Although financial planning seeks to improve the lives of all who need help making better financial decisions, in practice its scope has mostly been limited to those with a relatively high level of affluence, at least compared to the "average" American. Due in large part to a perceived limitation of business models, the profession has struggled to find ways to effectively serve the broad middle market. Where financial planning firms have failed, though, a technology company is finding success, as "start-up" firm LearnVest - a hybrid of technology and financial planning, seeded with enough money to make it one of the larger independent financial planning businesses in the country - leaps forward with a goal of reaching tens of thousands of people or more every year, and potentially hires the dozens of CFP certificants it will take to serve them. Are we catching a glimpse of what the middle market financial planning firm of the future will look like? Will a technology firm employing financial planners set the model that solves the challenge the financial planning profession couldn't?

The inspiration for today's blog post is a recent conversation I had with Stephany Kirkpatrick, the Director of Financial Planning for LearnVest, a technology-based financial planning firm seeking to empower Gen X & Gen Y women to take control of their personal finances - and in the process reaching a broad swath of the middle market barely served by the traditional planning world.

LearnVest's founder, Alexa von Tobel, speaks passionately about the importance of financial literacy (given that it is not taught at any point during the traditional educational process from grade school to graduate school), with a message of helping the masses make good decisions - and especially, to empower women - to create better opportunities and lives in the future. The video below captures her speaking about the importance of financial literacy for TEDxWallStreet earlier this year.

How LearnVest Works

What makes LearnVest unique as a financial planning company is two-fold: 1) it also has an extensive focus on creating content for its core audience, which gives it both advertising revenue for the financial planning content it produces, and a clear means to build a growing audience of followers who may then contact the company for financial planning assistance; and 2) with an extensive technology team, the company is well positioned to build and create whatever tools it needs to scale up and serve its target market effectively and efficiently, without being tied to the traditional planning software and tools the industry uses.

LearnVest is using these advantages to create a financial planning business the traditional industry has been unable to achieve: serving a wide swath of the middle market at a truly affordable cost using a strictly fee-only (no AUM) business model. A basic budgeting plan is only $69, while a complete financial plan is just $349, with a clearly delineated service offering, ranging from 1 up-front diagnostic phone consultation (e.g., a data gathering discussion) and 3 months of unlimited email support, to the up-front phone call, 3 follow-up phone check-ins, a year of unlimited email support, and access to additional LearnVest educational content. All planning interactions are virtual - a combination of telephone, email, and technology tools.

Financial Planning "Lite" Or Real Financial Planning? 

Granted, these plans may not necessarily be at the "depth" of the financial plans of many traditional firms, but the reality is that the Gen X/Y middle market that LearnVest primarily serves doesn't need that kind of depth, anyway. In fact, Kirkpatrick notes that LearnVest has had to build its own financial planning software and tools, because the traditional industry options are just too complex and time consuming to be effective (a productivity concern I've noted in the past as well).

LearnVest also gains efficiencies by using account aggregation tools to gather as much of the client's financial information as possible up front, to make the planning process more efficient; this also makes the monitoring and review process more efficient as well. All of which means that LearnVest can deliver the right kind of plan with the right level of depth for the middle market they're serving, with a strong focus on a plan that builds directly to short-term, immediately actionable items for clients to implement.

Similarly, as mentioned earlier, meetings and interaction with clients are conducted entirely by telephone and email (Kirkpatrick notes that video may be included at some point in the future), supported by LearnVest's tools such as their MoneyCenter, and planner interaction is heavily focused on addressing immediate client questions, and driving towards actionable solutions for clients. With the number of clients that each financial planning will likely serve, these interactions will not necessarily become deep, personal financial planning relationships. But that's not necessarily LearnVest's goal, either. The goal is to promote financial literacy and help people make basic financial decisions, interacting heavily with Generations X and Y (roughly age 20 to 40) who are very comfortable in a technology-driven environment; it's real financial planning at the level that their clients need. For those who ultimately have even more complex needs, or want a deeper relationship, they can choose to pay more for a more "traditional" financial planner.

LearnVest Finding Success

So what kind of results is LearnVest seeing so far? Many of the financial planning services have just been rolled out this year (an extension of what was originally "just" an educational content business), but the early response for one of their three financial plan levels has been strong and is resonating quite well with their target audience.

As I have written in the past, the truth in serving the middle market is not that it's difficult to build a cost-effective business model to do so, but that most firms (and the industry at large) is so bad at marketing that it cannot generate the volume of clients necessary to make it work. LearnVest is using their content platform (as well as building other strategic relationships) to solve the volume problem, driving traffic to their educational content and appealing to prospective clients who decide they would like to pay for a planner to give further advice on the details of their situation. 

In turn, this means that LearnVest is also hiring, and expects to add CFP certificants as their client base builds (on top of a team that already numbers nearly 40 staff members in functions ranging from content creation to technology support to sales and marketing to the core financial planning staff). Relative to the "average" independent financial planning firm, this would actually make LearnVest one of the larger independent financial planning firms in the country by staff count, even while serving a middle market with plans that cost just a few hundred dollars at the most! In addition, the firm is well capitalized, with venture capital firm Accel Partners providing a $25 million seed that would put LearnVest's valuation at the level comparable to a larger planning firm with more than $1 billion of AUM!

Implications For The Industry

LearnVest represents a rather unique entrant to the financial planning world - a "technology" company building personal finance content and tools and using CFP certificants to help people implement the advice. While a number of other technology-driven financial services startups have tried to cut financial advisors out, or even demonize them (such as Betterment's recent "Financial Advisors Are Bad For Your Wealth" blog post), LearnVest acknowledges that having a trained professional is still crucial to delivering effective advice across the broad financial planning spectrum. But coming in as an "outsider" - and without being constrained to the traditional tools of the planning world - is allowing them to build an entirely different kind of firm.

In the near term, LearnVest will not be much of a threat to any traditional planning firm, for the simple reason that the majority of their target clientele is younger than the clients most firms serve, with less income and fewer assets. These are the masses that most planners do not serve at all, with the exception perhaps of the Garrett Planning Network, although notably LearnVest's offerings may even be less expensive than the typical hourly planner (as LearnVest intends to produce smaller profit margins but generate radically higher volume).

In the longer run, though, advisory firms that try to expand their reach by growing to both less affluent clients and younger clients may start to find LearnVest a tough competitor, given their incredibly low cost supported by high volume, even with advice provided by real CFP certificants. Presumably, at some point clients may reach a point of complexity that merits a deeper personal relationship (or something local and in-person), and such individuals will "graduate" to a more traditional financial planner (unless LearnVest launches a more advanced service offering at some point in the coming years?). Nonetheless, LearnVest seems to be uniquely positioned as a poster child for a firm ready to develop and implement digital age tools to support the financial planning relationship

And notably, because LearnVest is operating on a digital model, they have the capacity to hire planners from anywhere in the country - not only creating financial planning jobs, but giving planners job opportunities regardless of their geography (which can also become a way for LearnVest to manage staffing expenses and keep their financial planning costs down). In fact, if you feel inspired, they're hiring right now

(Editor's Note: This post was featured in the Carnival of Personal Finance #361 - Mother's Day Edition on One Cent At A Time.)

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  • Bonnie A Sewell

    I agree that these companies will get subscription money from young people (who doesn’t get subscription money from young people if you’re a company born in the last 10 years?) – I don’t agree that young people will overnight decide saving is cooler than all the lifestyle things they purchase now.

    Financial Literacy has been available in every medium and many languages for decades. You can lead a horse to water . . .

    Where would young people really be helped?? BEFORE they purchase that overpriced college education and if they work during high school, start those ROTH IRAs then. And because longevity is a true threat to wealth, never, ever plan on taking much of a leave from paid work.

    Encourage family discussions around money – do young people know how often they are putting their parents financial security at risk over college, weddings, and first homes???

    There’s a lot to learn – for everybody. I would guess that the same number of young people save in this generation as in any generation although I do agree, Michael, that they will do so without spending much time in a brick and mortar bank or planner’s office. I hope I’m wrong. I hope they turn into early crazy manic savers.

    • gMg Management

      LearnVest looks like a wonderful guide to mastering personal finances. I have taken several personal finance classes and read several books, and LearnVest is definitely a good way to grab hold of your finances and get or become more financially secure.

  • Cathy Curtis

    I have been watching Learnvest for a few months now. I think their content is very good and it’s impressive they got funded. It will be interesting to see if this model is successful. It still seems to me that if you are going to pay for financial advice it would need to be more personal than email, phone calls, etc. The younger generation may prefer this model if they are looking for financial advice at all.I think hiring CFP’s is a really smart move. I wonder how much they are paying?

  • Joseph Perrotta

    As a younger advisor, I personally see this model being incredibly successful for my generation. Most young adults under the age of 35 are completely disheartened by wall street and the thought of working with a “broker.” This type of service model, where it is done almost entirely online, and at the convenience of the investor, should bode well.

    I agree, though, that this model is only viable up to a point. Once an individual accumulates enough wealth, or has more advanced planning needs, I still believe that working with someone on a full-time basis, who is a bit more local and has a more complete understand of their needs, will be the best option (and that’s not to say if LearnVest gets large enough that they won’t open or franchise out local offices staffed with CFP’s to serve a region).

    However, if it’s a choice between working with LearnVest, and going it on your own and maybe not saving or planning at all, I think LearnVest provides a great starter service at an affordable price.

    • Meg Bartelt

      I second Joseph’s response. I’m 36, and many of my peers are new parents, new home owners, and now “suddenly” feeling what it’s like to be a “responsible adult.” I have had many of them say they’d loooove to have a financial planner, but laugh at the prospect of paying what an average client does. I think LearnVest and its ilk might be the only way to help people such as this and still make a viable business out of it. It’s more personal than just self-help tips (that everyone nods vigorously at while reading and then doesn’t implement) but more affordable than getting several hours of dedicated CFP face-time each year.

  • Kevin Condon

    Learnvest is on the right track. But traditional branding is not the right approach. Experienced CFPs were not marketers due to the cost of branding with those methods. Social networking that is connected to the right platform to allow eCommerce WITH the information gathering to aggregate data will keep independent advisors in the driving seat in their own practices. With good target marketing and natural networking that uses the efficiencies of the web, we’re going into a brave new world for financial planners. Those of us who have been working on this for awhile (ten years!) could not be more pleased. FYI – #socialadvisor for you Twitterers is a good place to gather the troops who want to storm this wall. And check for how this can be done.

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  • Chris

    I think what Learnvest is doing is phenomenal in terms of broad based marketing. I still don’t understand how they can afford everything at $19/month. I can’t seem to find how many paid users/clients they have. 50 CFP’s, maybe they all handle a few hundred clients? Any thoughts?

    Chris Knight

    • Hunter Lowe Lappen

      I don’t think they are a profitable company yet. I know that they have a lot of venture capital paying the bills right now.

  • Chris Knight

    In some ways this is like the pre-paid legal/legal shield phenomenon. Currently 1.4M people paying $20 (give or take) for the ability to contact an attorney, etc.

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  • Michael Kitces

    LearnVest hasn’t been very forthcoming about their client volume, but the model is built to service thousands or tens of thousands in the aggregate. Just doing the basic math of the business, individual planners would probably each have an expected capacity of a few hundred clients – bearing in mind that will be handled predominantly by emails and phone calls, not necessarily the multi-hour meetings of “traditional” planning.
    – Michael

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Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.

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