The “middle class” is a somewhat nebulous concept both socially and financially. It can mean different things to different people, including financial advisors, who use terms such as “mass affluent,” “middle market” and “mass market” to categorize Joe and Josephine Investor.
NestWise LLC, a wholly owned subsidiary of LPL Financial Holdings Inc. that took shape last May specifically to serve the middle class, defines its target market as folks with less than $250,000 in investable assets. It aims to reach them through a combination of Web-based tools and in-office meetings with advisors with offerings that include financial planning, investor education and investment portfolios comprising mutual funds and exchange-traded funds.
“Our focus isn’t just on investment advice, but also on how people amass their investment assets,” says Esther Stearns, who left her job as president and chief operating officer at LPL Financial to become CEO of San Francisco-based NestWise. “We have a philosophy of full life financial management focused on spending, saving, protecting assets, investing and giving back and how people can align their financial decisions in all of these categories with what matters to them.”
Originally called LPL New Venture LLC, the company changed its name to NestWise in July after it acquired Veritat Advisors Inc., an RIA co-founded by Wharton School professor Kent Smetters that married advanced technology systems with financial advice. Smetters is now a consultant with NestWise, which went live in September and has since been ramping up operations with offices in Atlanta, Dallas and Denver.
NestWise acquired 10 financial advisors when it bought Veritat, and it’s actively recruiting new advisors from the ranks of recent college graduates, career changers and experienced advisors who want to serve the middle class. NestWise advisors are independent contractors who get paid from fees based on a percentage of assets under management and from financial planning, says Rudy Bethea, NestWise’s chief business development officer.
NestWise clients pay a one-time financial planning fee of $250 that covers financial goals, timing and priorities, along with recommendations for saving, investments, debt management, insurance and 401(k) or other employer-based retirement plans. They also pay a monthly $40 fee for ongoing advice that includes quarterly checkups and an annual review with an advisor. In addition, clients pay an investment management fee of 1% of assets that entails 28 model portfolios of mutual funds or ETFs based on strategies developed in-house (leveraging LPL’s research staff) and elsewhere (BlackRock and Morningstar).
Its Web site has a plethora of resources and tools covering a range of financial and life topics. For now, all of these Web-based offerings are free to people who sign up as NestWise charter members. Chief marketing officer Beth Stelluto says NestWise will add more online products and services throughout this year, and at some point will require a fee to access all of these goodies (they will remain free for NestWise’s advisory clients). NestWise’s online marketing employs a combination of advertising, social media and public relations. “To date, we’ve primarily used banner ads and search to steer people to the Web site,” Stelluto says.
NestWise calculates there are 34 million middle-class households within its targeted demographic, though it won’t divulge its current client and asset base. “A big part of this is our ability to reach an audience that hasn’t had many choices for personal financial advice with a message that it’s possible and it’s there for them,” Stearns says. “Our customers will tell us if our business plan has any validity.”
NestWise Focuses On Middle Class
February 6, 2013
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