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Building The NextGen Advisor & A Look At Reflect App For Advisor AI Labs

Updated: Nov 4, 2023

Welcome to another episode of Advisor Office Hours LIVE! Here's what we have lined up for you:

  • Advisor Updates with Chris Versace: Dive into the latest in advisor news, notes, and talking points that are shaping the industry.

  • Exclusive Interview with Michael Kitces and Alan Moore: The dynamic duo from XY Planning Network share their journey of building a powerful platform for 1700 RIAs. The advisory field needs more hands on deck, and these two have made strides in addressing this gap. And, as always, expect some insightful data from Michael Kitces.

  • Introducing: 'Advisor AI Lab' with David Ortiz: The future is digital, and AI is revolutionizing the advisory world. Join David as he shares the tools, strategies, and resources that are making a difference in his firm.

Full Episode: Building The NextGen Advisor with Michael Kitces & Alan Moore

Advisor Market Talking Points with Chris Versace (3/2/23)

Reflect Ap on Advisor AI Lab with David Ortiz






This is The Resilient Advisor Show with Jay Coulter.


One of the biggest challenges in financial services today is that we do not have enough financial advisors. There's a company out there called x y planning has done a great job of creating a launching platform for serious financial planners who want to go out and grow their own business. In this interview, I speak with Alan Moore and Michael Kitces of the XY Planning Network. They share some great data on what they're seeing inside of their network.


and share some ways that advisors can look at breaking away to independence. Here's the interview that I conducted at the XY planning live event in Atlanta, Georgia. I'm here at the XYPN Live conference with Michael Kitces and Alan Moore. I want to start with the story. In 2019, I came to my first XYPN LIVE. I was an institutional money management guy. I'm excited to be at the conference. I put my suit on my tie.


I go downstairs first day coming down the escalator and you are the only person in a suit or a tie. I Really really fit out of place. I saw shorts flip flops babies babies at the conference and I realized Oh child care on site. Yes. Yeah all the way back in 2019. Yes, absolutely Yeah And I knew it was different and I went back and I created a podcast after that after that experience and I said I think I've seen the future of financial planning with the next generation. I got some hate mail


They said, that's not real advice. Those people aren't going to make it, and boy, they could not be more wrong. Let me quote some stats that you guys gave today in your opening remarks. OK, so 1,380 RIAs currently at XYPN, 13% of all financial planning RIAs, 100% of all state registered RIAs, and 25% of the Investorpedia top advisors. Alan, what do you attribute those statistics to?


Ultimately, there's just so much demand from advisors who want to be able to run a business the way that they want with autonomy. And we talk a lot in our space about being independent, but you find out just how independent you are when you go to leave the firm that you're with. And so many advisors are looking to serve clients, a certain type of client that they want to serve in a way that they want to serve, charging a fee they want to serve, that they want to charge and working in a way, maybe remotely or hybrid or for overseas that ultimately supports their own.


version of a great life. And so we just continue to see advisors, really, you know, I would say, absorbing the education and expertise that we've been able to provide around how to build a successful business, develop a niche, get really focused and build that successful business. And we're seeing just the growth and really the explosion of the growth of our firms. You also mentioned that the audience was setting the standard in financial planning. What did you mean by that? You know, we like to use the term real financial planning. A lot of folks say they do financial planning.


But my definition of our definition of real financial planning is it really starts with what are your goals? What are you hoping to accomplish out of life? And we're really the only profession that asks that question. Everyone else is rearward looking. And so we're the ones who say, okay, what do you want to accomplish out of your life? And then how do we ultimately align your finances to support that version of a great life? And so they really are setting the standard, the gold standard in terms of what does it look like to do financial planning, to do comprehensive financial planning, to really be able to support.


their clients and all of their financial decisions. Michael, great data in your presentation this morning. As always, one stat that stood out to me. Schwab has experienced about 5% household growth over the past year. XYPN members, 28%. Dramatic. What do you attribute that to? So at its core, there's been this discussion in the industry for the better part of 10 years now of


Young people, to put in air quotes, are in this space like anybody under 55 or so, right? Not a retiree or a near retiree. Young people don't want to pay for financial planning advice. They're simple and they'll just use robo-advisors. And so on the one end, like just, you know, I'm in my 40s now. Like anybody I know in their 30s or 40s, if you ask them to describe their financial life, the word that never, ever comes up is simple. Like no one says that. Like I don't have portfolio complexities. Like that's not my problem. I have a big pile of assets. I'm trying to figure out how to withdraw from it.


Yeah, I have a lot of complexity that's going on in my life. It just doesn't happen to be portfolio based. And what we ultimately found is there's an immense, an absolutely immense amount of demand for financial planning amongst people in their 30s, 40s and 50s. They make enough income now at that age and stage of career. They have the ability to pay for advice, like really meaningful, substantive fees, but they don't have a liquid portfolio. Either they haven't built that up or they're building a business or real estate or.


employee compensation, which just all tie up with their 401k. Like they don't have an asset base to manage and they're not looking to buy a product because they don't want to engage on the commission side of the model. They just literally want to pay someone a meaningful fee for advice. And ultimately, there's so much demand for that, that even across almost 1800 advisors next to my client network, the average advisor has a five year client growth rate of over 28 percent. I mean, that's client growth rates. So revenue growth rates are even higher because.


clients move up market fees climb over time. So even just raw client count, five-year compound growth rate of more than 28% across the whole network of almost 2,000 advisors. It's, there just is that much demand. It's a mind blowing statistic, almost. It's like tens of thousands of clients. Yep. All right, so Alan, being an entrepreneur is incredibly, incredibly hard. Today you said about XY planning that we make it easy. We don't make it easy.


we make it easier. I hate that I botched that quote because that's my favorite quote from your speech. How does XY Planning make it easier for the breakaway advisor? You know, ultimately when you learn how to be a financial planner, they teach you the art and the science of being a financial planner. They don't teach you the art and the science of being a business owner. And so that's really where XY Planning Network as a platform plugs in is to help them understand what are all the compliance obligations that they have, how do they meet those obligations? You know, compliance can be really scary. There's not a...


There's not an easy to follow guidebook out there that says this is exactly what you need to do. We're able to provide our members with that. We're able to reduce the number of choices they have to make when it comes to technology. That, you know, there are I don't know how many hundreds of technologies on the technology map that they've got to navigate through. We just provide them best in class technology that they can choose to use. Or because of our platform, they can go to they can go use any technology that they want.


you know, making it easy to get ENO insurance, just all the things that it takes to run the business. And so that's really what we focused on is providing what we call real support and sort of aggregating all the different things that it takes to run a successful business under one roof so that it reduces the number of choices that you have to make so that you can go focus on what matters and the part we can't do for you, which is going and getting clients. And just as I would look at, look, I...


May I spend a portion of my time, my career early on, and in the big firm environment as well. There's a story that we tell in the big firm environment that you have to be big, you have to have scale and size in order to be succeed, right? You couldn't possibly be able to survive on your own without all of the infrastructure and support and services that we provide you as a large parent firm. And I think there's some validity to that in that, even in the most purist of the independent, of the independent firms, like,


It's not like advisors are literally slogging out their own financial planning software by hand and doing all of their CRM by written Rolodex. There is technology, there are service providers. There is support that goes around you. You're not literally wildernessing it with your own two hands. But the reality is there is so much technology and service and support systems in the independent channels. Even most of the major platforms, they didn't.


make the financial applying software, they bought one of three. They didn't make the investment platform. They bought one of three. They are almost all of the categories now, like three major providers that you can choose from. And you don't have to be in a large platform to get access to those. There are lots of choices out there and of either buying it directly or ultimately even what we do with XY applying now, we could say, let us put together, here's the compliance support that you need. Here's all the technology you need to run your firm.


financial planning software and investment management tools and custodial platform and CRM system. And we wrap all of that together in less than $10,000 to get started from scratch. Firms are maybe 15 or $20,000 in for like all in costs to completely make your firm entirely from scratch. And I still see a lot in the large-term world like, well, maybe when you're like 50 to $100 million, you can go and break out on your own. I'm like.


you're less than $20,000 all in first year costs to run your firm entirely on your own. So like $2 million at 1% covers 100% of your costs. You don't need tens or hundreds of millions of dollars to be operating independently as a solo. Now, I mean, it's no magic. We buy a lot of the same technology that large firms do. We're large enough at 2,000 advisors. We can get at very reasonable rates and then make that available to members. But this idea that only large firms can possibly have the platforms.


to make you survive and get like a big old chunk of your revenue in order to do it. It's like it's simply not true. And I mean, we've now operated that for nearly 10 years, nearly 2000 advisors. Like if we were a broker dealer, we would be one of the 20 largest. But we're not. Instead, we let all of the advisors actually own their own independent RAs, run their own firms and just give them the plug in structure that they need to do it for a minuscule fraction of what most send out paying back to their platforms.


So you're lowering the cost of entry for these advisors, but it's not just for small advisors. Could you speak to any of the breakaway advisors you've had from the major wires and the experience they have leveraging this network? Absolutely, I mean, maybe any firm, we have advisors who have left those firms, sometimes with clients, sometimes not, depending on their employment agreements, in order to ultimately find real autonomy, real independence in starting their own firm. And so we see advisors from across the industry spectrum who say,


You know, generally it's, there's a specific client I want to serve, there's a fee structure I want to charge, there's a way I want to work that's just not supported in the large firm environment. I'm tired of compliance saying no, you know, no, you can't do this. No, you know, I just interviewed an advisor who said she wanted to write a children's book, but because it had to do with money, her firm said no, too much conflict of interest. So she had to leave to write a children's book. And those are the types of things that continue to frustrate advisors that are inside the broker dealer warehouse world and why they're looking for an independent option.


Yeah, overwhelmingly fine. The people we tend to talk to, I mean, you know who you are. Like you feel like you're the square peg in a round hole in the firm you're in. You're trying to do more and more of this financial planning stuff. The firm kind of says they're doing financial planning, but it really kind of leads back to the core business model of the firm. Like, look, if that's who you want to serve and what you want to do, like more power to you, but.


When you're saying like, no, I really want to do more of this plying stuff and like the people I want to work with in the way that I want to charge my firm isn't really giving me the environment to do that or they're giving me lip service. But then there's a lot of nos that come along with it. That's really who we're finding makes a transition to X, Y, P, N, because the whole platform is built around autonomy, like you be you like your for literally your firm, your entity consult someday if you want your clients, they sign with you directly.


All of your data all of your agreements it really is your thing and like no you don't need hundreds of millions or even tens Of billions like you can cover the fees plus the two million dollars out of the gate And all of a sudden that door opens up say well if that's what I really wanted to do like oh I can really just go do the thing I wanted to do and I'm gonna go do it now So one of the bigger issues I think our industry is facing is there are not enough people getting into it you quoted a stat earlier today that first year revenue for folks who are members of the network


year six, $300,000. And I think most people find the $300,000 surprising. I like that one year number. I started in a bullpen making cold calls. You started an insurance broker. Oh yeah, yeah, I was in a bullpen. I was in a bullpen. I did not make $20,000 in my first year. Nope. No, and how are we gonna get the next generation of advisors trained up properly and into the marketplace? It seems like this platform could help facilitate.


Well, the irony for what we're seeing in practice, getting to the earlier statistics about the sheer amount of client growth that we're seeing from member firms offering subscription fee financial planning models is most of them are very quickly running head first into the capacity constraints of, I can only serve so many clients, even if I get some good tech and some good platform and some good admin support around me, I just hit a wall of how many client relationships I can manage, and then I need to hire.


And we're seeing that happening at large across the network. Like they're not hiring, frankly, the way that that a lot of us were hired coming in the industry like, oh, you're ready to be a financial advisor. We're like, I can set up a cubicle in my office with a phone book for you and like go at it. These are firms saying like, no, I have a flow of clients and a whole bunch to serve. I need you to just be an awesome financial planner for these people. And I will pay you a salary, a good salary to just give amazing financial planning and service and make sure these people stay with the firm.


and feel well served. And to me, that's a huge shift that's emerging around growth tracks and entry paths into the industry that yes, I mean, even in the context of what we see for X, Y, P, N, if you really come in and start a firm from scratch and you don't have background experience, it's awful and you're struggling to make $20,000 in the first year, although 300 by five or six years in is a pretty good number. So you do get there, but honestly, I think what we're gonna see more and more for the career track coming in is


firms that we see at XYPN that are growing to the point that they need staff advisors to handle all the capacity challenges they're having because the model is growing so well. And you're not going to come in for a phone book to go get your clients. You're going to come in as an employee advisor to serve clients that are handed to you because there's recurring revenue attached to them. So it works for everyone. And you'll do that for three or five or seven years and then decide like you'll stay in that job or you'll move up and start building your own client base because the firm has an opportunity for that or you'll decide to go out and hang your own shingle someday.


that that becomes the career path. It's got salary, it's got stability, it's got experience building opportunities. And then later you decide if you actually wanna build a client practice for yourself. Yeah, so earlier today, Alan and Michael also talked about an idea, and it's not an announcement, of launching a corporate RIA on the XYPN platform. What are you thinking through? What do advisors need to be thinking about as it relates to this potential offer?


Yeah, you know, ultimately our current model, which is not going to change, we're gonna continue to offer the independent model is that you start your own RAA, which means you are your own chief compliance officer. And you have all the responsibilities that come with that responsibility, and whether it be with the state or the SEC regulators. And so what we're evaluating, we have a lot of advisors or prospective members, and even those, some folks who are leaving the network saying, hey, this wasn't really for me.


they're saying, I really just don't enjoy doing the clients work, can you just be my CCO? I don't enjoy managing the technology, can you just be my IT department? I just wanna go do financial planning the way that I know to do it and do it the right way. And so a corporate RAA is what we're evaluating as an answer to that, which would give us the ability to allow advisors to go out and do what they do best, which is go get clients, build their own brand.


be able to serve them in the way they know to serve them, while outsourcing a lot of the back and middle office work to us. A lot of it are services we already provide that our advisors can opt into on an a la carte basis, whether that be our compliance team, or our in-house tamp, or our bookkeeping service. Really it's about bundling those solutions and making it really easy for advisors to use. As long as we can continue to adhere to our guarantee, which is what we make to our members, and we have from day one.


which is that you can leave at any time, you can leave X, Y, P, and membership at any time with 100% of your business. That's all your clients, all your revenue, all your data. And as long as we can continue to honor that, then it's something that we're excited to evaluate and potentially move forward on. And this is important. That's something you've honored the whole time with X, Y, P. Absolutely. We started that way from day one. Michael and I both said, how do we create a platform that we would have joined, that we would have wanted to be part of because...


You know, nothing makes you work hard more than knowing that your clients could leave you at any time. And that's how we've operated from day one on a monthly membership model. And our retention has been higher than most of the broker dealers out there. And they hold licenses and make it really hard for you to leave. So if anything, it just puts more pressure on our team to be sure we're providing great value to our members because they can leave whenever they want. To me, ultimately, what it comes down to is,


If you want to be entirely independent and have your own control, like you can own your firm, but the the regular has actually been very clear. Like if it's your firm, like you are the chief compliance officer. Are you even from X, Y, P, N's perspective? We do provide compliance consulting. We do provide coaching support. Like there can literally be someone with you to handhold you through every single compliance test you have to do and a piece of technology automated as much as you can. Like there are still things you have to do that you can't let go of that just that is the reality of being your own chief compliance officer. It comes with.


the owner, the full ownership of your entity. And what we continue here from subsets of members is like, I don't quite need it at that level. Like, can you just be my chief compliance officer and do some of the rest of the stuff? And that's the sort of the hole we're trying to plug with rolling out a corporate ARIA offering. It's not what frankly a lot of the other.


corporate area platforms on the business. Like we're not trying to aggregate members. We're not rolling them up. We're not mashing assets together to resell. Like XYPN is entirely privately owned by Allen and I. This is not PE funded. There's a venture to flip it in five years. We're literally just trying to solve problem of how do advisors that want to really be focused on, I want to serve the clients. I want to do financial planning the way I want to do it with the clients I want to do it with charging the way that I want to charge them. And that kind of financial planning platform.


I don't want to actually be my chief compliance officer in IT department. And so providing that way for an advisor to plug in and get that portion solved while still retaining all the rest of the autonomy to really do financial planning the way you think it should be done for the clients you want to serve. And Michael, I know there's a massive market for that. Yes. All right. Final two questions in the spirit of how social media is consumed today. You have less than 30 seconds to answer the question. All right. So your question. All right. What is the most impactful benefit of being an X, Y, P and member?


It's really about the community and being surrounded by other advisors who have been there. They're further down the road than you are. They're alongside you or maybe they're coming in behind you. But in the end, having a group of advisors who don't think you're crazy, who are very supportive, they'll give you the shirt off their back is huge. And ultimately that's the difference between success and failure as an entrepreneur are the people you surround yourself with. And that's really, that's the number one reason our members say they stay members of XYPN is for the community. What defines an advisor?


Oh, what defines a financial advisor? So to me, the the core of being a financial advisor is when you're running a business that is truly built around providing advice first and getting compensated for the advice. So that means you actually have the competency and knowledge to give advice on the domains that you're you're providing advice on. That means you're running a model that is agnostic to what it is that you recommend, because it's not about the thing that you implement. And again, it's literally about the advice itself.


Clients understand that they're compensating you for the advice and sort of like the knowledge between your ears that you're selling from these shelves. And when you run your business that way, to me, you're living the core of what it really means to be an advisor as opposed to an advisor, which unfortunately, advisors kind of become a nebulous term that captures a lot of different things in our space because even the regulators to me have been little lax about enforcing what that word means. So advisor to me is what defines this forward looking focus of really being in the business of advice.


and getting compensated for it. Gentlemen, thank you for your time. To learn more about the XY Planning Network, visit


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