Inside the Pod: Episode 9
In our ongoing profiles of innovative, fast-growing wealth management firms combining human expertise, empathy and guidance with technology, data and tools, I recently connected with Steve Lockshin, Founder and Principal of AdvicePeriod as well as heading up the Vanilla estate planning product suite.
Steve is a legendary figure in both the independent wealth and the advice tech space as chief executive, practitioner and investor. He has been named a Barron's top independent advisor numerous times and most recently the Wealth Management Wealthies award for RIA firm leader Innovator of the Year, 2020. Vanilla also won Wealthies awards for Technology Disruption and for Family Office Client Initiatives.
For someone whose tagline is "We're Reinventing Wealth Management. The current model is totally outdated.", one would expect bold views on the state of our industry and advisors as well as technology adoption, and Steve delivers. He shares his views on Humans and Machines, the need for transparency and why we need to stop "numbing people into submission" and overcomplicating things.
Steve is as tech-forward as any advisory firm leader in the business and continues to personally advise clients so he takes his own medicine. He also shares why thus far AdvicePeriod has chosen to grow purely organically and how they go about that both in terms of attracting like-minded advisors and attract clients that fit their target profile from ultra high net worth to smaller investors (they have a no minimum policy and are using automated solutions for the less complex clientele).
Show Notes
• The AdvicePeriod origin story [1:40]
• Steve’s views on Humans and Technology [4:53]
• The AdvicePeriod target advisor profile [7:30]
• The AdvicePeriod client experience and the role of technology [9:55]
• Advisor adoption of technology and the state of advicetech [12:25]
• CRM and data mining [15:18]
• Making the complex simple and providing advice that clients follow [18:22]
• Why Steve still personally manages client relationships [21:25]
• Why AdvicePeriod has no account minimums and how they leverage Betterment for Advisors [24:20]
• Household rebalancing with Just Invest [26:22]
• Leveraging an Abundance vs. Scarcity mentality to collaborate with his peers [31:28]
• COVID-19 Impact and the lasting changes of virtual engagement [34:25]
• The Vanilla origin story and value proposition [37:27]
• What Gets Steve Up in the Morning and What Keeps Him Up at Night? [41:45]
Podcast Transcript
Wealth Management v2.0: The AdviceTech Revolution, Episode 9
with Steve Lockshin, Founder and Principal, AdvicePeriod
PODCAST TRANSCRIPT
Gavin Spitzner (President, Wealth Consulting Partners, LLC):
Welcome to "The Wealth Management v2.0: The AdviceTech Revolution" podcast, where we are focused on the business of the business, the business of advice, and specifically, we study and celebrate firms that are leveraging the combination of technology and humanity to deliver better advice to more people, and better outcomes for more people through that combination.
I'm joined today by Steve Lockshin, founder and principal of AdvicePeriod, and someone who's really spent their career at the intersection of advice and technology, so he had to be on the AdviceTech Revolution podcast. So he's a legendary figure in the world of independent advice, going back to at least the mid-'90s, founding and then serving as chairman of an important firm in the history of independent advice and advice tech, Convergent Wealth Advisors, and that led to Lydian Wealth Management, ultimately acquired by City National Bank, now part of RBC and Fortigent, a groundbreaking wealth tech and outsourcing firm that was acquired by LPL, I think about seven, eight years ago.
And recently Steve is back in the advice tech space in a big way with Vanilla, where he's looking to disrupt the staid old world of estate planning. We'll hear more about that. So, Steve, we want to hear about all of this and your journey. But let's start where I start with everyone. Steve, tell us the AdvicePeriod origin story. And ultimately, it's your story, you can start forward and go backward, backward go forward, whatever you think makes the most sense. But, Steve Lockshin, welcome.
Steve Lockshin (Founder and Principal, AdvicePeriod):
Thanks for having me. The story is pretty easy because it's a clean sheet of paper story. Basically, the company was founded on the idea of if we could start over -- and I had sold the business in '07 -- and had different ideas of how about how we want to do things, so we really applied all the principles we wanted and fortunately, I was far enough in my career that I was willing to take some additional risks and try and break some things that weren't broken.
And that basically is the story of the name. It honestly came from trying to figure out how the hell we were going to name the firm when you can't find a URL, a trademark, and a name all at the same time. And I was sitting, I was visiting my folks in my childhood bedroom, and I'm thinking to myself, I just want something that says what we do, just advice, period that's all we do. I'm like, "AdvicePeriod." And so there we are.
Gavin: You didn’t pay a big consulting firm millions of dollars to come up with that?
Steve: I saved myself that money.
Gavin: So, talk to me that about those principles that led you to that and like you said, clean sheet of paper, you weren't beholden to any legacy business models. What were the founding principles of AdvicePeriod?
Steve: Transparency, technology, which allowed us to do more for less, liquidity, tax efficiency, we're huge believers of taxes are probably the one thing that create tremendous leverage, and we should apply advice first, we believe that investments are commoditized. And I'm sure we'll talk more about that as we get into the podcast. But for the most part, if it was my money, and I passed, and I wanted my family taken care of how would I want them taken care of, and that's the company we built.
Gavin: Excellent. So talk about the firm. How have you grown? How have you structured your teams? What’s the typical target client profile?
Steve: There's kind of two parts to our business, the overall philosophy and theme are the same. There's what we currently call the lab, basically we're always trying new things and wanted to note that group that focus on the ultra affluent clients. So, the minimum fee is $100,000 and very estate planning focused, very tax focused, we're almost all taxable clients other than some private foundations.
And then we've got a business that allows other advisors to leverage our platform. They become employees, but they can leave anytime and we agree we won't fight them for their clients. In fact, we won't even retain any of their clients. And we run it very much in a capitalistic way, which is, if we do a good job, pay us our fee. If we don't, you can leave. And again, they're leveraging our tech platform, our buying power, the things that we want to do. So we're about just under 100 people at AdvicePeriod, and then Vanilla, which you mentioned has got 17 folks and growing. Everything has been organic. We haven't done any acquisitions at all.
Gavin: So I've heard you in the past say much of what advisors do today can and should be automated. So, let's talk about this intersection of humans and machines. What's your view of that combination? Where’s AdvicePeriod today around what humans do, what you leverage technology for? And maybe use that as a jumping off point to talk about where we are today, but then also, where do you see things going over the next 5, 10 years?
Steve: Yeah. So let's talk about what advisors for the most part do today. The typical advisor, so there are obviously going to be outliers on both ends. But the typical advisor collects client information, comes up with an asset allocation, picks the funds, rebalances, hopefully tax loss harvests -- unfortunately, many still don't deploy tax-loss harvesting or proactive tax-loss harvesting. And they provide reporting solutions.
Well, we all know because a robo advisor is all that can be automated and can be automated for a very, very low cost. And chances are, they do a better job than most advisors because there's no emotion built into the computer. The things that clients want from the human part is somebody to relate to, somebody who can explain things, someone who can adapt to their personality, and for the most part, that's still what the human advisor brings. And it's no different at our firm. Empathy, relationship, being able to adapt are all things that the human advisor brings.
That being said, I think that stuff's going to get automated, for the most part. Computers have natural language performance with machine learning and AI, and we already are seeing it with Google if you've not seen some of their solutions where they'll call up and you'll think you're talking to a real human, they can adapt. Even with the language, the ums and ahs and the pauses, I think a computer will do as good or a better job than most humans in the future. Is it going to be five years out? Probably not. Ten years out? Maybe, I hope so.
I think there always be a need for boutique type advisor because somebody wants to sit down with a human and those advisors that can provide a solution that's different than what the computer can do or better, will still have a business. But if you're just mailing it in doing the basics, I think you need to fear for your career if you're not retiring in the next decade. Right?
Gavin: So with that said, what’s your target advisor profile? Who do you seek out? Or maybe the other way now, what type of advisor seeks you out based on that philosophy and what you've built?
Steve: The original premise when we started the advisor business where advisors user platform was, well it came from going to conferences and speaking and asking folks in the audience, "Who here thinks they're smarter than the person on their right or left?" Who thinks their portfolio is going to do better 20 years from now?" And a couple of chuckles and nobody raised their hand. And we would talk about the fact that by definition, we were then a commodity because everybody was providing essentially the same thing.
So, what were we going to do and how are we going to use technology to better enable advisors? And we talked about taxes, and, again, what the technology can do. We found when people left, they just went back to doing what they were doing the day before they came to the conference. And so, the big issue was going back to clients and saying, "Hey, that thing I sold you a couple years ago, yeah, I don't believe in that anymore. I think there's a better way to do this," and they just weren't making the changes, they were kicking the can down the road.
So, we felt we could help advisors bridge the chasm of I can come up with a better asset allocation, I can find better managers too… here's what we believe now in terms of tax efficiency, low cost, index based… things of that nature and then again, focusing on estate planning where it was appropriate. That was the premise for the business. The advisors we look for, and I think look for us are ones that are of similar minds. So, we say we want people to opt into our philosophy, we don't want to convince you to do things the way we do things. We want someone who's looking for us. And somebody says, “finally a place that thinks the way I think”.
And it's tough, because old habits die hard with everyone. We've been doing that part of the business for three and a half years, we're still a young company. So, we're learning. But every new advisor that comes on kind of raises the average in terms of what our philosophy is and how we're doing things and we start to take out the outliers so that we're delivering a consistent experience across the entire firm.
Gavin: It's a perfect segue, So, client experience. What, would you say you have a defined client experience from first meeting with the prospect through to onboarding and then ongoing service? And maybe related to that, do you have based on all your experience, do you have kind of a set gearing ratio in your mind with a very efficient tech stack, and I want to hear about that as well, an advisor can handle X number of clients or households, and deliver that experience really well?
Steve: I’d change it from households to probably revenue until they start growing things. And I think the thought being if you price each client appropriately, then it will define how much you can handle. So if you do very little for smaller clients, you can handle more, and obviously, as you get the more complicated clients, let's say they need more bespoke planning that the computers aren't ready to tackle if you will.
So, in that regard, I'd say that my experience is the typical advisor that's a good advisor probably caps out at a couple million, around there. Then where do they go from there? Well, they've got to hire better people and learn how to hand off their relationships so that they can do less and less of the day to day and more of the global advisory work. And so that's what we started doing 25, 30 years ago hence what we're doing here. The experience is definitely defined even for the partner advisors that come on board, we'll do their proposal generation for them, we'll do the portfolio management for them, we'll deploy this because the technology will do it and there's still some manual intervention, all the rebalancing and tax-loss harvesting all the recordings online 24/7, the collection of data is automated.
Any paper... I mean, it's crazy the amount of paper that still exists in our industry, and how difficult It is as you know to open an account or transfer an account and do the things that need to be done anything that can be automated we try and automate and if it doesn't exist, we just build it. So, hopefully everybody has the same experience. That being said, advisor A may have one personality, advisor B may have a different personality so the experiences are slightly different, but the overall deployment of technology is the same.
Gavin: So in terms of firms that are struggling, advisors still struggling with technology, I'm curious, do you feel like there are still missing capabilities? Do you feel like the issues are more, we have the bases covered, but things don't talk to each other well enough, the advisor is still swivel chairing, there's data flow issues, workflow issues? So, I guess I'd call that the second category. We have what we need, but it's not integrated well enough or do we have what we need it's pretty well integrated at least the way say you built it, but there's issues with advisor adoption, and just doing what they need to do to leverage all that the way it's built to be leveraged.
Steve: Can I pick “D, all the above”? I mean, it depends. So undoubtedly, everything doesn't talk to each other. It should, but it doesn't. And even if it did, advisor still don't, I mean, I say it and no disrespect to the people that are smart enough to listen to this. But the majority of our industry is lazy and stupid. And I say it publicly all the time. And when I say that they don't want to learn, they want to do the basic drive, they drive looking in the rearview mirror, I forget the number.
But I think the last survey I saw something like 20% of people are still running Windows 95 in our industry, they're using Outlook as their CRM. It's just amazing, the lack of interest folks have been doing things the new ways. Still PDF or paper reports are one thing, but still giving PDF reports when having access online all the time is available, and it cuts the work down for the advisor anyway. So, everything doesn't exist, we have the kind of sine wave of full stack versus best of breed to talk to one another. And they kind of keep rotating, the folks that will do full stack will have a head start, then people build the pieces that work together and it will be better. And then it'll go back and forth and back and forth.
I think once you get past the data collection, and proactive recommendations, and there's not a lot of that out there that exists, which is part of the reason we started with Vanilla, then you can get the adviser out of the day to day and put them in front of the client where they can do their best work instead of administrating. And so, I don't think tech's there. I don't think it'll ever be there because it's a progressive, we always want to do better. But I hope in the next five years, we see a dramatic increase in the ability for things not only to talk to each other, but to actually look the same. So, people don't feel like they're jumping between five different programs.
Gavin: Right. So, for a lot of firms, CRM is seen as kind of that holy grail, that single pane of glass to be that hub, that anchor where everything is flowing into, workflow is managed, data is managed. You talked about AI, so maybe this is a good jumping off point to talk about the data side. How that's being harnessed to surface up insights and help scale more personalized advice. But so maybe tackle those in whatever order makes sense. But CRM, what role does that play for you? And then how that's playing a role in terms of data synthesis, analysis, and driving insights.
Steve: Yeah. So, the old garbage in garbage out holds true obviously in CRM. We use Salesforce, I love it and hate it at the same time, you basically need a full time engineer or engineers to really get what you want out of it. But it's a very robust tool, which explains their mark again. We've got some folks that develop the tools that we need, which is what's nice about it's flexible, so we can measure anything from advisors’ scorecards, how are they handling revenue per client or revenue per advisor, or how many transactions. We measure every single request they make the operation so we can see who is a pain in the neck and who's running an efficient business. Are they charging their clients appropriately? It really gives us a chance to look at everything but aside from what's going on today, the real question is what should be going on, that's not going on. And that's another place that data helps us.
But all that data isn't necessarily available. And even things that shouldn't be available, are not because the industry doesn't want them to be available. And so, my pet peeve is after tax reporting, not that hard. Everybody says it's hard, it's not hard, you don't have to be perfect, you have to be close. Most of advisors on an after tax basis to track value, many on a pre tax basis to track value. Clients should understand that, advisors should understand that, but nobody wants to mine the data because it'll be so detrimental to the advisory business.
And I'm pushing Orion and Black Diamond to do it. I mean, there's a methodology, it's easy. So, we want to use the data every way we can. And as I said, if something doesn't exist, we'll try and create it. Estate planning is a set of rules. If you know how to run the traps, the computer can do it way...you don't need AI…it's just a rules-based engine. And that's what we started to build because everything that's up here (ed:points to brain) could be inside that box, making it way easier for folks at our firm and other firms to do that work. And again, that's where I think data can take us is proactively telling advisors, here's how you do a better job for your client, go call them about this, right?
Gavin: And, so ultimately, the goal is to guide clients to better outcomes. We can get so caught up in the tech and in the data and the business of advice. But let's talk about the client for a minute. So, in terms of delivering high quality personalized advice, comprehensive advice, I know given your clientele, that's a big focus, you're not narrowly focused on one part of the advice puzzle. So, to do all that -- and then the last mile -- to actually get clients to follow your advice. Talk about that, how do you do that in terms of the services you bring, the expertise, workflow, and I guess to some degree the data to build plans for clients, and then actually track it and help them monitor how well they're achieving the goals that they've set out.
Steve: I think the magic is making the complex simple. So, again, to pick on the industry, and I wrote a piece a couple years ago after sitting in a quarterly meeting with a client where we have a number of other advisors that have pieces of their portfolio, and listening to them drone on about performance and what's going on the economy. And by the way, one says it's going right and one says it's going left. And it's a complete waste of time.
So, I ended up writing this piece called “The Death of the Quarterly Meeting”. And as my dad often says, I'll pay extra not to go to those meetings. So, what do we do? We numb people into submission, so that all they start thinking about is when is this person going to leave. And then the advice becomes very simple because the client just says yes to get you out of the house or off the zoom or whatever you're doing. Clients don't want that. They want simple, they have decided that they want to hand the responsibility of making a decision over to somebody else, they want to be able to see in a couple pieces how it got from here to here.
So, just because someone's wealthy doesn't mean it needs to be overly complicated. And that's what I think we go out of our way to do. I don't show up with reports that are 40 pages long. It's online. Performance is usually one or two pages, it typically is a tenth of the meeting. The meeting is all about planning what's going on in their life, what matters. Again, for most of my clients it's tax and estate driven. And as David Canter at Fidelity says, clients want a little a lot, so we want to make sure that it's digestible, and they can come get whatever they want, whenever they need it. So, the process is, tell them what they need to know, rank it by impact, make it executable and simple for them, and do the work so all they have to do is effectively say, "Yes, I understand it. I want to do it," and then it's done, and that's what we tried to do, just keep it simple.
Gavin: You said something there, which I hadn't really thought about. So you're still managing clients yourself?
Steve: Yeah.
Gavin: So, talk about that. Do you do that purposefully so that you're not up in the ivory tower throwing down commandments, but you're consuming your own meal, as it were?
Steve: Yeah. I would keep looking for this tower and I can't find it. So, as soon as I get to the door and can find the key maybe I'll get up there. But intellectually, I say I want to work on the business and not in the business. Emotionally, I like working in the business, I love working with my clients and I don't think I get a greater level of satisfaction than solving a complex tax problem or dealing with clients around that.
To be frank, the investment part bores me to death. Again, because it's a commodity, and I just don't think it's that easy to add value so let's just make it simple. But solving a complex tax problem is something that I really enjoy. So, I'm typically involved in that. And then getting clients to actually take action is probably one of our skill sets. So, making it simple, as I said, so it's digestible, and making it actual and then getting them to go, "Okay, it makes sense. My last advisor couldn't get me to do this, or for whatever reason, I didn't do it, but here it makes sense."
In fact, I talked to a new client coming on, I spoke with her this morning, interestingly and their attorney is a very good attorney at a very good firm and he's been with the family for five generations, which I've actually never heard of, and he's not that old, starting with the great grandparents. And it's amazing, they did great work. It's amazing the amount of work that wasn't done. And when I spoke to the client, she said, "I didn't realize how much we hadn't done until you kind of highlighted for us and the attorney doesn't call us to tell us we should do stuff. We call them and say, Hey, we're ready to do something. What should we do?"
And just being proactive, and again, making it easy, because she doesn't understand this stuff. She wants someone to make it simple and actionable, that's what made the difference. And it was nice to hear. She said, "We interviewed tons of firms." Her husband had passed away in January, who handled everything she goes, "And you were very, very different." And it wasn't that we're smarter than anyone else. We just took I think a simple and a very direct approach and didn't scare her to death with complexity.
Gavin: Yeah, I think there's a lot of folks that they, I don't know, maybe it comes from a place of insecurity, but they want to just overwhelm to build the credibility and show how smart they are versus simplifying and just focus on the clients and problems they have to solve. Let's zoom out for a minute. So, it sounds like you've got certainly some very high net worth families, complex issues. In many ways, those who need financial advice the most have not traditionally had access to it. So, from a client segmentation perspective, I think you have a partnership with Betterment. And so, maybe can you speak to that? And does that play a role in terms of segmentation and being able to serve a broader set of clients?
Steve: It does, except I wouldn't...and when we started Betterment Institutional, which is now Betterment for advisors, with Betterment, there was a lot of talk about segmentation, but it really isn't a segmentation play. It's a tool that allows you to automate a portfolio that is appropriate for that solution. And there are some limitations today, you have to start effectively with cash and so there are certain clients that won't fit in with and it doesn't household rebalance. In fact, nothing does except for this one company we invested in, that actually does household rebalancing will account for estate ownership. And that was, again, something that didn't exist that we wanted, and we helped create, and so happy to talk about that as appropriate.
But we have no minimum. So, if a client comes in and doesn't need a lot, just some guidance, happy to put them on Betterment. If they've got some pre-existing conditions, if you will, built in gains, then Betterment may not work and we'll put them on a different solution. But we don't have a threshold. Now, have a threshold client in terms of revenue that I will work with, only because time is the one commodity I can't really replicate. But as a firm, we've got clients all over the place, size-wise, and as long as we're not under servicing and or over-servicing for the revenue, we're happy to serve any client and we'll pick the right technology or try to pick the right technology to enable them and us at the same time.
Gavin: All right. So you teased me there with the household rebalancing technology. Talk to me about that.
Steve: So, a couple of years ago, I went to one of the big tax-loss harvesting folks we've done business with for a long time and said, if you can rebalance and tax-loss harvest all of our accounts across entities and understand who the taxpayers are, like an irrevocable trust that has a grantor that also has a assets that are revocable, and handle things in the right way, I'll give you all of our money because it will take over all the work that we do and save me a fortune. And they said we can't do it because most rebalancers rebalance in a silo.
Oddly enough, about a month later, some folks came in to see me and gave us a pitch. And I thought they were coming in to pitch some technology. And obviously, I meet with a bunch of folks in the FinTech business, to look at investing in and they give us the pitch. And I go, "Wait a minute. You sound a lot like this other firm." Like, "Yeah, we're exactly like that." Like, "Well, that doesn't interest me. What interests me is, if you can do this." And I walked them through this household rebalancing tax-loss harvesting. They're like, "That's interesting." I said, "If you do that, I'll give you a billion dollars, you know, right away." And so they left, they came back and said, "We think we can do it." We sent them some accounts, and we spent a year actually…Marty Bicknell, who was on your podcast a little while ago, he and I invested in this company together, it's called Just Invest, and they're actually doing not only they doing that.
But I asked them to build one other tool, which how do you get a client that comes in that has positions with gains as well as positions with losses, and typically not in the portfolio you want them in into the portfolio you want them in, so they show up with X, and you want them in Y? The typical advisor if they're doing a good job, will inventory everything, look at the basis, figure out what the taxes are, try and reallocate where they can, it's a very manual process. And by the way, by the time you're done, and by the time you talk to the client who's on their holiday, and by the time you get the paperwork signed, the second mark has moved anyway, and you got to start over again.
So, they built a tool where we could pull the information in from Plaid. It's updated every day if we want it, we upload the portfolios we want, tell it tax loss carry forwards, tell it how much we're willing to give to charity, and we tell it the estate planning structure, and it will tell us the short path to get there and the tax implications of reducing the tracking error if you want to spend zero, or you want to realize this in gains, you want to give this to charity, etc. It's become a super-efficient tool. We tested it for a year or two and now, we're starting to deploy it widely across the firm.
Gavin: Very interesting. So in that case, are you both a client and an investor?
Steve: I'm a client, investor, and a board member as well.
Gavin: Okay. The trifecta.
Steve: Yes.
Gavin: Very good. All right. We'll be watching for that. That's super, super interesting. All right. We can talk tech all day. But actually, one more thing. It's tech, but marketing tech. So, you mentioned unlike a lot of your peers, you're 100% organic, not doing acquisition. So, from a marketing standpoint, lead generation standpoint, anything specific, obviously, you've got a lot of connections with centers of influence, especially given what you do on the estate planning side, I'm sure and CPAs but in terms of just let's say high net worth ultra-high net worth prospecting, anything there to speak of in terms of what you're doing to generate leads, and anything on the marketing automation side?
Steve: I wish I had a good answer on the marketing automation side. We've done a lot, we've tried a lot, we've spent a lot and the data keeps telling us that it's still people you know, referrals, industry referrals, etc, depending on what the target is. We still do it and we'll continue to market just if nothing else to create some brand awareness. But the fact is, nobody knows who any of us are in the industry. I mean, from Ric Edelman who's got an amazing business… if you don't watch the show, and I walked up to someone on the street, they might never have heard of Edelman… to Mariner, which is huge.. or Peter Mallouk’s business (ed: Creative Planning)…the typical client, if they have not heard of these firms have no clue who they are. If they don't have the brand that Goldman or Morgan Stanley has, and will never be able to afford it. So, we have to accept, I think that it's going to take much more hand to hand combat to find clients than it is mass marketing because it's too expensive to build a great brand.
Gavin: Right. Eventually, some of your peers so that's one thing I just wanted to touch on is it's one of the things I love about the independent spaces how much you share with each other. You can certainly be fierce competitors at times, but there does seem to be a strong philosophy around abundance versus scarcity, that there's enough for everybody. So, can you speak about that and how you work with them and share ideas with your peers.
Steve: I think the biggest issue is we don't compete with one another. I don't think I've come into competition with any of the folks that I just mentioned. In fact, I've worked together, collaborated with a bunch of them. So, much so that there's a group of YPO’ers -- Young Presidents Organization -- that has a forum… Marty's in it, Ron Carson's in it, Rob Frances, who has the largest -- not Aspiriant Rob Francis -- but from Canada, has the largest independent IBD -- and a bunch of other guys, we all get together a couple of times a year, and we share everything open book, talking about what's working, what's not working, I'm on Carson's board arguably, we were competitors we're not we're both go after advisors as well as clients.
I don't think we've ever competed with one another. So, I like the collegiality in the business. I think it's fantastic. It's kind of us against the wirehouses to a certain degree, although the wirehouses are starting to come around to the way that we do things. But it's great. It's a great community. And I encourage folks to learn from one another if they're not.
Gavin: Yeah, absolutely. It's funny, you mentioned the wirehouses, we're seeing this almost convergence, where we've got a lot of very, very large RIAs -- the aggregators that are, in some ways, becoming a little bit more wirehouse-like with centralized services and the like, and then wirehouses trying to deploy certain elements that look like independence or some variation. So, it's some interesting dynamics going on in the space for sure.
Steve: Well you saw Eaton Vance got bought. It'll be interesting to see the push where things go. And I think the dichotomy of wirehouses versus independence is converging. I really think, and I've said this for a long time, there are folks with conflicts of interest, and folks without conflicts of interest, or with significantly reduced... I think they never go away fully, you still negotiate your fee. But that beyond the fee, really have no product, no incentive to do anything. And that's the way I'd like to see the world divided in the future, not wirehouses versus our RIAs it shouldn't matter where you are good platforms. It really is how do you treat the client. And I think that matters.
Gavin: We can't not talk about the world we've been living in the past six, seven months. How have you and your team adapted both in terms of virtual engagement and remote work, I suppose, and how that's impacted business? I hear different things. Quite a few firms have seen an uptick more people looking for help, or it's increased the awareness that maybe who they're working with today, to your point before about conflicts isn't doing it for them. So, anything you want to comment on there in terms of in the COVID age, how you've adapted? What you've seen? And also what changes would you say are temporary versus permanent?
Steve: I'm never wearing pants again, it's probably one of the outcomes. I'm wearing shorts right now. I don't think people are going to go back to work the way they used to. I personally really enjoy working from home. A lot of our folks do, we've had a number of people move out of the city into either other states or to less expensive areas that commute. We had folks that were commuting an hour, two hours of work sometimes hired 21 people since COVID. And at Vanilla, we've got 17 people that has always been a remote workforce.
And because we now don't care where people live, we're going to have to go to a hybrid place. So, I think folks will still want to congregate to have clients come in the congregate to just interact with other people. But I think our businesses has changed forever. The best part about it is this that we don't have to travel to go see clients so that one client I mentioned interviewed all those folks all on video or phone, and they're on the east coast. I didn't have to travel east coast to see them. So, it's stepped up everyone's willingness to use video conferencing, which is going to dramatically reduce travel.
Gavin: Right. Yeah, I think in a lot of ways, clients led the way there were you had some advisors that might have been more resistant…maybe they said, clients don't want to engage this way. But it's really them not wanting to learn new ways of engagement. And then once all the clients were doing with their families and their grandkids, their kids or grandparents, whoever, they opened up that door for sure. And that's, I agree, I mean, it's not going to be all or nothing one way or the other going forward, it will be, but it'll sort of be a combination.
Steve: Yeah. Back to advisors being lazy, if you will. I always hear advisors say, "My clients want paper, or my clients don't want to use technology." My parents are 80, they have iPhones, iPads, and Imacs. They don't...my dad doesn't go on his computer anymore, he's on his iPad. It's not the clients, it's the advisors that are holding this industry back.
Gavin: Interesting. You've mentioned Vanilla a couple times. So let's talk about that you've got another origin story there. So, talk about what led you to bring that to market, what's the vision, and what's Vanilla all about?
Steve: So, originally, when I think back to Convergent before I even started AdvicePeriod, I was focused...the majority of my clients were paying fixed fees, and they were estate planning focused. But if you moved $50 million out of someone's estate into an irrevocable trust, and you showed them their family balance sheet, the number doesn't change, you're just moving from the right pocket to the left pocket. So, we want to come up with a report that we felt would be useful and simple for clients and illustrate what the value that we brought to them. So, what started as a one-pager it now has all kinds of personal financial statement by each entity behind it, has the things clients want to see not how much large-cap small-cap international have, but what's in rental real estate versus personal real estate? What's invested options versus not invested options? And how much is in cash, etc? Then what's liquid versus illiquid within my state or out of my state? And what would my estate tax be if I died tomorrow? And what if I die...the younger of us died at 95 and they grew at 5%?
Very quickly, their number we go their eyes, would go to the bottom and see, wow, we save that much. But look at that other number is still huge. How do we do more of that? And so, the focus became estate planning because the impact was gigantic. And obviously, you didn't pick up any volatility by moving things around.
So, I wanted to move it online. And some of the folks that had done graphic work for us said, I got someone you had to meet, and they brought in a guy who's now our CTO. And he's like, "Yeah, I can do this." And he not only was very good at development, but he was very good at graphics and built this unbelievable prototype that's like everything we had built an automated so that I could import from these Black Diamond, I can import from Black Diamond, drag things into the right bucket by entity, by trust, know whether it's a grant or non-grant trust, whether it's irrevocable or not, whether it's GST or not, if there's an inclusion ratio, keep all the information on who the trustees were, and then graphically represent the whole thing.
And an interesting test with one of my clients said, can you show my daughter, everything that she has access to, and she shows turns 30, but don't show her the big discretionary trust. And so we could check off the boxes share a link and give her access to that stuff, and then turn it off whenever we wanted to. Or we could show an estate plan without any numbers for family members. So, this became the genesis of this. And I showed more people like this is fantastic. And like, okay, I think there's a product here.
So for the first time ever, we raised some money, got some of the folks that are in the industry that we're friendly with, and build out a team. And we've been building the product, we expanded it to do documents because we got tired of paying high fees for a product that took forever when all it really was as a word processor. So we took high-quality forms, and we automated it. We didn't want UPL -- the unauthorized practice of law -- and advisors don't...a lot don't know about estate planning or more importantly, they don't want UPL. So, we actually built a law firm. So, the law firm works with the clients and now we protect the advisor from UPL. The documents get done.
Now, everything's in one place and it builds out not just a map of their existing plan but who gets what when, and it's updated contemporaneous with the data that we get from the providers. So that's a rough overview of it. But the next generation will be to take all the things that are in our head and start building the rules in there. So, it suggests to the advisor what they should do for the client.
Gavin: Fascinating.
Steve: Yeah, it's fun. This is my passion.
Gavin: I can tell. You're saving time, delivering high-quality advice, better client experience. That's fantastic. So, Steve, going through that litany, you're a highly successful serial entrepreneur, you probably could have retired already. So, what keeps you engaged? What more do you want to do? What gets you up in the morning? I guess at the same time, let's talk about what keeps you up at night, with all these different irons in the fire?
Steve: What gets me up in the morning is I look at Jack Bogle, who's kind of my history, I wish he was my history…he was a hero of mine in the sense that he really cared about delivering a better outcome for consumers, he could have died a billionaire, he probably was worth $20-30 million, when he died from pure savings, was full of piss and vinegar about the industry and what was right even to the point of fighting with Vanguard. And he wanted to make a difference.
That's my ultimate dream, and I'm probably maybe a little more of a capitalist than he is. I'd like to benefit from some of these trends.
But I would love to leave a legacy where I positively impacted the industry, which ultimately impacted consumers, which ultimately impacted the economy. That's the trickle-down that I think that gets me excited. And I don't...my parents still work at 80. I don't know how to not work. So, it's just the thrill, as one of my clients says you're running a race with no finish line. But you still want to compete.
What keeps me up is we're dealing with really, really big numbers. And so an error is a really, really big error. So, how do we build systems and processes and not do it…Culture, keeping people happy, making sure you're delivering and I always worry that someone's going to come up with a better answer than I did. So, how do you learn enough to make sure you do it? But overall, I sleep pretty well. And I'm excited about the industry. And I feel like it's the Wild West all over again the next 20 years it will probably be as much fun as the first for me.
Gavin: We will be watching that in the next 20 years, Steve. Thank you so much for the time. It's been great. We'll talk again soon. Thank you.
Steve: Thanks for having me.
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