Independent Perspectives: New views of the RIA model
The journey to independence
NATALIE GROEGER: Hi, I'm Natalie Groeger, Managing Director of Business Development at Charles Schwab Advisor Services.
Joining me today is Alan Moore, CEO and co-founder of XY Planning Network. Thanks for joining us, Alan.
ALAN MOORE: Good morning, doing wonderful.
NATALIE: Alan, I just wanted to talk with you a few minutes today about a unique challenge that we have in our industry, and that's serving the unique needs of young investors. I think the question many advisors have is how do I serve these unique investors and still in a profitable way?
ALAN: Absolutely. So our backstory is back in 2012, I started my own financial planning firm. I was 25 years old at the time. And people asked, "How are you going to convince Baby Boomer clients to give you all their assets?" And the answer was I wasn't. And so what I said was, "Well, I really want to work with clients that are in their 20s, their 30s, their 40s, people who are dealing with similar things to what I am." So we asked the question, would a client be willing to pay for financial advice out of cash flow? And the answer was yes, our younger advised… or our clients are actually even more willing to pay for financial advice than some of the older generations, as long as they're seeing value. And so we started XY Planning Network to support advisors to work with next gen clients that historically have not been able to get access to a financial planner.
NATALIE: How is somebody that's just starting out on this financial journey, how are their needs different than our traditional high net worth clients?
ALAN: Younger clients aren't interested in a trimmed down version of… you know, of… of what you normally would offer your higher net worth clients. What they're interested in is comprehensive financial planning that's built for them and their needs. There's so many things that are happening in their life that, ultimately, a financial planner can really assist with it and really help them make good decisions. They may not have savings habits in place, and they may have debt that ultimately needs to be managed. So it is a… it's definitely a misnomer that working with younger clients is simpler or easier. Their needs are just different.
NATALIE: So what products and services, what could a good advisor do that would support those unique needs of an investor that's just starting out?
ALAN: Just starting out with a service model. In the end, you know, younger clients have more debt than assets. And so becoming an expert on student loans, on… on managing a mortgage and a car payment, things that our older, wealthy clients simply don't have. But it's also the marketing. Younger prospective clients go to the internet. They're looking for information and validity that you're an expert on their situation and what they're dealing with.
NATALIE: How do you make a profit serving these types of clients?
ALAN: Yeah, the mistake we see a lot of larger or more established firms make is they say, "Oh, we just won't charge the kids of clients. We won't charge the younger clients because, eventually, they’ll be rich." Especially, for an advisor who is starting their own practice, you… you don't have the luxury of waiting 20 years to… for a client relationship to become profitable. As an advisor, don't be afraid to charge planning fees or… you know, for the value that you're providing your clients. And so know that you can build a successful, sustainable business specializing in working with younger clients.
NATALIE: Thank you so much, Alan. I really appreciate you taking the time today.
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