After recently raising $100 million, tech-advisory hybrid facet wealth is capturing on more than just venture capital. This remains a matter of curiosity for the asset management industry, with Facet’s shifting client acquisition strategy and particularly the large number of clients it says it assigns to each advisor.
For the three years after its founding in 2016, Facet Wealth’s client acquisition strategy was to buy other advisors’ business books. It focused on buying out small clients’ businesses that were unprofitable for advisors, a group that included older clients on the verge of retirement.
CEO and co-founder Anders Jones eventually balked at the strategy, which he described as “moderately successful”. The consultants who sell Facets to their clients struggle to explain to those same clients why they want to take them in the first place, he said. Since 2019, they’ve had a more successful strategy: going directly to consumers with a subscription-based service that moves with financial planning, not investment management.
The change in strategy has driven a growing client base of people to human-provided financial advice. According to Jones, seventy-five percent of the business book has never worked with an advisor before.
“When you’re building a business and trying to get the highest (return on) dollars you’re spending… you want to make sure it’s going to the highest and best use.” ,” said Jones. “It’s so easy and so much more ROI to go straight to the consumer.”
Facet’s current strategy, which Jones calls a “digital marketing machine,” benefits significantly from last year’s changes to the SEC’s so-called advertising rule. According to Jones, in addition to using paid media, social media, and search optimization, Facet uses “an influencer program” of happy customers who encourage potential customers to bring their assets to the hybrid. These paid testimonials are then targeted to individuals who are new to human-provided financial advice, emphasizing factors such as paying off debt, starting a family, or buying a home.
Another factor in Facet’s marketing playbook is the expertise of Chief Operating Officer Shruti Joshi, who was hired last year. Joshi previously led efforts at Verizon to bring customers to its Fios network and founded his own marketing startup called Compell’d, Jones said. Compell’d is a peer-to-peer service that allows the user to “collect, curate and share trusted recommendations”.
One of the aspects of Facet’s marketing is its focus on client metrics that don’t make it into regulatory filings under the traditional AUM umbrella. Among the firm’s clients, more than 400 babies were born last year, Jones said. This was a measure of success, he said, as it showed that Facet’s customers were confident enough in their financial plans that they were ready to grow their family.
“We manage over a billion dollars at this point,” he said, “but only about half of our clients actually invest the money. The rest of us are helping with those real life milestones.”
According to its most recent regulatory filing, Facet manages $961 million in assets across 9,664 accounts. According to Jones, those assets belong to about 5,000 clients who receive planning and asset management, of which less than 1,000 clients are considered high-net-worth—a client segment that the firm does not target. Another approximately 5,000 customers receive a financial plan starting at $1,800 per year.
For clients who have chosen to invest their money with Facet, the firm has its own business operations and a self-built set of model portfolios. It uses Apex Fintech Solutions and Fidelity to trade Vanguard and BlackRock funds. Accounts have a minimum of $500. Clients are interested in a crypto investment vehicle that is being considered, Jones confirmed.
While Facet has big aspirations (the firm wanted to work with 24,000 customers by earlier this year), it is still subject to human limitations. Four years ago, Jones said that his firm’s technology would allow each Aspect Advisor to work with 250 to 300 clients. Today that number has been revised down to 250 clients per advisor. The average advisor works with 90 to 94 clients, he said, adding that consultants who are just starting out work with fewer clients while more experienced consultants have 220 to 250 clients.
To be sure, even 220 subscribers are beyond the “cognitive limit” on human groups, often referred to as “Dunbar’s number.” First proposed by British anthropologist Robin Dunbar in the 1990s, the number – 150 – represents the maximum size of a stable social contract.
A decade ago, industry supervisor and consultant Michael Kitts applied that statistic to advisor-client relationships, noting that advisors “cap out” the maximum number of clients. [of] Around 100-125.” The observation was anecdotal, he said, but “it may be unrealistic to expect that planners will ever be able to maintain about 75-125 genuine customer relationships.”
Observations about productivity from Kitces The consultant contrasts with Facet’s plan by increasing the number of clients per consultant instead of the top count. Three years ago, Kits wrote that “understanding the average revenue per client also provides an indication of the ‘maximum’ revenue the consultant can ever earn (for example, $3,000/client in revenue for the practice each year). The maximum is $300,000/year!)”
Incidentally, Facet said that its average customer spends $3,000 per year for Facet’s services, and the firm’s revenue last year ran north of $25 million. The firm has approximately 110 consultants, working with 10,000 clients (about 90 clients per consultant on average). Jones said it takes more than a year to bring each advisor into capacity.
According to the predictions and expectations set by Jones, the firm should be able to serve approximately 27,500 clients, without having to hire another advisor. If each consultant works with 250 clients and if those clients continue to pay an average of $3,000 per year for Facet’s services, the firm should bring in approximately $82.5 million in revenue without increasing labor costs.
Facet plans to hire just five financial advisors in 2022, as it works to maximize the potential of its advisory workforce.
The facet has not yet hit the bullseye of advisor efficiency set by Jones, but as it moves in that direction, the market is open to a bullish move, he says.
“There’s a huge market for people who need or need help” [financial advice] And not working with a financial advisor at all because they don’t believe the industry provides a solution or offering that matches their needs,” Jones said. Facet “on building a sustainable and sustainable consumer brand.” is intent on actually meeting that huge need of the market.”
