Tech-savvy young planners band together to share the wealth

Six young financial planners who have launched solo practices in the last two years have formed a study group whose goal is to disrupt the traditional advisory model with new technologies and an affordable fee structure for their Generation X and Y clients.
The group members, who are in their late 20s and early 30s, call themselves the FP Hackers. They favor cloud-based virtual practices, live in all four U.S. time zones and see themselves as tech-savvy entrepreneurs. They meet every Monday for a video Google Hangout and promote themselves using the Twitter hashtag #FPHackers.
Many in the FP Hackers group charge clients a planning fee as low as $100 per month, and if the fit isn’t right, they refer clients to one another.
“We share the abundance mentality and are always helping each other,” said group member Sophia Bera, 30, founder of Gen Y Planning in Minneapolis. “I put the group together, but there are no leaders. Everyone leads at different moments.”
The “abundance mentality,” a term that was initially coined by Stephen R. Covey in his bestseller “The Seven Habits of Highly Effective People” (1989), has taken on a life of its own among business entrepreneurs. People who embrace an abundance mentality share resources with peers because they believe the world is a place full of opportunity and sharing will make them more successful.
Ms. Bera has blogged about the power of FP Hackers, which she calls a “mastermind” group. While the group decided to team together to share ideas that could push each member to create their best possible work and propel their businesses forward, the unintended result has been to shake up the traditional financial planning model, she said.
One form of that shakeup involves FP Hacker member Alan Moore’s April 4 launch of the XY Planning Network with Michael Kitces, a partner and director of research at Pinnacle Advisory Group Inc. and author of the Nerd’s Eye View blog.
The XY Planning Network, a financial planning platform dedicated to helping younger planners build a practice serving their contemporaries without requiring the sale of products or gathering of assets, had its beginnings in the FP Hackers group, according to Mr. Moore, 27, who is also the founder of Serenity Financial Consulting in Bozeman, Mont.
Mr. Moore explained that when he joined FP Hackers, he saw that all of the group members were struggling with the issue of getting paid monthly without taking a nearly 3% hit from PayPal or credit card charges. Using their “mastermind” group innovating skills, the group found a compliance-friendly payment processor, he said.
“I realized every other monthly model firm is facing this,” Mr. Moore said. “In our weekly Google Hangouts, we talked about how we were all getting calls from other Gen X/Y planners asking about technology, compliance and do I have to be a registered investment adviser. We were repeating ourselves over and over.”
So Mr. Moore called Mr. Kitces a couple of days after Christmas, and the XY Planning Network launched several months later.
To be sure, study groups have been a mainstay of the advisory industry for years.
Diane MacPhee, a longtime adviser, professional certified coach and founder of DMAC Consulting Services, said study groups old and new offer support for advisers in solo practices. The value of these groups is their ability to help advisers share information about a broad range of topics.
“When you’re new in the field and trying to launch a practice, it’s very difficult to wear so many hats,” Ms. MacPhee said. By sharing resources, advisers can tackle obstacles that seem too big for one person to overcome. “There’s a divide-and-conquer mentality, where everybody can contribute to the study group, when one person may not be able to collect all that information on their own.”
Study groups also offer collegiality, support and friendships that last for years, Ms. MacPhee said.
“I know firms that have merged together after starting out together in study groups,” she said.
But Ashley Murphy, 32, founder of Arete Wealth Strategists in Berkeley, Calif., and an FP Hacker member who has used Ms. MacPhee’s coaching services, believes the advisory industry has seen so much change since 2008 that study groups function differently for the younger generation.
For example, meetings are typically virtual and nationwide rather than local, and group members are more willing to refer clients to one another, Mr. Murphy said. Plus, there’s a lot of discussion about inexpensive technology that allows young advisers to build a book of business with clients whose assets can grow with the firm.
Although the FP Hackers study group meets digitally, some of the initial interactions were in person. Mr. Murphy met Ms. Bera at a NextGen meeting of the Financial Planning Association in 2011.
“We became friends and realized that we were both interested in a disruptive business model in financial planning,” said Mr. Murphy, who prior to opening his solo practice interviewed for a job as a Morgan Stanley broker, but found it to be a “tremendous turnoff” that he was expected to bring in $10 million as a young adviser.
Mr. Murphy said he would have preferred to serve as a paraplanner first at a wirehouse while training to become a full-fledged adviser, but that wasn’t on offer. Instead, he decided to open his own practice and build his business with the help of like-minded advisers his own age.
“The abundance mentality is taken to some extreme in our group, but I have to say I’ve been infected with it,” he said.

Related Topics: Financial Performance, Financial Planning, Wealth Management