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: It sounds like the automated advice is a new business model for SWS Partners. Did you think about going 100-percent digital when you were thinking through this?
Phillip Kessler: SWS Partners is probably a little different in that it’s really up to the client. One of the unique things that’s come out of utilizing this technology is you get to look at your client a little differently. We have clients that call us all the time, and we have some clients that will never call us again. That’s ok, it’s completely up to them.
The technology is – I think the word I would use – is empowering. When you can see what you own, what you make, what you pay 24/7 then we joke about brokers. Why do you need to come and meet with me quarterly? I’m going to show you a report you can see instantly on your phone anytime you want. So you’re going to deal with us on the things that are really important. We found that the communications we’ve gotten back from clients are bout the things that we want to communicate with them about. For example, when Brexit happened, the phone didn’t ring, because you can go on your phone. You can click it. You realize that the guy screaming at you on CNBC is out of his mind and your portfolio is ok, and you go on about your day. It’s been interesting for us just to watch how that works. It’s allowed clients to interact with us how they want to interact with us.
IWM: There is an impression that the automated offering is designed to attract smaller clients and millennials. Who are you attracting with this new offering- millennial tech-savvy investors, etc.?
Phillip Kessler: So we think about how we go to market in general as a firm, it’s around fees. If you talk to somebody who is coming out of a brokerage experience where they’re paying 125 bps (basis points) to their financial advisor and then they’re putting another 85 bps into their 15 mutual-fund portfolio, and then their 12b-1 fee, at some point they’re cruising close to 2.5 percent.
The outcome, whether you’re a young person looking to save money or you’re someone who’s heading into retirement – a former law professor of mine called me yesterday, and we’re going to put her on there. It’s a $2.5-million account. The reason being is that her chance of success goes up exponentially if her fees drop from 2.5 percent to 75 basis points, because I don’t think they’re raising interest rates anytime soon.
This excerpt may have been slightly edited for content, length and clarity. You may read the interview in its entirety by clicking here.