008: Helping people manage their finances in alignment with their values

May 02, 2018

Today's guest is David O'Leary of Kind Wealth. His story shows that it’s possible to make a difference in the world through financial planning.

In cliché fashion, David’s life was transformed after a trip to Africa. His ensuing soul-searching led him to quit his Bay Street career on a quest to effect positive change. Currently, there are three levers David is pulling to make a dent. As Director of Impact Investing at World Vision Canada, he is mobilizing capital to help the world’s most vulnerable people. He also founded Kind Wealth, a not-just-for-profit business helping millennials manage their finances in alignment with their values. David also sits on the board of Parker P. Consulting, a social enterprise helping organizations of all shapes and sizes achieve gender equity.

David has lived, worked, and volunteered at various times throughout Africa. One of his proudest accomplishments is founding and running Grassroots Youth Development while living in South Africa. David is a frequent speaker at conferences and in the media. He spent 13 years as Director of Manager Research with Morningstar, a global investment data and research provider. David holds a BA in English Literature from the University of Toronto, an MBA from the Rotman School of Business, and a CFA designation.

Topics Discussed in This Episode:

  •     How David’s experiences in Africa and with volunteering helped shape Kind Wealth
  •     What Kind Wealth is and what it does
  •     Why David started Kind Wealth and what the core values are
  •     What prompted David to focus his business on an X, Y, Z demographic
  •     How Kind Wealth’s business model can be applied to older demographics
  •     The fees and plans offered by Kind Wealth
  •     How flat fee pricing removes the conflict of interest between the advisor and the client
  •     David’s long-term asset management goals and building portfolios consisting primarily  of SRI/purpose/impact investments
  •     Compliance issues that Kind Wealth had to consider
  •     What type of financial planners would be good fits for Kind Wealth
  •     Some of the biggest challenges David faced when starting Kind Wealth
  •     Advice for financial planners who are looking for ways to grow their fee-for-service practice

Links:

Kind Wealth

17 sustainable development goals (SDGs)

Email David at dave@kindwealth.ca

Quotes From David:

“You don't have to stick with the status quo. Invent, come up, innovate and do what's right for the client and that will be the business model that succeeds in the long term.”

“What really rankled me about poverty was the uneven distribution of opportunity in the world.”

“Some of the values that we’ve put up front are the commitment to radical truth and radical transparency.”

Listening to David wax poetic about his dreams for a more fair and equitable financial planning model (and world!) is a special treat, and we’re sure you don’t want to miss the whole episode. Here, we’re sharing a quick take on three key ideas that we think you’ll find valuable:

  • How you can completely eliminate conflict of interest from your business
  • Why the retainer-based flat fee model is appealing to younger clients (and beneficial for the older crowd, too)
  • What challenges you can anticipate with a retainer-based planning practice

Make sure you catch the full episode through the link above, or on iTunes or Stitcher, to learn more about Kind Wealth (and whether you should work for them!), the future of values-based investing, and more.

How you can completely eliminate conflict of interest from your business

The conflict of interest in commission-based asset management is pretty obvious, but even charging a percentage of assets can land planners in a tricky situation.

Why?

Basically, it’s always in a planner’s best interest for their clients to invest. That means that when clients are choosing between investing and say, paying off debt or donating a significant sum to a worthy cause, the advisor is inevitably going to be biased.

David gives a particularly poignant example: let’s say a client has just retired and is trying to decide whether she should take the lump sum payout or annuity payments. It’s best for her planner if she takes the lump sum since it will increase her net worth, and the planner will get to charge more. However, it might be better for her to keep the pension and take the monthly payouts.

David and his team decided that for Kind Wealth, they wanted to focus on “radical truth and radical transparency.” That’s why they decided on a flat-fee structure for Kind Wealth: they’ve been able to increase transparency and completely eliminate any conflict of interest.

Why the retainer-based model is appealing to younger clients (and beneficial for the older crowd, too)

With commission- or percentage-based fees, planners are always seeking those elusive high net worth clients. This often leaves younger clients ‒ who understandably tend to have fewer assets ‒ out to dry.

David wanted to focus on those clients who aren’t being served as fully by the financial planning industry, and that meant doing things a little differently. According to him, “You don't have to stick with the status quo. Invent, come up, innovate and do what's right for the client and that will be the business model that succeeds in the long term.” For Kind Wealth, retainer-based flat fees were the way to go.

Millennials tend to be pickier about how they spend their money (who hasn’t seen those apocalyptic “Millennials are killing X industry” headlines?), so the transparency of the retainer model is more appealing to them. It’s also familiar to a lot of young consumers who are already used to paying subscriptions for things like entertainment, groceries, and even razors.

Hint: Whether you’re interested in working with ethically-minded millennials or not, having a niche can help you position yourself as an expert in your field.

The irony is that a fee-based model actually works best for older clients, who tend to have more assets and thus benefit more from being charged a flat fee. That doesn’t mean it’s an easy switch to make, though, which leads us to...

What challenges you can anticipate with a retainer-based planning business

Listening to David’s passion about retainer-based planning, you might be tempted to drop whatever you’re doing and start a values-driven financial planning business right now (and if you ask him, he would love to have you join him in that space ‒ the more the merrier!). However, there are a few challenges to be aware of:

  • Uncharted territory: The planning industry as a whole is undergoing many changes, from decreased margins to increased scrutiny from both regulators and clients. This creates many opportunities, but it also means David and his team are taking a risk by testing out a brand new concept. Retainer-based models may be increasingly popular in the US, but no one knows yet how that model will play out in the Canadian market.
  • More questions: Increased transparency is great for clients, but it also means they ask more questions. When they can see your fees showing up on every credit card statement and are actually aware of what they’re paying, they also tend to hold you to a higher standard and are more likely to question the value they receive.

Hint: Nip clients’ concerns in the bud by explaining your value in a way that makes sense to them. If you missed it, listen to Episode 002: How to properly articulate the value of financial advice, where John Page of Wealth Enhancement Academy talks about precisely this topic.

  • An unfamiliar pricing structure: Older clients especially tend to be a tough sell on a retainer-based model even though it tends to be a better deal for them. If they’ve been used to a model with tons of hidden fees, they may not even know how much they were paying their advisor in the past. The flat fee may be more confusing as it’s different from what they’ve been used to their entire lives.
  • Canada’s tech landscape: This isn’t exclusive to David’s niche or even to the financial planning industry, but the Canadian market doesn’t have as many choices as say, the US market, and available products don’t always integrate well together.

That being said, David is running Kind Wealth the way he is because he honestly believes it’s the right thing to do. In fact, next time you hear someone complaining about sleazy financial planners, share this episode with them to restore their faith in the industry.

We hope you enjoy listening to the full episode. Make sure you never miss one by subscribing to the show on iTunes or Stitcher and signing up below to get an email whenever we release an episode.

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