A different approach to high-tech planning

Providing scalable high-tech, high-touch financial advice to the mass affluent has been a goal of adviser entrepreneurs since the days of MS-DOS. While the technology and knowledge certainly exist to make it happen, doing so successfully and profitably thus far has been elusive.

Providing scalable high-tech, high-touch financial advice to the mass affluent has been a goal of adviser entrepreneurs since the days of MS-DOS. While the technology and knowledge certainly exist to make it happen, doing so successfully and profitably thus far has been elusive.

Veritat Advisors be-lieves that its formula may be the answer.

The fee-only registered investment adviser — headed by Kent Smetters, a professor of risk management at The Wharton School of the University of Pennsylvania, and backed in part by Andrew Rudd, co-founder of the financial information firm Barra, and Arnold Wood, head of money manager Martingale Asset Management LP — uses its own financial planning software and employs certified financial planners and certified public accountants. The system came out of beta in September and now has several hundred clients.

Veritat uses the Adobe Connect online meeting service, which allows advisers to stream live video to clients and potential clients, as well as share their computer screen. Thomas Mooney, the firm’s lead financial adviser, said the system’s bugs were worked out during the beta process.

“While the conferencing system confused a few people initially, it is all working well,” he said. “I’m currently working with well over 100 people on financial plans.”

While individual clients are welcome, Veritat is now marketing to corporations to provide planning in the workplace. It offers a 14-day free trial that begins with a seven-step online Financial Assessment wizard — basically a brief questionnaire to get a sense of the client’s status — followed by a 15-minute meeting with a financial adviser. During that meeting, the adviser provides a rough assessment of the potential client’s current financial situation.

“The key differentiator between ours and other attempts at reaching this audience is one-on-one advice, we are not just providing you with a calculator; you are picking a dedicated adviser, and he or she is with you throughout the advising process,” Mr. Smetters said.

“Less than 20% of the population are do-it-yourself investors or soloists, and for them, calculators are fine. But more than 80% of the population wants one-on-one advice,” he said, citing recent studies from both Cerulli Associates Inc. and Forrester Research Inc.

One refreshing aspect of the firm’s approach is its transparent pricing, which is easily found on its website. In addition to an initial $250 planning fee, a continuing financial planning relationship costs $25 a month for individuals, $40 for families and $35 for retirees.

The financial plan begins with a discussion of goals, budgeting, how to develop an investment portfolio and an evaluation of insurance needs and estate planning. Veritat then checks in on a quarterly basis. Clients can schedule an “On Demand” meeting when a significant life event occurs. During plan preparation, clients can discuss anything from retirement planning and homeownership to financing college expenses.

An implementation phase follows during which the Veritat adviser works with the client to identify the most-effective investment products and most-appropriate insurance policies, as well as assist with the preparation of estate-planning documents.

The firm also offers an optional portfolio management service through which its advisers purchase securities on a client’s behalf, manage investment recommendations, and monitor and re-balance the investments.

Veritat’s website and marketing materials make it crystal clear that the firm works exclusively on a fee-only basis and does not accept commissions of “any shape or form from any investment, insurance or other financial product companies.” All advisers are salaried employees.

Fees are straightforward as well. For asset management, clients are charged a fee of 0.5% for assets held in an account at Scottrade Inc., which Veritat uses as its custodian. There is no asset minimum.

“I don’t know of anyone else who has taken a wide-scale approach to the mass-affluent space; they lead with planning, not investment advice,” said Sean Cunniff, research director at The Tower Group Inc., a research and advisory services firm that covers the financial services industry. He noted that Veritat’s approach of having each client assigned a personal adviser is the key, even if a client wants merely basic advice on core issues.

“Providing advice to a mass-affluent model is still unproven as a business strategy, but the only way it will happen is through the use of a scalable platform, and that is essentially what Veritat has pulled together,” Mr. Cunniff said.

Of course, there are others attempting to reach the mass affluent with online tools and wizards. One is Betterment LLC, which recently landed significant additional funding (more about that soon on our blog). Another is Sophie, the online virtual adviser from Simplifi LLC. Then there is Boulevard R, a retirement-planning service for consumers and advisers from the father-and-son team of Jon and Matt Iverson. The Financial Planning Association has partnered with them and in April rolled out a detailed financial online wizard, Starter Roadmap, intended to help consumers determine if they are financially on track for retirement.

But all of these lack the human touch of a professional adviser, which Veritat provides.

For more information visit Veritat online.