Building a High-Value Marketplace: Why Harness Wealth Partners with External Advisors
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.
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 external 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.
There are other, competing or related services on the market that hire their own 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. Starting with a highly curated marketplace model would allow that immediately, whereas demanding all advisors we wanted to work with join us would mean that we’d certainly lose access to several top advisors who were unwilling to leave their firms. Additionally, 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 wanted to launch 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 could 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 real, 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.
Ultimately, having external advisors on our platform allows us to achieve a unique level of quality, diversity and breadth relative to any competitor or and 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.