Professional financial advice as a wedding gift? Or a gift to first-time parents? An uncritical article on the New York Times personal finance website profiles LearnVest, a start-up firm that provides financial advice online. The cost? A $399 upfront fee and $19 a month (or $608 a year). The advice is provided by CFPs — deemed “the gold standard among advisors” by the breathless Times reporter. “Financial advice shouldn’t be a luxury,” says Alexa von Tobel, LearnVest’s 29-year-old founder. “We want to disrupt the industry.”
Well, these days, who doesn’t? LPL Financial’s NetWise unit, for example, which launched in September 2012, comes closest to being a direct competitor of von Trobel’s firm.
According to the article, here’s what LearnVest clients get. First, they connect all their accounts to the firm’s “money center,” which captures “every last financial transaction” across all their checking, saving and credit accounts, as well as investments. The LearnVest advisor uses this data to put together a seven-step financial plan, and is available for “unlimited” phone and email chats. The advice suggests how much money to put in various types of investments (large-cap stocks, munis, etc., for example) — stopping short of recommending specific mutual funds or other investments.
LearnVest currently employs about 25 CFPs on salary plus a commission based on customer satisfaction. The goal is for each advisor to oversee 500 clients, says the firm’s CEO. (Let me do the math for you: that works out to about 4 hours per client annually.)
LearnVest’s business model (plus the facts, the Times reports, that von Trobel dropped out of Harvard Business School to start the company and is represented by the William Morris Endeavor talent agency) might lead one to surmise that the firm is just another start-up seeking to strike it rich via an acquisition down the road. But that doesn’t mean that it — or future copycat firms — should not be taken seriously. Consider this:
• The firm recently completed a second, $16.5 million round of financing, on top of the $25 million it has raised since its inception.
• It’s currently pursuing a deal with American Express, one of its new investors.
• It’s “working with employers and financial planning firms to sell its programs within 401(k)s,” according to the Times.
