When it was announced that Prumentum Group, a Silicon Valley-based firm, would join forces with St. Louis-based RIA Plancorp to launch BrightPlan, a new hybrid robo-advisor, it may have looked superficially like another effort by an advisor to upgrade its technology and keep up with the Vanguards and United Capitals of the world.

Under the surface, the deal was unusual for many reasons. One, Plancorp’s employee ownership had sold Prumentum a 40% stake in the RIA in hopes of cementing a long-term relationship. Two, Plancorp has gradually made clear plans to shift its wealth management business onto the human-artificial intelligence BrightPlan platform to create a more efficient firm capable of serving a larger segment of individuals with goals-based financial advice.

The Prumentum-Plancorp relationship, hinging on BrightPlan, could portend a new trend of synergistic mergers between tech firms and financial advisory practices. Plancorp will provide the human advisor workforce for BrightPlan and create portfolio strategies that will eventually be used on the platform.

“This was very much a deliberate strategy that my co-founder and I started executing about three years ago,” says Marthin De Beer, CEO of Prumentum. “We wanted to base BrightPlan on proven advice and a recipe that works.”

After spending years developing its software, Prumentum’s leadership started a search for a financial planning partner—a search that coincided with an attempt by Plancorp’s leadership to find planning-oriented technology that could scale and democratize their services.

For De Beer, a former Cisco executive, BrightPlan was about bringing fiduciary financial advice to a larger segment of people. Plancorp covered all the bases in Prumentum’s search: It was a long-established, planning-oriented independent advisory with a history of innovation and a future secured by a strong succession plan.

“To me, financial planning is almost like a human right,” De Beer says. “We now have two great firms now working together in this hybrid approach to bring this great tradition of financial advice to everyone.”

At its birth in 1983, Plancorp was an early independent fiduciary advice provider. The company’s founder and chairman, Jeff Buckner, envisioned the firm as a financial advocate for the wealthy and the emerging affluent. In the firm’s marketing materials, he claims to have not understood what was meant by fiduciary advice; rather, he was mimicking his family’s work ethic and business values.

Plancorp has left a trail of innovative thinking: It was an early adopter of Dimensional Fund Advisors’ factor-based products. Plancorp was also one of the first financial planning firms to test portfolios with a Monte Carlo simulation. Plancorp has also been certified by the Centre for Fiduciary Excellence (CEFEX) for a decade, one of the first firms to receive the certification. It also was one of the first to eschew asset-based minimums, preferring instead a minimum quarterly fee of $1,250.

“We don’t have a specific asset minimum, but if you look at a standard fee schedule, you could equate a $5,000 fee to $500,000 in assets,” says Brian King, Plancorp’s chief planning officer. “We do have clients who choose to begin working with us when they have less than $500,000 because they want the value of the planning services.”

In 1995, Plancorp became a founding member of the Zero Alpha Group, a coalition of advisors dedicated to goals-based financial planning and investment methods embracing efficiency and transparency. Zero Alpha Group members share investment information and discuss business strategy, holding one another to high standards of objectivity, transparency and accountability. By working together, members are able to negotiate lower costs and premium services for their clients.

When Buckner founded Plancorp 35 years ago, his goal was to serve affluent professionals with a new kind of advice that emphasized financial planning over investing. Today, Plancorp has more than $4 billion in assets under management, nearly $3 billion of which has been brought onto its platforms since 2005, managed by approximately 60 staff members in four offices scattered among three states.

In the firm’s first few years, Plancorp offered financial planning and nothing more—the firm didn’t start managing assets until after 1990. “All we did in the beginning was financial planning, and in our minds, that’s still our big value add,” says Chris Kerckhoff, Plancorp’s president and CEO.

As the firm began to grow in the mid-to-late 1990s, Buckner began looking for additional stakeholders, elevating key employees as partners. In the 2000s, the firm opened an office in Sarasota, Fla., as its clientele and AUM began to grow. In 2015, an additional St. Louis area office opened as Plancorp added a local institutional investment advisor.

Momentum From Prumentum

Perhaps Plancorp’s integration with tech-oriented Prumentum is another next-generation step in the firm’s history. Under the arrangement, Prumentum may still buy the remaining 60% of Plancorp at a later date via an equity exchange. “If the strategy is working as we hope after five years, Prumentum will own 100% of Plancorp,” De Beer comments.

Kerckhoff says the acquisition begins the integration of a traditional wealth management firm with a technology start-up. Together, the companies created a hybrid advice platform that might allow a midsize financial planning firm to serve large numbers of people with direct financial advice and expand its client base far beyond its founder’s original expectations.

Buckner, also Plancorp’s co-chief investment officer, originally concentrated on St. Louis area physicians, executives and small business owners as prospective clients. Today, its clientele includes other high- and ultra-high-net-worth families and individuals. “I wouldn’t say we’re serving any particular niche; rather, we have some pretty broad buckets,” says King. He adds that the size of the average client relationship is about $4 million in investable assets, but Plancorp is flexible enough to manage clients at any asset level.

A Team Approach

Plancorp’s team approach to financial planning suits the potential volume, complexity and diversity of robo-advisor accounts. All of Plancorp’s wealth management professionals are certified financial planners. CPAs, CFAs, investment specialists and estate attorneys are also part of the team. Clients do not have a one-on-one relationship with a single advisor, and instead are served by a team that may change over time. A primary financial advisor, planning associate and client service representative constitute the core of each team.

“We have a systematic, proactive approach,” says Kerckhoff. “Going back 15 years ago, we had started putting in place work flows to make sure the planning topics were at the top of our agendas with our clients.”

Advice not only remains consistent within each client’s team, but from team to team. Thus, when a client walks into Plancorp, any advisor is capable of serving them with the same level of advice. No advisor working at Plancorp has an individual book of business, says Kerckhoff.

“I always had it in the back of my mind that this was a relationship business, so the team approach has been a departure,” says Kyle Attarian, a partner and wealth manager in the firm. “The way we’ve positioned it for clients is that they are a client of the firm, not the advisor, and we make a concerted effort to allow them to meet others at the firm through all the different stages of their careers—that sends a message to our clients that the relationship can live beyond my career or theirs and provides some peace of mind.”

Planning Relationships

In addition to the team approach, BrightPlan clients benefit from Plancorp’s broad expertise in a number of key planning areas. The firm’s planning relationship begins with helping clients simplify and understand all the forces impacting their financial lives, says King. For clients who have not yet retired, a retirement plan is drafted that charts their path toward financial independence.

Plancorp’s areas of expertise also include philanthropy and charitable giving, education funding planning, and employee benefit plan analysis. As needed, Plancorp also helps clients manage their cash flow and retirement withdrawals, plan their estates, proactively plan for the tax impacts of their financial decisions and purchase insurance.

“We provide advice; we do not sell products in-house,” says King. “We deal with insurance the same way we deal with income tax and estate planning: We’re providing analysis and advice, then partner with a trusted CPA, attorney or insurance broker so that they can ultimately execute the plan.”

A Plancorp team meets with clients at least once a year, but more frequently with clients who have larger, more complex plans. Smaller clients also receive more generalized advice, Attarian says. “We still provide expertise, just as we do for those with larger accounts and more complex situations, but it may be more general guidance up front. We also believe we can serve less affluent clients on a personal basis. All of our clients have 24-7 access to us if they have any questions.”

Internally, the firm’s team-based approach is reflected in its day-to-day operations and the relationships between employees and management. Employees are encouraged to compete as a team against other firms, instead of against each other as advisors.

Plancorp staff are paid bonuses tied to the growth and success of the firm. Currently, 14 individuals own 60% of Plancorp, and all of the firm’s staff are salaried.

“Building a cohesive team like that requires dedication to a specific culture and discipline,” says Kerckhoff. “We’ve tried to make sure that we’re attracting the right kind of people who can put their own egos aside and make sure the client’s interest is first and foremost.”

So far, clients and advisors appear to appreciate the Plancorp philosophy—the firm boasts an advisor retention rate of approximately 95%, and a client retention rate of 99%, Kerckhoff says.

New clients are acquired largely through referrals, both from clients and centers of influence, in the regions served by Plancorp advisors.

The firm remains open to innovation and change, says Kerckhoff, as long as a strong case can be made for proposed changes. The same philosophy governs Plancorp’s investing decisions.

Zero Alpha Sought

Plancorp’s ultra-passive, efficient investment philosophy also jibes with the index fund and the smart beta management preferences of most robo-advisor services.

Plancorp believes that active management often leads to suboptimal outcomes for investors. The firm’s investment philosophy can be boiled down to three mandates: embrace market pricing, don’t try to outguess the market and resist performance chasing.

“One thing I can assure you is that no client’s financial plan has in it that they need to own an asset that goes bonkers to meet their goals,” says Peter Lazaroff, co-chief investment officer at both Plancorp and BrightPlan.

Rather than timing the market or finding the best opportunities, Plancorp tells clients that the market should be made to work for them. Success comes from a patient, long-term approach. No investment advice should be given unless it is academically supported. Financial decisions must be made with the backing of evidence.

Plancorp’s portfolios implement a mix of Vanguard and Dimensional Fund Advisors funds—the firm has moved from market-based index portfolios to factor-based portfolios, says Lazaroff. “We do target factors that have been shown to add return above the market.” He mentions factors like value, since the firm prefers cheap stocks; factors like size, since small tends to outperform large; and factors like quality, since highly profitable companies perform better than narrowly profitable or unprofitable companies. “But we’re only looking to target four or five factors at most.”

Overall, Plancorp has been slow to change or revise its investment philosophy. The last portfolio change, which reduced the number of funds used in the firm’s strategies, only occurred after more than 18 months of internal testing and discussion. Some investment decisions take multiple years—or decades—to consider before they are executed.

A client recently reached out to Lazaroff asking about Bitcoin in the middle of the currency’s bull run in 2017. Lazaroff responded with a 3,000-word letter arguing that Bitcoin was too volatile for financial planners. “There is no alpha, no chance to really beat the market,” says Lazaroff. “That’s a core part of our philosophy.”

A Bright Future Is Born

BrightPlan will compete directly with Betterment, which announced that it was moving toward a hybrid model in 2017, and Vanguard, whose hybrid Personal Advisor Services has become the nation’s largest robo-advisor.

The platform’s processes mirror Plancorp’s team-oriented approach to financial planning, informed and backed up with objective, professional human advisors. Clients can choose between a digital-only or hybrid service, but the full hybrid version won’t be rolled out until later this year.

“Through BrightPlan, we’re using risk tolerance questionnaires, similar to the verbal questions we would ask on-boarding a Plancorp client,” says Lazaroff. “We can usually tell by the way they’ve held assets in the past, the jobs they’re working, how they feel about risk.”

The result is a robo-advisor that focuses strongly on financial planning. BrightPlan’s end users are not required to invest any assets on the platform; however, they can aggregate all of their externally held assets onto BrightPlan either by linking them online or by manually entering balances.

The platform then evaluates the aggregated data to create custom financial objectives for each user. The system is sophisticated enough to evaluate a client’s existing 401(k) accounts held externally, use Monte Carlo simulations to evaluate the probability of portfolio success, and make specific investment recommendations.

End users can access digital tools to help make financial decisions. The system can also be set up for multiple investment goals beyond retirement. “We want to make sure that technology is really helpful to the advisor and provides all the tools they need so they can spend more time on client-facing tasks,” Kerckhoff says. “While that’s been a goal of almost every firm and advisor in the business for some time, we think it’s also a priority for the kind of clients we have on board.”

BrightPlan allows users and advisors to track financial goals in real time. Once their financial situation reaches a certain level of complexity, the platform prompts them to consider seeking an advisor. “We’re moving the whole planning process to digital,” King says. “Many of our templates are digital already and built into the work flows in our CRM.” Integrating with Salesforce, Plancorp has developed work flows for on-boarding clients that include sending wires and distributions and everything in between.

The platform has already passed one test of robustness: BrightPlan won certification by CEFEX, the first robo-advisor to do so. A subscription to BrightPlan costs $20 a month, with a $500 account minimum. No AUM fees are assessed until a client account reaches $50,000 in assets. At $50,000, BrightPlan users are assessed a 0.5% management fee.

For those who choose to invest their assets through BrightPlan, the platform offers a mix of low-fee mutual funds custodied at TD Ameritrade. It also includes automated rebalancing, dividend reinvestment plans and tax-loss harvesting.

The system is one of the first robo-advisors to allow clients access to Dimensional Fund Advisors products. Vanguard funds are also used in BrightPlan portfolios.

BrightPlan will also enable Plancorp to train its wealth management teams more efficiently, Kerckhoff adds. “We’re very much continuing to work on enhancements internally to continue to allow our people to train and develop at a faster rate so that they can spend more time with the clients. We can enhance our training with technology to get advisors up to speed faster and in a position where they have all the tools they need.”

Moving forward, BrightPlan will also add ESG investment funds to its platform, says Lazaroff.

Youth Movement

Plancorp believes that BrightPlan will help the advisory firm continue to draw young, talented advisors eager to serve clients as fiduciaries.

Young advisors and new partners are a key part of the firm’s succession plans. Kerckhoff, who came to Plancorp two weeks after graduating from Indiana University, has hired a swarm of young advisors over the last few years, leading to a team well under the industry’s average age.

But with that team comes challenges of uncertainty and higher turnover. On the other hand, hiring young advisors out of college is easier than training established advisors to work within Plancorp’s team system, says Kerckhoff.

Young advisors also have helped inform Plancorp’s client services. For example, the firm founded a women’s initiative on the recommendation of one of its youngest employees. “Some of our excellent female advisors have pushed the initiative forward; it’s also some of our younger folks who have become passionate about diversity,” he says. “They raised the idea on their own. The leadership team, who had their own grand design for more gender parity, quickly approved of the initiative and supported it. Since then, it’s grown at a fantastic rate, and it has been well-received by our female clients.”

Kerckhoff says encouraging more diversity internally is also a focus at Plancorp, and the firm is developing relationships with universities to create a better talent pipeline into its ranks.

Attarian is one of the young talents cultivated by Plancorp. Hired with only a handful of years of experience in the industry, he was attracted by Plancorp’s fiduciary practices and collaborative philosophy. After nearly nine years with the firm, he recently opened the company’s new Nashville, Tenn., branch office.

“The marketplace in central Tennessee is dominated by broker-dealers and bank-owned trust companies. There really isn’t a top RIA in this area, and I think it’s an opportunity for us,” he says.

Attarian will focus on attracting doctors and entrepreneurs to Plancorp. Doctors, in particular, often receive bad financial advice from their peers, their families and from the financial services industry, he says.

Attarian, who is married to a doctor, believes he can effectively build a network of medical professionals in Nashville and differentiate Plancorp with its status as a fiduciary and a comprehensive planning firm.

As Plancorp and Prumentum continue to integrate, and their clientele’s appetite for digital advice and communications increases, the synergies between advisor and technology should continue to create a higher quality of advice that can be more efficiently delivered to a larger cohort of people, says Kerckhoff.

As BrightPlan gains users, Plancorp will grow to serve the new clientele, says De Beer, both by expanding into additional offices and by purchasing additional RIAs.

“We are working to expand the Plancorp footprint,” De Beer says. “We will need other locations to continue the work of Plancorp. In the future, we may need to acquire other smaller RIAs that will fall under the Plancorp banner.”