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.”

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