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In | Vest West 2018: Why Personal Capital’s Hybrid Advice Model Succeeds

In | Vest West 2018: Why Personal Capital’s Hybrid Advice Model Succeeds

At the first main session of the opening day of Invest West 2018, Suleman Din, technology editor of Financial Planning magazine had a fireside chat with Personal Capital CEO Jay Shah on how the company is progressing. This provided a fascinating snapshot of perhaps the most successful hybrid advice firm operating today.

Shah highlighted that the firm has been a hybrid adviser from the start. Beginning in San Francisco, where I remember my first meeting with Shah and Personal Capital founder Bill Harris back in 2012, in an office that was still being built around us while we talked. Since then the firm has reported +50% growth every year and now has in excess of $8 billion assets under advice.

The business is growing in multiple locations, with hubs in Dallas and Atlanta having recently been added to the Denver base which opened in 2013.  Shah says while they deliver virtually, the strategy is based on being in customers different time zones, not building a bricks and mortar network, which he identifies as a significant unnecessary cost that would ultimately be passed on to the customer.

The new locations have been selected as areas where they have found a rich pool of adviser talent. Typically they communicate with their clients by video, using screen sharing, rather than in-person meetings, which the firm finds their clients would rather avoid. This strategy has seen a 130% increase in assets since the start of 2017.

Theirs is a mass affluent service to support consumers who have a compelling need for advice. The vast majority of the company’s relationships are advisory, although consumers can still access their free app and use it themselves to aggregate their finances and take their own decisions. The software can build a cash-flow for households and help them identify their savings and investment goals.

The average client is in the mid $400,000 range. This is right in the middle of the mass affluent asset space, which Shah described as $100,000 to $5,000,000 investable assets representing 28% of American consumers and totaling 60% of investable assets in the US.

Shah is clearly proud of the 90% retention rate the firm has achieved, pointing out that consumers vote with their wallets if they believe your story, and their feet if they do not. Having moved from 0 to $8 billion assets in just six years Personal Capital must represent one of, if not the, most successful hybrid advice models in the market.

About The Author

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Ian founded Financial Technology Research Centre in 1995 nearly two decades before “FinTech” became part of the industry lexicon. A boutique consultancy the firm focuses on how personal finance organisations can communicate more effectively with their customers and help them take better financial decisions. As part of this work the firm work with many of the U.K.’s leading long-term savings institutions, financial advisers and technology providers to identify emerging technologies that can transform customer relationships. More recently the firm has added its own InsureTech and RegTech ventures to help advisers ensure they help consumers find the life insurance and workplace pensions solutions that best meet the needs. In addition to developing a UK view Ian travels extensively to identify similar trends around the world and the lessons that can be learned from other countries.

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