#FASuccess Ep 401: One-On-One Advice Through Financial Wellness Programs To (Profitably) Expand The Reach Of Financial Planning, With Zack Hubbard

Resources Featured In This Episode:

• Zack Hubbard: Website | LinkedIn
• Kitces Research on How Financial Planners Actually Do Financial Planning
• Calendly
• RightCapital
• Trust & Will
• Gradfin
• College Inside Track
• LLIS
• BC Brokerage

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Full Transcript:

Michael: Welcome, Zack Hubbard, to the "Financial Advisor Success" podcast.

Zack: Yeah, Michael, thanks for having me. I'm excited to be here.

Michael: I really appreciate you joining us today and I'm looking forward to a discussion around this...I don't even know what to call it. I was going to say emerging realm, although maybe that's unfair because it's kind of emerged and been here for a while. The domain of financial wellness, which, at least to me, seems to have kind of cropped up largely in the 401(k) world as a way to describe some version, some aspects of financial planning as it pertains to plan participants where maybe the average dollars are a little bit less than what a lot of us do in the private wealth management world. Sometimes it seems very tech-driven, sometimes it's a little more human-driven in the financial advice.

But to me, it opens this interesting pathway into expanding financial planning advice to more people and it has some interesting ways to overcome the fundamental challenge that most of us have, as we try to expand our practices, which is like getting clients one at a time is is a really rough thing. And because it's very expensive and time-consuming, it's tough to do that for the proverbial average American because you don't make enough giving them advice for the time it takes to find the next one.

Until you start doing this in a one-to-many world and employer retirement plans, where suddenly there can be dozens or hundreds or thousands of people in one big group. And when you get an opportunity, suddenly, there's a lot of people to give financial advice to. And so, I know you've been doing a version of this in your firm and so I'm just excited to kind of nerd out a little bit on the current state of financial wellness and how this gets built in an advisory firm.

Zack: Yeah, yeah, absolutely. I could talk about this for hours and hours and hours. So get ready, listeners. But I think, really, the hard part is financial wellness is kind of a nebulous term. There's no single definition. So I'm excited to kind of talk about how we think about financial wellness, how we define it for our participants and our clients, and hopefully, that resonates with some folks.

What Is Financial Wellness? [05:43]

Michael: I think let's actually start there. I want to talk in a moment about just the advisory firm and give us more context. But if we're going to kind of throw this financial wellness term around for the better part of the next hour-plus, maybe let's just level-set a little bit more. How do you define financial wellness? As we have this conversation, how should everybody who's listening who maybe does not have as much background to the 401(k) world and the channels where financial wellness has cropped up, how do you define financial wellness? How should we think about that as advisors as an offering?

Zack: Yeah, so from a kind of general industry overview basis, financial wellness is kind of a catch-all term that's used to define the education that you get from your record keepers. So, that's like your 401(k) overviews. Your budgeting conversations. Some people use it as a definition for a very specific technical tool like 529s or college savings plans or employer-sponsored…your student loan payment program. So, it's a pretty broad catch-all term from an industry perspective, there's a ton of stuff that falls under this financial wellness umbrella. But the way we define it is really in 3 tiers of service.

So, we start...if you can envision a pyramid, the foundational level is education. Education is kind of the fundamental core of financial wellness. Any financial wellness program has to provide some form of education to employees, to participants, to give them a base level knowledge. Financial literacy is a huge issue. Financial wellness programs have to address that financial literacy problem by providing that base-level education. Where we take a little bit of a different approach is we stack 2 other things on top of this, and I don't want to get too far ahead of myself here, so I'll stop and wait and kind of save some of this for later.

But the the second tier is one-to-one advice. So, we seek to provide access to one-on-one financial planning advice, fiduciary advice for every participant in the plans that we work with. And then the top of that pyramid, sort of the tip, what I consider the sort of the “Holy Grail” of financial wellness programs is implementation because ultimately, we know and most of the listeners know, right, that education is great, advice is really great. But if that advice is never implemented, it doesn't really matter. So we want to give...and the way we design our financial wellness program is we want to make sure that we're giving people a direct path from advice to implementation. And so, we've structured our offering and our program in a way that really strives to cut down on that time from advice to action.

Michael: Okay. So, we'll get more into kind of each of these 3 pieces and what you all are doing there in a little bit. But this is helpful, I think, for context. My takeaway to how you were framing it initially around financial wellness, everything from education you get from your record keeper, some technical tools that you might roll out to plan participants. I don't want to say this in a negative way, but it almost feels like it's like a catch-all term for, "This is our value-add in offering 401(k) plans." Like, "We do 401(k) plans, and something in the value-add bucket, we're going to broadly call it financial wellness because it's something that is kind of useful to your participants and should make them more financially well."

Zack: Yeah, exactly. Exactly. And honestly, in a lot of cases, it's, "Well, we're going to offer financial wellness, but whether your employees use it or not doesn't really matter.” That's obviously not the approach that we take but that's kind of the more standard approach. There's like, "Hey, yeah, we've got financial wellness, it's this separate website that your employees can go to and access educational content and some calculators." That's kind of the industry standard, if you will, for financial wellness at this point.

Michael: So, the industry standard is more of like a tech, an automated self-serve through tech kind of solution. "This is our financial wellness portal, look at all the capabilities that it has, your employees can learn and become more financially literate and analyze their own retirement, and it's all in this website, they just log in here."

Zack: Exactly, exactly.

Michael: And so, you're then trying to distinguish yours because you've got, as you framed, more one-to-one advice, as I kind of interpret it. You're not doing the full tech or the tech-only thing, you're trying to put humans in this.

Zack: Exactly, because the percentage of people that can take the self-serve education and the self-serve tools and know exactly what to do with their finances after that is really small. It's very few people that are on that full-DIY route or full-DIY path that can truly do it themselves and do it well. So, the education and the tools are great, the calculators are great, but there's a missing step there for most people. Most people don't...most people walk away from those with some version of the same question, which is, "Well, how does this apply to me? How do I use this information?" Or, "How does this apply to my situation?" So, if you're just doing the tools and the education, you're not really helping people, ultimately.

Michael: All right, so now take us one step further into...okay, you said kind of education, one-on-one advice, and implementation. So, how does this really work? What do you do for plan participants?

Leveraging Email And Video To Build Relationships With Plan Participants [10:54]

Zack: Yeah, so it's a multifaceted approach. Because we know that everybody's engaging in a slightly different way. Not everybody is going to sit through an hour-long 401(k) overview presentation. Not everybody's going to come into the office. Most people aren't coming into the office still, right, in a virtual world. So, we have to approach or take the...from an educational standpoint, we have to provide multiple different ways to engage. So, that looks like a lot of the standard stuff. That's monthly webinars on a variety of topics, so that's ranging from New Year's financial resolutions all the way to deep dives on Social Security and Medicare. You're trying to provide employees with that base level of education on a webinar basis, those are live and recorded.

They live on our website that a participant gets to access and access anytime. And most of our companies now have those posted on their intranet as well. So, we make sure that every company has a link that they can use to direct their participants to those educational opportunities. We've also developed sort of almost like a Constant Contact-type of email program. So, we're reaching out to participants. By nature of working with the retirement plans, we have access to a fairly substantial amount of data on participants. So, we can provide not just kind of your boilerplate like, "Hey, it's April 15, remember to file your taxes," type of of emails.

But we can also get a little bit deeper and reach out to people that are turning 50 in a year to say, "Hey, you're going to be eligible for catch-up contributions this year, here's what you should really think about, and here's how you should plan for those. And oh, by the way, reach out to us to schedule a one-on-one meeting." Or we can reach out to somebody that is in their mid-20s and say, "Hey, you're probably thinking about buying a house or maybe you're dealing with some student loan debt. Here are some resources that you can use to learn more about this. And oh, by the way, contact us for a one-on-one meeting." So, we can get a lot more targeted and a lot more focused and frankly, provide a lot more value in those direct communications to participants by basically using the data that we have access to, to segment into multiple different buckets.

Michael: I was going to say, so segmenting heavily by just the data that you have by implementing their 401(k) plan. So, I've got names, I've got salaries, I've got dates of birth. All the stuff that shows up in the employee census. So, I guess just out of curiosity, what other data gets leveraged to target besides age? You gave some great age examples. Catch-up contributions when you're 50. "Oh, you're mid-20s, let's talk about student loans." Are there other data points that often show up in what content you're creating or how you're trying to target it to get in front of the right people?

Zack: Yeah, age is an easy one. Because pretty much a lot of the major financial planning milestones are somewhat age-oriented. But we can also...we also get income data, we get state of residence data. So, if there's a major change to a tax law in a state or a state law in a state, we can reach out to those specific participants in those states to say, "Hey, here's something that happened, here's some information about it, here's a link to schedule a planning conversation with us." Same thing with salary information. If we've got somebody that's on the edge in terms of Roth IRA contribution eligibility or if they're 65 and at a certain salary standpoint, we can reach out to them about, "Hey, here's what you should worry about in terms of Medicare IRMAA brackets."

So, there's a lot of other more tailored communications we can do with that additional sort of supplemental data. And the same thing with contribution rates. We get contribution rate information, we get Roth versus pre-tax contribution information. So, if somebody's earning $300,000 a year but they're doing Roth contributions, we can reach out to them to say, "Hey, is this really the right decision for you? Should you really be doing this? Or is it more advantageous for you to take advantage of the current year's tax benefits?" So, there's a lot we can do in terms of those more direct targeted reach that aren't just specifically age-based, but also income-based, and using some of the other data we get about what they're doing within their retirement plans.

Michael: Very cool. And I'm trying to visualize the cadence of stuff. How often are our emails going out? Are you all like quarterly tips, monthly tips, weekly tips? How frequent are you trying to send out these types of educational email communications?

Zack: So, we send a monthly quick video. So, me and my team, we record videos on varieties of topics. Our last month was on insurance, this month is on taxes. So, we've got...and those are 5 minutes tops, just a quick high-level overview on whatever topic it is we want to discuss some key things to think about. Those go out on a monthly basis, those are a little bit higher level of production in terms of those videos. The age-based stuff, the other targeted communications is going to be a lot less frequent, just because people aren't turning 65 every day. And in terms of our employee-based...you're not going to get more than one of those age-based emails in a year, for the most part. You don't turn 65 and 70 in the same year.

So, you're going to get those on a more sporadic basis, but we send those monthly educational emails. We also send a quarterly newsletter that just has basically a recap of our webinars for the quarter and the upcoming webinars and any blogs or articles that we put out. So, it's not overly frequent. The last thing you want to do is kill people with communication. If you're sending something weekly, that's ridiculous. Nobody wants a weekly email, nobody's going to read a weekly email, but monthly is a pretty good cadence.

Michael: In plan participant world. It's one thing if they're like, "Sign me up for your financial education newsletter." Its another when it's like, "My 401(k) sends me things."

Zack: Yeah. Yeah, your record keepers are sending out a lot of emails already. So, if we're doubling down on any of those things, it's not a...they're going to unsubscribe from one, and if we make it easier to unsubscribe, which we do because obviously, we want to make sure that nobody's getting our emails that doesn't want to get them. They're going to unsubscribe from ours first. So, we don't want to overwhelm with that information. We want to make sure that they're getting our communications because we...we're biased, right, but we feel like ours provide a lot of value for those folks.

Michael: When you highlight a monthly quick video that you're sending out, it sounds like that's separate from the monthly webinars that you're also doing, Is that correct?

Zack: Yep. Yeah, so the goal with that design when we're designing our plan for the year in terms of what our monthly webinars going to be and what our email communication...or our quick videos, we call them (k)larity (k)lips, what those are going to be. (k)larity with a K in parentheses. Because it's got to be cool.

Michael: Because it's 401(k)-based. Of course, absolutely.

Zack: If you don't have it, you're not cool. So, the way I design that is when I'm building out those calendars, basically what I want is the video to be a quick intro, and then the webinar that month, which is later in the month after that email goes out, it's kind of a deeper dive on that topic. So, this month, it's taxes that went out. Now we've got our monthly webinar on taxes. So, it's a little bit more of a deep dive on the sort of tax situation. So, it's kind of like, "Hey, this is a quick intro." For some people, it's going to be all they want. "If you want more, check out our webinar this month."

Michael: Okay. And so, the quick video, (k)larity (k)lip, kind of intentionally primes and cues people up for the webinar or not if they're totally cool with the 5 minutes and that was all they really wanted on the topic today.

Zack: Exactly, exactly.

Michael: So, are you doing much in the written content like articles and such as well? Because this sounds fairly video-heavy. Not to be negative, it's just like I'm fascinated that you seem to be leaning more video than written form when I think of a lot of, I would call it, traditional financial literacy education is being very very written-based, "Here's an article, here's a primer."

Zack: Yeah, what we found is people are more likely to engage with video, especially short-form video. It just seems to be kind of where people are going. This is not a commentary on society at all, I'm not going to get into that today. But it just seems to be like what people are more comfortable engaging with is pulling up their phone, engaging with a very quick video. They're much more likely to view it and view it fully. We do have the blogs and the articles as well. Those aren't necessarily posted to our primary sort of Greenspring advisors website, because that's more reserved for blogs that are focused on our private wealth clients and our institutional clients that aren't participants, that are kind of the committee level. But we do have a ton of articles, very quick kind of short-form articles that are almost replications of the videos in that it's a very high-level overview, prep view on the questions to ask on a topic.

And that's kind of the primary goal of all of our education is I don't want and I don't think anybody's ever going to walk away from one of our educational sessions, whether it's watching a video, listening to the webinar, and know exactly what to do with their situation on that topic. That's not the goal. The goal is to say, "Hey, we're going to get you to a point where you can ask better questions of us when you talk to us or anybody else that you talk to about your finances, whether it's your employer, whether it's another advisor, whether it's that kid down the street trying to sell you insurance." Anybody else that's reaching out to you to talk about finances, we want to make sure that our participant base is geared up to ask really good questions and has that base level...you have to have a base-level knowledge to be able to ask good questions. So, that's the goal of our education. And so, whether it's an article, whether it's a video, whether it's a webinar, the goal of everything is to say, "Hey, I want to give you the foundation to be able to ask really good questions here."

Michael: And out of curiosity, what kind of engagement do you see with these?

Zack: Yeah, so it's funny, the deeper you go, the lower those numbers are but also the lower the target is. So, if you look at engagement with the financial planning tools. The budgeting tools and account linking, really, really good numbers on that. It's like 20% of the participant rate. That's ‘blow you out of the water’-type of numbers in terms of engagement. So, the bar is pretty low across the board in terms of what's really exciting engagement on this side. So, it sounds a little bit underwhelming, but 20% of 60,000 participants is a really big number. So, if you look at email open rates, we're floating around like 75% to 90%, depending on the email. And depending on the timing. Over the summer, people tend to be on vacation more, so they're checking email less and we should notice a drop in open rates.

Michael: Those are monstrously high open rates. It's like people are opening emails affiliated with their 401(k) provider, I'm assuming that's how they perceive you.

Zack: Exactly. Right, so they're opening emails from somebody that they know is affiliated with something that's very important to them, which is their finances. If you look at then click-through rates on those emails, it drops pretty substantially. Right now, we're looking at like 40% to 50% in terms of article clicks or video clicks. And then if we boil it down to people that are reaching out to schedule one-on-one meetings, which is ultimately the goal of...kind of the primary sort of driving point. Our primary call to action is to schedule a meeting with us to talk through it on an individual basis because that's where we feel like we provide the most value and that's also where we can really develop that relationship with the participant. That's like 10% to 15% on a good day. So, it gets progressively less in terms of the number of people that are actually going all the way through to that call to action. But even still, we feel like if they're opening our emails at a really high clip, we feel pretty good about that because at least we know they know us.

Michael: Honestly, these numbers sound enormously large to me. I just look at traditional email newsletters that a lot of advisory firms used to send out messages to prospects or even to clients, I see numbers that are a lot more like open rates might be 50%, click rates are often no more than 5% to 10%, maybe 15%, and we're lucky to get a prospect to pull up for any kind of meeting. That's what we're all sort of collectively fighting for, you might get 1% to 3% who engage with an email to schedule a meeting and that would actually be a good email response. So, I'm struck as you're going through this. These just feel like enormously large engagement rates, which I guess just speaks to the context of trying to put forth some educated aims that are relevant and the fact, I don't mean this in a bad way, but they're a captive audience to you. You're attached to their 401(k) plan, this is a thing that they've got a very literal financial stake in, they see you not maybe as a solicitor, but as a provider because they're already in the work with you. And so, it just has a very different level of engagement.

Zack: Yeah, exactly. I think probably a more apples-to-apples comparison would be if advisors were tracking open rates on emails they send to their clients. That's probably a more...because these are our clients. Ultimately, the participants are already clients of ours. Even if they maybe don't necessarily see themselves that way, they are our clients. So, there's some form of relationship there already, which I think helps those open rates. When they see Greenspring, it's not like, "Oh, this is just somebody trying to sell me something." It's like, “Oh, this is our advisor to our 401(k) plan, this could be something important."

Converting 401(k) Plan Participants To One-On-One Clients [23:21]

Michael: So, on the education end, you've highlighted monthly webinars, you've highlighted the email programs, which feel like is kind of a combination of there's a monthly cadence with the (k)larity (k)lip, less than 5 minutes, "Here's an educational bit, if you want to go deeper, we're doing a webinar mid-month on the same topic that's more of a deep dive." So, that's got a monthly cadence to it. You've got the sort of like, I'll call them supplemental targeted outreach. Like age-based, trigger-based from the various data points that you get to know that there's an opportunity to put something in front of them.

Michael: So now, take us to the next level. You said one-to-one advice.

Zack: Yep. Yeah, so we have a team of 4 right now, myself included, that meets one-on-one with participants. We got 3 CFPs and one aspiring CFP on that team. And that's our internal financial planning team. And so, we are available for...it's point-in-time one-on-one advice, so we use Calendly to schedule that platform. I'll plug Calendly all day. I will swear by Calendly, you'll never take Calendly away from me, I love it. So, we've got it set up so that there are specific meeting types that a participant can choose from. So, when they're ready to meet one-on-one...not everybody's going to be ready in any given year or really have a major issue that they feel like it's worthy of a meeting in any given year. But we've got different meeting links set up for different questions.

So, if it's something very specific about their 401(k) or their 403(b) plan, like an investment review or help enrolling or rollover help, we have specific links for that. That's a 30-minute meeting maximum that's pretty quick and easy to get to. And then we have some more comprehensive meetings if they have questions about some other topics like budgeting or managing debt or planning for college for kids or insurance or anything like that. We have a more specific meeting type for that. And then we also have a retirement prep meeting type for folks that are getting closer to retirement, really starting to think about building that retirement plan. And folks that are looking for a more comprehensive financial plan, we have a meeting time for that.

But everything is participant-driven. So, they're going to that website, they're choosing the meeting, they're choosing the time, and they're getting on our calendar. So, it's a shared availability calendar. Whoever's first available, gets those meetings. And so, they show up on our calendar, some weeks we'll have 50 meetings, some weeks we'll have 10. It just depends on what's going on and kind of what goes out in those weeks. But those meetings are really driven by the participants. So, like I said, there could be some that are 5 minutes, so it's just like, "Hey, I've got this old account. I want to roll it over to my new 401(k). Can you tell me the process for doing that?" That's a 5-minute conversation, 3 phone calls.

Michael: That's almost like a customer service level conversation as opposed to an advice conversation per se, but I guess you get some of those as well?

Zack: Yep. Yeah, exactly. And some of the stuff, we just plain can't help them with. If somebody calls us and says, 'Hey, I'm locked out of my 401(k) account online," we can't open it up for them. We have to direct them to the record keeper to do that, but we can always get on the phone with them and kind of help them walk through that process. So, the goal is we want to be the first phone call, regardless of what it is. And ultimately, that to us means that we have a good relationship with that participant and they're going to go back to their company and say, "Hey, Greenspring really helps me out." We're very happy with the service that keeps our committee members happy. That keeps more people reaching out to kind of the water cooler talk situation.

So, regardless of...there's not necessarily a call that we say, "Don't call us." There's not anything that we want people to say, "Hey, we can't call Greenspring for this." Even if we can't necessarily help them directly, we can get them to the right place to provide that advice. So, in terms of what that looks like number-wise, on the year, we've done, across 4 of us, 830 one-on-one meetings with employees. So, that's through July 10th. But it's a lot of meetings, right, in terms of a one-on-one person. We're averaging about 200 meetings per person in the 6 months of the year so far.

Michael: So, I was just going to ask how you think about capacity for advisors and how this adds up? Do you effectively have a team who almost all their time is just kind of sitting through one meeting after another?

Zack: Yeah. Yeah, so basically, the way we operate...so I've run our internal financial planning team. So, about 2 years ago, we centralized financial planning as sort of part of an acquisition of our office in Lancaster. And so, I run on our internal team. There's 4 of us on the team. And basically, 70% of our time probably is participant advice. So, that's one-to-one meetings with employees, that's group education, that's webinars, that's designing the content, recording the videos, all of that that's needed to basically build out this program. And then about 30% of the time is true centralized financial planning. So, building out the financial plans for our private wealth team, doing the analysis, tax planning, those types of things. That ebbs and flows, right, because our advisors on that side tend to work on a more of kind of a ‘surge’ basis. Not true surge meetings, but you tend to get into a cadence where you meet with clients in specific months. So, that work kind of evens out, and the participant work is almost year-round.

Michael: Interesting. Okay, so this helps more to visualize because as I'm napkin mapping this out, 200 meetings per person is a good-sized chunk of meetings through just the first half of the year. But if I start breaking that out, roughly 26 weeks in the first half of the year, plus or minus vacations, so I'm really at 8 meetings a week on average for this, which is a lot but not a huge amount, especially since you're not necessarily doing the hour and a half, 2-hour plan presentation meeting that some folks do. You've got a lot of more short-form meetings that might be... I guess, you were giving the examples of 30 minutes. Are all the meeting types 30 minutes, or are there some meeting types that are longer?

Zack: There are some that are an hour. So, if we're doing a retirement plan conversation with somebody, we can't really do that in 30 minutes. We'll do 30 minutes of data gathering and then we'll usually have a follow-up call to really do an hour-long meeting. So, that total process would take about an hour and a half. The same thing with if there's a more comprehensive plan or maybe a deeper issue that they want to get into, we have some companies with some very unique benefits situations that sometimes require some more in-depth conversations.

Allowing Newer Financial Planners To Practice Their Craft By Meeting With Plan Participants [29:27]

Michael: Okay. So, that helps now to kind of visualize, so these advisors might be spending, on average with some variability, maybe there's a day to a day and a half a week of meetings, which then gives them another day or day and a half a week to support on all the educational elements. So, building videos, building webinars, writing articles, just creating that body of educational content. And then the last roughly a third of their time is a resource for the rest of the firm on the private wealth end. These are financial planners, so if you need centralized support for building financial plans for your clients, they get that kind of, I guess, crossover experience, I'd call it, because this is like they're going from the 401(k)-plan side to the private wealth side and getting some experience on both sides or at least supporting the firm on both sides.

Zack: Yeah, yeah, exactly. So, the way we've kind of designed this...we call them financial planners, so the way we've designed the financial planner role is really as an entry point to the firm. A lot of our new hires, whether they want to be advisors or not, come in through this financial planner role and the goal is to really give a really in-depth training program. So, at the start, of course, getting the [Series] 65 because you need that to talk to people and then getting on the path to CFP education as well. But if you think about what somebody comes out of this in maybe 2 years with…they're going to have a pretty in-depth technical knowledge on planning.

They're going to have a lot of work and progressive experience in building out true financial planning analyses, tax planning, insurance analysis, retirement projections, all of that. And then they're also going to get right around 400 or 500, if they leave after 2 years and they sort of graduate to become an advisor, or if they stay on the team, they'll get more, but they're going to get one-to-one conversations providing advice to people. At least the way I think about it is there's not really another firm that I know of that is willing to give that level of experience. Because it's...

Michael: You shared the numbers. You're at 200 meetings per person through the first half of the year. So, just annualizing out times 2 over the span of 2 years, a newer advisor coming in might get like 800 client conversations, getting their proverbial reps in, exercising the muscle of what it's like to actually sit across from another human being and try to give them advice and get them to take the advice in what I guess from the business end, I don't mean this negatively to the participants, but is a relatively lower-stakes way for them to practice this advice. You're not learning to give advice with multi-million dollar clients where if you say the wrong thing, the firm is going to lose tens of thousands of dollars of revenue. You can just go one plan participant at a time, one point-in-time advice conversation at a time, and learn to have these conversations with clients.

Zack: Right, right, exactly. And that's the way we think about it. So, they're very high stakes for the person on the other end of the phone. So, that is something that we always emphasize and consider. Even if they're just calling about enrolling in their plan, it's still a very important conversation to them. But at a business level, the risk to the business of having one negative participant conversation or experience is pretty low. Your one person is not going to move a plan out of the company. And of course, we have a pretty steady ramp-up program. Making sure that they're starting with a lot of shadowing in the first few months of work while they're getting that Series 65 so they can actually talk to people and provide advice. And then it's a very slow ramp from there.

So, we start them with some of the more basic conversations, those were enrollment help conversations, those were rollover conversations, so the things that are pretty low stakes, even from a participant level, but are good experience conversations, just to get a feel for the emotions. Especially if you're dealing with rollovers of a 401(k), it's still incredibly archaic. They're going to mail you a check, they're going to mail you some forms, it's going to take 2 weeks, people get really frustrated with that. So, it's a good way to kind of cut your teeth on those conversations.

And the same thing with enrolling. Every company is different, every plan is different in terms of how they let people enroll. So, even though they're pretty low-stakes, low-risk conversations, they're still really, really good training experiences if you just talk to people. And what we found is kids coming out of college even, they don't have a ton of experience just talking to people. Getting on the phone, nobody gets on the phone anymore. So, just the experience of having to talk to people, having to talk professionally is a really good learning curve.

Michael: So, out of curiosity, it sounds like these are framed as more entry-level roles and you have the plan participants and the business. They're not hunting for opportunities here, they're "just" literally answering the phone or responding to the Calendly request when it comes in to meet with someone. So, I'm going to presume these are salary-style roles. This is not a percentage of revenue, ‘eat what you kill’ kind of model, this is a, Answer the phone and provide advice, and we'll pay you a salary for this."

Zack: Yeah, exactly, exactly. Because as soon as you make a keep-what-you-kill type of conversation, the stakes are incredibly higher. So, we pay them a salary plus a bonus. There is an additional bonus if they refer a participant that becomes a private client. So, there are situations where we're talking with somebody and either they're getting ready to leave the company or they're getting ready to retire. If they decide that, "Hey, we want you guys to be our advisor ongoing," we'll make that introduction over to our private wealth team for that higher level of service, that true white glove financial advisor service.

And if they talk with one of our participant advisors and they make that introduction and then that person becomes a client, they do get a bonus on first-year revenue there. So, there is some additional income capacity in that role as well. And there are people that are on the team right now that say, "Hey, you know what? I really like what I'm doing here, I don't necessarily want to go over and be a true advisor, I really liked this this participant side of things." So, it's important for us to make sure that there's a way for them to still be recognized for their hard work and get some bonus capacity for that as well. So, that's where that revenue share in the first year comes in.

Michael: Interesting. So, it's not like they get a percentage of revenue for life for a basis point trail or anything. It's a portion of whatever the firm generates from that client in the first year and that's their bonus that tags on to their bonus this year.

Zack: Exactly. Yeah, because we're really not involved in the day-to-day management of the client in any way, so it wouldn't make sense to pay an ongoing trail for that person. It's more of a, "Hey, you made the introduction, you basically started this relationship, you did all the qualification, we're going to recognize that work and make sure that you're compensated for it." And so, it can be...depending on the amount of assets and revenue that's sent over, it can be a pretty sizable number. Last year, just looking at numbers, we sent over about half a million in revenue to the private wealth team last year. So, it's a sizable chunk and potential for a bonus there.

Michael: And can I ask roughly what range of a bonus you give? Is it like 10% of revenue? Is it 50% of revenue? About what have you found is economical to the firm to do this?

Zack: Yeah, 10% for that first year is what makes sense from an economic standpoint. Anything more than that would probably be too much, right, in terms of the...if we're looking at work to compensation. Then if you go above 10%, you're really not paying the advisor that's going to continue to service that client enough. So, 10% is kind of the number that we settled on.

Michael: And so, the industry talks a lot about competitive talent environment as well and talent shortages. So, can I ask what kind of salary range do you put on these positions as they're coming in the first 2 years? What do you have to pay to get someone to come in and do this and be able to do it at the level that you need them to do it?

Zack: Yeah, it's really location-specific. So, we've got, obviously, Towson, Maryland area where we're headquartered, a little bit higher cost. So, those locations, depending on the level of experience, were probably between $60,000 and $75,000 on an entry-level basis. If they're coming in with the CFP, you're going to be on towards the higher end. If you're coming straight out of college, you're going to be closer to that 60 level. And then as you progress up, we have bands built in place so that if somebody becomes...we have a career path to become a senior financial planner. So, that's another higher salary band, right, over and above that sort of entry-level, if you decide to stay on the team.

Then we've got a...it's all theoretical right now because we don't have anybody through it, but there's an associate director role. Basically, if somebody...as we expand the team, we kind of look at it like, "Hey, I can't manage 10 people," and it's just not an effective way to manage. So, we have the idea that we'll kind of build little triangles within the team. So, an associate director would manage 2 financial planners, and then basically, we manage the associate director. So, there's a career path built in there that has progressively higher salaries. The bonus stays about the same.

Michael: Because you're anticipating the total number of people in this team just has to continue to grow as you add more plans and more plan participants, and just the sheer volume of phone calls ratchets up as you go.

Zack: Yeah, exactly. And as the firm grows as a whole, we're constantly looking...we're constantly growing, we're constantly adding new clients, both on the private wealth side and on the participant side. And one of the things that we just started doing fairly recently is now we offer (k)larity@Work, which is our financial wellness platform. Again, k with the parentheses around it, (k)larity. But we started offering that as a standalone product. So, we've had companies come to us and say, "Hey, we really don't need you guys for the 401(k) stuff, but we really like what you do on the financial wellness side and we want to offer that to our employees. So, can we pay you specifically for that?" So, we've got a really fairly substantially growing client base in that side of things as well. So, as that continues to expand, really, my team kind of kind of owns that revenue for lack of a better term. So, we have to have staff on hand to be able to service that.

Michael: Right. So, is there anything else in the one-to-one advice realm shape up before we shift to your your third layer around implementation?

Zack: I think that's pretty much it. I think when I talk with folks about the one-on-one advice, a lot of people are kind of like, "Man, how do you how do you handle that? "How do you do that?" And I think that's an area that we're constantly looking to improve efficiency.

So, we think about capacity is about 400 meetings per year right now. One of the things that we're looking at are AI notetaker tools and other tools to try to make that a lot more efficient. So, there are, as I'm sure you've seen. A ton of tools popping up out there that help take notes. If we can have something sit in, take notes, and then also basically put it in Salesforce, which is our CRM, we can cut down on that time and really expand capacity for those meetings, probably to 600 per advisor. The hardest part is you have a 30-minute meeting but then you've got 30 minutes of notes afterwards and maybe 15 minutes of prep before. So, a 30-minute meeting is still an hour and a half in terms of total time. So, trying to figure out how we can get more efficient and expand capacity without just simply hiring because that obviously is a lot more expensive than maybe plugging in some tools to try to increase capacity that way.

Michael: Yeah, that phenomenon is something we've seen year after year. We do a productivity research study on the kitces.com side, and I'm just seeing for years this phenomenon that the average advisor spends at least an hour of prep and follow-up for every one hour of client meetings or 45 minutes of prep and follow-up for 30-minute meetings. But that same phenomenon, there's so much shadow work and what it takes from compliance documentation to just good follow up to the client on takeaways from the meeting, and the fact that these are clients and human lives, you can't walk into a meeting cold. I guess, well, some people are, they're just wonderful savants. But I think most of us, you can't walk into a meeting and go like, "I've got to pull up the file," or pull up the file in the CRM these days and just refresh myself on notes from prior meetings and what's going on their plan. It takes a bit to mentally get into the space for meeting with the client, so that calendar fills really quickly when you need an hour of prep and follow-up for every hour of meeting.

Zack: Exactly, exactly.

How Greenspring Advisors Uses Financial Planning Software Within Its Wellness Model [41:37]

Michael: So then, I guess my other question tying to this…when a lot of us in, I'll just call it traditional financial planning world think about advice. It often is gather data, plug in the software, analyze, bring some analysis results to the meeting, talk through results, determine recommendations to move forward with. Where does financial planning software similar play into your process? Because I'm cognizant you've got an advice offering that's separate from the private wealth side of the business, where you refer them where maybe you get more time and capacity to do the deeper planning and the full financial planning software analyses that are typically done there. So, where does financial planning software play into this kind of 30 to 60-minute meetings one-to-one advice model in the wellness program?

Zack: Yeah, yeah. So, if you think about the financial planning process and using the software and building it in, a lot of the timesuck there is just the data entry part. It's just gathering data, putting it all in. So, what we do on the participant side is to say, "Hey, look, if you want this, we're not going to do it for you, here's the path to enter that information for us." So, we use RightCapital for the participant side because it's got a good mix of cash flow and goal-based planning. It kind of sits right in the middle of eMoney and MoneyGuidePro. So, we like that because it allows us to be a little bit more dynamic in the participant conversations but it also has got a really comprehensive and fairly easy-to-use self-serve data entry. So, we sent our participants a link to say, "Hey, if you want this..."

Basically, if they sign up for retirement prep or a comprehensive plan meeting, they're going to get...as part of the Calendly workflow that we have built out, they'll get an email from us that says, "Hey, we're looking forward to this," basically a week prior, "Here's the RightCapital Link. Before the meeting, please go through this, enter as much information as you can. If you don't know everything, that's fine, we can enter it in." But we try to get as much as we can from the participant directly and basically enter directly into RightCapital so that when we get into that conversation, we log in, we verify, and then we get into the planning, and that cuts down substantially on the time that's required to build that out. Of course, it does require that participants put their data in. Certainly, not everybody is going to do that. So, we still have some of those where we need to gather and put it in. But in a lot of cases, we're able to get pretty much everything from the participant without having to be on the phone or sitting down in that hour-and-a-half data-gathering meeting getting it all together.

Michael: Okay. Okay, and so RightCapital, I guess, output is still part of the meeting for you. I'm presuming this is more screen share and talk through it than print ‘The Plan’, capital T and capital P, from the plan.

Zack: Yeah. Yeah, exactly.

Michael: This is more screen share or put it up live on a monitor and like, "Let's talk through some of these numbers and what we're seeing here?"

Zack: Yep, yeah, it's screen share and then afterwards, they have...we give them full access to the tool. So, we want to make sure that if they never want to talk to us again, they still have access to the plan and they can play around with it. And that's the other thing we like about RightCapital is you can basically give full access to the plan so they can truly take it and customize it and it kind of comes out of our hands at that point. RightCapital has some good reporting tools that tell us when people are going in there, so if we see that Joe Smith is logging in literally every hour to his RightCapital plan, we can kind of reach out and say, "Hey, Joe, maybe don't do that," but we can definitely kind of pass that on to the participant as much as possible.

Outsourcing Implementation Of Estate Planning, Insurance, And More To Trusted Providers [44:51]

Michael: Okay. So, now help us understand the implementation side.

Zack: Yeah. So, that's the part that we're really still…I would say, actively building out. And that's where we...we're kind of cultivating this, what I would call like a marketplace of third parties. So, we're a fee-only firm. We don't sell anything, insurance or other products. But we want to have a network that we can refer participants to and basically provide direct links to, to help them take that next step. So, right now, what we have in terms of that marketplace, we have Trust & Will for estate planning. I'll give them a plug too right there. Great company, basically Turbo Tax for estate plans. It's super easy to use, pretty low cost on a participant basis. And if we looked at...that was the first one that we added. Because if you look at the survey data, and we run a survey...actually, we're going to do another survey this year, on our participant base, about 60% of people said that they don't have an estate plan in place. If you really look deeper, there's probably another 20% that are lying or just haven't updated it in a while.

So, in reality, most people don't have that in place and a lot of it is cost. Estate attorneys are great, we love them, but they're also very expensive. So, Trust & Will provides a solution, especially when we're talking with participants that are pretty...you know, that don't have a ton of complexity. They need a will, they need the basic documents. You can get it done quick and easy, and all you have to is get it signed and notarized and then it's in place. So, Trust & Will is a really good platform for that, so we have them linked and we offer a 10% discount if they go through our website for that. It's part of our partnership there. We also have a company called GradFin that we use for student loan consulting. So, if we talk with somebody that's like, "Hey, I'm drowning in student loan debt," we've had a lot of those recently with payments restarting.

So, they will provide basically a free 30-minute consultation with employees, and then, if they decide to go down the path with them, it's a separately paid service, they basically act as a broker for loans. So, they'll shop them out, see what they can get in terms of refinance or repayment programs. And then we also work with College Inside Track on the front end. So, if we talk with somebody that's planning for college, College Inside Track...actually, if people don't know about their service, I think it's actually really cool, both on our side, but also on the private wealth side.

Because what they really focus on is not necessarily just the financial side, but also helping the kids choose the right school. So, they'll work with families…I think it's sophomore year and above in high school, so sophomore to senior year in high school. It's fairly expensive. They offer a free consultation. I think it's like...I don't know the exact pricing, but somewhere around $5,000 for the engagement going forward. But what they do for the families is they'll kind of talk with the student, talk with the family, say, "Hey, what is it really that you want out of school?" And they'll help really evaluate and kind of nail down that list of schools they can go to. Part of that is the financial side, of course, but also making sure that when the kid picks a school, they stay at that school because it's the right school. Kind of getting rid of this dream school concept, if you will. I think it's a really important service and conversation to have with a lot of families, even the ones that are substantially more wealthy, I think is still a really important service.

Michael: Oh, I get it. That's when there's so much variability between cost of schools and where students choose to go. You can still quickly get down to, "Hey, if I can just get my child to be comfortable with the in-state school instead of the out-of-state dream school that maybe really isn't that dreamy for them, they've just kind of got it in their head, I'm going to easily make back $5,000 when they choose our fine in-state institution and I get that price difference."

Zack: Exactly, exactly. So, those are the primary sort of partners that we have right now. What's challenging is...obviously, insurance is another one that comes up a lot. It's hard to find an insurance provider that's not going to sell ancillary services. So, that's something we're still looking at. That was a challenge that we had on the estate side too. There's a lot of online estate planning tools out there and I personally tested a lot of them and I still get the 800 number phone calls trying to sell me life insurance afterwards. So, trying to find a partner that wasn't going to sell to our participant base after the initial transaction or outside of the purpose is really challenging. It's still a struggle. So, we're constantly looking to add to that.

Michael: So, in a world where everybody wants to be the most comprehensive solution and platform ever to do the most different things for the people that they work with, your appeal is, "I really just want rifle shots." Like, "I just want you to be hyper-focused on this one thing because I'm trying to slot your one thing into our financial wellness offering. Don't go crisscrossing and cross-selling and pulling them into other stuff that I wasn't sending them to you for in the first place. I just want you to have one job. Do your one job really well."

Zack: Right, because ultimately, it will reflect poorly on us, right, if a participant has a bad experience with somebody that we've referred them to. the same thing with a private client. If you refer a private client to an attorney or an accountant and they just have a terrible experience, of course, they're going to complain about the attorney and accountant, but they're also going to look at you and say, "Hey, man, what the heck? Why'd you send me there?" So, we don't want to have that experience on a broader scale with participants, because ultimately, the more people that are going through those services and talking to them and if we have consistently bad experiences, ultimately that's going to come back to us and their committee members are going to come back to us and say, "Hey, Greenspring, what the heck is going on here? I'm hearing from 10 employees now that they've reached out to this company and all of a sudden, somebody's calling them to sell life insurance." We don't want to put people in that situation, which does limit some of the resources that we can add to the platform because there's not a lot of companies out there that are willing to do one thing and do one thing really well.

Michael: So, are there other domains where you're trying to find solutions for the marketplace? You've got going to college, you've got student loans after college, you've got Trust & Will for all the wills and trusts. So, what else are you trying to fill in here?

Zack: Yeah, insurance is a big one for us. Right now, we just refer out to insurance brokers that...like fee-only insurance brokers, so the LLISes [ of the world, the BC Brokerage of the world. Brock and Peter, great guys. We refer out to those folks right now for insurance on a more individual basis. But I'd love to have a service that we can basically have on the website to say, "Hey, if you need life insurance, disability, long-term care, whatever, here's an online tool that you can use to get some quotes and evaluate and if you need further conversation, we can talk through it." That's one that's fairly challenging to find. There are a few services that we're looking at, but none that we've quite settled on just yet. Debt counseling is another one.

So, student loan is GradFin's sort of bread and butter, but we talk with people all the time that are drowning in credit card debt, that have personal loans, that have...even people getting into trouble with car title loans and things like that. So, there are tons of free debt counseling services out there that we can send people to, but I would love to have one that kind of lives on our platform that goes above and beyond what we can do. Because, of course, we know about debt, we know how to sort of pay off debt, but debt counseling is a lot more about sort of the emotional side of paying off debt. And some of that is hard to get into and not everybody is comfortable having that conversation with us. Those are all that we can help, but it is nice to have a resource there to kind of refer out to as well when we have those much more challenging or more in-depth conversations.

Michael: So, are there others? Insurance, debt counseling. Are there others you trying to fill in?

Zack: At this point, no, those are kind of the 2 primary ones. What we do every year is we kind of sit down and look at, "Hey, what were the..." As we're entering notes for our meetings, we also capture themes for those meetings. So, one of the things that we're getting better at is doing some reporting and pulling down like, "Hey, what were our common themes across the board for all of the meetings that we had this year? And what are the primary areas that we can look to address via this sort of marketplace of providers?" So, estate was one of the big ones, college planning and student debt were the big ones. Insurance and other debts are kind of the next 2 that are on the list if we look at sort of the broad themes of conversations that we have. So, as we're continuing to have those meetings and as we're expanding the number of meetings that we have, I imagine we'll continue to get that data and be able to look back and say, "Oh, this was a...we had 30% of our conversations involved this topic in some way, let's see if we can find somebody to refer out to that's a trusted partner.

Michael: All right, so nerdy workflow process question for a moment. How literally are you capturing the themes? Is it tags? Drop-down list? Just how do you actually make that happen when you've got multiple advisors and 800 meetings where you're trying to generate some kind of themes report?

Zack: Yeah, so right now, we've got a drop-down list of basically topics to choose from. So, it's a pretty broad list. It goes from everything from plan-specific conversations to more broader financial planning topics, budgeting, debt, all those things. So, when we're entering in a meeting, we can choose those themes. It is a manual process right now. One of the things we're building out or working with consultants to build out in Salesforce, because Salesforce is a huge bear of a tool. So, you kind of need to work with somebody else to build it out, unless you have a Salesforce administrator on staff, which not every firm can afford. So, we're working with consultants to try to figure out how we can do more of a...and there's a way you can do it, like more of like almost a word search or kind of a heat map report within Salesforce itself that will basically pull from all of the meetings that we have and kind of look at the notes themselves and say, "Hey, here were your common themes across all of these meetings." And some of the AI tools that we're looking at too will do that.

Michael: I was just thinking, this feels like an AI thing. "Hey, record all my meetings," because the AI tends to do that anyways, to do its analysis. "Here's 800 meetings, do your AI run on the 800 meetings and tell me the 6 most common themes that came up?" I feel like that's one of those things that AI should be really good at.

Zack: Yeah, yeah. And a lot of the tools we're looking at, the notetaker apps, will do that. There are also some that will plug into Salesforce specifically and do that. Those are substantially more expensive than the notetaker apps, so we're probably looking at the notetaker app right now. But the apps will at least look at the meetings that have been recorded in those apps. They won't necessarily go into previous meetings, but if we're using it for our meetings going forward, they'll be able to kind of look back and say, "Hey, okay, here's what the common theme of the 500 meetings that we recorded," or whatever it was.

Michael: Okay. So, I'm fascinated by this implementation domain for you. But I guess I got to ask the sort of, I feel like, obvious question from the industry end, why not do some of these things and get paid for it directly? Insurance kind of being the most straightforward one. You can get an insurance license and write this coverage. You have people literally asking for it and you're already recommending it. So, I guess just help us understand how you think about what you send out versus doing in-house. Do you think about participating in the revenue that you're otherwise basically handing to these other folks? How do you delineate that?

Zack: Yeah, so we believe pretty strongly in being a fee-only firm. We think it's in our...and this is going to be a little bit preachy, so I apologize in advance. But we are pretty heavily involved in NAPFA. We believe we've been fee-only from the jump. So, when Pat and Josh founded the firm in 2004, it was a fee-only firm then. They both came from kind of the bigger wirehouses, where it was...really at that point, it was more commission-based. A lot of us have come from those wirehouses or broker-dealers, where it is that fee-based relationship and it just makes it a little bit...it kind of adds that element of question into the conversation. So, what we don't want to be is having a conversation with a participant and recommending an insurance policy, a disability insurance, or a supplemental life insurance policy, and have that question in the back of the participant's mind that we're making a recommendation because we can make some money off of this.

That's also really important for the ERISA side of things, right, at the committee level. Those conflicts are really heavily scrutinized at the committee level and at the ERISA level. So, we have to make sure that we're not...if we're giving advice to employees, we have to be acting in that fiduciary capacity at all times and we're signing on as 3(21) fiduciaries to these participants. So, it's a true fiduciary relationship across the board and it's really challenging to be a fiduciary, and really, you can't be a fiduciary if you're making commission on those recommendations that you're making. So, by nature of just kind of the regulators, we have to be fee-only with these relationships.

Michael: Well, I guess that's a good that's a good point and context. For a lot of us that do this on the private wealth side, the SEC’s version of the fiduciary obligation is still ultimately a fairly disclosure-based fiduciary framework. If you're an RIA that also implements insurance, you need to disclose it in your ADV and that there's outside business activities and that there is additional compensation and you have the legal boilerplate of the conflict of interest that may be presented by the fact that you also get paid separately on this insurance that you recommend through your RIA.

And the ERISA side basically just says, "Thou shalt not have conflicted compensation." So, at least in the SEC's RIA world, you can but you have to disclose, and then still have some liability if you don't navigate the conflict of interest well. But ERISA generally just bars those conflicts in the first place. So, I guess that's a good point. When you're doing this in the context of a financial wellness offering for plan participants, you're in ERISA's more restrictive fiduciary world in the first place, where you could just have an outright regulatory violation if you're crossing over your 401(k) participants into your in-house insurance solution.

Zack: Exactly, exactly. And if you have the in-house insurance solution, frankly, it makes the sale a lot harder. As an industry, we don't have a necessarily great reputation for doing the right things for people and plan participants in a lot of ways, especially the plan participants on sort of the lower levels of income and assets because most of your high-level advisors really won't work with them. They've been the ones that have been subjected most to a lot of that bad stuff in the industry. So, when we're talking with committee members, in a lot of cases, especially those that really care and those are the ones that we work with the best, they are really, really heavily emphasizing the idea that, "If we're saying our employees should go to you for advice, we need to make sure that you're not selling them anything else." Because they've been burned before or they...we know what happens, right, in the industry, if you will. And so, it's very important for us to be different from that and make sure that we are clearly different from that and that we're contractually different from that in a lot of cases.

How Greenspring Advisors Is Compensated For Its Financial Wellness Offering [59:03]

Michael: So now, help us understand how this works financially, just overall, for the offering. Do plan participants pay for a one-to-one advice meeting? Do they pay for the platform? Does the employer pay for the platform and then all the participants just get it? If we now take a step back from you've got this 3-layer offering for wellness of education, one-on-one advice, and implementation, how does this work as a business? How do you get paid for it?

Zack: Yeah, yeah. It's a great question. So, no participants receive a direct bill for engaging with our services in any way. It's not like, "Hey, if you schedule a meeting with us, we're going to charge you by the hour," or you pay a subscription fee to have access to this. We bill at the employer level. So, we bill for our plan consulting, and in some cases that includes the (k)larity@Work platform, in some cases, the (k)larity@Work platform is separate as an add-on service. But the employer then has the option to either pay for it themselves, so they can cut a check directly to us, and those are the ones that, frankly, candidly, I feel like are the best because that is truly an employer benefit at that point. Or they can put the fees through the plan. And so, in effect, the participants are paying that as a plan expense, but it's not a direct bill to them. It's coming out of their 401(k) plan as part of the administrative fees.

Michael: Okay. And so, how does this price? Can I ask, how do you price this when you can have a zillion plan participants and a whole bunch, I'm presuming, just won't use it and engage, or they only read the emails and do the videos that have a marginal cost of zero, but then you can have other plan participants that use one or multiple hours of meetings. So, how do you price this?

Zack: Yeah, yeah. So, we charge it or we price it on a per-employee basis. So, for (k)larity@Work, if it's not included as part of the consulting...if it's included as part of the consulting services, it's priced in a kind of the global level there. So, consulting and (k)larity@Work is mixed together. But if we're pricing (k)larity@Work as a standalone or as an add-on service, we're pricing it on a per-employee basis, and it depends on the level of access and service they want. So, we've got kind of 3 tiers that we've built with (k)larity@Work.

The first one is straight-up access. So, it's like, "Hey, here's the website, here's the link service." We'll send the emails, but we're not going to do any custom communications, we're not going to give access. We have a more custom per-employer portal that we can co-brand with them. We're not going to do that. And that's the lowest level and that's a minimum fee of, I think, $5,000 on that. So, that's a pretty low-cost offering, and that is literally just giving employees access to it, kind of like your EAP. They have the service, you can put on your website, but we're not being proactive.

Michael: Does that include the one-to-one advice layer, or is that kind of “just” the educational layer?

Zack: So, that does include the one-to-one advice on that one. It's not the...no custom communications or any higher level of service for them. It's literally if they sign up for a one-on-one, they'll get our emails, but we're not going to sort of proactively try to gather that data on them or anything else. We're going to be exclusively here as a resource for people to reach out to. The next tier I would call sort of our core offering. So, that includes the ongoing email communications, monthly (k)larity (k)lips, and the one-to-one access. That's about $30 per employee cost.

And then we have our highest tier, which we call our custom offering. So, that includes the co-branded dashboard that has some tools in there and budgeting tools and the like that is co-branded with the company. So, it basically becomes their personal financial management dashboard for employees. And that's, of course, our highest tier. That's, I think, $35 per head. That's going to be larger companies that are using that for the most part.

Michael: All right, so I'm just rough math-ing here. So, $30 a head. That's per year?

Zack: Right. Yep, with a cost of living adjustment built in there as well.

Michael: Okay. So, I've got a 1,000-employee offering. This is a $30,000 platform fee to have access and support.

Zack: Right, exactly.

Michael: All right, so I'm sort of just kind of like math-ing through in my head, $30,000 for an add-on for this for a 1,000-employee firm is a good chunk of change. But I feel like 1,000 employees, it doesn't take a lot of people doing this before, I feel like, you're going to have so many staff on one-to-one advice hours that you risk going upside down on this. So, just help me visualize how this works. Is this profitable for you? Is this break even for you? Is this like, "We lose a little bit on this, but the plan consulting and the private wealth is profitable, so it works in the aggregate and we're not trying to drive a profit from this?" How do these numbers boil out for you?

Zack: Yeah, it is profitable, probably not to the extent that our private wealth service would be or the institutional service would be. But if you look at...basically, the way we look at data in a really good year, for most of our clients, is 5% of their employees reaching out for a one-on-one meeting. So, in a 1,000-person company, right, 50 people are going to reach out per year. So, on an annualized basis, if you look at sort of the cost per hour of that service or those meetings and then net that out with revenue, we are profitable from that standpoint. If we have really highly engaged companies, those also tend to be our best private client referral opportunities.

So, the companies that are more engaged are typically your professional services companies, ones with higher average account balances, ones with higher annual salaries, ones where there's maybe more turnover in terms of people taking new jobs to take higher paying roles, so there are more opportunities there. So, even if we get 10% or even, in some cases, 20% of people reaching out, we're still going to have...we're going to make up that revenue on the back end through private wealth referrals. And basically, if you kind of stack up over long periods of time, that really substantially increases the profitability because those private wealth clients are...on an average basis, if we're charging 1% on $1 million, they're paying $10,000 a year in perpetuity. So, it adds up pretty quickly in terms of the profitability there.

Michael: Yeah, so even if I just napkin math, that 5% anchoring is helpful. So, 1,000 employees, 5% of them take me up, so it's 50 employees that do something, there's 30-minute meetings, there's hour meetings. I've got some prep and follow-up, but maybe I'm an hour to an hour and a half per meeting going through this, I might have 75 hours of advice. And so, at that realm, even if I value my associate advisor time here at $200 an hour or something to that effect, I basically have $15,000 of hourly staff costs associated with this for a plan that I'm charging $30,000. So then, I've still got some room for...I've got to do the webinars and maintain the education and support the platform and the overhead, but I get it, it kind of maths out. It's not the most gloriously profitable thing but that runs profitably as an offering, and then obviously it scales as you grow and it creates the other crossover opportunities.

Zack: Exactly, exactly.

Michael: Interesting. Interesting. And I guess I'm just curious, did you experiment with models like charging plan participants individually, having them pay versus having the employer just pay a per capita cost across all of them? Is that out there? Or did you just start with “employer pays and it seems to work, so we're sticking with it?"

Zack: Yeah, we really started with it as an add-on service to the consulting. Really, (k)larity@Work started probably, I think 6 years ago, about 2018 as basically a response. So, Josh Itzoe, who was one of our founders, has since gone on to start another company. But he kind of saw where the industry was going. He was very plugged in and he's obviously a thought leader in the 401(k) space and the retirement plan space. And he kind of realized that, "Hey, financial wellness is something that is not going away and probably something that we need to have as an offering to make sure that we're remaining competitive in the market as we're going out and competing for business." Because the retirement plan industry is incredibly competitive in terms of you're trying to win clients.

So, it started as kind of a response to that. It was a service that we added on to make sure that we make sure that we were remaining competitive in the 401(k) consulting space. And it's kind of grown to this point where we...to be honest with you, we probably didn't see it as necessarily this sort of crossover opportunity or the kind of a profit center itself in terms of being able to charge for it separately. But as we've built it out and as we've developed it, I think we've done...look, I'm biased, but I think we've done a pretty good job of staying ahead of the curve and kind of building the tools and resources and really developing the processes to make this a really good service and kind of top-tier service in the industry. And that allows us to think bigger in terms of working with more companies providing this and ultimately charging separately for this as a service.

Michael: I think what strikes me though is...and again, I'm particularly flashing back to 6 years ago I think you said when Josh was working on this. We're still on kind of the tail end of the ‘robo boom,’ where everything is about the rise of technology that will allow all people to self-service their own finances with technology and the end of financial advisors. And along you guys come with what, to me, is just a decisively human-based offering, where a huge portion of the cost and the value proposition is your plan participants can get on the phone with the fiduciary advisor for an hour to talk about whatever they're dealing with. That's a very human offering to pursue in an increasingly tech-driven world.

Zack: Yeah, yeah. And part of the reason that it's successful is that as much as we love to talk about how cool technology is and all the cool tools that are coming out there, if you look at especially blue-collar America, where a lot of our clients are, we have a lot of manufacturing clients. Distrust for technology runs very deep. They do not trust the computers. They don't want a robot to talk to, they don't want a robot managing their investments. They want to talk to a human being and be able to pick up the phone and call somebody and know that it's an actual person. Because basically, everybody else, even the record keepers to an extent. You're going through a robot phone system before you talk to a person and you might be there for an hour, right, before you talk to a person.

If we can...we're going to use AI tools on the back end to make us more efficient, but ultimately, the goal of that is to make sure that we can have more human face-to-face or one-to-one conversations, and not sort of shop that out to somebody else.

Michael: And at the same time, I am fascinated with the model. It reminds me...it effectively feels like the prepaid legal model as applied to financial advice. Technically, you lose money on every single plan participant that engages with you, but you do it at the plan level knowing that only a percentage of the people will utilize and so you can deliver it cost effectively to the base of participants in the plan, even though it's not profitable for any one participant when they paid $30 for a year and you spend an hour or a few with them working through their situation. Because if you have enough people, you know what the utilization rates tend to be and you can math it in a way that it averages out over time.

Zack: Right, right. Exactly. Ultimately, the goal is that we know not everybody is going to reach out every year. If you think about advisors working with private clients, it's a lot of the same. The first few years, you're meeting a ton, you're doing a lot of work, and then it's like pulling teeth to get them to come in. You can't get them to schedule meetings. So, we know not everybody is going to want to meet on an annual basis. But what we believe and what I'm passionate about is that we are doing this profitably and that the way we're doing it, the approach we're taking, gives more people access to advice that otherwise wouldn't have it.

And we know that they're not going to reach out every year, but we know that when they have...just because of our communication plan and the way we structure it, we know that when they have that big issue come up or they have that big conversation they need to have, they're going to think about Greenspring.

And they're going to think about Greenspring, and they're going to call us, and they're going to meet with us, and they're going to get really good advice on that without having to worry about being sold an insurance policy or anything else. We're going to give them the good advice that they need. And hopefully, for us...hope is not a strategy, but we know that, in general, right, a good percentage of those folks that we continue to meet with and have a good relationship with, when the time comes that their money goes in motion, they're going to reach out to us and that becomes an opportunity for us to continue to work with them and their family going forward.

Michael: Right, right. So, now help us understand just the advisory firm overall as it exists. We've talked very specifically about the wellness offering, but I know you sit within the context of a much larger RIA firm that does multiple things. So, just help us understand the advisory firm overall.

Zack: Yeah, so Greenspring, we're 41 employees full-time. If you factor in our interns, we're right around 45 employees across 3 offices. We're headquartered in Towson, Maryland, with an office in Lancaster, Pennsylvania, and then an office in Paramus, New Jersey. So, across our entire company, I think we're right around just under $7 billion in terms of assets, combining the retirement plan assets and the private wealth. The breakdown there is just under $5 billion on retirement plan assets and then just under $2 billion in...or right around $2 billion in private wealth assets, and that's about 1,300 households across the board.

What Surprised Zack The Most On His Journey [1:12:42]

Michael: Okay. Very cool, very cool. So, now help us understand, you've lived this journey for many years now, so what surprised you the most around the path of building out this financial wellness offering as you've gone through the iterations?

Zack: I'll take it at the sort of individual adjustment, and then maybe at sort of the business level. But from an individual basis. When you're coming up and learning financial planning, you are taught that, "Hey, financial planning looks like this, and it's an hour and a half a day of gathering and then 3 hours of building out the plan, and if you're not doing all of that, you can't deliver any advice." Because you don't have all the information, and if you don't have all the information, you're not going to give good advice. What the adjustment it took to do this properly is kind of recognize that, "Hey, there are questions that we can answer without having somebody's tax return or their last 6 years of W2s."

We can do a lot in terms of planning and provide a lot of advice without having that super, super comprehensive data-gathering conversation. And we can provide really good advice, right, just based on what we know about them from a simple conversation. And then, it's also an adjustment to not over-service. At a broad industry perspective, good advisors have an over-servicing problem. We want to help people, we are helpers by nature, and so we tend to do everything we possibly can to help somebody, even if maybe they're not asking for it or don't necessarily need it. And what you can't do in this type of program is that.

You can't give people services that they're not looking for or asking for or that they're not necessarily paying for. We can't do comprehensive tax planning for somebody where we're making $30 a head, right, per year. So, scaling back. Understanding what we can and can't deliver was probably the biggest adjustment for me, personally, to make in this platform. And it's still the biggest adjustment that...especially the guys that we've hired that have already had CFPs and a little bit of experience, that's the hardest thing for them to adjust to as well because we're all taught to over-service. It's kind of the general sort of training program that the industry goes through.

Michael: So, I had a curiosity, how do you explain it to those new CFPs coming in maybe that have experience elsewhere? Sort of the obvious is like, "Stop giving your clients some of the service." Well, that doesn't read well from a culture perspective. So, how do you help new team members re-anchor, reset their expectations to service at the appropriate level?

Zack: Yeah. So, part of it is I allow them to do it, right, for a little bit. And when they're first coming on, we allow them. We're going to say like, "Hey, I trust you. I want you to go have these conversations." After they've gone through kind of the ramp-up and training program, of course. But like, "I trust you to give good advice here." I'm going to listen in, of course. And then we do constant feedback. So, we've adopted a 2x2 feedback model. Dimensional teaches it. We're pretty heavily involved with Dimensional Funds at a firm level. So, we do 2x2 feedback. Every time I say, "Hey, here's what you did well, here's what you can do differently." We ask them to self-evaluate. And what I like to ask after every one of those conversations is like, "Hey, what do you feel provided the most value to this employee during this meeting?"

And for the most part, right, the answer that they say is, "Well, I gave really good advice on this, this, and this," and then I go back and say, "Okay, well, what questions did they ask?" And typically, what they highlighted is their sort of top takeaway that they thought their participant got was not related at all to the question that they asked. And so, we can then use that as a way to train to say, "Okay, this participant called in and asked about rolling over a 401(k) plan from their old employer to their new employer and you talked about Roth conversions. That's not a value add there. You've just thrown something into the mix for this participant that they don't understand and now we need to do more education on."

So, helping them kind of understand and right size. When somebody is calling in with a question, we have to answer the question. And if they not asking for that ancillary stuff and there's not necessarily a huge reason for us to talk about that ancillary stuff, we really shouldn't. Because we're not actually helping them, we're hurting them, we're creating more confusion, giving them something else to think about that they really probably don't understand. So, that's a super valuable process of that. That constant feedback that we're doing after each meeting and after each conversation.

Michael: And just my brain, I'm feeling the tension to it of like, "But look at how awesome it is. They didn't even know to ask about Roth conversion and I showed them when they called in just for a rollover. Look at the value I created by highlighting this opportunity they didn't even know was there."

Zack: Right, right. Yeah, and for somebody that's talking with a private client. Or private client prospect, that could be a really valuable tool. So, I don't want to...what we don't do is I don't want to get rid of that all entirely. I don't want to say like, "Hey, don't talk about anything unless they ask about it." But we also...it's part of sort of the training process to understand like, "Hey, these are already clients, we're not selling them anything. They're taking advantage of the service. They're already using us. They're a client currently. So, we need to deliver the service that we've been contracted to deliver."

And when you're bringing in those ancillary things or trying to talk them through or convince them that another strategy is good, you're taking more of a sales approach to it than you are the service approach and we really want to take that service approach to that conversation. And they also do learn by doing. As much as we have those conversations and feedback, you're going to have times where you over-service somebody and you take them down...you promise something that you probably shouldn't, and now you're doing a bunch of extra work. And you learn very quickly when you're doing 200 meetings over the course of 6 months that you straight up don't have time to do that. So, it helps to kind of...some of that pain is a good teacher as well.

Lessons Zack Learned Building Out A Financial Wellness Offering [1:18:09]

Michael: So, anything else around just like what you've learned in kind of building out the wellness offering and building out in the context of a firm that also does private wealth?

Zack: Yeah, yeah. There are some harsh lessons to learn as you're getting into B2B relationships and getting deeper on companies. And one of the more jarring things was like, "Hey, not every company really cares about this." There are companies out there that they're never going to really engage in a financial wellness platform because the people at the top just really don't care about it. They don't think about it or they think about it for themselves. And so, they have their own advisors and they feel like that's pretty good. And so, one of the hardest things for me to accept, and it's still hard to accept, is that it's not going to work for everybody.

We're just not going to get to everybody because ultimately when we're going in through the company, we will run into some of those roadblocks that if they don't care about it, the people making decisions don't care about it, don't value it, they're not going to communicate it out to the company. So, that's probably the hardest part for me and for the sort of platform as a whole, is we have to get that buy-in at the committee level and at the top level to make sure that there's engagement. As much of direct communication as we do, if there's not engagement and sort of cheerleading from the people at the top and the management team, they're not going to...their employees aren't going to engage. And that's the other sort of primary challenge with it.

Michael: Well, it's got to be hard and frustrating when you can see firsthand the impact that you have on the plan participants at the firms that you're serving who are engaging to be like, "Just help us help your employees, please."

Zack: Yeah, exactly, exactly. But in terms of context and building the team, building out this team, structuring this program and the career paths, one of the coolest things that I found is that I honestly believe that this is one of the top tier sort of training structures in...at least that I've seen in the fee-only RIA space, for sure. The technical skills that people are getting on this team, plus the at-bats that they're getting in terms of talking to people are going to make better advisors on the back end. And ultimately, that's going to improve not just their personal experience as they go through the industry, whether they're at Greenspring for their entire career or not, but also it's going to improve the firm, because better advisors make us look better. We have better relationships with clients, we have better conversations, and we get better referrals.

And so, I think more firms should be...especially advisors that are dealing with business owners that have 401(k) plans, my sort of soapbox that I'll get on is you should think about providing advice to all employees, not just the executives. That's kind of the common framing that most people use is like, "Well, if you have, you'll give it to your top earners." But ultimately, there are blue-collar millionaires everywhere, right, first of all. So, you don't know what people have on the back end. But also the reputational value of giving one-on-one fiduciary advice to somebody that makes $15 an hour, being able to go to your business owner client, your small business owner client, and say, "Hey, we were able to help your employees with these very substantial financial issues that, hey, guess what, those are impacting their productivity at work."

They're thinking about their debt at work, they're thinking about their lack of savings at work, they're thinking about how they're going to afford to put their kid through college at work. So, the more we can get at the ground level and address those, the better we look on a reputational basis to that business owner. Ultimately, if we're creating more value and productivity at the firm level...for the coming out, this is maybe a stretch. We're obviously not directly contributing to their bottom line, but we do know focused and productive employees are better for the bottom line. They add to revenue to the business, and ultimately, that enriches your small business owner clients as their business value grows. So, it's a winning...in my opinion, it's a winning proposition across the board, whether it's at the firm level, the client level, the company level. More companies, more firms should be thinking about this as a service offering, because frankly, we can't work with everybody. So, there have to be other people doing this at our level to be able to really make an impact.

The Low Point On Zack’s Journey [1:22:07]

Michael: So, what was the low point for you on this journey, on this path?

Zack: Yeah, I would say when I was making the transition over to Greenspring from RBC, I was at a crossroads in my career, where I had to choose between sort of the traditional financial advisor path, right, at RBC, and say, "Hey, I want to be an advisor here." And the way I kind of jokingly describe it, this is not disparaging in any way, but making rich people richer. Which is really good business, kind of what the industry has done for a long time. Or I can follow my passion, right, and I could work with these people that are, frankly, more like me. My wife and I, when we were in our 20s, we were not super high-income. We were earning well. We had some debts that we were dealing with. We had kids. We were trying to figure out how we could afford a bigger house. So, there were a lot of issues we were dealing with.

And if I hadn't stumbled into the financial advice industry 10 years prior. I would have no idea what to do. I really wouldn't have access to any education on it. So, I wanted to work with those types of people. But it was a huge risk. The job at RBC, the advisor there, it's not necessarily a sure thing but it's pretty darn close. If you're a decent advisor, you can do pretty well there and make a good amount of money and be pretty happy and healthy doing that. But I took the leap. I had the full support of the family, and it certainly was not easy to do. Jumping into this full new world, trying to learn.

At that point, we only had 2 team members. It's myself and another team member. And so, trying to do this...and basically, my workload went from relatively straightforward and easy to like, "Man, I'm working 12-hour days." It was a big adjustment to make and it wasn't an easy leap to make. It was a very scary leap to make. But I am 4 years on now, I'm very happy that I did it, but I certainly don't want to make it sound like this is something that was a sure thing from the bat. This was a pretty big jump in risk that I took, going from that RBC path to this more kind of nebulous, undefined area.

What Zack Would Tell His Younger Self [1:24:05]

Michael: So, I'm struck as well that part of that shift for you was for going from direct advising of individual clients to what sounds like kind of a blend of you still sought some client-facing work, but you've also got training and development of team and kind of managing this department and offering. So, I guess I'm also curious, what do you know now about just what it's taken to, I guess, build and scale up and lead the team, what do you know now that you wish you could go back and tell you 4 or 5 years ago as you were looking at transitioning into this role and would have to figure it out?

Zack: Yeah. Yeah, I think what I would really go back and tell myself is that, "Hey, you're not an advisor." And obviously, I give advice to people, but for me, the idea of going and being a private wealth advisor to individual clients is something that I can't see myself doing anymore. And that's part of the function of just enjoying what I'm doing, loving what I'm doing, enjoying the people that I'm working with, but also I really feel like I've got a knack for kind of the business side.

And the understanding of training and development and kind of building out the business model. And that's what I would go back and tell myself, is like, "Hey, look, you're looking the wrong way. You're looking at the wrong things. You're focused in the wrong direction." And even though it's kind of gotten me to this point, I probably could have gotten here a little bit faster, if I just kind of focus on the right thing. And so, that's what I go back and say, like, "Hey, look, you're looking the wrong way."

Zack’s Advice To Newer Advisors [1:25:27]

Michael: So, in that context then, any other advice you would give younger, newer advisors starting their career and looking to begin this path...or not this path, their path, whatever their path is going to be?

Zack: Yeah, I would say don't get pigeonholed. I think we have a tendency as an industry to kind of pigeonhole people into the advisor path, where even though if you come on as a service associate, in a lot of cases, that's designed as kind of the steppingstone to be an advisor. And that's not necessarily for everybody and that's okay. I think as we continue to develop and expand as an industry and as RIAs get bigger and become more and more like...kind of looking like broker-dealers and as broker-dealers look more like RIAs. There's a lot of opportunity for non-client-facing work and non-client-facing specialties. Whether it's on the planning side like my team is, we've got guys that are interested in specializing in tax and estate and insurance and other things, so there's opportunities there for them, or if it's on the technical side.

I talked a little bit about just how challenging Salesforce is as kind of a bear of a tool. There's a ton of opportunity for somebody with some technical skills to go in and learn Salesforce for RIAs. And be kind of that specialist and build it out. So, I just think as we're expanding as a profession and kind of these businesses are becoming more mature and more defined and larger, there's so much more in terms of paths and avenues that you can go that...having a solid foundation of planning is super important and is very valuable regardless of the path, but you don't have to be pigeonholed into that, "I'm going to be an advisor, and if I'm not an advisor, it's a failure of a career."

There are so many other routes and directions you can go at this point that I think it's a really exciting time to get into this business because we are maturing. I've only been doing it for 11 years. But from where I started to where we are, there's so much more true business in the business. It's an actual functioning organization at this point, which is really exciting and exciting to see that development because that creates a whole new suite of opportunities for people to get in.

What Success Means To Zack [1:27:29]

Michael: So, as we wrap up, this is a podcast about success, and just one of the themes that comes up is that the word success means very different things to different people. And so, you now built out this successful department and offering for financial wellness and the firm overall is doing so well. How do you define success for yourself at this point?

Zack: Yeah, so success, to me, is really impact. So, the way I think about my own individual career, when I'm sun-setting, right, and I'm on the back end, whatever that is, who knows? We could do this forever, right, ultimately. But in my 70s, 75, I'd like to be able to look back and say, "Hey, there are a couple million more people that have access to advice because of what we did with (k)larity@Work and what we did." But also, even more than that, there are more people that are in the industry working as financial planners because of this program that we've built out and the way we've expanded the entry points and the training for advisors. So, to me, it's really multifaceted.

It's not just about the direct client impact, but also impact through expanding the profession and bringing more people into it in a way that's not the traditional “keep-what-you-kill” type of model, but really gives people the foundation to be able to expand their knowledge and be really good advisors. And it is a little bit disarming to those that maybe are scared away by those other sort of big wirehouses and their training programs. I would love to...my goal is to be able to look back and say, "Hey, you had the impact that you wanted through expanding access to advice and expanding pathways into this business to more people that traditionally wouldn't have access to it."

Michael: I love it. I love it. Zack. Thank you so much for joining us on the "Financial Advisor Success" podcast.

Zack: Yeah, yeah, thanks for having me.

Michael: Awesome. Thank you. Thank you.