Nearing Milestone, Network for Young Advisors Mines 'Untapped Market'

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Eric Roberge's career as a financial planner began in frustration.

He slogged through mutual fund-related tax work in his first job at J.P. Morgan. He broke out as an advisor just as the market was crashing in 2008. The founder of a firm where he worked dangled the prospect of his buying the practice, but wouldn’t commit.

"Three years later, there was no succession plan," recalls Roberge, 36. "It was more of a risk for me to stay there, and have him change his mind, than for me to go out and start my own firm."

Throughout he never managed to work with the kind of clients he really wanted to serve – people about his own age.

That is until XY Planning Network launched in April 2014 to assist mostly younger advisors like Roberge seeking to work with their peers.


"At just the right time XY Planning Network pops up," he says.

Today Roberge serves close to 30 clients, who range in age from 27 to 42. Most pay a monthly retainer.

"I can't even explain the satisfaction," Roberge says of the career he's building in Boston.

Part of the credit goes to the two-year-old network launched by well-known industry consultant (and Financial Planning contributing writer) Michael Kitces and former Garrett Planning Network advisor Alan Moore. The pair started the network to help advisors build businesses delivering fiduciary planning services to younger clients who don't yet have many assets to manage. Some come to XY with zero assets as they struggle to pay off sizable student debt, Kitces says.

Most planners in the network charge clients a modest monthly retainer, roughly the same cost of a cable bill. Some, like Roberge, also offer hourly or flat fee options for clients who require a less-involved engagement.

This month, the network expects to hit a new benchmark when it signs its 200th advisor to the network, Kitces says.


Advisors in the network pay $397 a month for XY's technology, compliance and consulting help as well as membership in an energetic network of advisors building practices to serve younger clients. That fee also includes access to affordable errors and omissions insurance and the robo advisor Betterment. Many of XY's tools are customized to this underserved clientele, Kitces says.

"A typical advisor might [set] a price point from $100 to $150 a month as a fee," he says. "That's $1,800 a year. If you do that for a full base of maybe 100 clients, that's $180,000 a year in revenue."

The fast growth in this niche is worth highlighting, Moore thinks, given that many large financial services firms, brokerages in particular, are threatening to leave the middle-class advisory field. They are doing so in anticipation of a new federal fiduciary rule this year that would require them to put their clients' financial interests ahead of their own.

Under such a rule, many firms claim they won't be able to afford to serve smaller clients.

XY Network's fast growth challenges the notion that advisors can't make a living in this niche, according to Moore. "We are already doing it," he says.

To join XY, advisors must run fee-only firms, maintain CFPs and join NAPFA. The membership cost of the latter is included in the network's monthly fee.

XY's monthly price is low enough even for advisors who at first considered the more expensive Garrett Planning Network, which is geared to middle-class clients and founded by Sheryl Garrett. Since its launch in 2000, Garrett built up to 324 advisors by 2013 and now has 275, Garrett says.

Garrett charges $11,500 for the first year (the cost drops to $200 a month in subsequent years), which was "out of the question" for someone like Roberge, he says.


Garrett says she coached Moore when he was still a planner in her network, after he told her he planned to start a network devoted to Millennials and Gen Xers – only to get a surprise when she read the press release announcing the new network's launch.

"It was clear that this was not the complementary thing Alan had discussed with me and received my coaching on, but rather fairly competitive," Garrett says.

Moore acknowledges he received "really valuable" coaching from Garrett who, he says, shared with him some of the mistakes she made while building Garrett. But, he adds, "I'm surprised that she would say that we launched a competitive platform because we are so vastly different."

Garrett's upfront costs speak to the fact that it tends to attract older mid-career professionals with savings to invest, says Moore, who took out a personal loan to fund his Garrett membership. By contrast, XY tries to be accessible to advisors just launching their careers. And whereas the Garrett network secures discounts on a wide menu of technology and compliance products, XY set up its own technology platform and handles compliance for its advisors.

"We went the Apple way," with proprietary offerings, Moore says. "They went the Google route and said, 'We will just integrate with everybody.' I don't think one was right or wrong."

Garrett does think the market needs more, not fewer, networks like hers, XY or the Alliance of Comprehensive Planners founded by Bert Whitehead.

"All three organizations attempt to provide a very close-knit, intimate, professional peer support network for fee-only solos and small planning firms," she says. "We are all very similar in the general concept of what it is we do. However each organization has some core themes, focus areas and member benefits that differentiate each from the other."


Kitces wouldn't be surprised if the market evolved to include hundreds of networks like XY and Garrett. "The market is just so ludicrously open and untapped," Kitces says. "We have 200 advisors and there are 80 million millennials."

Not that breaking into the field is necessarily easy for every advisor.

Brent Dickerson, a sole proprietor with Trinity Wealth Management of Lubbock, Texas, has been with XY Network for three months. Thus far, he says, he's only had two clients, but only for one-time engagements and no monthly fee.

Since starting in the industry in 2007, Dickerson says he moved between firms and even left planning for a rough stint teaching high school for a year. Back in planning, he's hoping he can continue to pay for XY.

"The community is just unbelievably helpful," says Dickerson, who holds a master's degree in financial planning from Texas Tech. "I needed help with lots of different things like marketing…. I'm going to stick with it as long as I can."

Pam Horack, of Pathfinder Planning in Lake Wylie, South Carolina, also serves a small client book, but by choice. She currently works with 10 monthly retainer clients, taking the occasional hourly engagement. Keeping her practice manageable is important while she raises her children, she says.


After founding her firm in 2010, Horack says she jumped at the chance to join XY when it launched.

"The biggest benefit that I've gotten out of this is now I have co-workers," she says. "Now I have this whole group who are doing the same type of thing I am."

Horack was among the 170 members who attended the network's first-ever conference, which sold out, in September in Charlotte, and says she came away galvanized. "I kind of got dubbed 'mom' because I'm a little bit older," Horack says.

Since the conference she began branding herself as, "Your financial mom" on her website.

While the median age of XY advisors is 36, the network does have a handful of older advisors, including one who is 72, Kitces says.

"We like to say young at heart," he adds.

Membership in the network is evenly split between established firms and advisors who are using XY to launch their practices, Kitces says.

Abacus Wealth Partners, a Santa Monica, Calif., firm with $1.35 billion in assets under management and a strong middle-class clientele joined XY, Moore says, to learn how to profitability serve younger clients.

Shortly before XY hits its newest landmark this month when it signs its 200th advisor, Roberge says his practice hit one of its own.


"I left J.P. Morgan at 27 years old and my income dropped back to nothing," he says. "This past year in 2015, I surpassed what I was making at J.P. Morgan, so that was huge for me. The upward trajectory is very good for 2016."

Furthermore he gets to ride that growth curve, while setting his own hours and serving the population he wants to.

"I'm fully in control of my life right now," he says, adding, "I have the opportunity to help people set up a financial plan that is going to make them successful in the long term, unlike the Baby Boomers, who are playing catch-up because they were never taught the right things to do."

When it comes to attracting new clients, Roberge says he finds referrals come easily, given that few advisors serve younger clients.

"The cool thing about having your own company that is focused on younger professionals is that it's an anomaly," he says. "They remember me because I am the only person they've ever met who does this."

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