Part Four of an Interview with Philip Kessler on Automated Advice

The following is an excerpt from an interview that appeared in Investments & Wealth Monitor (IWM March/April 2017 issue) and was part of an original interview at the Schwab IMPACT Conference in October 2016:

IWM: We’re curious if this new offering has cannibalized your existing business. How have your existing clients related to the new offering?

Phillip Kessler: Really, we haven’t had any push-back or any question. We were a little targeted in how we did what we did. We have a fee schedule for clients under $2 million. If you want to be a private client, it’s 125 basis points. The minute you explain to them 50 basis points over time, they get it.


But to me, it’s a little different. We’ve seen a large uptake. They like the technology and they like the access. So cannibalization maybe, but our fee structure is 75 basis points for accounts $5 million and up. Now we’re 75 basis points for direct. We actually built the business model at SWS Partners around being able to be profitable with the understanding that the fees we charge will go down over time, not up. So we built that into the business model for the firm.

IWM: It seems like part of your motivation for offering automated advice has been to grow your business. How do you position this in the marketplace? How do you brand it?

Phillip Kessler: So far it’s all been organic marketing just through networks no different than we would communicate anything else about the firm, although we are in the process of trying to figure out what that will look like. There will be some sort of online presence, and it’ll be related to everything that we’re going to be doing firm-wide.

IWM: Many advisors are looking toward automated investment management as a means to scale their businesses or get efficiency. Has that been your experience to date? Are there any operational efficiencies:

Phillip Kessler: In fact, that’s one of the key reasons we incorporated it in the firm. To be frank, we look at it as leverage not only for the clients. They obviously are going to get a better outcome because it is less expensive. But speaking as the owner of the firm, there are a lot less people I have to hire. This thing never takes a vacation. It doesn’t need benefits.

I get it, but the point is that if you think about it from the ability to scale a firm, and the way that we’re constructed, just so you understand, is that all the clients are clients of the firm. There are no individual books of business. Then we’ve built the team around a specialty, whether that’s service or whether that’s financial planning or whether that’s client development. If you’re in one of those buckets, that’s what you do, and that’s all we ask of you.

This excerpt may have been slightly edited for content, length and clarity. You may read the interview in its entirety by clicking here.