The WealthStack Podcast
00:24:20 · Mark Swan
[00:24:20] S2: Yeah. So this is, like, the the meta goal of Nevis. Right? Ultimately, we believe that you can democratize access to professional financial advice. I think it's actually already happening. There's a transition happening where I think people who are high net worth, let's call them between 1,000,000 and 5,000,000 of assets from client side are now getting essentially family office services. And I think that has already happened or is in the process of happening. What it means for RIAs is they need to be offering a lot more basically services for the same fee. Now, the way that is actually happening today is it's largely mega enterprise RIAs offering those services, they get economies of scale. So like the reason why you go to creative planning might be over smaller firms, just because you have all this access of services, and it's going to create more and more pressure. But the end client, it's great for them, because they're getting more for their fee, right? But the question is, what on the lower end? So there's like a tipping point that happens, right? And it might be a 500,000 of assets might be slightly lower than that. There's a tipping point where you go from self serve to actually wanting an advisor, right? And the question is like, where is that line? And the line is actually not necessarily determined by the client. The line is determined by the cost to serve on the advisory side, right? When does it actually make sense, right, for me to from a cost side to actually get the revenue? Where's the breakeven, right? At point where I'm started making money as an advisor to services. And again, you just look at where is the cost today of an RIA, right? A typical RIA is spending somewhere between 3035% of revenue every single year on admin and operational cost. And that is like all the blocking and tackling in around the advisor. And again, if you're a small firm, and it's just you and one other that maybe you're running a completely different profile, but like, on average, your mid market firms are running somewhere there, right? And they're maybe running a 25% EBITDA margin kind of company. But the big cost is this admin part. And so the question is, if you can reduce the administrative cost, you can then actually drop the cost to serve.
00:26:22 · Mark Swan
And then you can actually start serving clients who are much less assets for the same for the same breakeven. And the way I think that you'll actually reduce that administrative cost is not necessarily through headcount reduction, though I think that might happen, but just through scale, being able to double the number of clients that you serve for the same team that you have, it has the equivalent essentially scale basis, right? And you got this operational leverage, and so your 30% will start to shrink. And I think that's actually how firms will start to realize that can profit loss. It really reduces the administrative costs that lowers the cost to serve. That means more people get access to professional financial advice. And that means that you're able to scale. The last thing I'd say is I actually think that the way I think I was the forecast ahead five years, right? What do I actually think the kind of midpoint will actually be is I think there will be there's always a need for the human financial advisor, you know, always be there. But I actually think that a lot of what client might want to ask for can actually be serviced, full pass through with AI. For instance, I want to know what's the performance of my portfolio in the last six months, but exclude my wife's stuff, just my stuff. And that should be honestly in like a mobile app where, you know, you're getting that request and then you have your quarterly touchpoint with your advisor where you're going through more complex financial planning and so on. So I think that also AI will help service a lot more kind of long tail requests so that the adviser is doing more high level strategic work with the client as well. And so I think that will also reduce the cost of service.
00:27:57 · Shannon Rosic, Mark Swan
[00:27:57] S1: Sounds like we could learn a thing or two from the digital banking world in that case going mobile like that. [00:28:03] S2: No. Exactly. And I think, again, the cost to serve on on an average account for a traditional bank might have been hundreds of dollars, and the cost to serve at a Revolut type example would be, like, tens of dollars. Right? So you're just a different order of magnitude in terms of cost to serve. And so as a result, you could scale. Right? And I think that same thing will happen in wealth management, right, where you just dramatically reduce costs, and then you're able to get much more scale as a result of that. [00:28:30] S1: Certainly sounds like we're headed in the right direction for that. But it is time now, Mark, for segment two of this episode called ask us anything where I've gone out to the social universe, and folks threw out their questions and slid into the DMs. So if you're ready for it, I'm gonna put you into the hot seat for a minute or two here. [00:28:46] S2: Absolutely. Yeah. [00:28:47] S1: So this always makes me laugh because I've gotten this question before, especially when it comes to tech companies. But the number one question we... I got and I got it from a few people, funny enough, was, are you building a CRM?
00:29:00 · Mark Swan
[00:29:00] S2: Yeah. Good. Good. Good. Good question. So, Luke, I think I'll answer it in two ways. Right? I think that there is part of a CRM, which I think that we ultimately are building, right, which is you need to be able to see a client relationships. You need to be able to understand who the clients are. You need all the information. You need you need a system of record ultimately, that has all that client information. Now, traditionally, CRMs have played that role. There's been like an accessible database for customers, right? Or for REAs, right? To be able to access that information. I think the whole concept of a CRM is actually going to die. I think just generally the idea of CRM idea of this database will actually go away. And what we ultimately are building at Nevis is that we can integrate into Salesforce and other CRMs that you're using today. But I actually think that information should be structured in a way that's a kind of point of need as they kind of... Or that's how you're to retrieve information, right? The idea of a clicking five clicks to access something, I think it's going to be much more given to that point of need, and it goes back to this front end side will actually going to be more will change dynamically depending on what you're showing. That's the first thing. And then there's always a need for kind of the more structured information, Where are my notes, where are my meetings, where are my client information? And we have that, right? We do have that within Nevis. And so if you look at Nevis today, we have a lot of core components that I would say look like a traditional CRM, right? We have task management, we have clients, you can structure different clients in their households and the entities they have and the accounts that they own. You can have notes as collaborative, it's like teams as well as we have all of those components. But I think the idea of like, I just really will be talking about a CRM in like even a couple of years, right? I think that there'll be a place where you store data. And then I think that everything on top of that will be a little bit more dynamic, right? So in essence, we, in essence, have built a lot of the parts of a CRM that we don't... You know, we we we work with CRMs as well, so we don't expect people to switch over if they don't want to.
00:30:54 · Shannon Rosic
[00:30:54] S1: Okay. Thank you for answering that very transparently. Much appreciated. Second question we got, what's on the road map for Nevis?
00:31:03 · Mark Swan
[00:31:03] S2: Yeah. So there's a couple of parts. So within the workflows part, like, we're constantly expanding that out, and the expansion there is actually on the connector side. So really, the more, you know, parts with connectors that we can build, and the deeper that we can go with those connectors, the more value we can add. So maybe the best example of that is with custodians, right? Today, you can interact with custodians by filling PDFs, but PDFs maybe are not the smartest way or maybe the most scalable way of being able to complete more action work with custodians. And one thing we're always looking to explore is increasing some of the API connectivity that we have with likes of custodians or other providers to be able to actually do more full pass through work. And that's a big part that we are looking at, or kind of expanding out and being able to complete more of that. And then on the platform side, we have an incredibly long roadmap. As I mentioned to you, we have system product, we've got this email client, but beyond that core things around building tax, we want to build a client application as well. So the client portal for customers, and then there's a very long tail beyond that, right. But the core thing is being able to enable workflows so you can do more full pass through work, right? By the end of this year, we don't want people to just be like creating a task to do a particular custodial workflow, but actually complete the task end to end, which is a sign never since done. First part of that is there, but the second part, we need to continue to expand that out. And then on the platform side, yeah, there's just a ton of stuff that is just getting unlocked every single... Basically, every month, there's a new big feature of getting shipped, which is awesome.