepreneurial advisers would kill to have—distribution.
Lifewise operates within BerganKDV, a once small-town CPA firm that has evolved over decades into a regional business advisory firm with nearly 300 employees. This has allowed us to explore different ways of bringing Lifewise to the world through our many in-house CPAs and children of our existing wealth management clients.
Although we have yet to find the perfect sauce, I’d encourage anyone looking to serve next gen inside their firm to spend the vast majority of your time, energy, and effort focusing on developing and executing a plan to bring your venture to market. Technology can help advisers become incredibly efficient at serving clients, but it has yet to solve the primary issue of how to acquire them.
Understand Intrapreneurial Challenges
A common misconception about being an intrapreneur is that it is a merely a watered-down version of entrepreneurship. It’s not. In fact, it’s far from it. Intrapreneurs face a wide variety of additional challenges, such as fighting organizational resistance to change, tactfully championing the patience necessary to allow new ventures to work, managing expectations of the new venture among key stakeholders, and most importantly, garnering support of an idea to get an initiative off the ground in the first place. Certainly, the security of knowing where your next paycheck is coming from as an intrapreneur adds an element of safety to the path, relative to being an entrepreneur, but nonetheless both paths remain chock-full of challenges.
One of the fundamental challenges intrapreneurs often face is organizational resistance to anything that even remotely resembles change. Oftentimes, as organizations grow and become increasingly successful, they become creatures of habit, which is usually what plays a major role in their success. The ability to consistently, without fail, deliver upon a value proposition is what allows businesses to thrive and grow. Unfortunately, it is this same strength that can become a weakness, if left unchecked, and could potentially stymie the same creative thinking that allowed success to occur in the first place.
Combatting any direct or indirect resistance to change is necessary from the start in order to get a next gen initiative off the ground. To do this, it can be helpful to paint a picture to key decision makers of what is ultimately possible and what opportunity your company may be missing out on if they fail to act.
By showcasing the opportunities that exist, like entering into a new target market (millennial entrepreneurs, for example), decreasing the average age of your client base, or creating a major engagement and training ground for young adviser talent, you create a vision of what the future could look like. In the end, the vision and the benefits of that vision will be different for every firm, but the necessity of painting that picture to garner key decision maker support is critical to serve next gen clients outside the norm of a business’s existing focus.
Matt Cosgriff, CFP®, is a financial adviser at Lifewise, powered by BerganKDV, which helps young professionals live great lives through effortless financial planning. Follow him on Twitter @matthewcosgriff.
Sidebar 1:
Profile of an Intrapreneurial Effort to Serve Young Professionals
Lifewise is BerganKDV Wealth Management’s intrapreneurial service model designed to provide effortless financial planning and investing to next generation clients.
The mission. Genuinely committed to helping busy, young professionals live profoundly great lives through effortless financial planning.
Service models. Three separate service models: Invest—low-cost investing with access to an adviser; Consult—planning “lite” for anyone looking to tackle a few basic planning needs; and Plan—comprehensive and ongoing financial planning guidance for young professionals. A free Learn model for individuals looking to organize their financial lives with technology is also offered.
The set up. Lifewise is set up as a DBA (doing-business-as) separately branded service model operated within BerganKDV’s wealth management department. It is designed to allow any adviser to work with clients in it.
Sidebar 2:
Should You Brand Your Next Gen Service Offering Separately?
It’s a common question among advisers who are considering launching a next gen service offering within their existing firm: “How do we know if we should brand it separately?”
There is no right or wrong answer to this question. It comes down to the unique characteristics of your firm, who you are attempting to serve, and more importantly, how you intend to do it.
For us, it was clear from the beginning that we’d likely need to brand our service model separately for two reasons. First, BerganKDV is largely a business advisory firm focused on helping businesses solve complex business, financial, and technology challenges. Not exactly the marketing engine for catering to busy, young professionals. Our firm’s business-to-business brand would make it too difficult to communicate and connect with our target market effectively, both in the community and increasingly online.
The other reason we ultimately developed a separate brand was that we wanted to provide comprehensive financial planning to busy, young professionals—not just accommodate them with a low-cost robo solution. For firms looking to simply accommodate heirs of top clients, it likely makes more sense to leverage the existing brand, while differentiating the service offering by naming it something that can piggyback on the existing firm name. Think iABC Wealth Management or ABC Company Lite—something that differentiates the lighter service model and sets expectations accordingly.
—M.C.
Learn More:
Journal in the Round: Looking Ahead to the Next Generation of Clients and Planners
This month's Journal contributors Matt Cosgriff and Cynthia Joyce dive into the challenges (and solutions) financial planners face in bridging the gap with the next generation. They are joined by former FPA NexGen president Andrew Silversen to discuss attracting and retaining millennials, both as clients and as emerging leaders in the profession. The roundtable is followed by a live Q and A, moderated by an FPA Knowledge Circle host. September 28, 2016 2:00 PM Eastern. Register HERE.