The financial advice industry is steadily shifting away from portfolio management to financial planning. So what is your firm doing to make sure it’s positioned for where the next generation is taking financial advice? The trends are clear. If you want to stay in front of this new fast-paced growth environment, you may need to change where you focus your business.
On this episode of the Elementality podcast, Reese interviews Douglas A. Boneparth of Bonefide Wealth, a leading financial planning firm for millennials. Wanting to play what he calls “the long game,” Douglas moved his firm’s emphasis away from retirees to find additional growth advising his generational peers. Find out why placing more attention on the younger generation may be the only way to survive—and thrive—as a firm owner.
Show Notes
bonefidewealth.com/
Podcast Transcript
Douglas Boneparth:
If you’re planning on sticking around for a while, you need to be forward-looking in terms of how you would be building out your firm. And I think that’s just something that I always try and do, when thinking about the future growth of the firm. It’s also just being curious and it’s networking and finding cool stuff. You’re developing financial planning software, it’s got me intrigued. You got the custom index platforms popping up now. This is cool stuff. How can I build out my business? I don’t know if I want it, I don’t know if it’s going to be the prevailing trend over the next few years, but I want to make sure my firm can plug into these things. How do you constantly refine your own operations to be able to latch onto something that very well could provide value, not just to your clients, but provide value in terms of you as an operator and a business owner?
Abby Morton:
Welcome to Elementality. I’m 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. I’m your host, Reese Harper. And I’m really excited today about an interview that I did with Douglas Boneparth, a financial advisor from New York that has targeted the millennial generation, using creative fees structure, and a lot of focus on technology. I think he has some good insight into what’s working today, and definitely a lot of energy and insight around the industry at large. I just thought a lot of his insights were fun and particularly relevant for a lot of our practices, and I hope you guys enjoy our conversation.
Reese Harper:
I just want to make sure that I’m capturing what’s on your mind the most right now, and where your head’s at the most. If you were to describe that and define a little bit how you would position yourself today, how would you do that?
Douglas Boneparth:
Yeah, sure. So, kind of like stand on my soapbox here. I guess, one of the things I had noticed at the beginning of maybe a few years before founding Bone Fide Wealth is, I had to figure out how I was going to grow a wealth management practice and what to me seemed like the new dawn or a new era of wealth management. And growing up the son of a CFP and watching the industry, it wasn’t just an epiphany, it was just carefully watching and being a part of the profession from a young age. So my dad started in ’91, I was seven. And what was indirect turned into direct as I got involved at 19. And it didn’t take me too long to figure out that if you’re going to hang around in the business, you need to figure out how to generate business.
Douglas Boneparth:
And I guess where all those paths crossed was watching my peers, friends, and then girlfriend, now wife, come out of 2008 and 2009 not in particularly great financial shape, not in a particularly great job environment or economic environment, and a lot of the narratives and things we were told would be there for us, weren’t. Like, “Oh, just go educate yourself, take out the debt, go get the degrees, and you’ll be just fine.” Well, no one’s going to be just fine when you have a global recession only second to the Great Depression. So, that was an eye opener for me, caused me to go back to school, believe it or not. Here’s everyone taking on student loan debt, why don’t we just go do that same thing all over again.
Douglas Boneparth:
But I did it with a mission and a purpose, because I knew I had to basically, on one hand, solve for growing a business and getting clients. There’s only so much time I wanted to spend growing other people’s practices and working in other people’s practices, either to basically be an advisor all on my own, or just build the thing myself. So that was the call to action in, not just launching the firm, which is where I saw the opportunity, which was let’s grow with… I’m a geriatric millennial at 36. So I was watching my peers in our mid to late 20s kick dirt, we had a help. There was a need to help, there was no money today, but that would come in time.
Douglas Boneparth:
So that was the long game, and that was the epiphany sitting in business school, is like, “Okay, we’re going to go for millennials.” If you say I’m a financial advisor for millennials today, welcome to the thousands of others that are doing that. I was probably one of the very first to really put it out there and really use it as a marketing technique. To be able to say, “Hey look, I’m doing something very different than a old stodgy industry. You’ve never seen this before.” And if people are laughing at you, you’re doing something right, or horribly wrong. I had a feeling it was mostly right, because I’ve been just been doing this forever, and I kind of had my finger to the pulse of it as being predictive. And my wife was kind enough to co-author a book about how millennials got into this position, and it was obviously also financial literacy, and helping people that way, being a voice in the media weekly, daily, to chime in on anything CNBC’s pushing out, by being on their advisor council.
Douglas Boneparth:
So I don’t have to talk about specific stocks, it’s really about financial advice and planning and things that people can take to heart and hopefully improve their financial lives around.
Reese Harper:
So what made you say, “Okay, I’m…” I mean, when you were in business school, was that the place where you decided that you’re going to go after this non-traditional niche?
Douglas Boneparth:
Yeah. I don’t think I had a choice. But once I made the decision that I did not want to pursue high-net-worth, baby boomers, pre-retirees, post-retirees. Because I had done that for over a decade, working in other people’s practices and even in my own clients that I’ve either acquired or got from growing up in Boca Raton.
Reese Harper:
Yeah. What did you not like about that? Or what made you pivot away from that?
Douglas Boneparth:
In 2008 and 2009, when the sky was falling and I was first year in New York, working in a practice where it was mostly retirees, I saw the level of hand-holding that needed to take place. I was particularly good at it, but I think the byproduct or the result was, you lose your time. If you lose your time having to service a certain type of client in a certain position of their life. These are not bad people, these are wonderful people. It’s just like, I did not see how fast, aggressive growth and losing your time due to that service, really went together, and I wanted to be in a more fast paced growth environment, especially being young, and I just didn’t see that…. When I think of growth, you want to be an early investor. From an investment perspective, you hoped you invested in Zoom and Peloton and any tech company that went parabolic before it went parabolic.
Douglas Boneparth:
My approach was that, but with people. How do I make early investments in people that I know are…. Okay, they got bad debt coverage because a student loan, or they got pushed back two, three years because of the recession. But I’m going to bet on them because, they could be friends I grew up with, they’re always the smartest kid. They were always impressive. Okay. So what? They’re delayed two years, and then they go parabolic, or then they actually crush it. That’s what I chose to do in terms of, I thought that was so much more interesting, it gets me fired up even to this day and we would grow together. And the relatability piece was critical. I was going through what they were going through. I didn’t need to try and relate to a 65-year old, which I could do because of where I grew up. But at some point in time, you’re going to run out of things to actually connect on, other than the plan.
Reese Harper:
So it was an interest, it was also an investment thesis. Talk to me about the fee structure though when you started, because if you’re trying to capitalize on… I mean, the difference between a typical [crosstalk 00:08:55]. Yeah. The difference between a financial advisory relationship and a seed fund or a venture capital firm is that they get equity in that long term thing. I mean, I actually don’t know your fee structure, but AUM at least gives you a shot at capitalizing long term, where if you go fixed fee you have to keep ratcheting that up, and figuring out… You’re really not capturing the leverage as much in some ways. How have you chosen to do your fee structure in that market?
Douglas Boneparth:
Yeah. So in the beginning, I was very fortunate to be effective at getting assets in the door based on having an early start, growing up in an area and having connections in South Florida where, there were plenty of retiree clients that I was able to work with along the way. And those were primarily asset under management relationships. So I like the way you phrased that is like they were the seed investors. They were the capital in terms of… And it was making sure they understood that I was going to pursue a growth strategy that quite frankly had nothing to do with their demographic. And if they were really good clients and also were investing in you, which they did, they’re like “Go dog go.” And the ones that weren’t, well, you kind of knew they weren’t going to hang around all that long.
Douglas Boneparth:
Yeah. And that’s okay. I mean, truthfully, that’s not the segment I was going to be growing my business around here, so you figured you’d have some attrition there. But I very much took stock in the financial planning process, I always was taught that you lead with financial planning, it’s what makes the relationship sticky, it’s how you are able to create a funnel into other services, should you be providing them. I thought the margins were still great on annual financial planning. I thought you had a very high chance of being that person to sell their first term. We don’t sell insurance any more, but the unlimited term insurance sales for a 20, 30-something year old, just settling down, DI of course, going…
Reese Harper:
So pausing on this a little bit. I don’t mean to interrupt you, but I’m like, there’s a lot here that I want to unpack. So you were able to pursue this niche by having a foundation in, we’ll say another niche that…
Douglas Boneparth:
Just a general like…
Reese Harper:
A lot of people call retirees a niche.
Douglas Boneparth:
Come on. Literally all of wealth management.
Reese Harper:
It’s like, that’s a third of America folks, I’m sorry. I don’t know if that qualifies as a niche market, but-
Douglas Boneparth:
Millennials don’t. There’s 80 million US citizens retiring. It’s just not [inaudible 00:11:42].
Reese Harper:
Yeah. It’s a bigger growth market. So you were able to subsidize some of the early years into the millennial market using your existing clients.
Douglas Boneparth:
To me, it was always about building a marketing machine around it. If the machine works, it was, we’re going all in on this because it’s not a matter of the machine breaking down. It’s a matter of improving the marketing machine to making it run all that much better. With the proof being like, can I do at someone to the website having found me through keywords, I want them to find millennial financial advisor in New York. I knew, and I’m savvy enough with tech in general, but certainly just creativity on the web to know that we got to get people here to fill out this form and hopefully produce a lead. Can we just… Don’t worry about the quality of the lead right now. Can we get a lead, because if we can get one, we can get 10, we can get 100, we just need time and maybe some money.
Douglas Boneparth:
But more really just time. I didn’t really view it as a capital intensive thing. You it’s all democratized now. And if you go read and study enough, you can configure your square space page or your WordPress page to be that much better at honing in on the keywords you want people to find. You can write blog posts and do all that stuff. So yeah, I think when the light went off and I saw the machine was working, I got super excited. Like that was the pivotalable moment when someone had filled out the contact desk form and it was-
Reese Harper:
Yeah, I did.
Douglas Boneparth:
I was just like, oh yeah, it works. Like, I don’t think most people understand just how insanely difficult it is certainly as a solo practitioner. I know you do. Despite how much experience I had under my belt to like really pull off the business development magic trick here.
Reese Harper:
Well, it’s not like you were, as I understand, what’d you do your business degree at?
Douglas Boneparth:
I did my undergraduate in public relations at UF, which you would be like, what’s that have to do with what you’re doing right now. And quite frankly, everything from how I approach things from a marketing perspective and long term relationships, it’s basically PR. And then the cake topper was an MBA at Stern School of Business in NYU. Which was primarily for networking and secondly, optionality, if like this didn’t work out, I guess I’d good to a private bank.
Reese Harper:
Yeah. Well, I think what’s interesting though, is like, there isn’t really a digital marketing undergrad or a graduate degree. I mean, even if you have an MBA from Stern and you’ve got an undergrad in PR, you got to head start, but it’s not like you…
Douglas Boneparth:
You got to put the pieces together. Yeah, you got to really… I think the saving grace was like always tinkering with computers and websites and stuff as a kid to be a native user of a lot of these things and to be able to have your finger on the pulse of how marketing and information flows and how to basically go cast that net and get the client in. If I didn’t have that piece, I would argue it’d be a lot more difficult to pull this thing off.
Reese Harper:
Well, it is. I think it’s hard to see like advisors really do spend a lot of their career creating what I would call like supply of their product, which is like, I’ll hire an assistant. I’m going to hire a financial advisor. I’m going to get ready because one day I’m going to have the demand side of the equation just show up at the door. So before they’ll put money into marketing or before they’ll put money into content or before they’ll pick a market and start marketing, they’ll like, get an advisor ready.
Douglas Boneparth:
Yeah, yeah. Invest in the infrastructure ahead of the actual like…
Reese Harper:
Demand. You’ve got to create the demand on the front end before you start. It sounds to me, I don’t know what your firm composition looks like, but it looks to me like you’ve been able to run it fairly lean and just keep focusing on the demand side of the equation.
Douglas Boneparth:
We just hired last week. It was his first day. We just hired our first associate since inception of the firm almost five years ago. So Marie and I, Marie, who came with me, she’s my VP. She came with me from our previous firm because we knew we wanted to do this thing and I needed her. I couldn’t do it solo. To your point, it’s been extremely lean because of our grasp of tech. There’s no paper in the practice. You can run it from your phone. Which is very… Again, one of the benefits of growing up in it is you’ve seen it all, you know which buttons to push, which ones not, where people get jammed up, you know really what best practices are. I guess that’s like the competitive advantage I have. 36, but there’s almost 18 years of real like experience, not just observing, but like doing it.
Douglas Boneparth:
And yeah, it’s been real lean. So I guess it’s a testament that we’ve been able to grow as much as we have with little overhead and staff. Got some shared workspace in World Trade Center. That is a great address, super sexy but it’s shared workspace in a really cool building that looks really well, that we haven’t been at really more than four times in the last 18 months. But need to be that [inaudible 00:17:19] hiring was really big deal, super exciting time to be able to do that right now.
Reese Harper:
But it’s easier to do that when you have lead supply. When you’ve got demand for your product. And I think that’s what a lot of people skip the step of focusing on the marketing and consequently I think they always are struggling to scale. They’re always wanting to grow, but.
Douglas Boneparth:
I think that’s always a dilemma of business owners here where the worst practices are, you don’t know how to market or find efficiencies between marketing and expansion of your infrastructure and what you need to grow. So you do the easy part, which is getting more space or hiring another person to accommodate the growth that may or may not be there. I mean, I think that’s a really ineffective way to use your resources if you don’t have the supply down there or demand, whichever way you’re looking at it.
Douglas Boneparth:
The second thing is, you can still backfire on you. If you got more coming in the door than you can handle, you’re going to find the suffering of, or the delusion of your service to existing clients and the inability to deliver on your promises to new clients. That’s not good either. I think a better worse situation to have, because then you’re scrambling to hire someone and fill those void. And if you don’t do it fast enough, you’ll get erosion and then you’re really in a pickle. So you try and hit that middle point of being very effective. You got to build out some infrastructure stuff, but I digress on that, what do you really need? If you’re really real estate heavy and in person heavy, especially after the pandemic, I can instantly figure out the demographic of your practice and what you’re dealing with if you’re in that position. I know exactly, I could probably value your book like right then and there.
Reese Harper:
Well, and you devalue it slightly sadly.
Douglas Boneparth:
Yeah. You’re not getting your two X multiple, if there’s paper flying around, if you know the tech isn’t right. If you’re not securing relationships with younger… If you don’t have a younger associate or getting those relationships, do you really expect a premium, no. Do you expect even prevailing rates? I didn’t even question that? I think a lot of advisors getting over the next 10 years who are looking to get out the business are going to have to rationalize or reconcile some of those things when it comes to-
Reese Harper:
Yeah. And I don’t know, it’s been… I didn’t specifically call out millennials. We specifically called out dentists and there’s a lot of different ways to get leads in the door. But our practice and your practice aren’t dramatically different and it does tilt younger. It tilts to that young accumulator. In early stage, that’s kind of challenging from a pricing perspective. But where we’re at now and after having suffered through it, it’s incredible just because you’ve got the highest lifetime value of any customer you could attract. They’re never going to be worth less money.
Douglas Boneparth:
Yeah. Money’s ahead. Money’s ahead of them.
Reese Harper:
How did you tackle your fee structure early on and where are you at today? Has it changed?
Douglas Boneparth:
Well the price for annual financial planning has gone up from where we were 5, 6, 7 plus years ago. I think advisors do a really good job of undercharging for comprehensive financial planning across the board.
Reese Harper:
Yeah, totally.
Douglas Boneparth:
It’s just one of those things where you got to put your value out there and after being told no too many times, maybe it’s too much. I find that people do it the other way. So it’s always lead with financial planning, annual financial planning fee. That’s really the primary way I want clients to come into the firm. I am more and more agnostic to whether or not they’re going to invest a single dollar with us. We have clients who are sophisticated financial plans that their fee structure can go all the way up to $10,000 a year for financial plan, just because we’re going to be spending a lot of time doing some detailed, whether it’s detailed stuff like divestiture schedules of long term incentives, the estate planning piece, the stuff we really want to dive into, if we’re really good at what we do as financial planners.
Douglas Boneparth:
And they don’t want us to touch a single dollar of the assets that they have, because they either got it or they’re real estate heavy or any number of reasons why we’re not going to be the investment advisor for them, but we’ll be the financial planner. I’d say it’s like a bell curve. The vast majority don’t want to do their own planning and they don’t want to do their own investment management. So it’s really understanding the demographic we serve and how… You can tell to do it yourself or within 30 minutes of a conversation and that’s fine. We don’t say no to that either.
Douglas Boneparth:
Start with the plan. You’ll get your annual fee. You get through a whole year. Yeah, you hope they renew, if they don’t that’s okay too. Says the person with a pipeline, a business. But ultimately you’re going to get a really good shot to offer other services, whether if you’re doing the insurance piece and whatnot, still that’s transactional. But get into the AUM and get the reoccurring revenue as well. I would tell you 50 to 70% of people who do planning will do the investment management as well.
Abby Morton:
I know one of your biggest challenges in 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 the 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:
So I don’t know if… I’m curious, can we explore the exact fee structure if that’s okay?
Douglas Boneparth:
Yep. So flat annual financial planning fee. If you’re just doing planning, quarterly meetings, whenever you need us, we’re there. 1% on assets managed for our clients that will then… Once you get to half a million dollars in assets with the firm, you don’t pay a financial planning fee anymore. It’s now part and parcel. You’re you’re guaranteed a financial plan. I want you to receive the plan. And the notion here is that the most important piece of working with our clients is the planning advice relationship. The investment management piece more and more commoditized.
Douglas Boneparth:
So where are you generating value there? Are you generating value when people just don’t want to do it or they don’t want to spend their time doing it? It’s usually not a matter of intelligence or wherewithal or how market… They just don’t want to do it. These are 30 something year olds with two young kids running all over the place and 60 to 80 hour a week jobs and both spouses are working. So, that’s how you’re going to capture that without having to sell. You don’t have to sell anything. I think it’s just a matter of course and knowing that that type of client is going to utilize you for those services.
Reese Harper:
So the fixed financial planning fee will just vary based on complexity, it sounds like. How do you score complexity in your practice?
Douglas Boneparth:
It comes out through that complimentary consultation. You got to dive deeply enough to understand over those six areas you’re going to be getting into with that prospect, hopefully client where you’re going to be spending your time. You’re looking for key things, how many sources of income they have, do they own a business? Is long term incentives part of the puzzle? Do we have to do any trust work? Is it inherited wealth? You get good at knowing your client or knowing your prospect. And you do it enough, you can start to figure out how many hours you’re going to be dedicating to this. And you have enough reference points on previous clients to learn where the time traps are versus what’s a more standard plan.
Douglas Boneparth:
Try not to make it about how much money they have or how much they make. That’s usually not the best indicator of how much time you’re going to [inaudible 00:25:42] making a ton of money or have a ton of money, it doesn’t mean they’re financial life is really that complex. Usually it means there’s complexity there. So I think it’s really just getting good at that. If you’re a new advisor, you’re going to spend a lot of time figuring out how much time you’re going to spend and where the value centers are for your clients. And happy to talk to you more about the structure in any way you want. I think what it really boils down to at the end of the day for any financial is…
Douglas Boneparth:
My biggest concern is that clients are getting value for what it is they’re paying. That is really all I care about. And yes, use prevailing market rates to guide you in terms of what’s discount versus premium in terms of what you charge. But if you are truly working in your client’s best interest and trying to provide them value, there really shouldn’t be an issue and you’re doing it transparently. You’re going to find very little issue around fee conversations with clients. And I haven’t had too many.
Reese Harper:
How much of the revenue in your practice is coming from, let’s say planning fees versus AUM fees. What percentage of revenue?
Douglas Boneparth:
Yeah, I got to go with like the 80, 20 rule on that. I think it’s a really good way, but I’ve seen a dramatic shift with… Well, number one, it’s because there’s a lot of business coming the door. It’s a great thing. It’s not a brag as much as it is, factor of the matter here. So new clients, we’re getting more financial planning fee revenue coming in [crosstalk 00:27:12].
Reese Harper:
So you say though, it’s probably still like 80, 20 to 70, 30, somewhere in that range in terms of AUM fees are still the majority planning fees are still…
Douglas Boneparth:
These shifts I think happen over a longer period of time.
Reese Harper:
Yeah, they do. I mean, I was at that place in year, let’s say year five or year six. I think today our firm is closer to 45% planning fees and 55 AUM fees. I might be exaggerating slightly. It probably isn’t under 40 though, like 40, 60. 40 to planning fees, 60 to AUM. I don’t know if it’ll get over that, I could probably affect whether it would, we’re about 10 years in now to that pricing structure. But I’ll tell you when we run our worst case scenario analysis, I’m very grateful that I’ve got 40% of my revenue that’s not going to be affected by AUM. But I also like that the AUM fees give me that payoff long term, because we invested and in financial planning, you don’t, unless you’re on a fixed fee, like a rigid fixed fee model, then you usually end up over investing in people pretty early on.
Reese Harper:
Like, I know that you’re having conversations with these 30 year olds that far exceed in some cases, the scope of what they’re paying and your payoff, it does come time and the client knows that. The client knows that. So I don’t think they mind it.
Douglas Boneparth:
More and more [inaudible 00:28:53].
Reese Harper:
Yes. I just don’t know that people would rather have a higher fixed fee up front to never pay AUM fees later on, like you’re cutting off at 500,000 your planning fee. And I see that being like a reasonable thing. It’s like we have these… We don’t care where the revenue comes from, it’s revenue. Come from assets. It comes from planning fees.
Douglas Boneparth:
Again, there’s the value point like that was some… Clients say, well, why half a million dollars? I’m like, I’ve just been doing this long enough to know [crosstalk 00:29:27].
Reese Harper:
I know that’s kind of…
Douglas Boneparth:
You showing out five grand a year for a risk adjusted model. Guess what’s going to happen if I keep that up. You’re going to leave eventually and it’s going to be price competition versus value competition. You want to be playing the value game, not a pricing game because I know, I trust in my skills. I trust in what we can do as a firm. I can trust in the relationships that I have to put down that value. And it is very refreshing to hear you. And thank you for sharing that with me. I would expect the ratio of AUM to fees to continue to trend from where I am at today to more towards where you all are.
Douglas Boneparth:
I sometimes kid myself into thinking over 10, 15, 20, however far out you want to go. What would it be like to be like super bougie, 50 clients charging 25K, do it all, or 15K do it all. And I’m just like, 100 clients I can get a million. I’m like Jesus, a million in revenue. It’s like, I’m just going to the lifestyle practice for the win. You start creating these visions and stuff like that. And you stop having your daydream and get back to work to make sure everything’s good. Because is that what life’s going to be like for advisors? And it’s hard to really bite down fully on that. Maybe just constantly seeing more revenue being derived from the financial planning part.
Douglas Boneparth:
But we might be going there. We might be going there. I don’t know. It’s not a today problem. [inaudible 00:31:01] it’s a problem for advisors such as yourself or myself, we’re constantly thinking about how is this thing going to shape? I think this is a massive problem. If you got 12 [inaudible 00:31:13] is on the books, still I think you have bigger problems than the one-
Reese Harper:
We have a lot of, I mean, selling element has been interesting because I’m meeting with at least a dozen advisors a day like right now. For the last three months we’ve been selling and it’s been great. But I’m seeing how resistant a lot of advisors are to going to on market, like to where you’re at, where I’m at, where other firms are at who are trying to create a little bit better bell curve in their practice. I mean, that’s all we’re trying to do is say, look, you can milk the book and just sit there and hope that it sticks around. Or you can…
Douglas Boneparth:
If you care about your valuation, you’re going to care about the things that we’re talking about. If you do not care about your valuation and [inaudible 00:32:12].
Reese Harper:
But I just think more people care… They don’t actually really care about valuation. That’s the truth. They’re going to sit on this cash flow tell, they can’t move anymore. And it’s just easier to not add value. It’s easier just to sit there and just wait. And that’s what, even, I don’t want to be too critical, but you got big insurance companies, big broker dealers. They’re making that same decision. They’re like planning fees. I don’t know, it’s kind of hard. And shout out to some of the big firms that are trying to do it like LPL, I think, is doing a good job of trying to make planning fees accessible. MassMutual for an insurance company. I just saw, it’s trying to do this in a pretty intriguing way. But like, this is not where the market is at right now. The market is mostly just sitting there going, don’t make me do too much. And I don’t want to have to add too much value because I like charging 1% and just saying that my value prop is I sit on the money.
Reese Harper:
I liked that you were going after this younger generation, but your fixed fees aren’t 10 grand a year minimum, or eight grand a minimum. You’re like approaching people at a place where they can afford to hire you. And you’re then capturing a little bit more margin on the back end with AUM. I think that’s more…
Douglas Boneparth:
It’s just investing in people and their future. And again the…
Reese Harper:
Well, it’s more accessible. It’s a more accessible fee than a purest fee structure. You and I are both technically, I think you said you stopped selling insurance. So I think we’re both fee only, but clients interpret fee only as like no AUM fees. A lot of people think fee only means like I just pay a fixed fee. So it’s getting even more confusing now, but.
Douglas Boneparth:
We’ve done good enough of a job with all these structures that clients honestly have no idea.
Reese Harper:
They have no idea, no freaking idea.
Douglas Boneparth:
[inaudible 00:34:26] what down at this point, that’s our own.
Reese Harper:
Yeah. You could tell them. Yeah, and fee me. They’re like good, I thought you were fee based. That makes a lot of sense. I just think our industry’s going to go through a lot of transformation and you’re at the stage where the customer…
Douglas Boneparth:
We’re ready for. Isn’t that is not something you have to, as a younger advisor, if you’re planning on sticking around for a while, you need to be forward looking in terms of how you would be building out your firm. And I think that’s just something that I always try and do when thinking about the future growth of the firm. It’s also just being curious and it’s networking and finding cool stuff. You’re developing financial planning software. It’s got me intrigue, you got custom index platforms popping up now. This is cool stuff. How can I build out my business. So I don’t know if I want it, I don’t know if it’s going to be the prevailing trend over the next few years, but I want to make sure my firm can plug into these things. How do you constantly refine your own operations to be able to latch on to something that very well could provide value, not just to your clients, but provide value in terms of you as an operator and a business owner.
Reese Harper:
Yeah. Well, I think the place where you and I align the most here and where I think it’d be good for advisors to at least get this one takeaway is, I think if you’re not creating revenue outside of AUM, if you’re not actively engaging clients in some planning process and having them get some skin in the game by writing a check, I feel like that is the future of the best firms are going to be in that boat. And firms that are just dependent on AUM and are going to continue to have aging clienteles that, and lower valuations and firms that can get down market profitably and figure out a way to like engage the next generation. I think you’re going to be able to preserve your valuation if nothing else, but you wake up in 10 years if you’re not. And if do anything, but sit on assets. I do think you’re going to be in a bit of a pickle because we don’t-
Douglas Boneparth:
You got to hedge. You got to hedge either by how you pair that service with other services or how you basically just go about your business altogether. I’m with you on that. But again, these are big, big changes that happen slowly. Our industry and profession is not one known for how quickly things change. Merrill Lynch just last month, I never thought I’d see the day where the whole cold calling, call everyone you know raised $10 million recruitment tactic that most banks have followed since stock selling and boiler room days. Here they are saying, we’re just going to focus on existing clients and maturing that. And I’m like, wow, here’s the actual viable financial advisor career path at Merrill Lynch who would’ve thunk it.
Douglas Boneparth:
You’re telling me they actually care about, you’re sticking around six, seven than years before you’re able to develop business on your own. They’re going to help you do those things as opposed to hit them. Let’s take them at their word that this is what they’re actually going to do. It’s the first time I was actually like clapping my hands and cheering for the big bank to set the tone for how this should work. I always phrased it like this, you got the like 70 year old, 68 year old team lead, the five to 10 billion Morgan Merrill, UBS team lead, he is been doing this for 40 years and you got the 50 something year old, that’s like literally praying for him to retire or. And it’s usually a him, rarely a her. It’s like, please get out, I need to get my around this thing. That guy has been waiting 30 years for this, to 28 years.
Douglas Boneparth:
And then there’s the 36 year old next down, and he’s going to himself or she’s going to herself, how the hell am I ever going to get the [crosstalk 00:38:35]. It’s never going to happen. And then wait, there’s one more. Yeah, there’s the poor intern.
Reese Harper:
Yeah. The intern is like…
Douglas Boneparth:
[crosstalk 00:38:46] advisor kid in there and they’re just like, well, I’ll be not doing this in about half a year’s time.
Reese Harper:
There’s no future.
Douglas Boneparth:
Yeah. This is a completely busted model.
Reese Harper:
When we started, you’re going through this right now, but we started at Dennis advisors, because I wasn’t asking… because we created leads or generating demand. There was never like any go build your own book incentive plan in our business. So I would just hire someone, pay them a salary, give them clients, and then we would grow. And I would look at that transaction and be like, holy cow, that takes me quite a while to break even on this investment. I mean, sometimes it was under a year if I had a lot of marketing growth, but most often it took more than that. And I’m sitting there for 12 months hoping that this is a good fit and it’s going to work out.
Reese Harper:
And I guess I kind of hit this place in my own career where I just said, I don’t know what’s going to happen in a few future, but this feels like the right thing to do. Train someone, give them benefits, like provide them a career path, give them leads. And then I’m looking at Northwestern Mutual where I came from, because I was there from 2003 [crosstalk 00:40:10]. And it was just like, it was a freaking mess. I mean, it was like, all right, all of these financial advisor…
Douglas Boneparth:
Pure numbers game.
Reese Harper:
30 of you are in this like training cohort. One of you is going to last and I’m just like, okay. Looking around and everyone in the industry is coming from like random different backgrounds. And we all, or going to open up the phone book and start going to town on it and that’s our future.
Douglas Boneparth:
[inaudible 00:40:41] to entry kind low there. And honestly to actually be a financial advisor, I thought the Barrett entry was super high. We just earlier talked about the difficult of this thing. Who cares I started at 19. The ability to generate business didn’t happen until my late twenties. If you get a young person out of school, I have the best career in the world for you. And truly this is one of the best careers out there from what you can do with your time and what you can earn and just get in helping people.
Reese Harper:
Having an impact and all the combination of everything.
Douglas Boneparth:
Yeah. [crosstalk 00:41:25] tell the board. But go tell a 22 year old grad that listen, it’s a seven year training program. Boom, out the door, they go. You’re like, wait, come back.
Reese Harper:
Well, Douglas, it’s been a blast chatting with you and going over some of the industry trends and kind of, I guess, relating on quite a few different topics. I appreciate your time and your energy that you’ve given to the industry. And I’ll let you leave advisors with the last word today.
Douglas Boneparth:
Yeah, sure. For older advisors, I guess that have listened to us, go back and forth. I’m a firm believer in that no one has to do anything that they really don’t want to. We talk about marketing or social media or hiring and managing. Last thing I’d want to put on anyone is FOMO or any fear that they’re doing something wrong. If you’ve built a successful business and you’re living a great life, fantastic, hats off, you’ve already won.
Douglas Boneparth:
But if you don’t feel… If you feel that you haven’t won and there’s work to do, it’s not too late. You can do these things. And the biggest thing I would say is, you don’t need to do the things you’re bad at. You can hire that out. You can get a younger advisor and give them a crack, you can get a media expert. You can get a marketing expert and find the things that you like to do. These are all on the table. Or do nothing, or die with your boots on because you love it and cash those checks and stay out of your spouse’s way because you’re annoying them at home, whatever.
Reese Harper:
Well, it’s fun to catch up, man. I appreciate your time. Again, we’ll look forward to hearing the story about how things are going a year from now.
Douglas Boneparth:
Thanks man.
Abby Morton:
Next time on Elementality.
Reese Harper:
In order to have ongoing planning, you have to have deliverables. You definitely have to have deliverables and you have to have technology and you have to have touch points that allow them to feel like this is a real ongoing relationship, but you shouldn’t call it a plan. They’re engaging you to be a financial advisor, a behavioral coach, a counselor, an investment counselor. And that relationship is best accomplished through a steady stream of interactions over a long period of time.
Abby Morton:
You can learn more about the Elements Financial Planning System @getelements.com/me and schedule a time to speak with one of our friendly financial planning experts. Elementality executive creators are Reese Harper and Chad Jardine. Elementality is produced by Abby Morton and directed by Jordan Hays. Have a good one.