In 2013, in the early days of Compass (what today has become a $6B real estate tech platform), we believed that the best way to deliver a better home discovery process was an integrated technology solution that would replace the role of the traditional agent.
However, what we quickly discovered after launching was that we had misunderstood the value that a talented and experienced agent could add to the offering. Clients did want better tech, but they wanted it to work alongside human experts who had worked for years on transactions like theirs.
A few years ago, in the ideation phase of Harness Wealth, we knew we wanted to create a next generation financial platform for the next generation of builders: founders, early employees, business owners, and investors. I was able to transfer some learnings from the early and late stage developments at Compass to this new context.
Human Advising + Technology = Better Client Experience
What does wealth management have in common with real estate? And consequently, do these similarities lead to the conclusion that Harness clients are also better served by human advisors alongside tech?
- High value, high risk transactions: Any missed considerations can be expensive in opportunity cost or even expose the client to legal risk.
- Increasing specialization of client needs: As clients have new, unique needs that differ from historical precedent (equity ownership, alternative assets and direct investments, family considerations, and new industries, etc.), the expertise of specific advisors who have familiarity with niche or specialty experiences becomes even more critical.
- The importance of interpersonal skills: As part of an ongoing professional relationship that can last for years or decades, clients want to be able to feel comfortable providing personal background information and explaining their financial goals and concerns. Advisors often have to coordinate with multiple other vendors and family members for one client, and management skills are key.
Partnering with Firms Across Financial, Tax, and Estate Planning
There are other, competing or related services on the market that exclusively hire their own salaried advisors, particularly for the financial advisor segment. We chose specifically not to do this for Harness Wealth for several reasons:
1) Comprehensive services across three verticals: We ambitiously launched with not only one advisory vertical, but three (financial, tax, and trust & estate), which meant we needed several top advisors of all three types across historically fragmented industries, right from the start. This would have been time consuming to do internally while guaranteeing high quality, and going external helped us take full advantage of existing, traditional firms with strong track records in all three verticals.
2) Appealing to top advisors at top firms: We wanted to ensure we could bring on the absolute best advisors for our clients onto the platform, starting from day one. Commencing with a highly curated marketplace model would allow that immediately. Even the best firms had the ability to grow their base of clients by partnering with Harness and saw an elite platform like ours as highly compelling.
3) Ability to service diverse client needs: We did not want a cookie-cutter approach: we launched with broad geographic coverage, expertise across demographics and industries, and experience with unique client situations. In an industry that often under-services many groups that don’t fit the traditional “wealth” profile, we are confidently be able to meet their needs with our firms.
4) Multiple price points: We sought to have a variety of fee structures and levels to be able to serve individuals across the wealth spectrum, and having firms offer their own existing fee structures made this possible in a way that matches market supply and demand.
5) Aligned incentives and ongoing quality control: We can maintain and encourage high standards for our advisors, both at the point of initial rigorous advisor diligence when they are accepted onto the platform, and on a continuous basis with regular vetting and use of ongoing client feedback. For example, our financial advisory firms are required to be registered with the SEC and act as fiduciaries, so that they are driven by acting in the best interests of clients and not commission-based on selling certain products.
Harness Tax: Modernizing the Tax Experience
Across our interactions with firms and clients, we’ve learned that tax is a particularly unique industry, and wanted to adjust our marketplace model accordingly. The best way to do this was to launch Harness Tax.
What’s different about tax and why do we need an in-house brand in addition to the other firms on our marketplace?
- Access to specialty tax services: We found that the vast majority of established tax firms had less flexible business models that made it difficult for clients looking for one-off expert consultations that fell outside of annual filing or ongoing planning services.This is a gap for one of our most popular client needs, which is one-off consultations on equity decisions right before and after a liquidity event.
- Tech experience: Our goal from day one has been to build an end-to-end digital platform that made Harness clients’ experience in both discovering and collaborating with advisors seamless. We saw an opportunity on the tax side to begin investing more deeply in the digitization of the tax workflow to create that experience for a traditionally very paperwork-heavy industry.
- Tools and insights: Harness is developing some of the most sophisticated tools for analyzing the tax implications of financial planning for equity and wanted to develop those in conjunction with leading tax professionals on our core team.
- Tax market gap: There are several large, brand name firms that have high minimum fees, which can be a good fit if you have ongoing, high complexity tax needs, but they have limited flexibility in how they serve clients. We are seeking to deliver the expertise of big firms with more dynamic services that result in lower fees, so that discerning clients don’t have to feel like they’re stuck between choosing between two extremes: TurboTax (affordability) vs. big tax firms (expertise).
- Servicing and efficiency: Highly skilled tax professionals go through annual periods of extremely heavy workloads during tax season as they manage not only work that requires true tax expertise but a variety of client-facing and back office work. We’re pushing for a change in the tax servicing model to smooth out the “spikiness” of service availability throughout the year to improve client experience, accessibility to the top tax experts, and the job satisfaction of CPAs so they can do their best work.
We continue to maintain and grow an extensive set of external tax advisors as well to be able to provide global coverage and comprehensive expertise. Having the dynamic combination of external and in-house tax advisors on our platform allows us to achieve a unique level of quality, diversity and breadth relative to any competitor or any incumbent.
We have been excited by the success of our model with clients so far. As the business continues to grow, we’re able to continue to develop quickly due to this marketplace model.
Feedback from both sides of the market, the size of our user base, and changing industry landscapes all continue to influence how we adjust the services, tools, and supply of firms we offer to our clients.