What do two investment advisor firms with $13.5 billion in assets between them and a start-up that has attracted more than 200 clients in its first year have in common? Women leaders who have built profitable service models to work with next generation clients now—instead of waiting until they meet minimum investable asset levels.
All three women – Cammie Doder, Aspirant; Stacey McKinnon, Morton Wealth and Kamila Elliott, Collective Wealth Partners—will share their winning formulas for working with next gen clients at Financial Advisor magazine’s 8th Annual INVEST IN WOMEN conference in Atlanta, May 1-3.
With $12 billion in assets under management, 70 wealth managers and 11 offices nationwide, LA-based Aspiriant can boast that that its average client (there are 1,600) has $7.5 million invested with the firm. But with clients’ median age approaching 80, attrition and revenues losses have been real concerns, said Cammie Doder, chief marketing officer and partner.
To counter the outflow of assets, Aspiriant created its “emerging wealth” offering, said Doder, which incentivizes advisors, especially younger practitioners, to help their network of family, friends and peers grow wealth and to establish relationships with millennials who stand to inherit $80 trillion from baby boomers over the next two decades.
“We wanted to work with next gen clients now because we know they are our perfect future clients. We also knew that telling them to ‘Just go away and call us when you hit our minimum [$1.5 million]’ just wouldn’t work. So, we launched our emerging wealth service offering three years ago,” Doder said.
At Aspiriant, next gen clients pay a 70 basis point assets-under-management fee. as well as a minimum wealth planning fee that starts at $2,400 annually. Those clients who have complex needs, such as stock options and compensation negotiation needs, will pay a higher planning fee, Doder said.
“We wanted to charge in the same manner for all clients. We didn’t want to make next gen clients think ‘oh, you’re different,’ because we anticipate they’ll become full-fledged clients in the future,” she added.
By design, Aspiriant has brought in 27 next gen clients in its first three years and plans to add another 12 or so clients this year, Doder said, noting that the firm wants to “serve, but not overserve” clients who are in growth mode.
“It is difficult to make money on next gen clients in year one, but this is an investment in long-term, profitable relationships,” Doder said.
The emerging wealth offering also provides “an incredible training opportunity for younger advisors,” who receive a bonus for bringing on an emerging wealth client. “This offering gives them something to talk about with their own network instead of telling prospects they don’t meet our minimum,” Doder said.
Kamila Elliott, the co-founder and CEO of Atlanta-based Collective Wealth Partners, created her firm with three partners a year ago almost exclusively for next gen clients. The four partners are Black and cater to Black executives, professionals and business owners in earning mode, she said.
The firm brought on 200 clients its first year and 23 clients so far in 2023 by offering holistic wealth planning for an annual subscription fee of $4,000 for single clients, $6,000 for couples and the greater of a $10,000 annual fee or a 1% AUM for business owners.
It’s a lot of heavy lifting to work with next gen clients the first year, when they need “just about everything” from first-time homebuying expertise to insurance and estate planning advice, but Elliott called the investment “an inflection point” she believes will yield lifelong clients with significant wealth.
Elliott worked previously as an advisor at another firm for three years where the service offering wasn’t as “high touch.” Now she and her partners focus on individuals who may not yet have significant assets, but have the potential to grow impressive wealth over their lifetimes with the help of a Collective advisor who helps them check all the boxes, including buying their first home and paying off student debt, she said.
“It’s so enjoyable to help these clients reach major milestones to building wealth, especially since many are my age,” Elliott said.
Stacey McKinnon, the chief marketing and chief operations officer for Calabasas, Calif.-based Morton Wealth, which manages $2.5 billion for 1,100 clients, said the firm just did a soft launch of its “Modearn by Morton” service offering for next gen clients and plans to do a hard launch May 19.
Modearn by Morton Clients pay a $6,000 annual subscription fee for a wealth plan that targets their needs one month at a time—from developing a spending strategy and insurance plan to ensuring they manage debt, maximize credit, optimize stock options and make wise real estate decisions, she added.
“We are targeting earners. It’s a funnel for those who will become Morton wealth clients in eight to 10 years. I know this can be a little bit of a struggle for advisors to get their head around, but I’d rather take on a 32-year old client who makes great income and very good decisions with their money, then wait until they’re 55 and have compete to get them,” McKinnon said.
“We’ll make a little less on the frontend, but think of the years of reoccurring revenue,” she added, but cautioned “this is not a low balance offering. We are targeting clients who have complicated lives, side hustles they’re trying to decide whether to turn into an S corp. or limited liability corp. They need a corporate retirement plan, and to make wise decisions about stock options and investment real estate. These aren’t college students who just graduated.”
This year Morton plans to take on 20 clients. McKinnon estimates the firm will earn a 15% profit margin on its first crop of next gen clients, due to the investment in marketing, technology and credit card payment options in year one. “But in year two, when we expect to have 40 clients, the profit margin goes to about 40%,” said McKinnon, who predicted Modearn by Morton will become a significant chunk of the firm’s business over the next three years.