#87 Rory Brachner – Transcript

Louis van der Merwe
Welcome to another episode of ensemble advice South Africa. Today I have with me Rory Brachner. Rory, it’s wonderful to have you here.

Rory Brachner
Thanks. Thanks, Louie, you pronounce it perfectly. By the way.

Louis van der Merwe
Thank you, I had to practice that and that Afrikaans genes are showing is that German

Rory Brachner
is actually a German origin, my father’s Hungarian, but randomly, we have a German surname. And so yeah, there’s a German background there somewhere in the family.

Louis van der Merwe
Wonderful. And, you know, that might come through when we start talking about the precision in your technology offering. So for those listeners that are unfamiliar with Rory, he is the founder and MD at DoshGuide. Rory, this a very unique offering. And I want us to unpack a little bit of what led to you creating dash guide like we were you saw a gap in the market, I know you often talk about product market fit. So I’m sure those words will pop up, but share with us how DoshGuide came about.

Rory Brachner
Sure, I mean, it’s almost don’t know where to start. I mean, you know, there’s been, you know, loads of things that I’ve been involved with that have led up to this point where I’m now launched to have launched dash guide. I think, you know, my first startup when I was in my 20s is actually some has contributed to it, which is I started a tutoring company when I was in college when I was in university. And it actually grew to have 250 tutors and five full time staff. And I think one of the things that that I took away from that was the incredible power of educating people, or taking somebody from a point of not really understanding something and not really feeling confident about something to a point where they get it. And time and time again, like I was tutoring high school kids in maths. And I mean, these were kids that were, you know, really struggling and failing maths, their parents were freaked out. And there was not one kid that I didn’t sit down and tutor and spend time and coach them through the parts that they were struggling where they would have these miraculous turnarounds and all it took was just this, somebody to coach them through it, somebody who understood and wasn’t a subject expert, to sort of take them through that. And so that was something that really left an impression on me. And I just absolutely loved that. I’d say that definitely has played.

Louis van der Merwe
Can I interrupt you there with like, Where was this? We were you in Cape Town? In South Africa? Yeah. Okay. Yeah.

Rory Brachner
Yeah. So this was I was based in Joburg. The company was called Higher Education. Terrible little like play on words, which I’ve learned not to do for SEO reasons, if not others, since then. But yeah, this was something that I started when I was in university started hiring like buddies and people around me. And by the, by the end, after about sort of five years, I had, you know, 250 people. So that worked. You know, that was a that was a really inspiring part of this journey. And it was some reflecting on it. And think about what we have led to kind of made me think about that. And then I think that the next part of the journey about what that led to it was, after I finished with that company, I went and worked at Google in London. And I ended up working at Google for about nine years, started in London, moved to Singapore for about four years, and then was transferred to the mothership, which is San Francisco for about two years. And that, you know, my I’d had various roles, but my main job was like a business development guy at Google. So we had these technology products, and I would go and basically be building these businesses in various parts of the world, either sort of Europe or Asia or the US. And it was, yeah, it was, you know, what I learned there, it’s just the power of scaling the power of technology, an interest and keen interest in these kind of marketplace businesses, you know, my clients were like, Airbnb, or Uber, or booking.com. And you can kind of see where some of these connections, and some of the sort of inspiration coming from that background coming from that technology background, led me towards this platform and this idea. And then I guess, the, you know, the final part of the story is the actual catalyst of me getting into launching this company was in 2021, I was kind of winding down my career at Google and looking for something else to do. And I’d take I basically quit and I was I’d taken about a year off and I was trying to figure out, like, what would be the next thing to do? And I remember, you know, definitely the entrepreneur sort of startup bug was biting because I remember that, you know, even though it was challenging. I enjoyed that in my 20s, my first startup, and I was thinking it needs to be something scalable, something sort of technology orientated, something consumer facing Seeing because I was sick of working with, like b2b type of businesses. And I had this awful experience with with a financial advisor, where I got sold a product that was, you know, had like 4% fees, I’d put five years of monthly premiums into this product, and long story and many tears in many conversations later, I decided to surrender out of that product, I burned 25% of the money. And it was just a huge, very difficult, very impactful learning. For me, just having wasted even the opportunity cost, you know, five years later being 25% down instead of like maybe 40 or 50 to 30% up, I was just, you know, just super angry and just disappointed myself for not asking the right questions. And I ended up that was, I’d say, the biggest catalyst, there were other factors involved. But that was the biggest catalyst for me thinking, Okay, well, what is wrong with this situation? How is there a person that sold me that product? Why did that product even exist? What is the system that’s created a place where someone like me who, you know, is, you know, I, I think I’m like, relatively well informed, you know, but I just didn’t ask the right questions. And, and got basically suckered into buying a product that was just not fit for purpose, and just an awful product that enrich the provider versus really providing for my needs. And that that was sort of 2021 and, and launched and got our first set of customers last year. And and ongoing this year.

Louis van der Merwe
I want to pause a little bit about that experience that you’ve had, because this is a story that a lot of financial planners face, they probably meet a new client, and they asked him sometimes, you know, what is the experience been? With working with someone in our professional industry in the past? And time and time again, it ends up in a really bad experience, like, do you think that just makes the conversation that much easier for the new financial planner? Or our potential clients already on guard to say, I don’t want to be taken for a ride again?

Rory Brachner
Yeah, it’s a good question. I mean, definitely most of our clients have have that background, you know, a very typical call that I will have with a client with a new client is, I’ve spoken to five advisors this year, it’s like, every single one of them, I can just see they’re trying to sell me some product, or it just doesn’t make sense, or the costs are just prohibitive. And it just doesn’t feel right, especially the younger clients, that’s which is our target market, you know, our target market is sort of 20s 30s, maybe 40s, like, wealth builders, and in inverted commas, you know, they haven’t necessarily got a lot of liquid assets. And so that profile of client is also like young and relatively savvy, and can kind of just, you know, it doesn’t take a genius to figure out that actually, this person, the incentives aren’t quite aligned, you know. So I guess, you know, from, from our perspective, actually, a lot of our clients have had poor experiences, I think probably an in some way it helps, you know, for for us to go well, this is literally how it’s different. And what we talk about is the incentives are the things that are causing that behavior to not be, you know, going in the right place. It’s misaligned incentives, basically, which are incentivizing advisors to push products, or incentivizing advisors to collect assets. And neither of those are really suitable for sort of younger clients, you know, where they don’t necessarily have assets, but they still are really, like, keen and desperate sometimes for some great advice and could really benefit from it. So and they can afford, you know, a monthly premium, they pay for their gym, they pay for their medical aid. So, you know, they pay for their DSTV subscription. So it’s the same, it’s trying to get them to think about it that way really well, trying to get the market to think about that way, is where we get our clients. So yeah, I guess it kind of helps us. But I think also the, the other side of that of your question is, you know, maybe it will just put a lot of people off. And I think that’s sort of unfortunate, because, you know, going back to my experience with my first startup, like, it is so powerful to have somebody hand holding you and coaching you on something that, you know, you can’t expect it to be an expert in, you know, not everybody’s going to be an expert or even has any interest in the financial industry, landscape or financial product. So it’s super valuable to have somebody to handhold you through that. You know, just like the same as you wouldn’t operate on yourself. If you had some sort of medical condition, or you wouldn’t prescribe your own drugs, that would be probably not the smartest thing, you know? Why, what, but we see a lot of people kind of doing that, themselves, buying random products or investing in shares or things like that, without much knowledge of the market and without much knowledge of you know, how to allocate assets and do all the stuff that a really a proper, well qualified financial advisor or planner will run through. So I guess it’s kind of it’s it sucks that, you know, the industry has gotten to a stage where it’s kind of put off so many people that they, especially younger people that wouldn’t even consider getting a financial advisor, because actually, the right kind of financial advisor can just have such a huge impact. And because of compounding returns, like doing it and getting the things right in your 20s is just such a powerful, you know, thing to start you on the right course and your financial life.

Louis van der Merwe
Rory, this, this is something that I think it’s so topical and so important for us to figure out, how do we align incentives with our clients? Like, is it something that we can do? So tell me a little bit more. So now you’ve had this unfortunate experience, which I guess is part of life’s lessons of what to look for when you’ve paid some school fees? And it sounds like it wasn’t the right person, which led to the wrong product? Link to you. Right. Was that? Was that a correct assumption?

Rory Brachner
Yeah, you know, like, this was, this was a guy that I was based in Singapore at the time. And this was like, a guy that was referred to me by a friend. And he was my friend was like, really impressed with him. And my friend, by the way, worked in technology, super smart guy. And he said, Yeah, this guy’s great, you should go and you need to, like, figure out what to do with your money that you’re just piling up in your, in your bank accounts. That’s dumb, like, you should go do something with that. And I’m like, Yeah, this is, you know, I should go do something with it. And I sat down with this guy, and he was just like, friendly Scottish guy. And he had all sorts of stories about, you know, how he was, you know, independently wealthy, and he was just doing this just, you know, out of the goodness of his heart, because just wanted other people to like, benefits. And, and, and, you know, thinking back, it’s just, it was all just BS, basically, you know, like, I don’t know, if he understood that it was BS, I don’t know if it was malicious. Or if it was his just like, well intentioned sales pitch to kind of just get people to be comfortable with his level of expertise and his intentions. I honestly don’t know, I can’t I’m not I can’t get in his head. But he’s either malicious, he was either malicious, or he was just just not very smart, and just was selling products and pushing products that were just awful. And I think, you know, yeah, clearly, once I started asking the right questions, clearly wasn’t the right person. You know, clearly, this was not somebody that was actually that actually understood what it was that he was selling, or understood it and was like, Oh, well, I’m just gonna make some money anyways, and just get some commission out of this. But really, at the end of the day, looking back, he got a big commission payment upfront when he got me to sign up to that monthly premium. And then at some point, like in the three years, in the five year period, I think three years in he he convinced me over a beer to top it up to increase the monthly premium. And that part, I looked back at quite sour Lee, because because, you know, he then took another little commission, check out of that, you know, and none of that was to my benefit, I had to surrender all that and burn 25% of that money. So yeah, clearly, clearly, in hindsight, this was not the right person.

Louis van der Merwe
Do you think your your acceptance of what happens? Or you’re at least the emotional response around it? If you, let’s say you paid an hourly fee for this and you ended up with the same product? Do you think your emotional responses would have been similar? Or do you think that would have been different purely based because the the payment actually then came from you, even though the outcome was maybe the same?

Rory Brachner
Yeah. So that I think that’s a super interesting question, because that gets to the heart of what I’m trying to figure out. And, and, and, I guess, explore with this Das guides mission that I’m on, which is, you know, the the fee model, or the internet’s quality incentives, how much impact does that have on the behavior of an industry? And it’s an it’s a question that, you know, I don’t know exactly the answer. But I’m very curious about that question. Because my, my sort of thesis or my sort of hunch is that, that, you know, it has a big impact incentives drive human behavior. You know, I think there’s that there’s a Charlie Munger quote that says, show me the incentives and I I’ll show you the outcome, you know. And he’s always talked about just how he’s been throughout his career. Charlie Munger, by the way, is vice president of Berkshire Hathaway. So you know, one of the most, I think, the seventh largest company in the world, and super successful, and he’s the right hand man of Warren Buffett. And he, you know, he always talks obsessively about incentives and how everything he’s looked at, and all the systems and setting up the companies that operate in the right way, is all about incentives. And I think like, people often believe that they are above the incentives of the system that they’re in, you know, that, Oh, I, you know, I would I know that there’s like, you know, I often talk to advisors, and they go, I know that, in theory, there is a sort of conflict of interest there. Because, you know, if I’ve got a bunch of assets, and I’m charging AUM, I’m going to be less inclined or biased towards you removing those assets from my from the portfolio, to I’m not going to necessarily, and I’m biased against that, you know, and I think, I think people trust their ability to rise above that too much, you know, like, just in general, and not just with advisors, it’s with everybody, you know, because I think individual advisors would always go, Yes, I, you know, I would I will not, I always do the right thing for my clients, but in aggregate, like, look where the industry is and look like, what the levels of trust on the financial advisor, like financial advisors is like a tainted term, like, it sits on this nice on the same sort of trust level as like a used car salesman, like there’s some studies that actually show that, you know, and that’s, that’s so unfortunate. That’s an awful place for a profession to be, you know, I guess the level of trust, you can debate, but I think that, you know, there’s a there’s an issue there. Yeah, there’s a big trust issue. And my, you know, my thesis is that a big part of that is, is that in aggregate, like, you know, incentives drive behavior, and if your incentives if an industry is incentives are, you know, to push to get to pay a commission for selling product, that is what the industry will do, regardless of what’s good for the clients. And we’ve seen this time and time again, I think the commission question is answered, I think, you know, a lot of the like, regulatory stuff in other countries and in South Africa is moving away from that. So that is answered, there’s no really debate about that. But the next step is, is is on aum. I think AUM actually works super well. For wealthy clients, I think it aligns incentives, if you’ve got a bunch of liquid assets, it a lot actually aligns and centers and you’re the advisors kind of incentivized to grow that. So I think there is some alignment, and I think ABM is going to stick around for decades. I don’t think that industry is under any risk. I think it’s a great model for certain profiles of clients. But I think like younger clients are just unmasked, just rejecting that model. You know, these clients are kind of used to, you know, subscriptions and platforms and ratings and reviews, like they don’t book a hotel and SFC, you know, 100 reviews that says, this, this kind of hotel. And so, you know, it just none of it really falls into the category of the way that this sort of, I guess, traditional approach to financial advice works. And so I think, you know, that profile of clients is asking questions and kind of moving in a different direction.

Louis van der Merwe
Before we get to the matching of potential clients, to advisors, and how that makes sense. I want to talk about setting ourselves up to almost with standard temptation of incentive of what are the rules that you’re seeing advisors or practices follow, that set them up to be potentially more aligned, or at least a little bit more immune against this temptation? Because, you know, as you rightly say, these when you look at the incentives, you can almost predict and you can guess what will follow, yet, a lot of the times, I speak to a lot of young financial planners, you know, even within our business, we’ve had this discussion, the employer is also incentivized to make sure that you don’t ask too uncomfortable questions, and I don’t want to say brainwash, that’s maybe too far. But, you know, get you so passionate around what you’re delivering that in your financial advisors defense, maybe he wasn’t aware of the impact. So yeah, tell me what are those rules that you think can set us up to be a little bit more immune against incentives or or how do we prohibit this?

Rory Brachner
Yeah, I think it’s a great point, like, you know, just the first part of that question just around that, like sometimes the advisors And the company’s kind of, you know, drinking the Kool Aid is the term that Yeah. And like, there was the there was a great documentary recently about what’s the company that does oxy cotton. And how the, they had these sales meetings where they basically tell the salespeople, like this is you know, the oxy cotton Contin is, is this miraculous drug that’s going to change the pain management and you’re going to help people, you know, you’re going to help millions of people, and they want 100% would go to the doctors with that belief very much in their heads. Obviously, in hindsight, we’ve not all learned that that was a that was just an off day basically started the sort of OxyContin sort of opiate crisis in America, and we’re literally responsible for the deaths of millions of people. But I think that speaks to the point of like, though, a lot of those sales reps in that show, they weren’t necessarily aware, I think they started becoming aware later on in the episodes, but they weren’t necessarily were at the beginning. They were like, honestly, believing what the sales managers and what the, like the product managers were telling them, you know, and I think it’s the same for for the sort of the financial side of things, or the financial advice industry.

Louis van der Merwe
So yeah, those cigarettes salesman, come to mind the Marlboro Man. Yes, like, there might be some benefit. But there’s also dire consequences of, you know, the advice or the sales that you’ve made,

Rory Brachner
and if you’ve over done it, and you’ve kind of taken something and pushed it into, you know, I mean, opiates are probably really useful for certain people to help with medication, but not for, like everybody, you know, and because of greed, and because of, you know, that family, the Sackler family started, you know, just going crazy and pushing it to everybody. And it was just super irresponsible. And I think that’s a great metaphor for, you know, financial products, there’s certain things that are not meant for everybody. And there’s a certain level of responsibility to, to make to set up the incentives for your salespeople, I guess, or your frontline sort of customer facing people. That removes as much kind of, you know, skewed incentives, or tries to discourage bad behavior. And I’m not saying I don’t think that you can ever have a perfect system, right? I don’t think that you might always get a bad act bad actors. But I think that the incentive setup in the right way, can set it up that most people operate in the right way, rather than the the, the opposite, which is most people operating against the interests of clients, which is not what you want. So I think like, you know, to your original Podio question is, like, you know, what do we think about like, how do we put, you know, the right incentives in place. I mean, if you look at if you go to, you know, our website, and you and you look at what we’re up to, we’re very much like, fee based approach, you know, so there’s a complete disconnection from products. There’s a complete disconnection from the sale, or the push of product or the collecting of assets, like we operate, we’ve got three tiers a low, low complexity to mid complexity and high complexity. And depending on the complexity of the clients, you know, they’re starting out, they’re low complexity, if the got a family, maybe they’re mid complexity, if they’re bit more high net worth their high complexity, that’s very rough description of what it is. But you, you slot into one of those three tiers, and you pay a monthly subscription, just like you would pay or DSTV, or your personal trainer, and you get access to an advisor, a CFP, qualified advisor, as much, or as little as you need, you know, like, obviously, at the beginning, obviously, it might be quite a lot too many meetings a month, and then it will sort of get into more of a maintenance thing. But then if something in life happens, you know, a year like a divorce or starting a family or moving overseas, then that will ramp up again. And you might use them more frequently, but they’re sort of on call and they’re and there’s an ongoing annual engagement with them after that first initial kind of building out a financial plan and, and all the good stuff that I think everybody listening to your, your podcast would know about, you know, like holistic, great sort of financial advice. But I think the difference with, you know, fee based and we’re like a subcategory of fee base, which is specifically a subscription based approach is that you are removing any of that conflict of interest, and you are removing any of the sort of the push towards behaving not in the interest of your clients or the pool, let’s say towards behaving not in the interest of your client. And so that that actually, I think is super important. And it’s something that we’re obviously, you know, aiming our goal is to accelerate the adoption of fee based in South Africa. And but we don’t think that not all fees A bet fee is are born equal, you know, like, you get lots of different categories or under the category of fee based, you get like an hourly, you know, where you just charge an hourly ad hoc rate, you would get like project based. And then you get subscription base, those, I’d say, are roughly the three categories. And, you know, for whatever reason, you know, in the category of fee based financial advisors, the, like, hourly is never really taken off. At scale, right, you do have people who charge hourly, but it’s never really been a big thing. And the same thing with like, project base where you charged, you know, 10,000, or 20,000, or 5000, for a financial plan once often, then it’s done. That is not really I don’t think necessarily scaled, it’s I don’t think it’s a huge part of the industry. But I still think that fee base is important. And so the experiment here is like, let’s try out a subscription based approach and see if that’s something that will get us closer to product market fit and get us closer to meeting that need of, you know, that particular profile of client who is really looking for, you know, unbiased, unconflicted advice. So that’s, that’s sort of the approach with with dash dash guide.

Louis van der Merwe
I like how you’ve simplified and just given someone a different option, right? Because when you were looking for financial planner, yes, you might, they might have been around, but you know, the ones that you had in mind was okay, I engage, I see what’s to offer. And then I need to judge, is this a good fit or not? I want to flip it around a bit to say, how do we protect the advisors and the financial planners from being abused by clients that might, you know, opt in for subscription and just try and milk as much as possible? Is that happening? Or is it just my irrational fear of giving away too much, because, you know, oftentimes, when we speak to someone that may be working for commission, he has to, or she has to speak to five or six clients and potentially, you know, one out of them take a product. So I understand the mathematics behind that. Yet, if you have a subscription model where I think essentially where the communication is unlimited, how difficult is it to set those boundaries to say, well, actually, this is not we need to go and revisit that. Is this a conversation that’s come up before?

Rory Brachner
Sure. Yeah. And it’s a good good question, that definitely would be a concern about from advisors that are looking to diversify into this into this category. Right. So I think like the magic number, in terms of like painting a picture of what it looks like, like a fee, a subscription based advisor, business model, what does that look like? Because I think that would answer your question. And the magic number seems to be about 100. Like 100 clients, right? That’s not that’s an ideal amount. I mean, some could do a little bit more, some could do less if you have really amazing platforms and systems. And there’s some great examples out of the US, by the way, people should check out facet wealth. They’re a great example of this model really, like just absolutely exploding that businesses, I think they got $100 million of funding last year, just absolutely growing hugely double their client base in 2022. But so that’s a good, you know, the subscription based approach is not like I’m didn’t invent it like I it’s, it’s it’s not like I’ve come up with this approach. It’s the thesis and the US there are proof points and comparables and other markets where actually, people are really responding very well and adopting at that particular, especially that profile of client, right. And so where was I going on this remind me, Louis?

Louis van der Merwe
Hey, we were talking about how do we create the framework, at least for people not to abuse the system? So now you’re paying a subscription? I’m thinking, my Netflix subscription, I can watch as much as possible. And yes, maybe it has a bit of a drain on the servers and how much they need to pay for storage. But other than that, I’m not taking up a professional time. And so I’m trying to figure out how do we create those boundaries, I guess, between advisors and clients?

Rory Brachner
Exactly. And so yeah, so I guess, you know, painting the picture of what the model looks like, is getting towards answering that question, which is you have 100 clients, let’s say for argument’s sake might be more might be less. But in that, in that that group of clients, there’s always going to be like, a portion of clients who are starting out, right, have the 100 100 clients say there’ll be 20 or 30. I’m just making up numbers. Yeah. That will be at that early stage, which is like, you know, the process is top loaded or front loaded, you know, you’re going to do more work and it’s been much more touch points early on, with the engagement of the with the client rather than like six months or a year in where it becomes more of a maintenance thing. And then there’ll be a portion of clients, like the sort of the midsection of clients, I guess, the torso, that’s let’s call it who are more shifted towards a maintenance, you know, level, let’s say six months a year in, and then there’ll be a portion that are just very high maintenance. Yeah, they’ve gotten so comfortable and you’ve gotten to them to a stage that they are just so on top of it. And it’s just like, maybe you only see them twice a year, you know, but when things do happen, maybe you need to see them a bit more. So again, I think that the model works, because you know, you have that distribution of clients, a percentage that will be top loaded, or front loaded, a percentage that we more mid, sort of torso, just regular amount of maintenance and touch points, and then a percentage that will be very low touch, and actually really easy. And so it’s sort of spreads sort of spreads itself out. And, you know, the other thing that we see with our clients is that they don’t want to speak to us, like, every month, that’s not what they’re not interested, of course, when they’re first engaging, and you’re trying to figure them out and get the foundation in place, there’s going to be it’s, it behooves the, the the adviser to kind of get the right information and get good foundational mount of information. And you know, that that’s going to take some time. But certainly like, I don’t think any of the clients, actually, very few of them want to be constantly every week, every month talking to the advisor. In fact, they are very happy to shift into, you know, maybe touching every touching base every month or every two months. And actually, some of them will move to, you know, only speaking to the advisor twice a year.

Louis van der Merwe
It strikes me that some of this is not too dissimilar of the assets under management model, where you still have this cross subsidization to say, some of the clients that are using more, or paying or their clients that use less or paying for the ones that use more than hopefully, over time, it balances out, I do want to challenge the the concern that I have around selling time, like how do you then position as an advisor? The value offering, you know, you’re paying the subscription, but if it’s not linked to time, what, you know, what else is there?

Rory Brachner
Yeah, exactly. I think, you know, and that’s, that’s definitely like trying to figure out, you know, how to continuously add value is, is a key thing. I’d say like, the one thing just to mention, even before going into that is that, you know, the subscription also is flexible, like, it’s not like somebody has is signed up for life, you know, if they’re not, if they don’t feel they’re getting value, they’ve stopped paying, you know, so actually there is a, there is a bit of a, I guess one of the challenges of operating on a subscription basis is you have to figure out a way where you are continuously adding value, and the client feels like, you know, they are continuously getting value, and they don’t feel bad about that, you know, 1000 around a month, or whatever they spend on the subscription. And so that is something that, you know, each advisor on our platform has to sort of figure out and people have different approaches. But there are some sort of themes, you know, and I think that one of the themes is like, you know, like, I like to think about the financial needs pyramid, if you Google financial needs pyramid, like, you’ve got these, the hierarchy of needs, and there’s loads of different versions, but the the one that sort of the one that sort of sticks out of my head is that at the bottom of that pyramid of needs for for clients, in terms of their financial needs, is like what you’d call maybe like the fundamentals, you know, like wealth protection is like the description there. And it’s stuff that is pretty fundamental, like setting a budget and like being accountable to that budget, you know, building an emergency fund, managing your debt, not getting too crazy on the credit cards, and not getting too deep into debt where it gets unmanageable. You know, even just figuring out your relationship with money, like, why is it that I behave in certain ways with money, a lot of that sort of foundational, basic sort of stuff is sort of at the bottom of that, that pyramid. And it’s also you could also define that as sort of coaching because there’s an accountability portion to it. It’s like, you need to be checking in because you’re trying to change people’s behavior. It’s like the human side of financial planning, right? And then the next app, that’s the one that’s the kind of the base, and I think if you don’t have that, right, honestly, you’re you’re kind of in trouble, like if you if you as a client, haven’t got some of that basic stuff, right, you’re a little bit in trouble. And the second part is like the sort of planning right, where it’s like now you’re looking at products, you’re looking at, like risk mitigation, and those related products, you’re looking at investment products, retirement products, and then you might be purchasing and deciding what to what to buy. And then at the top of the of the the pyramid, you’ve got the more advanced stuff like the optimizing, like tax stuff, and estate planning, and maybe some trusts, and it gets a bit more complicated, but it’s not, you know, it’s not as necessary as the stuff as the foundational stuff at the bottom. And I think like to answer your question, like, a good advisor, because they are touching all those points of the pyramid, there’s like a continuous level of value that they can provide. Because a lot of you like, advisors that are not incentivized in the right way, let’s say, we’ll focus on the middle part of the pyramid without going into the basics, you know, because that’s how they get paid. That’s how they, you know, pay to feed their family and, you know, pay their mortgage and stuff, they can’t, they have to, like, keep doing the middle part, which is selling financial products and moving financial products and collecting assets. And unfortunately, even though they may want to, they don’t get to spend time on the more foundational stuff, which is like the financial coaching stuff, and making sure you’re building up an emergency fund, and in three months time checking in, like, how are we doing on that emergency fund? Okay, why is it not growing at the rate that it should be? Let’s look at that, let’s reassess that. So there’s a great, like accountability around it. And it’s not just, you know, always say, like, you know, building a financial plan is great. But like, basically, what people often do is they take the financial plan, they go cool, and then they don’t look at it for about two years. But you know, when you have that continuous engagement, you’re looking at, you’re referring back to that plan, and you’re and you’re setting up goals, and there’s accountability around it, and a coaching element of it, that moves people towards not just having a great plan, but executing against that plan. And honestly, I think that’s where the magic happens. And that’s where the value can be created, where with somebody will go, oh, man, I don’t mind spending that money that money every month, because I can see like that I don’t, I just have a great plan, but execute again, against that plan. And I’ve got a meeting with Louis in like six months, and he’s gonna like, give me hell, if not really, when he’s gonna, I’m not gonna feel great if we are not, if I’m not hitting some of the targets that we’ve set, I have not changed some of the behavior, and I’m not building up my emergency fund. So I think that’s a good way to think about how to continuously add value.

Louis van der Merwe
I love that. And it’s like, aligning the incentives, but also having someone that’s got your back, I remember a few years ago, there was a well, they still operating US based business called LearnVest. And they had this analogy of kind of a personal trainer, you’d pay a monthly subscription. They had boot camps that you can join in on like fitness classes for your finance group sessions. And they really had to get to scale. And unfortunately, they were then bought over, I think, by one of the product providers. And so we’ve seen that over and over again, businesses that have figured out how to scale and VI’s ended up being acquired by product houses to just link it back to a product, ultimately, because oftentimes, these businesses don’t generate enough revenue to cover the expenses. Like, do you think that with smaller practices, this is a sustainable model? Or is it something where, hey, we’re trying to figure out what’s a balance to actually serve these clients? Because I’m, I’m wondering, for most financial planners, is it profitable to service clients in this phase? Or, you know, throwing ideas around? Or will this be serviced by robo advisors or the banks in digital channels? I’d love to hear your take on I know, that was a very vague question. But no, she was me. What do you thinking?

Rory Brachner
Yeah, exactly. I mean, yeah, I think that there is a you know, a value to be had from from from approaching it this way. Maybe if you could, just because I feel that there’s something good nick, if you could just rephrase it, just so I can, because there’s there’s definitely a good answer. And now I just want to make sure I’m getting it.

Louis van der Merwe
Yeah, if if we can talk about the sustainability of this moron, right. We’ve seen businesses being acquired by product houses, because I feel like a lot of them are not sustainable. And they fix it by saying, Oh, now we have a product linked to it. Right, which goes back to your initial problem around incentives. So is there something that we can fix? Is this sustainable enough? Or will time

Rory Brachner
tower? Right, and I guess the question is also around like, does it even make sense for advisors to be trying to service this segment of the market is where I was kind of going also. So I guess, you know, I mean, we believe you, we believe, yes, we believe that there is an ability to service and actually I think that, you know, again, if the comparables that company in the US called facet wealth, that, you know, people believe in that model so much that they been given $165 million to grow, right. And they’ve, they’ve doubled their client base of 12,000 clients in the last year. So clearly, you know, and it’s the same, it’s the model, it’s basically low cost. In the US terms, US dollar terms, low cost, subscription based access to a CFP, that’s basically the business model. But they also have a platform, you know, which helps to helps people to sort of engage with with with clients will help the advisors to scale up. So I think the platform part is important and helps an advisor to instead of just doing 100, because it’s more efficient, they can do 150 or 200 clients, right. And so there is, you know, proof points of this model, definitely working. But it is, it’s a very different approach. And I think if you’re, if you’re very much in an AUM mindset, it’s quite difficult to get your head around, well, how is this going to be sustainable. But I would say like, you know, even just do the simple calculations, you know, let’s say you can even like 500 Rand a month, let’s say, if you got 100 clients, or like 150 clients, that 75,000 Rand a month, so if you, if you can get a planner, a relatively junior planner, to do a great job with 100 150 clients, you can, you can basically get 75,000 Around a month out of that. And if you have 10 of those, you know, do the maths, the challenge, obviously will be be able to scale that out and to have pods of advisors, and then you your clients would graduate from 500, to 700, to 900, to 1000. And they would move up to more senior level advisors who are maybe charging one and a half, 1000 a month. And you can do the math on that also, you know, one and a half 1000 A month 100 clients, 150 clients? Yeah, it can be it can be actually super profitable, and very sustainable. And, you know, the great thing from the advisors that work on our platform is that, because they’ve been freed up from having to push products and collect assets, they’re doing the work that whole permits, you know, they’re doing the work that they they were set out to do the reason why they went into this profession in the first place to help their clients, and they don’t feel this need anymore to kind of push products. And so they actually really, really love it. And it is, you know, it is sustainable.

Louis van der Merwe
I love how passionate you are about this, and I agree with you, there definitely is a space, it’s interesting to see a change and evolve. And I’m wondering the the advisors that are on your panel and listed, do they then refer out to a product specialist to implement the products? Or do they implement themselves? And if they do, you know, from an insurance perspective, what happens to the commission? Is it then okay for them to then earn that commission?

Rory Brachner
Yeah, that’s a great question. And I actually meant to answer that earlier on, like, because I wanted to make sure that people understood this. So 100%, like, our advisors can advise on products, they can, you know, and that’s, you know, that’s if a product is needed, sometimes a client has a great product, and there’s no need to change it, you know, and so, and with them, they have no compulsion to change the product, if they think it’s a good fit, and it’s low, the costs are low, and it’s a good reputable provider, they’re gonna go, they’re gonna say, great, you know, use that product, no problem, which is, which is quite unique, I’m sure you’d understand in the financial advisor space. But if let’s you know, and there’s a big assumption, I think it’s a, it’s a problem in the industry, that there’s always an assumption that we need a product, sometimes, especially younger client, they don’t need a product, they’ve got a work pension scheme. They don’t need life insurance at this stage, they’ve got no dependents, it’s fine. Just keep putting into maybe increase the contributions to a pension scheme. Let’s get a bit of an emergency fund set up, let’s you said you want to invest in some shares, we can dabble in that, let’s figure out what is an appropriate level to do that we can help you to do that. But but you know, it’s not necessarily needing to sell like a whole new product, right? And I think back to your question, if a product is needed, then 100% Our advisors can do help with products and they can help with implementation if that’s what you want. And they are only they only point people towards zero commission products. So any of the products that they would select, it would it has to be either a zero commission products like either a DIY product that the client would sign up themselves, and they just point them in that direction. Or if it is a platform that the advisor uses it has to have an option where you zero the commission out there can be no commission that’s that’s pretty much the most important rule on our platform. And then also on that’s just not on the investment on the risk side of things. People don’t seem to know this but like, you know, especially consumers, but you a load of the platform’s you can zero out the Commission on the risk products life insurance disability The cover. And often when you zero out the commission, you get about it. So far, we’ve seen about a 20% saving for the client. So that’s another thing that we tell our clients like, yes, this costs you 800 Rand a month or 1000 a month, but your life insurance for your family, we’re going to save you 2030, we’ve seen up to sort of 40 50% saving. And so you’re already starting to make some of that money back just because we’re helping you to make the right decisions.

Louis van der Merwe
Rory, I want to add that what we see in our business, especially with all the clients is because often the insurance was never reduced, they end up in a position where they’re serv insured. So we actually cancel more insurance than what we sell. And, you know, it’s really a function of the clients in the practice. And how we can try to save points

Rory Brachner
towards like, it’s such a great example center, because I think it’s just such a great example of the wrong incentives. Like, like, you know, the people who sold that insurance product, they should be checking in and reducing that insurance product. But why would they, you know, like they’ve already like sold, they’ve gone into commission, and they’ve moved on, you know, and this is, I think, a perfect example where, where it’s, it’s not necessarily like outwardly malicious, but it’s just not incentivized to behave in the right way. And that’s to the detriment of clients.

Louis van der Merwe
Yeah. Just like you’re not incentivized to cancel cellphone insurance contracts. If you’re not, you might not even have have that cell phone. We, we had a client that were paying three cellphone contracts, and she had one cell phone. So now okay, well, what’s these other two notes, you can’t remember what they’re like, I don’t know why the same thing happens. And I think if you, if you follow the trail back, for me, a big part of this is remunerating advisors, at least, the bulk of their income from a salary perspective, then you’re trying to do that, what you’ve said is, hey, let’s try and mix that to the actual end advisor, you know, being paid by the client. Or you could do it through the firm, where they then facilitate it and figuring out that balance. As we wrap up this conversation for advisors that are interested to learn a little bit more or clients that want to find out, where should they head?

Rory Brachner
Yeah, sure, they can just, you know, email me, Rory at dash guide.co. That’s aro ry at dash guide, do sh, do ID e.co. Or just go to our website, das guide.co. And get in touch with me and have a chat. You know, like I love chatting to financial advisors and hearing, especially the ones that are sort of interested in diversifying outside of you know, their current business model and looking at diversifying into a fee based approach, specifically, a subscription fee based approach is what we support. And so the way to think about us is like if you are an advisor, and by the way, if you have an existing a in business, all power to you, I actually have if contrary to maybe some of the sentiments on this talk now I have nothing against AUM and AUM advisors, I think it’s a great model. I think it works great for certain types of clients. And so but if you are interested in diversifying, and not basically putting all your eggs in the Aum basket and having some eggs, at least in the sort of subscription based or fee based basket, then our platform is there to support you connect you with a network of like minded advisors who are also trying to make that transition. It’s not easy. It’s a difficult transition to make. It requires, you know, lots of business retooling process, retooling the way you engage with clients from, you know, sales calls to ongoing engagement, everything shifts, right. And it’s not an easy thing. But that’s what we’re here to do. We’re here to support those advisors who want to look at making that transition and sort of capture, you know, a younger market, I guess, then and have access to a younger market who are kind of thinking in this way, then that’s that’s what we’re here to do. And ultimately, also provide you with a, you know, a pipeline of leads, you know, subscription based lead that you can start chatting to.

Louis van der Merwe
Rory, I want to echo what you said around rethinking your value retooling. And we saw that when we started charging for our financial plans, now we had to defend the value that we’re offering not defending the end product. But, you know, often clients would say, Okay, but what do I actually get? And so we had to really figure out how do you convey the service into something that’s valuable? And then someone can equate to say, Okay, I’m willing to pay this fee for what I can expect to get. And I wish you all the best with building this platform. I really hope that in the future, we can look back and say great, this is a growing pot, because for us to service, the growing population and a part of our population that might not have access to financial advisors. I really believe that this might be a sustainable model. And I want to thank you for for taking the risk and building this. We wish you all the best

Rory Brachner
Awesomely great chatting to you thanks so much for all the great questions and for doing what you do.