Beacon Flash: Navigating Complexity to Simplify Wealth Management, a Conversation with Aaron Klein

Aaron Klein

There’s one thing that advisors kind of have a tendency to get wrong. And it’s when they are trying to make things more complex for their clients in order to prove their value. It’s such a powerful mindset shift. Some of the most successful advisors that I’ve seen really innately understand that clients are hiring them to kind of take over the important and the complex, but not to like put that on display for them and not to drag them into the complexity, but to really guide them past the complexity into the simplicity.

Speaker 2

Welcome to the beacon flash the go-to podcast for enterprise Wealth Management Professionals, looking to stay ahead of the curve hosted by Chip Kispert, Managing Director of Beacon Strategies, this podcast explores the future of the industry, and the most pressing issues facing today’s top leaders. Join us each week as we sit down with industry experts to discuss the opportunities and strategies for success.

Chip Kispert

Good morning, I am so excited to have Aaron Klein, CEO of Nitrogen with us today. Aaron, welcome.

Aaron Klein

Hey, thanks so much for having me on

Chip Kispert

Aaron, you have you’ve been in transition mode, to say the least over the past six months. And fun to watch. Tell us a little bit about it.

Aaron Klein

Well, yeah, I mean, first of all, you know, we’ve just had this really kind of remarkable decade of having the incredible opportunity to serve so many financial advisors. And, you know, we embarked on this journey in 2011, we really believed that you could really transform how investors see great results, and empower the world to invest fearlessly, if you could help them understand how much risk they were taking, help them understand how to proceed that help advisors help financial advisors really tell their story more effectively. And we just believe that more people needed access to great financial advice. And frankly, advisors needed a great way to help their clients see and understand the things that they’ve been telling those clients for years because humans have this remarkable ability to sabotage their investing. So we embarked on this journey in 2011. The first thing that we built was a, you know, quantitative objective way for advisors to measure risk tolerance on the part of our clients. And we built, you know, the ability to drive risk alignment between, you know, a client and their portfolio. And we kind of named the company after that first feature that we built. And we named it Riskalyze. And, then we embarked on this decade of building all of these other capabilities because what we very quickly realized is the reason that people bought Riskalyze risk was a means to an end, the end that they were coming aboard to accomplish was actually driving growth in their firms, there was nothing more powerful for either bringing a client aboard or keeping them aboard retaining them in their firm, then setting the right expectations and saying, you know, Chip, you’re telling me your risk, 45, like your portfolio is currently invested like a risk 82. And let me show you how we can bring that into alignment. And let me show you how we keep that in alignment over time. And so, you know, we just embarked on this decade of building out this very broad growth platform for wealth management firms. And along the way, a number of very visionary wealth management firms starting to say, Hey, this is how we actually create a consistent growth process in the firm at scale. This is how we scale up the impact of all of this to our advisors as a whole. But, you know, we realized about a year ago, we would walk into these larger firms. And I would just say, maybe we got through the early adopters with the large firms, the ones who are on the bleeding edge, right? And, when we got into a bit more mature part of the curve of some of these larger firms, so we’d walk in talk to these firms chip, and they would say things like, well, listen, we’ve heard of you guys, you’ve got a great reputation. Many of our advisors love to use you. We don’t even understand why. Because you’re like our risk tolerance tool. We don’t need one of those in our firm, like, we’re fine. Like, we don’t need a risk tolerance tool in our firm. So, you know, we just came to realize somebody very wise said to me, you know, branding is such a double-edged sword. If you do it really poorly, you can change your brand to have it mean anything you want it to mean if you do it really, really well. You are stuck in the box that you’ve created for yourself. And it was as if Jeff Bezos had named his company online bookstore.com, like Riskalyze, was not going to get us to the next level of helping wealth management firms see the growth platform that we built for them. And so we’re excited about it. We today have large firms coming to us looking for the growth platform that we deliver instead of stumbling over it like they have for the last decade.

Chip Kispert

yeah, you know, I gotta tell you, one of the things I’ve always admired about your firm is your branding. Right? And, and your marketing, you’ve always told such a fabulous story, right? And then really over the last year, I, it was interesting, because I was thinking, Alright, what’s next? What’s next? What’s next? And then, you know, before I know, knew it, you reached out and said, Hey, I want to talk to you, we’re doing new things. And, you know, I love seeing you grow. You’re, you’re the innovators in the industry, you change the way many advisors work with their customers, for the better. And you know, you are a very, very special person within our industry. Well, thank

Aaron Klein

you, I really appreciate that. That’s very kind. And I, you know, I would just say risk carried us as a firm for a long time. And I think we came to the conclusion that risk was a means to an end, and the end was growth. And it was time to be really, really clear with the industry and create clarity around what that means to an end, or what that end is. And it’s been interesting, because if there’s been any, you know, just speaking, really, candidly, if there’s been any blowback against the nitrogen name, it’s just been a small percentage of the solo advisor firms. And you know why, because they were using the Riskalyze brand with their clients, right? So the means are more important to them than the end. And so they’re sitting there going, Well, gosh, like, I recognize that nitrogen means growth to me, and you’re right, like Riskalyze always was the means to the end for that growth for me, but like, I want to make my client the hero, and I’ve been using your brand with my clients. And, and, you know, I think that’s a very noble aspiration for those advisors. My advice to those advisors has been listen, you can keep using the Riskalyze brand, we will always be the makers of Riskalyze, it’s part of our legacy, our heritage, and we will continue to own that brand. Honestly, the other thing you can do is you can do what our original intent was, which is we invented the wrist number brand few to use with your clients, notice our logo has never been in it. We designed that to kind of fit in under your brand and never contradict it because we’re not a direct-to-consumer brand. You know, you’re the one who owns the client relationship. And so, so anyway, that’s been going really well. And we’re really heartened and excited by the response to it.

Chip Kispert

It’s great. That’s great. So one of the things I kind of want to shift to is, you know, we’ve seen probably some of the most incredible transformations over the last five to seven years. COVID really was a big driver as we add the customer and their needs going forward. Right, and transparency to data. Right. So how do you see the needs of the investor customer influencing the role of the advisor going forward? And what does that look like?

Aaron Klein

Yeah, I think that’s such a profound point. And there has been, like a decade of digital transformation stuffed into like, a year, year and a half that happen between 2020 and the middle of 2021. Right? Yes. And it’s impacted our product strategy in different ways. I mean, here’s one example. Actually in 2016 or so built a meetings capability into our product, which basically was, hey, you’re on the phone with your client, have your client go to meet my advisor.com and punch in a six-digit code, and you can show them what you’re talking about, rather than just talk it out, okay, because nobody had a Zoom account. Right? That didn’t exist. And so that was a really innovative and great product capability. And we just sunsetted it, because in COVID, we saw the usage of it tripled overnight, like it just exploded, and then it collapsed down because everything went well. We just shifted to Zoom, like we learned how to live digitally. And now we’re using Zoom for this. And we’re still using all the nitrogen analytics, but we don’t need Nitrogen’s meeting feature to do that anymore. Because we just share the screen on Zoom and off we go. Right. Okay. So it’s, it’s fascinating how, again, that’s one of those kinds of technology shifts that would typically take a decade to take hold, and it’s just like been stuffed down until like a year and a half. So, you know, if there’s one thing is I think about all of that transformation, that I think advisors I, you know, I was thinking about that the other day and I’m like, there’s one thing that advisors kind of have a tendency to get wrong. And it’s when they are trying to make things more complex for their clients in order to prove their value. And I just think that it’s such a powerful mindset shift. Some of the most successful advisors that I’ve seen really innately understand that clients are hiring them to kind of take over the important and the complex, but not to like put that on display for them and not to drag them into the complexity, but to really guide them past the complexity into the simplicity. And I would just say, like, I’ve come to a really strong conclusion, particularly, and I and again, I think it’s accelerated by COVID, I think it’s accelerated by putting things on the screen and zoom, I think it’s accelerated by how communication styles have changed with COVID. But, you know, I’ll just put it this way, if a financial advisor is spending their energy trying to take their clients into the complexity and sort of a misguided effort to prove their value, they’re losing, they’re losing to another financial advisor who can say, I’ll get you past the complexity. And I’ll take you to a place of simplicity and understanding because that does not cheapen that advisor’s value in any way.

Chip Kispert

But you make a great point. And it’s funny, because we’ve been working with some of our advisors, one who’s mutual in a mutual customer. And we’re working on exactly that. Right, we’re working on starting with the simple, right? What’s their financial health? Yeah. And then, for those engineer types, the ability to drill down only to, yes, it makes

Aaron Klein

so much sense. And at the end of the day, we all have to earn our place in the world, and it’s all about the client. Okay. And I think the best financial advisors are ones that, you know, yes, they’re going to bring the process to the table, they’re going to bring consistency to the table. But they’re also going to recognize that they have to adapt that process to meet the client where they’re at. Because ultimately, this is a people-driven business. This is a relationship-driven business. And, people are trying to build trust with you and decide that they’re going to put their life savings in your hands to help, you know, guide them to the other side. And that is a place. I mean, it’s first of all, it’s incredibly noble work. Second of all, it’s a place that requires immense trust. And you have to meet people where they’re at, you can’t just go one size fits all. I mean, if your clients wanted that, they could go and get a robo-advisor to put their money on autopilot. Like that’s, that’s not a great idea.

Chip Kispert

Good to eat trade. You got any? That’s right. Yeah, that’s right. You go to markets, right?

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Chip Kispert

So shifting gears here, so we’ve got a bit about innovation, and we’ve talked a little bit about your organization. There’s a lot of rhetoric out there right now on artificial intelligence. Yeah. You know, where do you see AI having a meaningful impact? In what advisors are doing it? In the, you know, the enterprise wealth firms as they’re trying to support advisors? Yep. And you know, what changes or transfer transformations Do you see being driven by AI?

Aaron Klein

So, you know, five years ago, I think I was on stage somewhere. And I said the only true deployment of AI in our industry is in press releases. And, you know, I think that that was true five years ago. And I would tell you, I am incredibly excited about the new phase of generative AI that we are stepping into. And I think that there’s going to be an incredible I think that this is a platform shift. I think there’s going to be an incredible transformation over the next couple of years leveraging this technology, it’s going to be very interesting to see how it impacts financial advisors because I think there’s a really important component of, of where generative AI is at but I’m not sure a lot of people see and understand yet and that’s this. Generative AI is very good when you don’t need something to be precise and perfect. Okay, if you’ve seen the new Indiana Jones movie, AI has been used to basically generate to de-age Harrison Ford, who’s 80 years old into seeing some that are freshly filmed where he looks 40. Okay. And it’s really good. It’s like if you don’t know that it’s happening, and you’re not asking how in the world did they do this, like, you probably wouldn’t be able to tell.

Chip Kispert

Okay, just believing,

Aaron Klein

Right. But the thing about it is that AI doesn’t need to be perfect. And what I mean by that is, if the shading on the side of his face is off by one or two colors, okay, like, you’re never going to know, like, like, that’s the kind of thing that AI can do really, really, really well. And you’re never going to see those small things, and it’s just going to get better and better and better and better, better. So where it can really struggle is when it needs to be perfect. And when it needs to be very precise. And what generative AI is starting to prove is that it can get closer and closer and closer to that level of perfection. But it still needs humans to provide the creative spark, and to edit, you know, and to and to approve. And I think one of the most interesting things is going to be, my prediction right now is that the most interesting thing is that we’re going to be able to use this technology to take unstructured data and turn it into structured data much more quickly than we were in the past, it’s still going to need, it’s gonna take a lot of experimentation, it’s going to need, you know, the financial advisor to look at that data that was unstructured that we just tried to make structured with the technology and verify that it’s right, okay. But it’s going to save immense amounts of time on the part of financial advisors, who are manually moving data between systems who are manually restructuring data into different formats, and things like that, it’s going to save immense amounts of time. And I think it’s one of the things that is going to dramatically accelerate access to financial advice, because advisors are going to be able to handle more clients take down minimums, you know, profitably serve smaller clients do things to expand access to advice, which I find most financial advisors would really like to do their limited time. And so when the technology can take the drudgery out of work, and you just get the chance to, you know, serve more people, because you like to do that, it’s going to be an amazing, amazing future for those financial advisors.

Chip Kispert

So it’s, it’s interesting, because if I dissect your words there, right, what I really took away was, and we talked about customer service earlier, it’s really going to drive a lot of enablement for advisors in the customer service thing, as

Aaron Klein

totally, totally. And I, you know, this is an imperfect analogy, because, you know, what financial advisors do is, by necessity, more personal, more specific to the client, and more complex than say, what our customer care reps do for advisors, okay? What our customer care reps do for advisors is some are somewhat repetitive, somewhat similar by advisor, okay, and I’ve got an army of humans who are responding to advisor emails, and or chats, you know, that are relatively similar to each other. So I can tell you right now that what generative AI is going to do for our own operation is it’s going to very intelligently look at the data behind this client, look at the features they’re using, look at these other advisors that have been using the same features, and maybe the problems they had flagged those things for our product teams. So we can put a little bit more focus there, but also probably pre-draft a response to the customer saying, Oh, here’s how you’d fix that problem, or here’s how you’d solve that. Okay. And, you know, one of the things I was talking with my team about the other day, as I said, we have to instrument that very, very carefully. Because here’s the thing, if, if our customer care rep is using the pre-drafted response back to the advisor 0% of the time, then that means that the AI is not very good, that means that the technology is not very good, and it’s not doing its job well, and we have engineered it correctly. On the flip side, if the customer care rep is not editing it and just hitting send 100% of the time, we are also not doing our job, right, because we’re not making sure that we’re working with the customer on an in a personal way, and really looking with the creative spark of a human to make sure that we’re addressing that customer’s need. So we got to instrument this very carefully because we’re not trying to do either of those things. Right, that guardrails on both sides of the road. That’s right. And so you know, the same thing is going to be true, it’s an imperfect analogy, but the same thing is going to be true, I think, for financial advisors, life is just gonna get a lot easier because the technology is gonna be able to go beneath the surface and say, this is probably the right solution for your client. You now take your expertise and ingenuity as an advisor and edit that and hit go and we’re going to go execute it

Chip Kispert

Interesting, great thought. All right, what keeps you up at night? As you think about the wealth marketplace? And looking forward? Yeah, I mean, I think

Aaron Klein

A couple of things, one, one would, and it’s really about change and inertia. And, you know, we are in an industry that tends to operate about a decade in the past, not at the bleeding edge. Nice. Yeah. Yeah, you know, like, Look, these are the people I admire and love, and we love serving, okay? But it’s just the reality that if you look at our industry as a whole, like, we often are kind of living a bit and operating a little bit like a decade of the past. And if we cling to some of those things of the past, whether that is leading clients down into the complexity to prove our value, whether that is, you know, old ways of thinking about technology, whether that is, you know, I would say, another interesting challenge is like, kind of like the chasing of the tail of like, should I go with kind of like, lowest common denominator all in one solutions, or should I go with best of breed Well, integrated solutions. I, you know, to me, one of the great challenges that we’ve got to solve in this industry. And I, we’re making a lot of progress. We’re investing a lot in this. And I think we’re making a lot of progress in this regard. But like, I don’t care how big and broad nitrogen gets, I will continue to be a believer that best-of-breed solutions with focused innovation are always going to be the best solution for firms. And so therefore, it’s on us as technology providers to make sure that we’re providing seamless, integrated, seamless workflow integrations, I think it just gets a little overused, and it’s like, single sign-on, they got a little bit of data going back and forth. Now we need seamless workflow integrations, and we need to do, you know, I keep pushing our team, I’m like, we need to be thinking about this at a deep linking level. And what I mean by that is, is when it pops up in your CRM, that you need to do this thing in nitrogen, I don’t want you to go to nitrogen search for the client and drill three levels deep, I want you to click in the CRM and be three levels deep in the app off and running. And so these are the kinds of things that, you know, I think, I think it’s on us as technology providers to get to those seamless workflow integrations, you know, for advisors, well,

Chip Kispert

I think you’ve done a very nice job of that you plug and play, like, you know, the, for our enterprise customers that we’re working with Salesforce, maybe they’re using red tail, maybe they’re using, you plug and play very, very nicely. We

Aaron Klein

do. And yet, I still like, and I’m my worst critic on this, but I still constantly am like, let’s find ways to push the curve on that. Because that is how you get to real value for these organizations, I would argue in the enterprise is, you know, change management is hard for them. Training is hard for them, and getting advisors to adopt them is hard for them. And, you know, we have firms, it’s very interesting, because in you know, this well, like firms have to make decisions. And they have to make, you know, frankly, pragmatic business decisions about what are they going to mandate versus what are they going to encourage. And we’ve had to realize that, you know, we have cut with clients on both sides of that equation. And some of our clients with the best results mandate nitrogen they go, you can’t do business at our firm, unless it’s run like you run it through a nitrogen proposal. And those firms have driven their meeting declined conversion rates up 113%. Okay, you know, so some of the best results have happened on that side of the fence. But a lot of firms will say, Listen, I don’t have the ability to mandate that from my advisors, they’ll leave, okay, I can’t tell them what to do. We’re in a different affiliation model, we have a different set of dynamics there. I can’t tell them what to do. And for those firms, that’s why we’re rolling out a lot of these insights capabilities. Because we need to equip the firms to go in and persuade the advisors like, Hey, Tom, the reason Jill is so much more successful than you as an advisor is looking at the activity she’s undertaking in nitrogen to drive these outcomes. If you would follow the same process, you’re gonna see the same kind of result. So you know, I think, I think it’s, it’s, you know, it when you get into those enterprises, they’ve got to decide which way they’re going to go. And then we’ve got to put resources behind helping them drive that adoption.

Chip Kispert

It’s a huge issue. So good, great point. All right. So as we’re wrapping up, one of the things we absolutely love to do is to give you the final word. Take 90 seconds Share your thoughts. This is your little editorial.

Aaron Klein

I mean, that’s a crazy shift because I’ve never gotten the final word on anything in my entire life. But that’s very kind of, you know, I love your focus and what you do for your clients. And we’re so proud to have some great joint clients together that we get to serve. And I appreciate our partnership in that way. And I’ll just say this, like, I think what is so critical for wealth management firms and for advisors is number one, that they focus on making sure that they pick great technology partners, with best-of-breed solutions, where you have the ability to own your own data, certainly where you can pull your data out and leverage it to drive business value, but where your tech partners are really helping you leverage your data to help drive value faster. And then it creates the opportunity to bring great expertise to the table like your firm, to figure out how to tie all of that together and actually get the results out of those investments that wealth management firms need to make to me, that’s the most critical thing that firms need to do if they’re really going to scale and grow.

Chip Kispert

Aaron, thank you very much. What a wonderful 30 minutes we’ve just spent talking about the issues of the World Within wealth management. Really appreciate you spending the time with us and absolutely had a blast. Thank you very much.

Aaron Klein

Thanks so much for having me. Have a great rest of your week.

Speaker 2

We hope you enjoyed the latest episode of the beacon flash podcast, we’re always working to bring you the latest insights and trends in the industry. To stay up to date. Subscribe to our podcast on Apple Podcasts, Spotify, or wherever you listen to podcasts. And don’t forget to visit our website at www.beaconstrategiesllc.com To learn more about our consulting services and the beacon roundtable offerings.