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Aiming to bring financial planning to the masses

By Tara Siegel Bernard –  New York Times  – July 27, 2013


LearnVest Alexa von Tobel

It’s an unfortunate fact: The people who are most in need of honest financial advice often cannot afford it, or they don’t realize that their so-called adviser isn’t an adviser at all, but a salesman.

If Alexa von Tobel has her way, however, financial advice will be as widely available — and affordable — as any other mass-produced consumer product or service. Think gym memberships. It will become the perfect wedding gift for your best friend, or for adult children after they have their first baby.

As the founder of LearnVest, an online financial advisory that she started four years ago, von Tobel, 29, repeats these themes several times over a recent meeting to underscore what she has set out to do: deliver comprehensive and conflict-free financial advice to the middle class.

“Financial advice shouldn’t be a luxury,” von Tobel said in the company’s loftlike offices in New York. “We want to disrupt the industry.”

If her plan works, she would be among the first to crack the code, using both technology and bona fide certified financial planners — the gold standard among advisers — to make this sort of help more accessible to millions of Americans. Most individuals do not have terribly complex financial lives, nor should they need to spend several thousands of dollars to get the advice they need.

But for LearnVest to succeed, von Tobel will need to sell its product — one that, let’s face it, feels a little like eating your vegetables — to a vast number of customers across the country.   LearnVest, which started in 2009 as a budgeting website directed at women, just received another large round of financing from big-time investors, which will allow it to hire more planners and support staff and open a training and adviser hub in Phoenix. The company raised $16.5 million, which comes on top of the nearly $25 million raised since its inception.

The plan is to beef up its operation so it can handle the big distribution partnerships in the works, including a potential deal with American Express, one of its new investors. The company has broad plans to provide its newly designed product: a seven-step, customized financial plan. Von Tobel, who dropped out of Harvard Business School to start the company, also said it was working with employers and financial planning firms to sell its program within 401(k)s.

Most financial planners focus on wealthier people, whom they can charge $1,000 to $3,000 for a financial plan, or collect 1 percent of their assets, on average, to manage their money. In contrast, LearnVest charges a $399 upfront fee and $19 a month, or $608 annually. You can pay less for help on a specific goal, like paying off debt or starting a budget.

Von Tobel, who is represented by William Morris Endeavor, the talent agency, has worked hard to raise the company’s profile — as well as her own — in the world of personal finance, although she has not yet reached Suze Orman status. A book by von Tobel will be released in December.

So what do you get at LearnVest for $19 a month? Since the company became a registered investment adviser last year, it can now offer investment advice. Von Tobel says she is ripping a page from Weight Watchers’ playbook with the most recent version of its service: a seven-step action plan, which begins with a diagnostic call that typically lasts 45 to 90 minutes. “You can be someone who is extremely sophisticated with millions of dollars or a doctor with $200,000 in debt,” said von Tobel, who became a financial adviser this year. “But you should still go through this process.”

(So far, most customers are college-educated people between 25 and 55 with incomes of $70,000 or more.)

The advisers save time by leaning heavily on the company’s technology: A planner could see where you overspent on dinner the night before by viewing your online profile.

Clients connect all their accounts to LearnVest’s online “money center.” This captures every last financial transaction across your accounts, like checking, savings, credit cards, and investments. Your adviser uses all this data, combined with a financial questionnaire and the information gathered on the call, to tailor a plan. You can both view your personal “money center,” which is a cross between an e-mail inbox and a giant checking register, while on the phone.

In about 10 days, you receive a customized financial plan. The sample I reviewed was about 77 pages, with a section dedicated to each of its seven steps — which include “organizing” and “building” — that cover all aspects of your financial life. The plan provided specifics on how to get out of debt, set up a college savings plan for a child, and how much to save for retirement, among other things.

You are assigned a financial planner, and the cost includes unlimited phone and e-mail chats. “When I say unlimited, I mean unlimited,” von Tobel said. To make sure you follow through, the financial planner e-mails what the company calls bite-size challenges — say, to buy life insurance or increase your 401(k) savings by 1 percent — with a deadline. “When you miss a deadline, the planner is also notified and can nudge you to help hold you accountable,” she added.

Right now, the service stops short of making specific mutual fund recommendations, but instead tells you how much money to put in each type of investment, like large-capitalization stocks and bonds. It also included a list of “vetted providers,” like Charles Schwab, Fidelity, TD Ameritrade, and Vanguard, and detailed information about their costs.

Time will tell whether the planners, all salaried employees who receive bonuses based on customer satisfaction, can handle the number of clients required of them. LearnVest currently has about 25 certified planners in 10 states, with plans to expand to about 35 by the end of the year. Von Tobel declined to say how many customers the advisers, most of whom work from home, would ideally handle at full throttle. NestWise’s chief executive said the goal was for each of its advisers to oversee 500 clients.

Former LearnVest employees told me that some people left the company because they were overworked, but those were also relatively early days at a start-up. It’s also possible that LearnVest will be owned by someone else a few years from now, since many entrepreneurs with big investors are building companies to sell them.

For now, von Tobel said she was focused on getting the program, which holds great potential to revolutionize financial planning for the masses, in as many hands as possible.

“There is no reason this can’t be enormous,” von Tobel said.

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