A desire to make financial planning accessible to the more than 1.8 million Australian households without money to invest inspired the creation of online advice start-up Life Sherpa.
This is a financial coaching and planning service, comprising general, scaled and holistic advice delivered at various price points and different levels of client complexity.
Investment management is the focus of most digital financial advice offerings launched so far, including those providing automated or “robo-advice”, according to Life Sherpa founder Vince Scully.
“But asset selection, stock selection and asset allocation is such a tiny part of the industry. That’s what gets all the attention, but that’s not actually that big a market in Australia.”
His target is clients under 45 years of age, who earn salaries and wages as their income.
“They’ve got above average income, little in the way of investable assets, no self-managed super, no family trusts – they’re a group of people that have reasonably similar needs, and you’ve taken all the real complexities out of it.”
“But they don’t actually have assets to invest, so how do you charge them an assets under management fee?” he says.
Instead, he saw an opportunity to provide tools to assist in overall financial strategy, budgeting and cashflow management. These are delivered on a subscription basis, along with fee arrangements for scaled or more holistic advice.
Scully says he wanted to address what he believes are the three key reasons why the majority of Australians don’t seek advice from a financial planner: “they don’t have enough money, they think it’s too expensive and they don’t trust planners.”
No fact find
A key element of the service is that there is no clearly identifiable fact find, with Life Sherpa instead using a series of approaches including games and quizzes to gather client information on a gradual but consistent basis.
“Nobody’s going to sit down and fill out a seven page fact find online, so [we collect information] by playing this game, and building your score as you go through.
This information is then securely interfaced into Salesforce CRM software, so when the adviser logs in, they have a single page view of the client, simplifying and decentralising the process.
“Therefore, it doesn’t matter who that adviser is; the client has a relationship with Life Sherpa, not with ‘Joe the planner’,” Scully says.
The business model
Life Sherpa’s most basic level of membership is free, providing access to a number of online articles and calculators for debt repayment and various mortgage and home loan scenarios.
The next level costs $12.50 per month, providing email access to a financial planner who can provide general advice.
For clients requiring more specific information and assistance, it offers fixed price advice on investing, superannuation and life insurance. “ASIC would call this scaled advice – I just don’t think that term actually means anything to a client,” Scully says.
For super and investments, where no commissions are involved, the advice is billed at a flat rate of $299.
“When you get onto stuff where there is commission, like risk, we take a fixed fee and then rebate the balance,” Scully says. Life Sherpa charges a $1,500 fee up front, rebates all commissions and a $300 per annum fee, with a similar arrangement for mortage clients.
The service currently has 1,200 members, with Scully estimating this base needs to grow to at least 2,500 to become cashflow positive. “If it can get to 10,000 members, then we’re talking about a serious business,” he says.
Having started Life Sherpa with a soft launch in February 2015, and making a few tweaks between then and April, Scully is re-launching a campaign in October 2015.
The issue of conflicts
It currently has one full-time adviser, and Scully emphasises he is fully employed, something he views as crucial in helping minimise conflicted incentives and maximising accountability.
“The biggest problem with supervising advisers today is that advisers’ interests aren’t necessarily aligned to the clients’ or practices’ interests.
“The adviser is incentivised to grow their book, while the practice is really about being a sustainable business with no compliance problems, so that conflict creates a supervision requirement that is very hard to scale,” Scully says.
He believes Life Sherpa’s systemised approach removes some of these problems, “so that the same set of circumstances give you the same sort of answer every time”.
“You’ve got to be able to incentivise the adviser through a salary package that’s not volume related. We pay a base salary plus a bonus based on customer care KPIs.
He sees it as removing the sales and client acquisition tasks from the adviser. “So you need a different sort of person. You don’t need someone who is a great salesperson, or who is happy to run seminars at the local RSL, [but] someone who is focused on coaching and servicing.“
For this reason, he is focusing on hiring advisers who have come to the industry mid-life, “people like teachers, nurses and ex-hospitality staff make very good financial coaches and advisers.”
