fbpx

Innovations in Financial Services with Natalie Taylor

Next-gen technology is taking a bigger role in financial services with innovators trying to expand the role of financial planning for a more general audience—changes that will alter the RIA industry as well. As with most glimpses into a crystal ball, future projections may only be conjecture, but what is coming next could have a monumental effect on fintech … and advisory services as well.

On this Elementality podcast Reese Harper welcomes Natalie Taylor. Director of Financial Advice for LearnVest and current Head of Financial Advice for Monarch Money, another startup, Natalie has spent her career trying to disrupt fintech’s status quo. With the financial services landscape shifting and innovations coming soon, find out where the role of an RIA might fit best in the future.

 


Podcast Transcript

Natalie Taylor:
Just like TurboTax will never put CPAs out of business. There is always going to be a need for complex planning that I don’t know that any software without a human… There’s just so many variables and so much there that I don’t know that software will ever be the solution from a complexity standpoint for a certain tranche of clients. And so, and that’s okay.

Abby Morton:
Welcome to Elementality. I am Abby Morton, CFP and Producer of our podcast here at Elements. I love being a financial planner, but I know it’s a challenging profession as well. That’s why the number one goal of our show is to help you prosper as an advisor, as you better connect with your clients. We know your time is very valuable. Plan on a good return when you spend it here with us.

Reese Harper:
Welcome to Elementality, everybody. Another episode this week. I’m really excited. The sun is shining. It’s a beautiful summer day. The mountains got a little cooler today, which is nice. We’re not 95 and really excited with kind of on this vein of better weather. I’ve got somebody who I’ve been admiring for a while because she has a really unique perspective on both FinTech and financial advice. Both from a consumer perspective, she’s working on an end consumer DIY oriented tool that we’ll talk about today. She’s also had a lot of experience consulting and coaching and speaking and doing financial advice and I just think she’s a brilliant person. So I’d like to welcome Natalie Taylor to the program. Natalie, welcome.

Natalie Taylor:
Thanks so much. Thanks for having me.

Reese Harper:
So I am not wanting to give your whole introduction. I want to let you tell us a little bit about how you… Give us a little bit about your background and how we got to the place to where you’re at today with Monarch and this new career path that you’re going on.

Natalie Taylor:
Yeah, so I being a financial planner was my first real job and I came into it by accident. I had trouble finding a job and ended up being a financial advisor because my older sister’s college roommate became a financial advisor and said I might like it too. So that’s the real story of how I became a financial adviser. But I ended up really loving it. So I was in private practice for eight years with Ameriprise and I learned a ton. I had a phenomenal mentor there, and I did comprehensive financial planning and I learned so much through all of the casework that I got to do. We did investments and insurance and we were financial planning first. So every client was a financial planning client. If they needed to implement, then we would offer implementation for them, but we were really financial planning first.

Natalie Taylor:
And those years of casework and learning were so phenomenally helpful. I thought I would take over that practice and do forever and then that didn’t work out. And what ended up happening is I realized that I was helping people my parents’ age for money and helping people my own age for free, which I feel like is a very common story.

Reese Harper:
Very common, yeah.

Natalie Taylor:
And so I started looking into how could we use technology to serve my demographic. And in doing that research, I found LearnVest, and this was nine almost 10 years ago. Actually I was pregnant with my first son and he just turned nine. And I was really excited about what they were doing. They were wanting to make real financial planning, fiduciary level financial planning, affordable, and accessible for the masses. And they were trying to help people in their ’20s, ’30s, and ’40s. And I was like, this is the thing. I want to do that. And around that time I had my first baby and we moved 200 miles away. So through that series of change, I ended up leaving the practice that I was part of and joining LearnVest, which was just a phenomenal experience. I got to do so many different things.

Reese Harper:
Give some context for why you think what worked and what didn’t work?

Natalie Taylor:
Yeah. That’s a great question. There was a lot that worked. I mean, I think one of the things that we did best is we were one of the first millennial friendly, I’ll say financial brands. Wasn’t just five tips for your summer vacation or whatever.

Reese Harper:
Yeah, totally. I feel like that’s how it is a lot of the time on NerdWallet or something or [inaudible 00:04:30]. It’s like, this is like the best place to travel in the summer for cheap.

Natalie Taylor:
And it’s like, sure, that’s helpful. But I think what we did really well was bridge the gap between accessible content and real financial planning in the RIA. And part of my job was to take, because we started as a content site. So part of my job, one of the things I did there was managing the brand voice. And in that role, I had to take this millennial friendly upbeat brand voice and translate that into RIA speak so that we could still be like a trusted enough that if I said, go sell this house and buy that house or put all of their money here instead of there, that it had enough credibility for clients to do that.

Natalie Taylor:
So I think there was a lot that worked about the way that we were able to connect. I got to do some research throughout my time there to learn more about our users, and our users trusted us. And to be a trusted financial brand is extremely difficult. I think there was a ton that we did well there. I think the idea of doing more efficient, scalable impact, weighted financial planning, one of the phrases we used internally was directionally correct advice, which from a CFP standpoint might make you bristle.

Reese Harper:
Because we’re used to Monte Carlo Simulation level precision as opposed to directionally appropriate.

Natalie Taylor:
Yes. To think that if we’re 80, 20, I said like 80% of the things that that’s enough for our client, I think was a real shift in thinking. But I think it was really valuable because it allowed us, because ultimately it’s false precision, right? Like who the heck knows what insurance…

Reese Harper:
Oh, yeah. It’s not like the inflation assumption that you made on your rental property income assumption in the Monte Carlo Simulation’s going to be precisely accurate.

Natalie Taylor:
It like do I need a contractor and handyman. You don’t hire a contractor to hang a picture frame… Well, my parents do that.

Reese Harper:
Yes. Yeah.

Natalie Taylor:
So I think that was transformational thinking for us, this idea of directionally correct is good enough. And I think ultimately maybe a better way to describe it is what we started to understand as we built product, like from a tech standpoint did the product build, which was that rather than being directionally correct, what might’ve been more accurate to say is to say that we were impact weighted. Where can I have the most impact for this person? If I can only spend X amount of time preparing for these clients and X amount of time on the phone with these clients, where can I have the most impact in their lives? And I think as a profession, we would do well to focus there, is to say not where am I most well-versed or where can I sound most intelligent or what’s my special sauce that allows me to charge 25 bips, more than someone else does. It’s like, where do I have the most impact for this person?

Natalie Taylor:
And so I think that’s another thing that LearnVest did really well. I think in terms of what was hard, the list of things that didn’t work was long. But I think part of what didn’t work is that it started out to some extent wanting to create like a TurboTax for financial planning, like more of a digital experience. And I think we sticks and taped it with humans. And then we got so ingrained in the human, like a more traditional RIA experience, but like digitally enabled, like phone calls instead of in-person meetings and a digital interface instead of… [inaudible 00:08:13] we didn’t go far enough. We didn’t have the opportunity to go far enough on the digital side. And you mentioned churn. It’s not that we had trouble trying to figure out how to retain clients. It’s that when you’re in startup land and you’re looking to get your next series of funding, new users are more important, or at least they were at that time than-

Reese Harper:
Than adoption.

Natalie Taylor:
Than retention.

Reese Harper:
Than retention. Yeah.

Natalie Taylor:
And so it was like, where was our focus? But then, in 2015 we got acquired by Northwestern Mutual. And that didn’t change everything right away, but it definitely changed things over time. And so we were building this software that there were two versions of at that point. There was a version for NM to use, Northwestern Mutual to use and then there was a version for LearnVest to use. And we had fundamentally different planning philosophies.

Reese Harper:
Yeah. Totally.

Natalie Taylor:
Permanent life insurance is a waste of money for the vast majority of our clients because they are in…

Reese Harper:
I can’t believe that. So did they know you thought that in your culture. Did they know you thought that?

Natalie Taylor:
I don’t know how well they knew it but we weren’t shy about it. It was out there. And so we had [inaudible 00:09:25] philosophies. And then we were building two versions of the same planning software, ultimately like the engine that would be the client experience, the planner experience and the algorithmic calculator behind everything. And ultimately we needed to just build one version. And as incentives shifted over time to be more NM focused and less LV focused, so, NM, Northwestern Mutual, LearnVest, LV. I think we just we no longer had the resources to be able to invest in our business the way that we would have needed to, to bring LearnVest to a better place. We were kind of just stuck in time. So all innovation basically paused and 2015 until the death of the RIA in 2018.

Natalie Taylor:
One of the interesting things we learned at LearnVest, one of the other things that I wouldn’t say it’s something that didn’t work, but it’s something that we maybe didn’t anticipate is that people really don’t know what financial planning is, especially in this demographic, people in their ’20s, ’30s, and early ’40s. And it’s understandable why they don’t know. Because a lot of people call themselves a financial planner or financial advisor and really all they do is sell insurance or they really only manage assets and they’re not really interested in your budget or your emergency fund. They want to tell you how to invest. And they offer a really great service, but it’s impossible, it’s virtually impossible for the public to understand.

Natalie Taylor:
And so one of the things we found is that a lot of our marketing efforts were educating the consumer on what is financial planning? What do I get out of this? It’s not like saying I want to go buy a car or I want to go buy a computer, or I want to go buy TurboTax, it’s going to prepare my taxes. The truth was that a lot of people didn’t really even understand what financial planning actually meant. So to go engage with a digital tool that allowed you to do financial planning, there was a variety of expectations there. So I think we did… We had 14,000 clients, I think when we shut down. So we certainly were able to say our piece to enough people over time and how to get impacted [crosstalk 00:11:27] but that was something that I think was a little bit surprising to us is that people didn’t really even understand what it was.

Reese Harper:
I didn’t understand exactly who your customer was because when I looked at it, I was like, there’s DIY people that are part of the market that literally are looking for digital tools to give them a leg up. And then there’s people that are just like they could go either way, but they would probably lean human and just be like, I don’t really want to deal with this, but I might if it’s too expensive. They’re kind of middle ground. And you’ve got people that are like, I don’t want to touch it, I don’t want to think about it, I just want someone else to do it. I’m going to generically throw those for the sake of our conversation into three groups. I want to get your response on whether you see the market in that way, or how would you share it? [inaudible 00:12:26] how would you break the market up in your mind?

Natalie Taylor:
Yeah. So one of the final pieces of research I did at LearnVest was a cross-brand referral experiment to see would LearnVest clients be interested in being paired with a Northwestern Mutual advisor to fulfill their insurance needs? And I don’t think you’ll be surprised to know that given the psychographic profile of our LearnVest clients, they were like, absolutely not.

Reese Harper:
Do not. Do not.

Natalie Taylor:
[crosstalk 00:12:57]. There were a few that were like, “Yeah, sure.” But the vast majority of them were like, “This violates all trust that I had in LearnVest, in Alexa, in the whole…” The results, I mean, we had 25% of our clients responded. This was D2C only, but we had a huge response and we learned a lot. And so I think there’s do it for me, that’s a great Northwestern Mutual client. Somebody who’s like, “I’m happy to pay fees. I just want someone to do this stuff for me.” Or a great more high priced RIA client. Just do this for me.

Natalie Taylor:
Of the three categories that you gave, I mean, I think there’s delineation between each one, but that middle category of facilitated DIYer, I would call them, it’s somebody who is digitally savvy enough to open an account on Vanguard or Betterment or wherever. They are savvy enough to read up and somewhat understand what they’re reading and put some pieces together, but they still really value the expertise of a true professional of an expert. But they have a deep need for trust. They really need to know that that person’s incentives are pure. And LearnVest did well with the facilitated DIYer demographics, psychographic. That’s more of a psychographic than a demo.

Natalie Taylor:
And so that’s who we were serving, and that was fundamentally not a good psychographic profile for Northwestern Mutual’s business model. I think that their facilitated DIYer is only growing. And so for me, I love doing one-on-one work in my practice, but one of the reasons that I joined Monarch is because we’re actually building the tools that facilitated DIYers need to be able to manage their own finances really effectively without holding back, because it’s part of an advisor relationship. It’s not like I can’t tell you all of it, because I still need you to need me. We’re trying to like teach everybody to fish. There’s no reason that everybody shouldn’t have their own fishing pool. I [crosstalk 00:15:03]

Reese Harper:
So do you have any idea how the market… If I just said, hey, there’s 300 million people, 120 million households in the US, what would your guests be? Okay, you might know this because you’re smart, but if you just have a guess, that’s all I want, you could just say it’s a guess. How big do you think the DIYer market is that doesn’t want a facilitator, they’re just hyper private and they want to do this all on their own. How big is that if you had to throw a percentage at it?

Natalie Taylor:
Like total pure DIYer like doesn’t want [inaudible 00:15:36]

Reese Harper:
Doesn’t want anybody.

Natalie Taylor:
I think there’s a good number there.

Reese Harper:
Would you say it’s a third, more or less than a third?

Natalie Taylor:
I think it’d probably be less than a third.

Reese Harper:
Okay. What would you throw the percentage at if it was like less? Would it be way less like 10% or would you [inaudible 00:15:52]-

Natalie Taylor:
I might say 10% to 15%

Reese Harper:
So your guess with your guts that’s like, look, it wouldn’t surprise you if it was as little as 10%.

Natalie Taylor:
Right. I think the category of facilitated DIYer is much bigger, but I think that trust is the core component that… I think that actually if a true DIYer could know that they can actually trust and respect a professional, then they would be a facilitated DIYer.

Reese Harper:
Yeah. So the gap between moving categories is trust?

Natalie Taylor:
Yeah. I’ve worked with some serious DIYer in my planning practice and it’s been great to serve them because they see how I’m paid, they’re able to see where my incentives are clearly. I support them continuing to be DIYers. They respect that I know what I’m talking about and then I can serve them. And then they go back to DIY land. And they say, “Can I call you again in three years and do a one-time engagement and pending capacity?” Yes you can. But I think that if you had real trust and respect, either in a human or in a software experience that I think a lot of even the DIY, the staunch DIY group would want a facilitated DIY experience.

Reese Harper:
So let’s talk about the opposite extreme of the bell curve. The I don’t want to do this. It’s intimidating, overwhelming, it’s a subject matter I’m disinterested in. Any variety of reasons that someone says, no, I don’t… Of course I just want someone to handle it for me. Is that market bigger than the peer DIYer or do you think it’s similar?

Natalie Taylor:
I think that it’s probably bigger and I think it’s older. I think it skews older and you’ll find many more baby boomers in that category than you would Millennials or Gen Z. But yeah, I think it’s probably bigger than the true DIYers.

Reese Harper:
And so I, this is really interesting was you said if they either have software that gives them trust or humans that give them trust, you equated those two in a way that… I don’t want to say equated, but you mentioned them in a similar way. Do you think that clearly you believe that software can engender trust or destroy trust? A lot of people like me believe that too. I don’t want to put words in your mouth. Software can either engender or destroy trust, right?

Natalie Taylor:
Agreed.

Reese Harper:
So can software cause someone who would not normally want to deal with software, can good software cause this older kind of person that you’re talking about and this more generally delegator, can good software caused them to actually want to go to this facilitated model in a same way that good software, good trust can take a DIY or, and bring them into a facilitated model? Talk about that a little bit, because I’m curious if you think that it works both ways basically or not. Can software bring both of these people into the center?

Natalie Taylor:
I think software has a much better chance at bringing the true DIYers into the fold, then to bring those who want to outsource it.

Reese Harper:
What makes you feel that way?

Natalie Taylor:
Well, I think some of it is the motivations of those who are delegators, who want to outsource. Some of it is like, I literally need this off my plate. I don’t have capacity to be able to think about this, to be able to pull this stuff together. I need you to like personal assist me out of this situation that I’m in and do all of the leg work. And software is never going to be able to do that as much as a higher priced RIA can.

Reese Harper:
Yes.

Natalie Taylor:
And so I think there’s that. I also think there’s the digital component of it, that the older you are in general, the less likely you are to feel comfortable with a purely software experience that doesn’t have a human attached to it. When I think about my parents, there’s no way because they can barely log in to their Vanguard accounts. And so for them to be able to interact with the software effectively, be able to pull the information that they need or connect accounts, they don’t have online access to their checking and savings accounts. So I think that there’s a technological learning curve that some people on the do it for me, the delegators on that end of the spectrum just aren’t willing to overcome, and I think that’s okay. Just like when I think about-

Reese Harper:
Well, pausing on that for a minute, if I’m a 35 year old today and in 20 years from now, I’m 55 and I’m older, but today I’m a facilitated DIYer because I like tech and I’m like… Do I eventually… The only way I really go away from that seems to me, if I become your first category, which is like, I’m too busy, I don’t have time, I’m not… then I would outsource again but it would seem like time will cause more if technology discomfort is the reason that you’re saying the older demographic doesn’t use it, well doesn’t eventually that go away once a generation or two passes?

Natalie Taylor:
I think it certainly diminishes. I absolutely, I think it certainly diminishes by a huge degree. I think the other thing on the delegator side is a level of complexity.

Reese Harper:
Of course. Yes.

Natalie Taylor:
That there are, just like TurboTax will never put CPAs out of business, there is always going to be a need for complex planning that I don’t know that any software without a human, like there’s just so many variables and so much there that I don’t know that software will ever be the solution from a complexity standpoint for a certain tranche of clients. And so, and that’s okay. We’re not trying to build something that is everything to everyone, but we’d love to build something that’s most things to most people.

Reese Harper:
We should probably give the audience a chance to catch the context of where you’re saying we… So let’s go from Northwestern Mutual now. Let’s say what’s happened since then. That was 2018, was the time that you wrapped up?

Natalie Taylor:
That’s right. Yeah. So I quit in mid 2018. And then since then I’ve been doing some professional speaking and then consulting in the FinTech space for companies like LearnLux and SoFi and Ellevest, and actually some major Fortune 500 insurance companies as well, which has been interesting.

Natalie Taylor:
And yeah, so two weeks ago I started a new role at a startup called Monarch Money. And there’s three co-founders, they’re absolutely phenomenal. One of them was the second Product Manager at Mint many, many years ago. And they’re deeply versed in the space. There’s 12 of us. It’s a phenomenal team. My friend Joe, who was the Head of Product at Northwestern Mutual, took a job a week before me at Monarch as the Head of Product.

Reese Harper:
And he’s like, I want her too.

Natalie Taylor:
So I get to work with one of my favorite people who I just so respect in the product world, who’s taken every class for the CFP. I mean, he has a deep understanding of when you need to pull in. So I’m head of financial advice, but he has a really deep understanding of all the complexities and when to pull me in and how it all works together. And so it’s so exciting to get to work with this team and ultimately build a software based planning experience that doesn’t rely on a human relationship. That allows facilitated DIYers to have the tool set that they need at their fingertips and the content that they need at their fingertips. To be able to get depth of analysis and depth of information without sacrificing accessibility.

Abby Morton:
I know one of your biggest challenges is delivering a consistent financial planning experience to your clients on an ongoing basis. You get off to a good start, onboarding a client, and then what? There just doesn’t seem to be a good process for nurturing a new relationship. The Elements Financial Planning System can help you easily organize and evaluate client financial data. Then based on key indicators of their financial health, deliver timely insights to your clients. Using our system gives you the structure you need for ongoing planning. To learn more, schedule a time to talk to us today by going to getelements.com/meet

Reese Harper:
That’s now that people have the context of where you’re coming from. I want to jump to this place where advice with a person begins and where advice with technology where it starts getting stretched and it becomes hard. And I’m curious if you have any, for starters, do you have any demographic information? Is there a place where net worth and complexities start breaking, we’ll say the Monarch target customer a bit and where it’s now this customer is going to likely find a professional? Let’s just start with, I know there’s a ton of ways that we could dissect that, but what about complexity? Is that something that you can kind of speak to at all?

Natalie Taylor:
Yeah, I mean, I think the elements of complexity that would move somebody towards a human advisor experience and maybe a way from a software experience are things like inconsistency of income. So if you’re W2 and you generally make the same amount every month and you have a bonus once or twice a year, even if those numbers are relatively large, that’s pretty easy to handle from a planning standpoint, from a budgeting standpoint I think when you start to introduce a lot of inconsistent income. And then on the equity comp side with a lot of variability, that isn’t just based on your performance, but it’s also based on market. And then you introduce illiquidity of some of that if you’re a privately owned company or you have lockup periods. I think we’re planning to build for that as well, but that will have to be later down the line because just more complexity there.

Reese Harper:
And several fundraising moments away. Which and you may find pressure as you saw in your last experience where the market ultimately dictates whether they want that part built or not, right?

Natalie Taylor:
Well, interestingly, equity comp is a really interesting one because there’s a growing demand for it. There’s a growing need for it-

Reese Harper:
Oh, yeah.

Natalie Taylor:
… no question.

Reese Harper:
I love it.

Natalie Taylor:
And like Origin, my friend David Blaylock, he’s had a planning over there, they just came out with an equity comp. And Northstar, my friend, Kristen [inaudible 00:27:24] all these LearnVesters have moved on and are doing amazing work different places, but they’re starting to come out with more content around equity comp. I got asked to co-found a company, which I ultimately declined so that I could join Monarch that was around helping people with equity comp starting there in the employer space. And there’s a couple of other companies that I’m not allowed to mention by name, but they are also starting to get into that space of helping with equity comp. I can certainly see an acquisition of one of those companies by [inaudible 00:27:52] or Shareworks. So, I think there’s a lot of need there and I think software is going to be able to do some pretty amazing things there. I don’t know how quickly Monarch is going to bite that off. I think we would like to be able to help with more foundational financial planning things.

Reese Harper:
So if I said business… I’m going to throw some other complexity things out there that I think I’ve experienced that are the dividing line. Business ownership tends to be one for me where it seems to be a complexity thing that then starts breaking the traditional tools. Would you agree with that?

Natalie Taylor:
Agreed.

Reese Harper:
Yeah. And there’s for all of you out there looking for a good market, know that the [inaudible 00:28:35] professional… Dentist Advisor is my former or current RIA that I am still involved in. It’s targeting this dental market, business owners, but in the dental market, there’s a bunch of people that would be perfect customers for Monarch. It’s just not the ones that are like… Usually they work for a dentist and they have really high, consistent income. And that’s hard for us to go service that customer because it’s like, well, that your complexity is not… We’re trying to find people with maximum complexity. And I think that’s the big thing that I’ve loved that you’re validating and hopefully RIAs listening can take heart and kind of, this is that there’s… Complexity does drive what technology can do. And the more that complexity goes up, it’s hard for technology to have a scalable solution for customized complexity. So business ownership you’re saying, I’m just watching you nod, and I didn’t really let you say it, but you’re saying that’s valid item?

Natalie Taylor:
Totally. I think [crosstalk 00:29:44]-

Reese Harper:
What about…

Natalie Taylor:
… and other estate planning issues, I think are very difficult for us to handle with software in the way that we’re building software.

Reese Harper:
Would you say though that income is also, even though you made the exception, you said it’s also very large income as long as it’s consistent. But wouldn’t you say that income also though, just as a raw number, like the higher that someone’s income goes, does it generally that correlates to complexity?

Natalie Taylor:
Yes and no. I mean, ultimately yes, but I think that consistency of income is actually a bigger determinant. If I have a client-

Reese Harper:
Predictability, consistency.

Natalie Taylor:
… $300,000 a year consistently, and they have a $60,000 bonus a year and they live in a relatively high cost place, like where I live in Santa Barbara and they own a house that’s a million dollars, then they’re just paying for their regular stuff and saving for retirement. Like there actually might not be that much to their plan. They might have a relatively straightforward financial situation that could be well-served by software. But ultimately yes. I mean, I think if you’re making 300,000 a year and only 150 is what you actually get to take home monthly and the rest is not in a combination of ISOs, NSOs and RSUs, then we’re in complexity territory. And it’s not that software can’t help in that space specifically, but I just think that that’s where at least at this moment, we don’t have effective software to help [crosstalk 00:31:06]-

Reese Harper:
It is…

Natalie Taylor:
… advisors [cross talk 00:31:07].

Reese Harper:
I think what you’re saying too [inaudible 00:31:09] the market is become smaller for that as well. I mean, the market for complexity is smaller than the market for… The bulk of America is more predictable. And financial advisers are geared for complexity and customization. And so when they meet the average person whose situation is not hyper-complex or hyper-customized, they don’t know what to do.

Natalie Taylor:
I think it’s beyond not knowing what to do. I think the fact is that you can’t profitably serve that demographic.

Reese Harper:
That’s what I meant. Yes, you’re right.

Natalie Taylor:
We traditionally serve clients that are more complex. And I will say we tried as we might with humans at LearnVest, a somewhat hybrid experience between humans and digital. In my planning practice, I feel like I’m about as efficient as a planner could possibly be after spending half my life in practice and then half my life in FinTech. And I really place a lot of weight on keeping my prices accessible and reasonable, but still my prices are not reasonable for the vast majority of Americans.

Natalie Taylor:
And I hate that. I wish that they could be. I just legitimately can’t run a business where I get to keep much of anything if I don’t have my prices where they are now. And I know that for equivalent work, other RIAs charge double or triple what I charge. That’s okay with me. But it is just feasibly, it is impossible to serve this demographic of low six figures, generally steady income, but have a lot of decisions to make. How much home can we afford and when can we buy it and should we pay off any debt before we buy our house? And how much should we save for retirement? Should we do rather [inaudible 00:32:49]? What should I do with my old 401(k)s and how much should I have in my emergency fund? And where does that come into play in terms of the credit card debt that we have? And how do we balance all of our priorities? And do we need life insurance? If we do, how much and how do we make sure that no one’s taking advantage of us in trying to tell us how much we need and what kind we need?

Natalie Taylor:
There’s so many questions that this demographic needs help with and deserves help with and ultimately can handle if they’re given the right tool set and the right content that supports them without any ulterior motives. And that’s what we’re focused on doing. So, I’ve been asked well, are you worried that if Monarch is really successful, that it’s going to put your RIA out of business? And ultimately, that [crosstalk 00:33:31]-

Reese Harper:
You hope, you hope.

Natalie Taylor:
I mean, if we could figure out like how to get to even that level of complexity and effectively serve that demographic, that broad demographic without needing a human planner, that would be so awesome.

Reese Harper:
Well, if you think about it though, that if that ever did happen, the humans that are in business would also find a way to innovate their value prop, which is service high touch, white glove, simplicity, let me take that off your plate. I mean, there’s always going to be… That will just be better for the humans anyway. Imagine a model where advisors didn’t spend time collecting random data and micro-managing client data connections and collecting documents and sir sourcing documents. Imagine a world where literally the humans could just do the listening skills, the coaching, the empathic kind of relationship building that they’re so good at, that uniquely AI is going to take like hundreds of years to get to that point, if it ever did at all. Imagine that humans could just stay in that lane of where they’re helping make decisions and helping take action and they’re not organizing data, they’re not analyzing data. That’s great for computers to do. And we should really… Humans can spend more of their time having deep impact, like you were saying at LearnVest trying to get to that moment where you’re having these critical like… We went away from calling it directional and you called it critical.

Natalie Taylor:
[inaudible 00:35:24]

Reese Harper:
What was it?

Natalie Taylor:
Impact weighted.

Reese Harper:
Impact weighted. See, those are the decisions that humans do really well if they have enough data that they’re provided with. But if they have, like in the RIA space right now, we’re spending most of our time just trying to corral information together. And so you could see a world where a product or a system like Monarch or elements or any number of software platforms that are out there trying to solve can help advisors stay higher in the market. Like stay not higher in the incomes part. They can come down in terms of income and complexity, but they stay in that decision and empathic listening and deciding in coaching world and they don’t keep wasting all their time with all this routine stuff that computers are really better suited for. I want to know what your response to that is. I’m not looking for validation as much as I am just trying to get you to react to something.

Natalie Taylor:
No, I think there’s so much opportunity in the space of technology for advisors. It’s funny when I talk about FinTech, a lot of advisors will come to me and talk to me about their advisor software stack of like, oh, I don’t like any money because of this or I use MoneyGuidePro because of that. And I’m like, FinTech is so much broader than that. But advisor tech, within advisor tech, which I think is ultimately kind of where you’re talking about, I think there’s so much opportunity for innovation there, and there’s so much white space. And from where I sit, even as it was very difficult for Northwestern Mutual to envision a revenue model that wasn’t permanent life insurance based, it is also very difficult because they’re entrenched, they’re embedded and there’s so much already built around this thing.

Natalie Taylor:
I think to some extent it’s very difficult for a company like eMoney or MoneyGuidePro especially those to be [inaudible 00:37:22] to do something fundamentally new and different because they have such deep integrations with these big partners. Northwestern Mutual finally dropped advice in it recently because LearnVest, what we built finally overcame and is now used as the planning software. But for advice on eMoney or MoneyGuidePro, they’ve got so much integration that like for them to change the way that they frame budgeting or for them to call things differently or organize things differently, or do calculations differently, would append so much deep integration work that’s already other places that I feel it puts them on their back foot in terms of doing really new and powerful and innovative in the adviser tech space. And I think that creates a huge amount of room for elements and others. I talked to a lot of other RIA owners and I talked to a lot of founders in FinTech as well and in the set of one week, I had like multiple RIA owners. They were building their own financial planning software.

Reese Harper:
Yeah.

Natalie Taylor:
Good for you. [inaudible 00:38:28]

Reese Harper:
Yeah, [inaudible 00:38:30].

Natalie Taylor:
[inaudible 00:38:31] But there’s so much opportunity.

Reese Harper:
There is and I just think it’s a really cool time to be… I hope that Elements has something to do with success in making advice available to people that maybe otherwise didn’t. But I’m just more motivated that like it’s a time where the whole industry seems to be shifting and starting to see that the technology is going to play an important role here and having more conversations, more meaningful conversations with more people. And that’s really just exciting for me to see that regardless of who carries the torch or what percentage of the market each company grows to. I just like the idea that we’re thinking about how to get advice down market, how to make advice. We’re differentiating between precision and impact weighted conversations, because you have to make some of these sacrifices. You have to sacrifice some precision to pick up some speed and sometimes speed is what’s required to bring down cost. And impact weighted conversations are more important than precise conversations. A precise conversation it’s not actually that valuable if it doesn’t result in any decision that’s going to be made. It’s just we’re just modeling. Most financial advisors right now are literally just modeling people’s reality.

Natalie Taylor:
That’s right.

Reese Harper:
And what are we doing to actually improve behavior and change the impact conversation that is going to change their trajectory? That’s where I’d like to see us start to get to. So…

Reese Harper:
It’s so interesting how these big financial institutions have so much influence in America, but they’re all still stuck distributing product as their primary mechanism for it to make money. No one’s getting paid on advice. Really advice isn’t a product yet for any of these big companies. Is there a way that they’re… Are they going to start seeing that they need to bring advice in as a product independent of selling product, or are they just going to eventually lose influence and all these new companies are going to have to keep sprouting up that actually make money on advice as their only thing? How do you see that evolving over the next 10 years?

Natalie Taylor:
Yeah, it’s such a big question and it’s such a good one. I mean, I think that Northwestern Mutual did have some understanding of the importance of advice and advice potentially being able to monetize separately than product sales. But ultimately when it came down to it, there are still only, I think a few hundred Northwestern Mutual advisers that are actually allowed to charge planning fees. When you think about it from Northwestern Mutual’s perspective, if you allow advisors to charge for planning, it’s a one-on-one relationship with Reese. And Reese could go work somewhere else and there’s nothing sticky about that planning fee. If Reese has sold me a permanent life insurance product with 10 years of surrender charges or an annuity with seven years of surrender charges, or 10 years of surrender charges or whatever, then Reese leaves, I’m not just immediately getting rid of my product and paying $10,000 in surrender charges. So advice is a lot stickier. It’s a lot stickier for the relationship for the agent, and it’s a lot less sticky for the company. And that’s a huge risk for them to take. And so I don’t like it. I don’t think it’s the right way to do business, but it’s understandable why they’re so entrenched in product sales versus allowing their advisors. And I’m ultimately starting providing investments as an accommodation to agents that were going to leave because they were like, I have to be able to do investments with clients.

Natalie Taylor:
And so they offered it and it was very inefficient and very high costs, but they did it as an accommodation. And ultimately they’re trying to revamp that business and bring the cost down and hopefully offer a better product. But I hope that ultimately the same thing will happen for advice that it will just become something that they can’t deny anymore and have to be able to offer their advisors, their agents, the ability to do it, their reps.

Reese Harper:
Yeah, because right now advice is tied in a [inaudible 00:43:17]. Like it’s so tied into product distribution still. If you… everything.

Natalie Taylor:
Every plan says this financial plan is incidental to the sale of an insurance product. That’s part of the disclosure that they have to do. But for clients, users, consumers, they don’t know that. They went to somebody who said he was a CFP and called themselves a financial advisor and did this what feels like comprehensive planning experience. And they don’t really know that the underlying reason that that plan was done is to position insurance sales. And sure there’s value in that planning experience and it’s certainly better than nothing and I’m glad, but it is incredibly confusing for clients, users, consumers, to understand that you’re doing planning for these reasons and somebody else is doing planning for other reasons. And then which one is for me and who do I trust? And it’s just infuriating.

Reese Harper:
I just don’t see a world though, where these big organizations can convert. I almost just see a place where most of them end up dying. Because they can’t change their underlying economic reality, and you just there’s going to kind of wait and see how long they can last. Literally, you have to pivot from a highly profitable product distribution model to one that has low margins that you said is tied to the end advisor because that’s the only place the client feels loyalty. They’re not going to do that. They’re just going to wait until… They probably rather shrink their market share than try to add advice.

Natalie Taylor:
I do think that there’s an opportunity for insurance companies to innovate separately from their brand to test and figure out what works and then maybe potentially grow that business. But it is going to be really difficult. I’m not worried about insurance companies entering the business that I’m in at Monarch. What I do think is that there’s the potential for companies like Vanguard, Schwab, E-Trade, Northwestern Mutual, MassMutual, Prudential Fidelity. I think there’s potential for all of those companies to be able to want to provide a digital planning experience, like what we’re creating at Monarch, so that they can serve clients and start relationships with clients like Merrill Edge. Start client relationships with those that wouldn’t typically meet asset minimums or whatever, but provide a meaningful enough experience that when those people do graduate to be ready, which makes me want to throw up to even say, but like when they graduate to being having enough money to be profitable for the company, that the company already has a relationship with them and then can serve them at a higher level now that they’re worth their time. And that makes me [crosstalk 00:46:05]

Reese Harper:
Of course.

Natalie Taylor:
But I do see, like Betterment for Advisors. [inaudible 00:46:11] analogous to that offering where advisors are using… I do use Betterment for Advisors as well. I don’t use it the way that most advisors do, but I think a lot of advisors use it for their lower balance clients that they can’t really serve in their regular practice. And so they can outsource it to Betterment, but still make a little money off of it and still have somewhat of a relationship so that when that person inherits the money from their parent, that maybe that person would want to work with that advisor which again, just still over here throwing up, but…

Reese Harper:
That’s sad, but that’s true. You’re highlighting the truth. Yes. Well, this has been fascinating. [inaudible 00:46:47] probably go for a few more hours and I’m not going to take any more of your time because I know if you’re like me, you’ve got kids running around. It sounds like life’s got to get going, but I want to let you leave the last word today. I’ve been just really grateful for your experience.

Reese Harper:
I just want to say thank you for coming on and of exploring what is a heady business model kind of topic. I do want to have you back on to talk about values-based planning and all the speaking that you’ve been doing. You do such a great job with finding… There’s so much we didn’t get to cover today. But like this topic, I think of understanding the landscape, understanding where you’re at in the landscape and trying to add value to the right people at the right place, I think most advisors are a little confused about how to do that. And they don’t need to be, they just need to understand that like there’s places where they can add massive value in their spots where technology is going to be going to be adding more value than an advisor can for a while. And so you need to either find a way to integrate technology and double down where you’re strong or don’t fight against the future where things are headed. And I think you’ve given us like one of the most… You have experience dealing with this from so many angles. It’s just been really insightful for me. So thank you. I’m going to let you leave the last word.

Natalie Taylor:
Sure. Well, thanks for having me. This was super fun to talk about. I just looked at the time and I’m like, gosh, we’ve been talking for so long, but this is so fun. I would say, I mean, for advisers, I think to the points that you were just making, the idea of starting with nothing of if I only had 30 minutes with this person once, what could I say to them? What could I help them with? What action can I drive? What perspective shift could I create for them that would lead to the most positive change in their life? And go from there. Strip away all of the other stuff, like kind of blank slate of like if I didn’t have all of their data in [inaudible 00:48:53], if I didn’t have all of this process stuff that we do, and if I just had 30 minutes to sit down with this person, where could I have the most impact? And let that lead how you serve clients and not so much the processes that were ingrained in and the systems that were ingrained in.

Natalie Taylor:
And I would say, think about the jobs you’re hiring technology to do. Not just, oh, well it does these things. It’s like, what job do I need to hire. And if it’s on staff, what am I paying it for? What’s its job description. And I think that might help you put together your tech stack a little bit differently.

Natalie Taylor:
And I know you said last word, but I’ve given three, but I would just say like for the advisors out there who want to do meaningful work and really believe pollyannaishly that there is a way to win, win with clients that you can truly do the right thing for clients, that you can put clients first, that you can have really clear, clean motivations that you can be truly a respected and trusted person and do the right thing for them and still have it be profitable, when let me be one of many examples that like that is actually a reality and that is true. And so don’t lose sight of that. Don’t feel like you need to compromise and sell product that you don’t feel good about or engage in a business model that doesn’t feel great to you. Keep looking and keep exploring for how you can create a career that you feel really incredible about.

Reese Harper:
Thanks Natalie. Beautifully said, and really appreciate your hard work over the last decade and plus. And all that you’ve been able to do, it’s been, it’s been helpful to a lot of people. So really appreciate that and look forward to watching your success over the next few years.

Natalie Taylor:
Awesome. Thanks so much.

Abby Morton:
Next time on Elementality…

Reese Harper:
I take every penny seriously, right? I look at every dollar, everything matters to me because I’m an accurate, highly measured, thoughtful wealth manager that’s tracking everything to the penny, to the date on time. And like that message is way better than the message of, “Yeah, you’re probably right. We don’t need that. Let’s not add that in there.” Yeah, whatever. It’s like, there’s a reason they have that $1,800 Bitcoin account at Coinbase. There’s a reason it’s there. They emotionally have a connection to it.

Abby Morton:
Learn more about the Elements Financial Planning System at getelements.com/meet and schedule a time to speak with one of our friendly financial planning experts. Elementality’s executive creators are Reese Harper and Chad Jardine. Elementality is produced by Abby Morton and directed by Jordan Haynes. Have a good one.

 

Leave a Reply

Your email address will not be published. Required fields are marked *