LPL Unit Buys Veritat, Aims to Bring Financial Planning to Masses

New advisory platform marries LPL’s advisory know-how and marketing prowess to principles of academic finance

Veritat Advisors, the brainchild of Wharton professor Kent Smetters, may have been the smartest advisory platform for serving the mass market but it was surely also the among the smallest.

Now, in a rare combination of brains and brawn, LPL’s newly created subsidiary NestWise has acquired Veritat Advisors and plans to scale up the startup’s robust financial planning platform to reach the underserved middle market.

NestWise, a newly formed and wholly owned subsidiary of LPL, on Tuesday announced plans to use Veritat as the chassis on which to build a vehicle that can reach an estimated 32 million middle-class households that have the financial ability to save.

Kent SmettersIn an interview with AdvisorOne, Smetters (left), who will serve the new venture as a consultant after completion of the sale in the third quarter, said LPL’s financial and personnel resources offered the key missing elements his startup lacked.

“The real advantage that the new platform’s going to have is a lot more marketing support for the advisors and a skilled group of people who are not coming in part time [as were a number of Veritat employees]; they’re all-in,” he said.

Smetters added he saw “very little overlap” in this marriage of LPL’s business acumen and Veritat’s unique automated yet personalized financial planning approach.

“What we bring to the table is technology and a lot of thought about what clients want and what advisors want,” Smetters said. “What NestWise brings to the table is lots of industry experience about what motivates advisors and lots of marketing to help them acquire clients.”

With Tuesday’s acquisition, the recently formed LPL New Venture officially becomes NestWise, which will operate Veritat under the new NestWise brand. Veteran LPL executive Esther Stearns will have day-to-day responsibility for the new venture, which rolls out in the fourth quarter.

Stearns, formerly president of LPL Investment Holdings, told AdvisorOne that NestWise’s essential mission of providing affordable personal financial advice for the mass market matches that of Veritat, and does not overlap with LPL, whose advisors target mass-affluent and high-net-worth investors.

Esther Stearns“When I first met Kent, I was absolutely struck by how much his beliefs aligned with NestWise,” Stearns (left), one of AdvisorOne's Top Women in Wealth, said. “Kent has built the tool that is really optimal for this market.”

Smetters’ platform, the subject of an extensive report by AdvisorOne earlier in the year, is based on using both technology and personal service to provide objective, transparent and comprehensive financial advice based on principles of academic finance.

“The academic side of it very much stays,” Smetters says, including helping middle-class investors prioritize through goals-based investing and modeling risk in a more sophisticated way than mere Monte Carlo analysis, he added.

While that “chassis” remains the same, Stearns says NetWise will add to the structure in three main areas. First is a “consumer education program, which will really be able to help [investors] identify what is most important to them,” Stearns said.

The second addition will be “professionaly designed managed portfolios,” which are fee-based. “Some will be based on strategists from outside the firm and some will be based on the work of NestWise investment managers,” Stearns said, adding “they will be specifically tailored cost-effective options in this marketplace.”

The third key expansion will be in the area of training and development of financial advisors, which will be particularly important given Stearns’ expectation that many of them will not have previous experience as financial advisors.

“They will be entrepreneurially minded people who have a good way with people and who want to build a good business,” Stearns said. “We think there’s a lot of second-career opportunities.”

Beth Stelluto, NestWise’s chief marketing officer, says Veritat will continue to operate normally until the new firm’s launch. “We’re aggressively moving toward the close,” she told AdvisorOne. “The important thing is that Veritat will remain in place until we officially launch NestWise in the fourth quarter.”

Neither NestWise nor Veritat disclosed the terms of the sale.

Smetters, in addition to his consulting with NestWise, will continue his role as a full-time professor at Wharton. His entrepreneurial foray into the financial advisory business was based on his view that the middle class remains an untapped market with a great pent-up need for financial advice.

He says NestWise will carry on that vision. “[Veritat] continues as an RIA. The basic model maintains; and the mission maintains,” he said.

Adds Stearns: “We are all about how we develop new financial advisors to [provide] personal financial planning to the mass market.”

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Check out story on Smetter's Veritat, Wharton Professor Gives Advisory Model Radical Makeover, at AdvisorOne.

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