For Ask a Financial Advisor, the medium is the (video) message and the specializations include Lutherans

March 5, 2013 — 6:12 PM UTC by Kelly O'Mara

6 Comments

Brooke’s Note: It seems almost every week we’re coming up with a number of 20 or 30-somethings innovating in or for the RIA business with a mindset involving technology, process and a confidence born of academic credentials and a belief that this is the time to reinvent Wall Street West Coast-style. Kelly is already working on two more of these profiles of companies that meet various needs and look plenty promising even in the embryonic stages. It’s why I like the West Coast and it’s why I like the RIA business. It’s a mindset that can exist on the East Coast, too, based on what I’ve seen of inStream Solutions and BlueLeaf. See: How Blueleaf sees itself taming the RIA’s two betes noire — and how it is being challenged on that.

Acquiring useful leads that can be converted into actual clients — without spending too much money or wasting too much time — is a holy grail of the RIA business. And, while many have speculated that the Internet is a potential gold mine, few have found a way to use the technology profitably. See: How one firm is supposedly cracking the lead generation code to the tune of 50,000 advisors supplied — by, for now, not trying to create referrals.

NerdWallet, based in San Francisco and backed by Stanford and MIT minds, thinks it has cracked that nut with a new Ask a Financial Advisor site that allows RIAs to answer common financial questions, attract interested customers and connect the potential clients to an advisor’s profile and video message. In theory, as consumers come to trust NerdWallet, it’ll be a natural place to come when looking for an RIA.

And, then, those clients will be able to watch advisors’ video introductions, see what they have written, read about their qualifications and find the right match.

“It’s like a dating website for advisors,” says Shiyan Koh, the head of personal finance at NerdWallet, who is a graduate of Stanford and Harvard Business School and worked at JPMorgan Chase & Co. and a major hedge fund. The dating website is an apt comparison, since those sites are certainly a dime-a-dozen, yet when done well people are more than willing to pay for the service.

The NerdWallet difference

Koh acknowledges there are plenty of websites aimed at generating leads for advisors. And, there are plenty of places online with questions and answers. “There’s lots of Q&A on the internet that is of dubious quality,” says Koh. But, she insists NerdWallet is different.

“Other things that exist are very directory-like,” says Koh. A directory is not an avenue by which people actually make decisions, she says, like picking blindly from a phone book. Most directories or information about advisors also come with lots of certifications, but without context around that information, she says. Allowing people to feel as if they are truly getting to know advisors through their answers, profiles and videos makes it more likely that they will choose them.

“There’s lots of people advisors are not currently looking for business from,” says Koh. With so many diverse advisors, including one on the site who specializes in Lutherans, NerdWallet is simply hoping to make a business of being a middleman. It will draw potential clients in with a variety of consumer information, give advisors a place to show off their expertise and create a video profile, and sit back and hope for the best.

It made sense to Lyman Howard, a co-founder of the eight-month-old San Francisco-based Point Bonita Wealth Advisors LLC. See: How and why I’m starting an RIA from scratch and what I’m spending to make it happen.

Sites such as Paladin Registry or BrightScope Inc. certainly offer a way for consumers to find advisors, says Howard, “but people would have to know where to go to get to that site.” NerdWallet, which covers a broad range of consumer finance topics and has a number of sub-sites beyond the advisor-focused tool, offers “greater exposure,” he says. See: Third-party advisor review sites vie for attention from investors and advisors.

No goals

Howard is one of 20 Bay Area advisors who are part of the pilot group that NerdWallet launched Ask a Financial Advisor with in late February after three months of building out the platform with the 100 most common questions. The pilot group of advisors is made-up solely of San Francisco-area RIAs simply because it was easier to meet with locals and concentrate on one location. Now, NerdWallet hopes that advisors from all over the country will sign themselves up, make a video, and start answering questions.

The company will help facilitate that by curating the questions, gathering the most popular ones and sending them to advisors, as well as ensuring that consumers’ questions aren’t so individually specific so as to be useless to anyone else. As it gets more traffic and sees what people are looking for and what advisors are answering, it also will experiment with sending questions along to specific advisors.

While NerdWallet verifies credentials listed in advisors’ profiles, that’s as far as it will go. It doesn’t recommend any advisor.

The key to being successful will be in how many advisors and how many potential (and ultimately convertible) clients the firm can attract. It’s a problem that has plagued other sites with similar plans. And, Koh acknowledges that the firm just doesn’t know how popular it’ll be yet. “We have a good initial pilot set and initial feature set,” she says. Now, NerdWallet will have to wait and see.

Though the company won’t reveal it’s overall traffic, with just a week since the launch of the advisor Q&A there are only a few comments or “'likes’” on questions. Koh says the firm has no specific goals, but that there has been an “overwhelmingly positive” response from advisors.

Lyman Howard: We won't get the quantity of eyeballs they'll get.
Lyman Howard: We won’t get the
quantity of eyeballs they’ll get.

On the ground floor

For Howard, NerdWallet offered a viable option “to introduce ourselves more broadly on the internet but in a somewhat controlled environment.” He was looking for a way to reach potential clients and to expand his use of technology in his outreach. Posting financial educational content on the RIA’s blog is only useful to reach those people who are already prone to visit his website or blog.

“We won’t get the quantity of eyeballs they’ll get,” Howard says. And, he believes the question-and-answer format is the best way to bring in curious and interested clients. “We think a lot of our potential clients are asking those very questions.”

Howard was also tempted by the idea that he’d be able to get in on the ground floor of the project, offer suggestions and help guide the project. After meeting with the NerdWallet team, he says, he was impressed with “the caliber of the people there” and felt that they truly understood what concerns an RIA might have about the venture. NerdWallet was founded in 2009 by an MIT grad and a Stanford alumni, who had worked at hedge funds, tech companies and JPMorgan.

One of the main issues Howard had concerns about was uncontrolled content about or from him floating around in cyberspace. There are compliance issues with anything that can be considered marketing materials, and he didn’t want to get in trouble or give off the wrong impression.

The dangers of the worldwide web

Those are valid concerns, says Les Abromovitz, senior consultant with National Compliance Services, Inc. and author of The Investment Advisor’s Compliance Guide.

“This will be treated as any other ad,” says Abromovitz — and that means everything posted on NerdWallet has to follow the same rules as all advisor ads: no marketing hype, no embellishment of credentials or performance, nothing misleading or false, and everything should be reviewed by an RIA’s compliance officer, including answers to posted questions.

And, says Abromovitz, advisors should obviously “stick to answering the questions asked. You can’t use an answer to promote your firm.”

NerdWallet could work well, he says, if the company ensures that it’s avoiding hype and overselling. You wouldn’t want a situation where an advisor plants a question in order to make his or her firm look good or gives it a glowing review.

Mike Alfred, chief executive of BrightScope, whose site, featuring advisor profiles, attracts about 400,000 unique visitors monthly but is not currently focused on lead generation, says that the main problem isn’t necessarily compliance issues.

“A lot of people have tried and failed to create a website with financial advisor profiles,” he says. “Compliance is usually not the reason why these websites fail. A crummy product, no name brand, and scant consumer traffic are typically to blame.” But, he notes, he isn’t familiar with NerdWallet, and thus can’t comment on it, though he hopes the firm has “a fresh approach to the challenges in this space.”

Mike Alfred: A lot of people have tried and failed to create a site with advisor profiles.
Mike Alfred: A lot of people
have tried and failed to create
a site with advisor profiles.

While Alfred is right that plenty of sites haven’t succeeded online, there’s nothing inherently wrong with the internet. “I don’t see any issue with going more high-tech,” says Abromovitz.

Birthed from credit cards

NerdWallet isn’t just a site for consumers to ask financial advisors questions. It isn’t even just a site for financial information. It’s a consumer website with four main sections: finance, travel, education, and coupons, which got it’s start focusing on credit cards.

Now with a couple dozen employees, the site was launched in spring 2010 focused on credit card comparisons, information and recommendations based on what the consumer was looking for. NerdWallet, in turn, received a fee from the credit card companies when someone applied and was accepted based on one of its recommendations. In the last year, though, says Koh, the company has expanded into a number of other products — one of those being Ask a Financial Advisor.

That overall general consumer traffic will help NerdWallet attract visitors to its financial advisor section, which is a first step.

No business plan

Les Abromovitz: I see more advisors participating in these kinds of sites.
Les Abromovitz: I see more advisors
participating in these kinds of sites.

If NerdWallet has managed to develop a viable system to generate solid leads, advisors would likely be willing to pay a pretty penny for access. But, Koh says the firm doesn’t yet have a plan to make money off the offering.

“It’s still early for us to tell,” she says, though the logical extension would be to create subscriptions for advisors to join or sell ads on the site if it generates enough traffic. But, first, NerdWallet needs to get the traffic. “We’re not in a rush to monetize it,“Koh says.

That’s not to say NerdWallet hasn’t monetized the other products and offerings on its site. Each section has different revenue streams and attractions for consumers. For example, says Koh, the company just won a grant from the Bill and Melinda Gates Foundation to build an app to help low-income families fill out FAFSAs, the college financial aid form. That comes under the education category, while the finance category still has the original credit card comparisons as well as recommendations on checking accounts and consumer finance information.

The company, which Koh says has never taken institutional capital, won’t reveal if it is profitable, but is “comfortable with our financial position,” she says.

'It may result in nothing’

Making money on the Ask a Financial Advisor section may be harder than it seems. One of the attractions for Howard was that posting answers and a profile on the site didn’t cost him anything other than the time it took to create the content, much of which he was already doing. That appeal may change if he is asked to fork over money, particularly as the kinks in the system are still being worked out.

“I’m seeing more advisors participating in these kinds of sites,” says Abromovitz, who has had several questions in the last few weeks from advisors considering efforts like this. “They’re making greater use of this approach,” but it’s too early to tell if it’ll be successful or not.

“It’s an alternative channel for us,” says Howard, who doesn’t yet know how it will pan out or complement other outreach efforts. “It may result in nothing,” he concedes.


Mentioned in this article:

NerdWallet
Financial Literacy

BrightScope, Inc.
Data and ratings for RIAs

NCS Regulatory Compliance
Consulting Firm
Top Executive: Mark Alcaide, COO/Partner



Share your thoughts and opinions with the author or other readers.

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Elmer Rich III said:

March 5, 2013 — 8:22 PM UTC

If there is a B2C tech solution that works , i.e., predicts investors buying an ad visor’s services – we’re all for it.

We do this work for a living and our experience is that it is a B2B sales and with the older clients having the most money tech solutions are pretty ho hum.

I would like to see independent validation of this business model and process – before investing anything in it. Since there are a lot of academics involved surprised there is no evidence and primary research proof offered.

Wouldn’t a truly universal tech solution be best to test outside of the Bay area? Sounds like and echo chamber effect is occurring.

But it is always exciting to pronounce a solution to asset gathering where you basically sit at your desk and work on your computer. But it’s kind of a kool idea from a decade ago.

Gravatar

Elmer Rich III said:

March 5, 2013 — 8:23 PM UTC

If there is a B2C tech solution that works , i.e., predicts investors buying an advisor’s services – we’re all for it.

We do this work for a living and our experience is that it is a B2B sales and with the older clients having the most money tech solutions are pretty ho hum.

I would like to see independent validation of this business model and process – before investing anything in it. Since there are a lot of academics involved surprised there is no evidence and primary research proof offered.

Wouldn’t a truly universal tech solution be best to test outside of the Bay area? Sounds like and echo chamber effect is occurring. Don’t really see the benefits to the investor.

But it is always exciting to pronounce a solution to asset gathering where you basically sit at your desk and work on your computer. But it’s kind of a kool idea from a decade ago.

Gravatar

randomwalk said:

March 6, 2013 — 10:48 PM UTC

It’s embarrassing that you would cover this company as a potential serious player in this industry.

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Elmer Rich III said:

March 7, 2013 — 3:45 PM UTC

That’s a good strong opinion, but I support the widest reporting possible. Who can predict what is valuable to advisors or clients?

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