Lon Dolber (left), Ralph DeVito, Amy Webber and David Stringer (Photo by Tom McKenzie)

What’s your view of challenges tied to Amazon’s impact on the broader business world and investors’ rising expectations about quick, high-quality digital-based service? How do you make this an opportunity? 

David Stringer, Prospera Financial: You can’t ignore the technology advancements that are happening. You’ve got to embrace them, and you’ve got to innovate and stay current. You’ve got to move forward with the technology.

But there are some basic things that just stay — like having a clear value proposition. We’re building our firm very much like a good advisor will build their practice, with a clear value proposition, scalable business processes and a great client experience.

We know people value the fact that 40% of our advisors have been with us for [at least] a decade. And the only reason this is at that level is because we keep adding new advisors.

We just have people who value that experience, and we have not found that we’re behind the curve on technology — because we stay in the business; we participate. We understand what people are doing out there, some of the changes that are taking place and are trying to advance the ball with all that. But we also try to stick to our knitting. We’re a boutique firm, and we’re trying to be the best boutique firm we can be and are not trying to compete on scale.

For us, the driver that we follow is net asset flows. If net asset flows are coming in for an advisor and for the firm, we’re growing. If we get net outflows, we’re shrinking.

And with compression going on, you’ve got to have more assets to make the same amount of money. That to me is a driver for how you build a scalable business, whether you’re at the advisor level or at firm level; it’s working for us.

Amy Webber, Cambridge Investment Research: It’s interesting being [different in terms of size] but still very similar.

Start with your value proposition, and ours is client experience, an intimate client experience. The trick for us has been scale and still maintaining that client experience, as it is still in demand. And that’s where the technology comes into play.

It allows us, if we do it correctly (despite the lack of a common data format) to take control of that ourselves and to partner with some entrepreneurial technology firms, but a lot of it is ours.

We have a situation right now where our end-to-end digitization, along with client experience, means we believe in being fully digital end to end. Ultimately, we need to get to this, because we need to compete and to be able to compete on price, as well.

Really this is all about the advisors. They have to compete — and they need more from us for less [cost] now, so they can really go out and compete in the market.

Lon Dolber, American Portfolios Financial Services: We decided to eliminate as many hands as there can be in our pocket.

For instance, we went out to the advisors and said, “We can integrate something that has all the bells and whistles [others] charge you for. What if we could give you the basic platform, which means you could put five or six money managers into one account? Will that be enough? And we could do it and not charge you, because we recognize that to help the advisors scale, we’ve got to bring our costs down.”

We decided to do that by building a platform. This end-to-end solution is going to be important … for the public and for the advisors, so they can open up accounts quicker, easier and in a more digital fashion.

What about the future? Right now, we go to one advisor, and they bring about 400 clients to the firm. What if we could go to one network and bring three million relationships to the firm? I’m not talking about going direct to [investor] clients; that’s why robo jumped the shark — because the cost of the client acquisition was too expensive for the price point that it offered.

What if you went directly to a network of relationships? To do that, you need to have an end-to-end solution that somebody could point to, that a network could point to. I see that down the road.

Now, with that said, you start by building that index solution for your existing customers, who are financial-service professionals, so they can open up accounts quicker and more efficiently. To me, having an end-to-end solution is very important; we’re building it internally now.

That’s not to say that we don’t have some partners. We have a partner called CGI that’s building our client front end [technology]. We do integrate; but to keep costs down, we’re building a platform that we own and control. That’s important.

Webber: What we’ve learned over and over is that there is a generation of advisors that don’t always use all the new bells and whistles and another generation that’s coming in and demanding them and using them like crazy — that’s the right time to invest the dollars to build the sophistication on the other end. We’re telling advisors they have to be prepared for the generational wealth transfer. We spend a lot of time balancing that.

Dolber: To do what you just said, you really have to walk in the shoes of your customer, and you’ve got to ask them to do this together; let’s do the design together.

Webber: We have a New Century Council of advisors, and it’s celebrating its 10-year anniversary. It started as advisors in their mid-40s and under. However, I would have had to fire myself a few years ago, so I realized that we’d better stop talking about age if I still wanted to be a part of this conversation.

But it’s the forward-thinking advisors, and we just had a meeting with them; they’ve now added virtual reality, augmented reality. They’re telling us what they think the financial planning, UMA, wealth management and fully digital platform needs to have three, five or seven years from now. That’s how we got to where we are today, by working with them for 10 years.

Dolber: Have you brought in the end customer at all?

Webber: We have not. It’s a delicate situation for a financial-solutions firm working directly with the end investor in any way. But if we give [advisors] the tools, they can go out and have those kinds of conversations with their [own] client advisory boards.

Dolber: Have you ever invited, with the permission of advisors, [advisor] customers to the national conference?

Webber: We have not. Have you?

Dolber: We did and then we met with them afterwards. It went well. We were concerned about some of the things they might hear, but we thought it was still worth it to get their opinions. We did, again, do this with the permission of the advisors, and advisors are pretty keen on having it happen.

We had a whole group of end clients come and participate, and they gave some interesting feedback. From the design-thinking point of view, it’s essential to have the end client involved on an ongoing basis.

It can’t just be the advisors, your staff and be top down. It’s got to be bottom up, as well, and has to include the investing public; it is tricky, but you could do it with the permission of the advisors.

Ralph DeVito, The Investment Center: How do you balance the group [of advisors] you bring in [to discuss tech]? We have an advisory council of forward-thinking folks. Everybody says, “We need ‘this.’” We spend all this money to build “this,” but then no one buys it.

Stringer: We look at them through the [tech] adoption bell curve. We’ve got an early adopter group, roughly 10% or about 10–15 of our advisors. We’re a small firm, so we have to be nimble and quick. Still, it looks like some of this is taking off; we get [new tech] adopted pretty quickly.

But we’re not going to do the experiments, though the bigger firms can.

DeVito: We look at this whole plan of everything integrated, and it’s coming together. What we’re finding is that we have to teach each rep or regional office one on one; by doing that, they learn to adapt and get into that [innovative] mindset.

Webber: Actually, regulation can positively impact some of this. I can’t believe I just said that, but I did. From a tech perspective, we’ve been talking about goals-based financial planning, comprehensive financial planning, that’s where we’ve really been.

And the traditional advisor would charge an asset management fee and still be doing all kinds of comprehensive financial planning, but not documenting that in their value proposition. That’s just how they did business with investors.

Then the DOL [fiduciary rule] hits the street, and everyone wakes up and realizes: Hey, transparency is important. I should start articulating my value proposition. The cost compression, the price compression on asset management is coming down. My clients want me to charge less and still provide all these services. Maybe if I articulate what I do differently I can actually make sure that my clients understand all the hours that I’m putting in.

About 1% of our revenue came from financial planning some two, three or four years ago; over the last two years, that’s now up to over 15% in planning under our corporate RIA. Today, 52% of our advisors are actually doing full financial planning.

Now, they’re not doing the old-fashioned binder financial planning. They’re using the digital tools to do goals-based financial planning, which is really what we think the future is.

And 50% of them are absolutely doing this on an ongoing basis, whether that be the new innovative stuff that they’re looking at, subscription-based financial planning and different terms or different ways of doing ongoing financial planning. I don’t think their behavior is different; it’s just the tools they’re using [are], and how they’re delivering it and articulating it.

Dolber: What’s your view of subscription-based work and its future?

Webber: Our advisors are using it and are having huge momentum. Also, there’s more new partnering with it, and it’s all about life planning. They’re partnering with outside … services that all investors want or use in their segment.

It’s fascinating. It could be tax planning, or an advisor could partners with a nutritionist and a fitness instructor and do a 90-day boot camp. They charge [a set amount] and split it [three ways], … but the client only has to write one check.

For 90 days, they can come in, and they can work out next to the financial planner, who is not giving them high-level financial planning advice through a normal financial planning engagement form; [clients] have access to the financial planner at the same time that they’re getting nutrition advice and fitness workouts.

Cambridge is being the facilitator to make it really simple for a client to think about their whole life. Now, that investor actually understands that their financial planner cares about their entire life, cares about their health and wellness, cares about taxes, for instance. Most of the time, it’s going to be a combination of services that have to do, perhaps, with their financial picture — but it doesn’t have to be.

Dolber: Are you getting a lot of traction with that?

Webber: It’s starting to. The early adopters, they’re the innovators, and they’re getting a lot of traction.

Dolber: And that could be the answer for a lot of younger people. They want that experience.

That’s very different from their parents, getting back to [the theme] “not your parents’ advisor.”

Webber: We need to listen. It’s about listening. The answers are out there, or at least the beginnings of them. I was with an intern listening to an advisor panel, and the average age on the panel was 58–60.

The young lady crossed her arms, looked at me and said, “I will never do business with any of those people, because they don’t understand us.” We have to listen to the market. Amazon CEO Jeff Bezos always listened to what he was being told by the market.