- Facet Wealth is a three-year-old registered investment adviser with a fintech twist that’s tapping into major themes playing out across the wealth management industry.
- A focus on all-encompassing financial planning, subscription-based offerings, and regulation prompting financial professionals to act in their clients’ best interest are major drivers.
- Business Insider spoke with Anders Jones, Facet’s chief executive officer and co-founder, and Brent Weiss, co-founder and head of planning, about the firm’s growth plans.
- Visit BI Prime for more stories.
If an investor assembled a basket of themes shaping the wealth management industry today and fed them into a blender, they would end up with a creation that looks a lot like Facet Wealth.
Facet, a Baltimore-based registered investment adviser with a fintech twist, uses Facet-branded digital tools to pair clients with certified financial planners who work remotely from homes around the US.
The firm, founded by a financial planning executive and two venture capitalists, finds clients primarily by referrals from independent broker-dealers, hybrid robo-advisers, and traditional RIAs who might pass on them because their asset base is too small.
Its 102 employees and 30 certified financial planners across 16 states service Facet’s 1,300 clients who are, on average, 55 years old. Anders Jones, Facet’s chief executive, told us its client base has been growing by 20% each month since July, and the average client has $350,000 in investable assets.
That places Facet’s client base in the so-called “mass affluent” set — well below what might be considered high- or ultra-high-net-worth clients that wirehouses like UBS are focusing their energy on as they look to boost adviser productivity.
It’s a space where there’s competition from roboadvisers like Wealthfront, which has an account minimum of $500, as well as human advisers, though human advice often have higher account minimums. Personal Capital, for example, says it has a $100,000 minimum account size for customers to get human financial advice services.
Facet charges clients a flat fee to work with their advisers, leaning on a subscription model, a la Netflix. Brokerages Charles Schwab and TD Ameritrade have channeled Netflix in pricing and recommendation products, respectively, rolled out this year. Depending on how extensive Facet planners’ services are, clients’ flat fees range from $480 to $5,000 per year.
Revenue that comes in from clients’ subscription fees goes to Facet, while all of its financial planners are salaried — and planners’ take-home pay is not tied to the revenue they generate.
“I’ve been a big believer that the AUM model does not make sense,” Jones said in a recent interview, referring to the wealth management industry’s traditional fee model that ties advisers’ pay to their clients’ total assets under management.
Jones, formerly a founding partner at the firm Argyle Ventures, started Facet in 2016 with co-founders Brent Weiss, now head of planning, and executive chairman Patrick McKenna.
That year, the Obama administration’s Department of Labor passed the fiduciary rule — which stated advisers must act in the best interest of their clients, a rule that’s been overturned under the Trump administration’s DoL — and Jones called that an “a-ha moment.”
The Securities and Exchange Commission’s “Reg BI” rule passed earlier this year that states financial professionals must disclose what fees and costs their clients may incur.
In response, the CFP Board has created a new code of ethics and standards, which were effective last month, which designated its planners as fiduciaries.
“The future of this industry is about financial planning,” as opposed to solely offering investment management advice, Jones said.
He likened his firm’s approach most closely to digital wealth management firm Personal Capital, which offers free online savings tools and also employs human advisers.
Facet does not implement account minimums, and its clients typically fall into three groups: young professionals, early- to mid-career families, and pre-retirees. It has some $100 million in assets under management, with assets under advisement around $500 million.
To date, Facet has raised some $37 million after a Series A round led last fall by the private equity firm Warburg Pincus and an earlier investment from Slow Ventures.
With that funding, it’s been able to expand. After the robo-adviser Wealthfront in August absorbed team members from financial-planning start-up Grove, Facet took on Grove’s planning business, members of its planning team, and their clients who weren’t integrated into Wealthfront for an undisclosed amount.
To be sure, even as new and digital entrants crowd the wealth management industry and gain market share, legacy wirehouses (the large, full-service broker-dealer institutions) still oversee trillions in wealth.
Morgan Stanley, UBS, Wells Fargo, and Merrill Lynch manage a combined $9 trillion in client assets as of their third-quarter filings; Morgan Stanley is the largest wealth manager in the US by assets.
And as we reported, analysts increasingly believe scaling up in the wealth management business, which includes consolidation and gobbling up smaller players, will keep firms competitive.
Brent Weiss, a Facet co-founder and head of planning, told us in a recent interview that he thinks its subscription model for mass-affluent clients makes it stand out from firms with more traditional models.
“Our subscription model really becomes a unique differentiator in that space where we can go to those families and say, ‘Hey, we know you need some help with your financial life plan. Let’s talk about it for an affordable flat fee,'” he said. “And that creates great practice in that space.”