From Custom Portfolios to Scalable Relationships with Alex Laipple

How are you redefining what it means for advisors to deliver a truly bespoke investment experience that still saves time and streamlines workflows?

[00:00:34] Alex Laipple: That's a big question there. I'm going to start with what our mission is. I'd be remiss to not just get really clear. Our mission at Ethic, we've worked really hard on this, is to deliver a seamless, customized investing experience to financial professionals.

That's a big question you asked. I think it's actually two questions. So I'll start with how do we deliver a bespoke experience? So to me, at the client level, each client has different intentions. Everybody's trying to achieve something differently. So to make it feel bespoke, there's a few things as an advisor who need to drive home, I think the first is helping clients align and define what their preferences are.

From there, it's offering a variety of investment structures. So if everybody feels the same, it's definitely not going to feel bespoke. So having options. And at Ethic we focus on things like direct indexing, model portfolios, and UMAs. And I think the final step of the process is making sure it feels tailored, that last mile, and that final tweak. When you get a suit, making sure that final tweak is really fit to the client.

So these are things like the risk of the client, the tax preferences, and any individual position level customization that you need to drive home. So that's what I feel on the first question. The second question, that's more important for the advisor, is how do we save time? I think to understand how do you save time, you need to understand what's happening today with advisors and investment managers? And oftentimes taking action on a client account with an investment manager can take a week or multiple days depending on the custodian you're utilizing in your workflows. So how we set a difference here is to start, we're connected with all the custodians the advisor utilizes on a daily basis.

So making sure that process of going from one custodian to us as a subadvisor is seamless, is really critical. And obviously partnership plays a role in that. From there, we build on that time saving with the initial client onboarding, making sure we deliver a very seamless first experience.

After the account is invested, the ongoing investment experience is important as well as the reporting. So how do you quantify, with the personalization, what you're delivering. The final piece of the equation, I think the most important from a technology perspective, is the training that you provide advisors. So oftentimes technology is a short term pain, right?

Because you're learning something new in the medium and long term it can increase scale and your ability to connect with clients if you know how to utilize it. So we're very committed to the ongoing training, both initially in the setup, but also making sure advisors feel supported.

[00:03:18] Doug Heikkinen: How can advisors use personalization technology to make clients feel more connected and understood rather than simply managed by algorithms?

[00:03:29] Alex Laipple: To me, personalization and scale don't naturally fit in the same sentence. It's almost like a push and a pull, right? And technology is the key to connect them together. But I think importantly, each client has a different set of needs as it relates to their wealth management. So not every client wants to feel connected with their money.

Some hire an advisor to feel disconnected, but for the ones that do, and I think even within a household, Doug, it's important to know that a husband or a wife, one may want to feel connected, another may want to feel detached. But for the ones that do, let's say it's 60% of the wealth that you manage wants to feel connected.

It starts with helping them feel like they're a part of defining what they want to achieve. So upfront, aligning on preferences is very important. We have a process we take our clients through which we collect all the key inputs that we need to define the portfolio, right? So from there, from taking those preferences, and if each question has a different answer, you get a different result. You get presented a set of options, so those can be product structure, risk-based, values-based, tax-based, but making sure that you have the ability to tweak options and you have a variety of options to choose from. You don't want to feel the same as every client.

I think that the last piece and most importantly, is after you define your North Star, making sure you have transparent reporting to go back to, to quantify whether or not you did a good job as an advisor, or the asset managers that you're hiring to build trust with that client are delivering on services as advertised. So those are my three things. The preference definition, being able to present a variety of options that can be tweaked both initially and ongoing. And the last piece is that transparency, which is a really powerful thing to deliver through reporting.

[00:05:20] Doug Heikkinen: You've spoken about tax management being a key differentiator, and as I'm talking to more people this year, taxes seem to be top of mind for both product and service providers and clients and advisors. Can you unpack how automated tax solutions turn what might seem like a commodity investment product into a customized wealth strategy?

[00:05:41] Alex Laipple: Yeah. Yeah, definitely. I think that's a very trendy question these days and an important one to hit on. I think first you have to get to the root of it, that products feel commoditized because a lot of advisors try to bucket clients and invest them similarly, right? And that's usually because they don't have the tools and resources to customize the product.

So, they're really looking, a lot of times advisors are trying to get you into buckets, right? But it's important to know, let's say you're a prospective client of a firm. Everybody arrives at that firm at a different place. So some fund with cash fund securities, some fund with a rollover. And everybody's got different risk profiles.

And so because you have a different starting point, there's things that you need to take into account if you want to deliver a scalable tax experience. So the first is, how you're going to transition that strategy to the one that you are now managing. So making sure you have a strong technology tool that gives options to clients.

And then from an ongoing management perspective, after you transition that strategy to where it's headed, how you make sure you offer the active tax loss harvesting component. The other piece that I would say is important before hitting on the automation part of your question, is a lot of clients will come in with very concentrated positions.

They were gifted a security or worked at a specific company that IPO'd, and they have tax gains in that account that they don't want to realize all at once. So automation plays a role. And it's really powerful for advisors. Because if they don't have an automated solution, they then have to do that manually.

So that gets back to your question on how do you save time as you select a provider that can look at an account on an automated basis. The way that we do it here, is we do it systematically. We have a 25 basis point trigger, so we have a trigger set up to get eyes on a portfolio then to take action. So automation's critical back to that time saving question.

But it's also critical to a client feeling connected. If you're just going to treat them all the same, they're not taking into account what's unique and what often is unique is their tax goals, their tax preferences, and how they arrive in a strategy, which can be from a different place.

[00:07:54] Doug Heikkinen: Many advisors struggle with transitioning legacy portfolios efficiently.

How can tools like Ethic help advisors manage those transitions in a tax efficient way that feels tailored to the client?

[00:08:08] Alex Laipple: So we start, this is something that I'm hard to pick two things that we do that are really unique, one of them is our tax transition analysis and tool that we have on our platform. And that starts with showing a client where they are.

I mentioned that we're connected to the custodians, so being able to link an account, see what securities they have, the tax lots, and understand kind of where they are today. So after diagnosing and analyzing where they are today, we provide multiple options. One with a max loss harvest option. One where a client wants to achieve things a little bit more tax neutrally.

And then we actually allow a client to customize a gains budget so they have the ability to, they want $25,000 worth of gains in their portfolio. So giving them three really clear options. And then also providing the ability to go back to the drawing board and say, actually not $25,000. Let's look at what $30,000 would be against these other strategies.

So that's something that really helps advisors with the initial transition. And once they have experience doing that for one account, they then get that medium and long-term scale I mentioned, because they get comfortable doing it and that becomes their go-to bread and butter way with engaging clients around tax transitions.

[00:09:22] Doug Heikkinen: You often talk about the opportunity to capture the next generation before the wealth moves, which is such a big deal now. What does that look like in practice and how does personalization play a role?

[00:09:35] Alex Laipple: I think what's interesting is if you look at how most advisors get clients, there's been an evolution to now where it's more focused on households.

This is more recently, like thinking about the households you manage versus the clients or accounts. And I think the reason why that's important is, advisors were often losing clients when assets changed hands. So if it went from one spouse to another, there was not that connection point there.

So the first thing that I think is really important is engaging a household, at least initially engaging the spouses together, and then how you engage that next generation. So you asked that great question around connection, realizing how clients want to engage within a household is important.

Because if you align with, let's say, the wife, and that's who selected the wealth manager, but then the husband wants to engage in a different way, has different preferences, has different priorities, and there's a death in the family, you're not well positioned. So it really comes down to how you engage across all the stakeholders. So within the house, the next generation, and just understanding what their needs are. And I oftentimes feel like this is something that advisors deprioritize because they have so much they're working on. They have such the limited time today. But this is something that is like it's defense.

You know, sometimes defense is the best offense. And making sure that you have that ability to connect across every stakeholder, understand what makes them unique. The earlier you do that, the better. So if you get clients children involved once or twice a year with an event on financial literacy and understand what makes them tick, you could find that within your firm, another advisor would be suited to build a connection with, let's say the son, right? So being proactive about those connections is really important and I think personalization's critical there. Because once you collect all that data, you can put that into motion when the time comes, which is important.

[00:11:33] Doug Heikkinen: For those advisors worried that customization slows them down, what are some practical examples of how technology can actually save time while elevating their client engagement?

[00:11:45] Alex Laipple: Well, I think first and foremost, nothing's free in this world, right? So from a time perspective, in the short term, anytime you change behavior and workflows, it doesn't save you time.

Even if you're spending a lot of time manually clicking through screens, if you know those screens well at the custodians or with the spreadsheets you utilize. For you, that understanding is a time saving in the short term. But how you help unlock that is in the medium and long term, and that's where technology plays such a critical role, whether it's Ethic or another technology solution across the landscape, spending the time to unlock the medium and long-term part of your role is really the critical aspect that I think, it is what advisors should be focused on.

Because, yeah, they've built trust in the way that they do things every day and they know those things well. And changing behavior can be hard. But if you commit to the initial pain, then medium and long term, you're going to really unlock the time that you need to spend on only the passes you can play, right? So as an advisor, 80% of their time is often spent on doing things that are not high value. What's high value is spending time with clients, or trying to find new clients.

And you can't do that if you're in front of your computer screen pressing buttons that you can train someone else to do, or you can hire technology tools to do more seamlessly. So the commitment upfront is the unlock, right? So making sure they feel that commitment to understanding how to utilize the tool.

Because the other challenge, Doug, that I see is if you're not going to fully commit to utilizing the solution, then technology will never save you time because you're onboarding that tool, but then you stay with what you know best. So we are very committed on the training upfront with our potential partners.

And if you don't get them locked in, you don't get them confident, this is just going to be something else that sits on the menu that they don't utilize on a daily basis. So that's really where we're focused. And over time, if you utilize a tool like Ethic, it's going to allow you to do what you do best as an advisor, which is connect with relationships, build new ones, and help evolve the brand of your firm.

[00:14:01] Doug Heikkinen: How do partnerships, whether with tech providers, custodians, or model managers, help Ethic and advisors scale personalized investing without increasing operational complexity?

 

[00:14:14] Alex Laipple: I think that you're hitting on some of the big three there. The way I say you have technology providers, custodians, and asset managers. And advisors need to utilize all three to have a scalable business.

So from a technology perspective, a lot of advisors don't use all-in-one tools that do everything. So you'll have to have your CRM, your reporting tool, your personalized investing provider. All of those things can be used in a disconnected way. How you connect those together is critical. So we're very focused on how we partner with other technology solutions as well as custodians.

I mentioned we use about 20. So, we never want advisors to have to introduce a new custodial partner to utilize our solutions. So we're open architecture there. And then the final piece is partnerships with asset managers. And we've done our fair share of partnerships. We've done one more recently with State Street.

And why that's important is advisors have built trust with many of these asset managers over time. They don't want to always use a new alternative. They've got great relationships, they have trust with the way the firms manage the money, and you want that partnership to evolve and grow over time. So we are very connected across those three areas to making sure that client experience doesn't drop off.

If anything, it grows through the utilization of our platform.

[00:15:31] Doug Heikkinen: Ethic's origins are rooted in value-based investing. How are you helping advisors weave client value seamlessly into tax efficient, performance driven portfolios?

[00:15:43] Alex Laipple: Yeah, I mean, I think connection will be the key theme of this podcast that we do together here.

And I think for me, for the clients that want to go deeper, your portfolio is a reflection of you, right? Everybody you walk by on the street has different preferences, different value sets, and making sure that you can reflect that and how you invest your money is critical.

So our platform is a way to initially define the things you care about, which can be your value set, and a value set could be, I really care about the environment. Religion can be a key value set. And also it can be that you just want to buy an index and make the most money possible with the lowest risk. So defining that upfront is a way for you to go deeper with your clients.

If you can get into that fulfillment phase, that intention phase with a client, you're really going to strengthen your relationship. So our platform is the mechanism to define what the client cares about, show them alternatives, right? So what a variety of things that you can do, and education around that to go deeper to really understand from a literacy standpoint.

And then the final piece is quantifying it through reporting. So I mentioned there was two things that we do that are really unique. One is the tax transition piece, but also the reporting. How do we quantify the personalization in the portfolio? That's a difference point for us. And the result we've heard from advisors, we work with over 300 advisors, from a firm perspective across the country, is they always feel more connected to their clients when they go into that value piece of the conversation.

It's not for everyone. Each client's different. But once you do go there, when a client expresses interest, you just go that layer further than another advisor would, which means that you make the portfolio reflection of the client's value set, which is great.

[00:17:30] Doug Heikkinen: Last one for you. As technology continues evolving, where do you see the greatest opportunities for advisors to combine personalization, automation, and human advice to strengthen long-term client loyalty?

[00:17:44] Alex Laipple: Well, yeah, now, I'm going to really seem like a broken record here with this. But for me, Doug, it's how do you spend time on the right things as an advisor, right? And technology is a way to unlock that. If you select the right technology providers, it unlocks time. It helps scale your business.

It helps your business be better positioned for a future sale, or when assets change hands. But ultimately, I think the biggest thing is the connections that you'll have with your clients and with your team, which does futureproof your business. If you can have more time and deeper connections, I think your business evolves.

And that's really what advisors are in the business of doing is, a lot of the advisor space is aging, but there's also some young up and comers in the space that want to do things differently, and are thinking about things over the next 20 and 30 years. And if they have stronger connections and they have better use of time, they're going to build a, business that sustains.

And that's what we're, in the business of helping advisors do.

[00:18:46] Doug Heikkinen: Great stuff. Thank you so much for being with us today. Really nice to see you.

[00:18:51] Alex Laipple: Thanks again, Doug. Cheers.

[00:18:52] Doug Heikkinen: To learn more about Ethic, please visit Ethic.com. We are on all social media platforms. Please give us a follow for our producer Tory Miller. We thank you so much for listening.