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Prospecting with a Freemium Model

Using Elements® as you sell helps engage prospects in what you do, generates steady interactions, and encourages quicker commitment. But many advisors worry that it could also motivate clients to “do-it-yourself”?

On this Elementality podcast, Reese Harper and Matt Glazer look at why freemium is becoming a large part of how lead nurturing is done for XYZ prospects. With freemium, prospects get the chance to start working with you—and you get to prove your value as you communicate and connect directly with them. By whetting their curiosity, you can move a prospect further down the sales funnel and closer to becoming a client. But are you giving away too much when they get used to an app they received for free? Reese and Matt say “no.” Find out why.

 


Podcast Transcript

Reese Harper:
You can either live in that place of being a therapeutic, experienced industry expert, or you can live in the place of like, I have exclusive access to products that you can’t get anywhere else, but through me. I work at large, you name it, broker dealer, or I work exclusively as a career agent inside of XYZ insurance company, you can’t get these products without me. At some point, guys, that argument’s gonna die. You have to live and die on the fact that you’re just a really great advisor and a really great human that can interpret people, listen to them, give them feedback, coach them, help them make tough decisions, and they’re hiring you precisely for that.

Jordan Haines:
Welcome to Elementality. I’m Jordan Haynes, financial planning specialist at Elements. Each episode, Reese and Matt will discuss major challenges faced by financial advisors and the things they can do to navigate the complexities of delivering quality financial advice to clients. We hope you enjoy this episode.

Reese Harper:
Welcome to another episode of Elementality everybody. I’m your host, Reese Harper. Excited to be here with a familiar guest that those of you who are long-time listeners of the show have heard from. Matt Glazer, he’s our head of product. And Matt and I decided with how busy we are the last few months that we would use this chance to start introducing Matt into some of the episodes as another co-host on the show, because Matt is interacting with advisors, he’s looking at the product, he’s actually doing a lot of research on industry products and competition and market research for how consumers and advisors are behaving. So that’s kind of the short intro to Matt Glazer again. And those of you who have already listened in, you’ve heard him a few times, but I just wanna give him that formal welcome and say welcome to the show, Matt.

Matt Glazer:
Thanks, Reese. In reality, this is really just the only time I can lock down Reese on the calendar, so this works pretty well to my benefit, and you guys get to listen in, I guess.

Reese Harper:
And makes for good audio because you’re getting, again, a real-time response on some very pressing and cutting-edge issues that we think are important to the industry. So how about we start today, Matt, with you introducing the topic of the day.

Matt Glazer:
Yeah, sure. So this has come up a bunch, not just recently, but probably since we first started talking to advisors earlier this year, and we get this a lot, and I’m really looking forward to your feedback on this. What people tell me, what advisors tell me is, I feel concerned that your app is free in the App Store. Why is it free and what happens when my clients actually understands all of this stuff? Can they just leave me and walk away? Talk to me about that concern and why perhaps that is a concern to you or it is not a concern to you. How should advisors unpack this?

Reese Harper:
Well, I think it ultimately, I’m curious about how the market is going to respond to that. One, I would like to say that we’re not convinced that it should be free forever. We’ve taken the stance mostly out of getting our beta off the ground and getting adoption going and understanding the customer, that by having an app that was free, it would provide less friction for us to test and learn with the consumer. And I think that’s proven to be true, but I think it also brings up another interesting question, like regardless of whether we choose to make this be exclusive to the advisor, there are clearly features that only pertain to the advisor.

Reese Harper:
I think the question that I have legitimately is if we just strip away everything about financial planning, which this product is about orienting the consumer around financial planning in a new way, around financial wellness, around topics that are relevant for them to gain exposure to. If we strip all of that away, and then we say, it’s all up to the advisor to be able to expose to the client what financial planning is, I think we put ourselves in a position where the jump from prospect to client is like leaping a pretty large chasm as opposed to small steps, which is why I think how most people make decisions.

Reese Harper:
So I was thinking of myself going to an event and saying, “Okay, I’m gonna go to an event. There’s gonna be 25 people over dinner, and I’m gonna teach them about a topic around financial wellness.” Maybe I’ll pick debt to income ratio, maybe I’ll pick measuring savings rates, maybe I’ll talk about net worth progress. If I can engage them right there with an app or with a technology experience that is free and invite them into my world and then continue to drip and market and email and call over the next six months to a year on those who chose not to become customers, ’cause some will choose… It’ll be like a typical event where maybe one or several people, one or two out of your 25 actually become customers, regardless of whether you have tech or not. There’s someone there that’s in enough pain where they’re just like, “I’m gonna sign up.” But then you have a bunch of people in that room who are either… The only option for them is to do everything with you or nothing. And so you have no way to sort of engage them in that small setting to sort of get into your universe. And I just like the idea of baby-stepping prospects into my universe and hopefully having customers, some that are free.

Reese Harper:
Think about how software is distributed today, think about how all businesses are trying to grow in this new generation with X, Y, Z customers. You can’t just have it be all or nothing. Freemium is a major part of how lead nurture and customer cultivation happens. And I’m leaning more towards the direction of how can advisors get a larger database of customers that they can nurture and help. Imagine if once a year, your free clients, you reach out to and say, “Hey, I know you’ve been interacting with my content. I know you’ve been getting my emails. I know you’ve been coming to my site. I know that you’ve been receiving some of the updates from my system. I’d like to get you to experience what it’s like to get advice from me, rather than just be receiving impersonal content from a distance.”

Matt Glazer:
You had an interaction the other day you told me about that was similar to this. Not the content marketing approach, but a friend of yours who you had met and moved a little bit of investment over to you for you to manage, and then that turned into a lot of it sometime later. And it revolved around this drip, so to speak, of engagement around Elements. Can you talk about that specific story a little bit? How it played a role here, ’cause I think that’s really specific to this example.

Reese Harper:
Well, yeah. I had a neighbor that I have known for quite a while and he knows what I do, and he’s very successful, and I didn’t really have… Until Elements was released on the App Store back in… Earlier in the summer, I didn’t really have a way to engage him with content or anything that would expose him to what I really did. And so once I put him on the app and got his information in there, he still didn’t share it with me, I just let him download it and keep it private for a while. He put all his information and had some questions for me. He said, “I couldn’t link this bank account and this wouldn’t connect,” and your classic account aggregation woes that happen to every advisor. And I think it was like HSBC is down or something like that.

Reese Harper:
And at the moment that we started interacting about his actual numbers, even though I couldn’t see his data ’cause he hadn’t chosen to share it with me, and I let him know like, “This is private to you. You’ll be able to just get a sense for how we’re gonna work together.” I don’t know if he would have put his information in, if it would have been shared with me right out of the gate. He wasn’t maybe ready for that level of commitment, but he was ready to engage me around some questions that were generally I could talk to him about, because I knew the scorecard and he knew I knew the system, and I could at least coach him on what I saw, and that sort of resulted in three or four interactions. I was surprised that I put it on his phone, I thought nothing would happen, and then 60 days later, he reaches out to me and says, “Hey, I was just looking at this and it was kind of cool, and saw this.”

Reese Harper:
He was too busy to engage right away, but I had planted something in his life that was permanent and that he was going to use eventually, and it has resulted now in a very, very large customer relationship that went from… The first interaction was, let’s say, a six-figure deposit that represented 0.1% of his liquid assets. And now, I probably manage the bulk of his liquid assets and many millions of dollars, and it was resulting from a six to nine-month interaction with a hyper-private person that started with reaching out through technology, getting them comfortable with doing something related to financial wellness and financial planning that sort of oriented them around me and now they’re a customer. But I think, how would I be able to interact with that person if I didn’t have some kind of freemium offer as an advisor? And advisors right now don’t have that. It’s all or nothing. It’s like, you know?

Matt Glazer:
Yeah, so I think that’s a great example, and probably really hits on what you had spoke to initially, which is like, “Let’s just reduce the friction to getting a ball put.” Let’s not talk about how Elements actually creates for an engaging conversation, but just the fact that it’s easy to get to in this case, creates a really smooth path to just engaging around something to begin with. I think where this question is coming from for most advisors though, is year two in the relationship, year three. I’ve resolved all their initial concerns and recommendations and action items, and we’re into this ongoing mode, and they have perhaps learned enough to understand what the Elements actually mean, and we monitor together and we engage around them. I think these advisors feel there’s a risk of the client becoming so well-educated because it is simple to understand and engage with, that they begin to think, “Well, I could do this for free on my own.” And I think that’s where the fear is kind of resonating from. If this is so easy to use and a client can use it without me, is my value at risk here? Is my relationship at risk here? So I’d like your perspective into the relationship.

Reese Harper:
Let’s let you riff on that, ’cause I think… I’m guessing you have an opinion that’s as strong or stronger than mine. I wanna see what you actually think about this issue.

Matt Glazer:
Yeah, I do have a strong opinion and I think it’s one we share. And that’s, for someone, for an investor, client, consumer, who is ultimately gonna self-direct and ultimately be so cost-conscious that they are willing to do things on their own, I think those are consumers that, generally as advisors, we don’t necessarily want in our book long-term, because they take a lot of expense to get up and going, and they ultimately don’t value the ongoing or long-term advice. So I’m actually less concerned about churning that smaller portion of the book. Now, for the other vast majority of clients, and the majority are not self-directed individuals who are coming to talk to you, the majority do value advice in an ongoing relationship.

Matt Glazer:
I think we just have to tell ourselves and reinforce ourselves that we matter in this relationship. That, sure, the better the client becomes educated on the Elements, honestly, the better for our relationship because we can get to a shared understanding and a shared state of buy-in a lot quicker, and I can get more adherence more quickly, and we can get to progress and impact in a more repeatable kind of way. So I actually want the client to understand, I actually want the client to engage, I actually want the client to make observations about their own situation to me, because that indicates a whole lot of value that I’m providing and that I can actually build on top of. That’s one piece of it. And the other is kind of a sister or brother to that, which is, the advisor brings this to life. Some might reach that level of comprehension, but a lot won’t, and a lot won’t candidly wanna take the time to. And so how do they know if savings rate or liquidity or the state of their insurance, how do they know what’s right or wrong? Or good or bad? Or where they should be versus where they shouldn’t be? And even if they did know that, how do they know how to get there?

Matt Glazer:
We play a big role in the behavior game here, of actually getting them to make progress. We can observe on their progress, but we actually get them to make progress, and they can’t do that on their own. So, for us, this is my opinion, and I’m certain we share this, is we’re here to help amplify advisors in that regard.

Jordan Haines:
A big challenge for advisors is delivering a consistent, ongoing financial planning experience to clients. Knowing what to do initially with a client is easy, but how do you consistently add ongoing value to strengthen that new relationship? The Elements Financial Planning System is centered on key indicators of the client’s financial health, and it gives you the structure you need to deliver ongoing value through financial planning. Start by evaluating key client financial data, then deliver timely insights that are both valuable and appreciated. To learn more, schedule time to talk with us today by going to getelements.com/meet.

Reese Harper:
We have a deeply held belief that the advisor market plays an essential role in changing behavior for a large percentage of the population, like the vast majority, not like… We think human interaction or human intervention around coaching, around behavioral finance, this is a psychological challenge, if 80% of Americans are ranking financial stress and anxiety as their number one stress, we’ll call it according to American Psychology Association, that’s been happening for 100 plus years. That’s not gonna change overnight, where money is no longer the major stressor for people, even if they’re self-directing, even if they have new tech, it’s not gonna change.

Reese Harper:
I don’t like playing into this historical argument that advisors have used of like, well… It’s like, you know, like with DFA, the argument for DFA used to be like, “Oh, you can only get DFA funds if you are with me, but you can’t get them direct,” but then somehow they started leaking them through 401k providers, and then somehow a couple of custodians got it, and then now the value proposition of exclusivity through an advisor is now starting to crack, and then some advisors get mad and some don’t. And I just think, it kind of like… The same thing happened with E-Money, the same thing happened with other products I’ve seen, like, “Okay, we’re gonna make the argument be that you can’t get it any other way than through me, ’cause this thing, this tech I’ve got is the value prop,” or, “This product I can get you is the value prop.” The more we play into that, I think the less trusted the market is.

Reese Harper:
If truly, you go to an event and you’re like, “I’m here for financial wellness, folks. I’m here for helping you make good financial decisions. I’m here to orient you around how to make progress. I have a lot of data that I have as an advisor that I can help you develop heuristics around. I have lots of industry knowledge around your occupation, around the choices that you make. I can read you. I can listen to you, and I can give you feedback on your decision-making, where your logic is, and the way you’re prioritizing all of your choices.” You can either live in that place of being a therapeutic, experienced industry expert, or you can live in the place of like, “I have exclusive access to products that you can’t get anywhere else but through me.” “I work at large, you name it, broker-dealer,” or “I work exclusively as a career agent inside of X, Y, Z insurance company. You can’t get these products without me.”

Reese Harper:
It’s like at some point, guys, that argument’s gonna die. You have to live and die on the fact that you’re just a really great advisor and a really great human that can interpret people, listen to them, give them feedback, coach them, help them make tough decisions. And they’re hiring you precisely for that, because they don’t want to be at risk of making choices that reflect their biases, their life experience. And you’re going to prove that you’re okay with that by engaging them with a valuable interaction for free, which is, “Hey, I have a lot of content I put out there.” Like how many of you probably have email newsletters and podcasts and events and content you’re producing. You’re going to educate this audience. Why not have some offering that you can put out there in the market, let them come engage it for free, and of course, it won’t have all the features, of course it’s not gonna have everything in it that they’re going to get when they become a customer.

Matt Glazer:
Which includes your advice, your advice is not…

Reese Harper:
Which includes your advice, which includes… That’s the primary thing that it’s not gonna have. Now there will be some features that are just different, because a consumer that’s wanting to self-direct isn’t gonna use this tool that we’re building for… It’s influenced so much by the advisor community that they’re just… In case you guys didn’t notice, people don’t actually really love using PFMs, they’re not obsessed with them. A PFM, for those of you who are not familiar, is a Personal Financial Management tool, it’s a category of software that is free, they are all over the place, and there’s thousands of them. And so, your PFM isn’t going to be the reason people hire you, and we just feel like playing into that in an advisor community right now, it feels just a little premature for us, maybe we’ll decide at some point there’s some compliance reason or some other factor that we can’t see. But I want you to be able to go to an event, I want you to be able to engage a family in a consultation, give them a chance to start working with you, tip-toe in, invite them to your universe, teach them, coach them, give them some advice. Let them tip-toe in.

Reese Harper:
It doesn’t have to be personalized advice, just orient them with top-of-funnel content, that’s what we’re trying to distinguish here, and watch how they’re willing to take a next step, and I guess that’d be my response, hopefully that’s something that can help people kind of understand where we’re headed. Thanks, Matt. Really appreciate the chat on this topic, and look forward to having another conversation in advisor land soon. Have a good one, man.

Matt Glazer:
See you.

Jordan Haines:
Next time on Elementality.

Justin Castelli:
The hero in the relationship is shifting. For so long, the financial advisor was the hero. I provide the solution, I provide the investment, I provide all the answers. And now it’s about, “Okay, how do we make the client the hero of their journey?” So how do we become more of an ally rather than the focal point? It’s not about us, it’s about our client.

Abby Morton:
You can 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 Matt Glazer. Elementality is produced by Abby Mortin and directed by Jordan Heins. Have a good one.

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