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00:00Well, really it's about the empowerment of the consumer.
00:03The internet was the first wave of giving access to consumers information about choice and options
00:11and really helping them understand what pricing power they did have relative to their bank,
00:18their financial advisor, their investments.
00:21And that opened up the mind of the consumer to really delve deeper into what their options are.
00:28And, of course, now with AI and with these incredibly powerful tools at the hands of consumers,
00:35they have much more leverage when they are dealing with things like retirement, their financial advisor,
00:42which is really the opportunity we're pursuing at Domain Money.
00:45We are trying to blow apart the 1% AUM fee that most people pay to their financial advisor,
00:51which, if you do the math over the course of a lifetime, is essentially the equivalent of giving your advisor
00:58a house.
00:58Okay.
00:59So here's what I don't get.
01:00Okay.
01:01Here's what I don't get.
01:02So many rich people are super smart, hence how they got their money.
01:07They are still paying huge management fees that end up eating into returns.
01:10Yep.
01:10Even people who don't have a ton of money are paying huge management fees.
01:13I thought the robo-advisors were going to kill this.
01:16But you know what?
01:17Quarter after quarter, we hear from the banks, wealth management business is booming.
01:20We're bringing in more and more clients.
01:22We're bringing in more and more money.
01:23Why?
01:24So a couple things.
01:25One is that when the complexity is high and the cost of being wrong is high, you want an expert.
01:30And while robo-advisors solve one part of that problem,
01:33which is just your fundamental taxable investment accounts,
01:36what about your 529 plan for your kids?
01:39What about your RSUs?
01:40What about your 401k?
01:41What about how you manage the cash flow and budgeting to fund the various goals you have for the long
01:47term?
01:48Robo-advisors don't do that.
01:50And people want a bespoke human experience.
01:53They want to be able to sit down with somebody that they trust and understands the nuances of their life
01:58and help them navigate all of those pieces.
02:00And so, you know, people continue to seek out a human advisor and will continue to seek out a human
02:06advisor.
02:07If you want a digital AI advisor today, you can get it from ChatGPT for free, essentially.
02:12But people don't want that.
02:13They want the, you know, interaction with someone who has judgment and understands, again,
02:18the nuances of their family and their lives, and they'll pay for it.
02:22Unfortunately, most people don't appreciate that that 1% fee is enormously erosive to their long-term net worth.
02:30And one of the things I'm curious about, too, a flat fee you guys do, you've got one advisor, one,
02:35you know,
02:35that works with one client, and you do that through the duration as much as you can.
02:39That's right.
02:40With Domain Money, you get a dedicated certified financial planner,
02:43which is the highest level of designation in the advisor business.
02:46They stay with you throughout your journey, and we handle everything.
02:49We manage your investments.
02:50We file your taxes.
02:51We get you an estate plan.
02:53We give you a financial plan, obviously, and we work with you and coach you along the way
02:56to help you stay on track as your life unfolds and as things change.
03:00Adam, who's your demographic?
03:02Give us an idea of who is mostly on the platform.
03:04Yeah, our average customer is 42 years old, household income of $364, net worth of $1.3 million.
03:10So they're right smack below the traditional wealth management sector,
03:14and they are frustrated because their options are call Vanguard,
03:18get sold an ETF with somebody with a headset on trying to get another account,
03:22or they go to a traditional wealth management firm, and they say,
03:26you don't really have enough investable assets.
03:28We'll take you because you're an accommodation client, a friend of the firm,
03:32but they'll end up assigning you a junior person, and the quality of advice you get
03:36and the attention you get is quite low, and nobody wants to feel like a second-class citizen
03:40wherever they go.
03:41What are the assets they want?
03:42I'm curious about it.
03:43We've spent a lot of time, I feel like, over the last couple of years talking about
03:46private credit, alternative assets.
03:48What is it that they want?
03:49It's a great question.
03:50Our client is not looking for private credit or access to alternatives.
03:53It's really about the correct tax allocation and strategy and minimizing those taxes.
03:58It's about allocation of their investments given what's in their 401k and their RSUs,
04:03and it's really about planning, ensuring that you're consistently saving towards your goals
04:08given the permutations of life as it unfolds.
04:11Are they going to stay with you throughout their financial journey?
04:15Yeah, that's our ambition.
04:16It is?
04:17So they'll grow with you, because they won't start making more money and then go and become
04:21a private client at one of the big banks.
04:24That's right.
04:24So this client will have $5 million in 20 years, and they'll inherit $84 trillion over
04:29the course of the next 20.
04:30And our ambition is to evolve our service offering and serve clients as their complexity increases.
04:36And to that point, we do have clients today who are in their late 50s and have $5 or $6
04:40million and are looking for the proper allocation.
04:44What's the, I guess, the stuff that you're missing right now?
04:48Like, what do you still need to build out to accommodate people who have even more complex
04:52financial lives?
04:53Well, we've partnered with Trust & Will to help with things like estate planning, where
04:57there are much more complex trusts in place rather than just a straightforward will.
05:01So we feel like we can serve clients pretty well today, but of course, over time, we'll
05:05enhance the platform.
05:07One of the things that we're working on is building out our scenario planning capabilities,
05:10which is what clients really want is to be able to interact with a digital platform that's
05:15modern and next-gen, but also have a human advisor.
05:18And so we're working on expanding our scenario planning tools to basically serve clients as
05:23they get more mature in their life.
05:25Got to ask you, because you guys, I love talking with folks like you, because you see stuff
05:28on the platform and what real investors are interested in, are they still interested in
05:32cryptocurrencies?
05:33Like, I'm curious, you've been involved in this world, and what's going on as we've seen
05:37certainly Bitcoin fall back dramatically from the highs?
05:40Yeah, I mean, there's always an interest in the thing that's going up the most.
05:44And when crypto is tearing, people are very interested in it.
05:47When it sort of falters or goes down, people are less enamored by that asset class.
05:52But we absolutely have lots of clients who have crypto, and we help advise them on what
05:57allocation would be an appropriate risk to take, given their timeline, their horizon,
06:03and their, again, essentially their willingness to bear risk.
06:07I mentioned that you sold Clarity money to Goldman Sachs, reportedly for around $100 million.
06:13Who buys domain money?
06:16I get that question a lot.
06:19You know, we really focus, and I felt the same with Clarity money, I'd like to focus
06:24on solving a problem.
06:25And there is 29 million people in the United States who fall within the demographic that
06:30I described earlier that really can't get good wealth management services.
06:34And we're trying to solve that problem.
06:36I think if we do that well with technology and our teams, there will be no shortage of institutions
06:42that would be interested in our business.
06:44What would your timeline be for that?
06:45I don't really have that in mind.
06:47Are you in this for the long haul?
06:49I mean, because you are a serial founder, you're a serial entrepreneur.
06:53You know, you invest in a lot of different places, too.
06:57I understand you're committed to this, but how many years are you going to be running it,
07:01do you think?
07:01That's a great question.
07:02I'll let you know when you answer that.
07:04Are you working for investment bankers or something?
07:07I don't know on the side.
07:08I know something I don't know.
07:08Well, it is a time when it seems like there are so many opportunities for exits and there's
07:14so much growth in this area.
07:16And like you were saying, I think a lot of financial institutions would find this demographic
07:19interesting, one that they don't traditionally pay attention to because it doesn't necessarily
07:23make sense for them.
07:24But you found a way for it to make sense financially.
07:26Yeah.
07:26I mean, we can serve this client segment profitably, given our technology and the way we serve
07:31this client.
07:32And part of the magic that we've uncovered is that we really define the journey clearly
07:37and map it out for the client rather than let the client drive, which is typical in the
07:42industry because it's a service-oriented business.
07:45You tend to let the client do whatever they want, which is if they want to call and talk
07:49about the machinations of the market, you talk to them.
07:51We've come up with a service delivery model that really locks down the experience.
07:55And we found that clients appreciate it because they feel like they were being led down a path
08:00that helps them end up at the goals they care about, rather than just talking about the
08:04market, which really isn't very useful.
08:06What's most important is, do you have the right allocation?
08:08Do you have the right long-term strategy?
08:09Are you sticking to that strategy?
08:11And will that strategy yield the result you want?
08:13But to your point about the institutional interest in our business, we believe that there's
08:18no shortage of the large wire houses, the large consolidators in the RIA space who
08:23would find our business model and, most importantly, our technology incredibly compelling.
08:27What we have built is a product that serves the actual needs of the emerging affluent.
08:33And the needs are connecting cash flow and budgeting with long-term goals.
08:38You go to a traditional wealth management firm, and what they focus on is investment management.
08:41They'll give you a 60-page analysis, sharp ratios, and Monte Carlo simulations of your investment
08:46portfolio, and if you're 42 and you make 360 as a household, what you really care about
08:52is how much can you spend on vacation this year, not am I getting this nth degree of
08:56yield on my Monte Carlo simulation if I were to change my allocation in my portfolio.
09:01People wake up every day, and they're not thinking about asset allocation.
09:05They're thinking about, can I go on vacation?
09:07It's kind of reality, right?
09:08Can I buy the house I want?
09:09Can we afford to send the kids to private school, which we believe they need and would benefit
09:13them?
09:13Those are the life decisions that we help people navigate through in the context of
09:18their long-term goals.
09:19If we could just kind of broaden out the lens for a moment and just think about the conversations
09:23we have so often at Bloomberg about artificial intelligence and where this is all going,
09:27and I think about things in the financial world, prediction markets.
09:29What do you find interesting right now?
09:31Well, AI is just incredible.
09:33I mean, I know I'm not alone in that proclamation, but we use AI in every part of our business,
09:39whether it's the sales side, engineering side, marketing side, the service delivery of our
09:44financial plans, and the rate at which these foundational models are learning and improving
09:49is just astounding.
09:51The other incredible thing is how quickly the costs are declining.
09:55You know, we consume a lot of tokens in the utilization of our service delivery.
10:00We ingest a lot of documents.
10:01We parse a lot of documents.
10:02We extract a lot of data.
10:03And the cost of tokens is declining so precipitously that really our costs are declining.
10:09And so I'm just incredibly excited by the disruption in business process innovation that AI presents
10:16for our business just on a pure operational level.
10:20Yeah.
10:20And so I think about that in the context of all the millions of businesses that are out
10:23there.
10:24And if you talk to any small business owner or even a large business owner, they are really
10:28focused on finding ways to use AI to improve costs and improve efficiency.
10:31If you're not, you're really not doing the right thing.
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