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Students vs. Startups Ep. 15: How to get away from fee-based financial services

Students vs. Startups Ep. 15: How to get away from fee-based financial services


Featuring Plynty

Welcome to episode 15 of Students vs. Startups. This week, moderator John Gilroy learns about the newest way to save and plan for retirement, with Plynty. President, Dennis Hooks describes the lofty goals for Plynty, and the importance of using data to plan for the future.

[audio src="https://easternfoundry.files.wordpress.com/2017/02/students_vs_startups_podcast_episode_15-final.mp3"][/audio]

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John Gilroy: Welcome to Students Versus StartUps showdown in the Potomac. My name's John Gilroy, and I'll be your moderator today. Well, Claude, we just finished 14 episodes. This is episode number 15, and I've gotten a lot of feedback from everyone in the United States. What most people say is they're amazed that people would sit in the same room as me for half hour, so let's have a round of applause for everyone in this room here.

Actually, what the feedback has been is that they love the opening with that 1940's radio voice, but then when I get on, they tell me that I sound like a fake radio voice, and I should sound more like a podcast guy instead of an NPR guy.

So what I'm going to try and do is, I'm trying to loosen up and get a little iced tea here and try to make it a little softer and more podcast-y. I guess podcasting means making mistakes. What I'm going to do is I'm going to try and make some mistakes and change and move. In the software world, it's called an iterative approach, isn't it, Chris?

Yes, it is, so we're going to iterate and see what kind of feedback we get from this. If they hate this, we'll go back to the old stodgy John Gilroy doing his radio impression voice like it was before.

Chris Ajira: Agile is a movement going on . . .

John Gilroy: We are sitting in a room in Rosslyn, Virginia, off the Potomac River, and we're in a community called the Eastern Foundry. They have 95 startups here. I thought this would be a good place to have students meet up with startups.


img_8362 Chris Ajira, Dilma, Chris Davis


What we normally do is, we have three students and the startups sitting across from them. They ask some questions, we take a break, they ask some more questions, and we close out the podcast. It should last about 26 minutes.

If we had a television camera here, you'd see to my left we have three students. We have Chris Ajiri. Chris, tell us about your background and how you wound up at Georgetown.

Chris Ajiri: Currently I work as an auditor. I work at Freddie Mac. Currently I'm in the audit space doing data analytics work. Georgetown was a program that Freddie Mac and Georgetown partnered together, so I had the opportunity to do my master's degree.

John Gilroy: I have to warn you that he's trying to get an MA, which is another letter after his name. He already has CIA, CISA, PMP, CFE. You need two business cards, don't you Chris?

Chris Ajiri: Well, I was trying to look more presentable and also give some reputation to my name, so as an auditor, those are a lot of audit-related certifications that I have.

John Gilroy: You're trying to fool people, aren't you? We know, we know exactly what you're doing. Dilma, you're a candidate for master's degree in technology management in the School for Continuing Studies of Georgetown. Tell us about your background, how you wound up at Georgetown, please.

Dilma: Hello, everyone. Yes, I've been in the technical field for a few years now. Currently I manage the client and technical support for the Association of American Medical Colleges, and Georgetown happened to be just a block from where I work.

John Gilroy: That's pretty convenient.

Dilma: Very convenient. I'm enjoying the program because I am looking forward to continue learning about new technologies and building networks to see what other colleagues in my field are doing and just to make sure that I am up to date with technologies.

John Gilroy: Our third student is also another Chris. His name is Chris Davis. Tell us about your background and how you wound up here, please, Chris.

Chris Davis: I've been working at Georgetown University for quite a few years in the IT department. I'm a support account manager in our university information services group, and the technology management program at SCS was a natural fit. I'm hoping to actually after working in IT for quite a few years, I actually have been making connections with some more professional people from outside the Georgetown ecosystem. I'm hoping that's going to help my professional growth going forward.

John Gilroy: Well, ladies and gentleman, there's an outsider right across the table fromplynty you. His name is Dennis Hooks, and he is with an organization called Plynty, I think you pronounce it. For some reason, they have an aversion to vowels. It's Plynty. Dennis, tell us about your background, and your affiliation with this company please.

Dennis Hooks: I spent the first 17 or 18 years of my career in the large corporate financial services area. Head of retail for a large regional bank, head of marketing for another one, and during that time, introduced a lot of services around financial advice, financial planning, insurance, brokerage, and all the electronic services, electronic banking. I felt at the time when I was on the client side, I thought it was interesting how basically ignorant you are when you're on the client side about what's happening to the customer.

We all try to practice great customer service, but we really didn't think about the impact fees would have or the lack of training that our brokers would have in terms of talking to the client. When I got out of the industry for a while and was on the entrepreneurial side, I've done several startups, it became more apparent to me.

We did a financial planning product back in the heyday of the internet, and it was very expensive to do back then. We sold it to Ameritrade and basically got out of it. I always wanted to do it again with better technology, and that's why we started Plynty.


img_8322 Dennis Hooks, President of Plynty


John Gilroy: You also have an MBA, so we know Chris is jealous of that degree.

I ask this question to everyone, so I might as well be just direct with you, so what business problem does your company solve?

 "Our product is targeted at the person who doesn't have the assets to get a fee-based financial planner."-Dennis Hooks, President of Plynty

They're not going to spend $2000 to go get an independent financial plan. They're going to get poor advice from the banks or the brokerage firms they use because they don't have the assets to get the best talent. They usually get poor advice and poor guidance.

You can say our retirement planning focuses on the mass market, also, for the less MBA types, it's for the average Joe.

John Gilroy: Great. We don't have an average Joe. We have an average Chris over here, Chris Davis. Do you want to ask the first question please, Chris?

Chris Davis: I'm actually curious. How are you actually targeting people? Are you going strictly after individuals on an individual basis or are you trying to leverage employers as a marketing channel to get to people? Is that your target or not?

Dennis Hooks: In the interest of full disclosure, we're in an early beta. We're about a month into it. We have a business plan about who we're targeting, but I can't speak in terms of I've gone after this market and this is the response rate I got and this is the plan closure. The answer is because of the way we're funded, we're funded by one company. It's the only way I could build this product because the person gave me the latitude to take the time to build it correctly and the financial backing. I don't have a venture firm breathing down my back, but I also don't have the marketing capital a venture firm would give you. For example, competitors in my space are spending several hundred million on marketing, and we just don't have that. Where with also what we're doing now is building up an audience for usage statistics and understanding, so we have a nice audience right now.

For example, I can tell you that for every person that downloads the plan, you know, about 26% will complete it, which is by the way, an unheard of statistic in our industry. I was hoping for 5%. With those statistics, we're trying to get enough on each channel whether it's an insurance community, the internet, social media, email, various lists. We're in the middle of figuring that out now.

John Gilroy: If you're listening, you can go to plynty.com to actually see it. It's a nice little website. Very web-friendly and mobile-friendly, isn't it?

Dennis Hooks: Yes, it is a mobile app. Right now we're not ... The reason we did it mobile first is obviously the trends, but also the goal was to make the plan as easy as possible to use. If you can do it in mobile, it's going to be easy to use.

John Gilroy: PMP Chris?

Chris Ajira: My question is not going to be as complicated as Chris Davis's question. I just was interested in the name. How did you come up with the name?


img_8298 Chris Ajira


Dennis Hooks: I can answer this by describing the problem in the industry for us and then how we tried to solve it. What happens with people when they do a financial plan is that they hate it. It's a very cumbersome process. About probably 95% of people that finish a financial plan in the traditional sense are going to get bad news. They go tell their neighbors, and the whole thing gets so much like going to the dentist.

The whole purpose of our planning process is to get someone through retirement. We wanted to create a positive image that you can do this, and there's a lot of resources for you and Social Security is a nice pension plan whether or not you understand that and how to leverage those resources. The name is kind of a play on you can have plenty for retirement.

John Gilroy: Dilma, do you have any questions?

Dilma: I see myself as a potential client of your product.

Dennis Hooks: Great.

Dilma: I've been in the shoes of those customers that you just described. I tried a bank. I tried different companies like Ameritrade or others, but I've seen that they are working for themselves and barely the plan that they work for me I was not trained or educated to understand in full. If I become a customer of yours, what should I be able to do now that I have not been able to do with these other products that I've tried before?

Dennis Hooks: I really think that's a great question. I like the way you phrased it because first of all ... Do we have time for me to give an example? A quick one. In a traditional financial plan, somebody makes $50,000 a year. They have $50,000 in assets and say they're 50 years old. That plan is going to tell them to save 250,000 more dollars by the time they turn 65. That's a nice little scenario we've run in our planning process.

Our plan takes the same set of circumstances, but presents your 65-year-old budget as a monthly cashflow. You're looking at, what is my monthly budget in retirement? When you look at it that way, you'll see that Social Security covers 65% of your retirement. Instead of having the concept that I need to save 250,000 more dollars, it's a concept of, okay, I'm almost there. Do I need to get a part-time job? Can I save $50,000? Or should I buy an annuity or how can I close the cashflow gap?

It's focused on making it more relatable. The second thing you get from us that you don't get from other services is we're patent pending on this process. We took an exhaustive study of the Department of Labor data. You won't believe what's in there, but one of the things that's in there is a huge database of people that are in your income range now. When they retire, here's what they spend. Rather than have you guess what you're going to spend on retirement, this database allows us to prefill your plan with what people in your income bracket are spending in retirement. That's very helpful when it comes to healthcare and those type of expenses.

You can also see a lot of people reduce their mortgages, and so the old guidelines of like an 80/20, you need 80% of your income in retirement, you don't. I mean, you can. It's nice, but you can do a lot of things with your planning process to reduce those expenses and that's what we focus on that you're not going to get from Ameritrade, Schwab, or any other companies you mentioned.

John Gilroy: Dennis, good job. Students, good job. Take a little break here and come back with more questions for you.


img_8379 Chris Davis


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Welcome back to Students Versus Startups, Showdown on the Potomac.

Well, you already know our students. We have PMP Chris, we have Dilma, and Chris Davis. We've had the conversation about financing and managing financing with Dennis Hooks. His company is plynty.com. I am going to turn to my friend Chris here and ask the first question starting off the second segment.

Chris Ajira: Yes, Dennis. I'm just curious about the demographics, you know, of your target audience in terms of age and can you explain to him?

Dennis Hooks: I'm glad to. It's an evolving process, but right now the product in beta is a retirement planning product. That's going to push you out to the 40, maybe 35-40 age group and up. After doing a lot of focus group research, we've decided that men think that they know how to beat the market, and they know how to do this stuff. Even though we're a bunch of old guys on the site, we do have a lot of women working on the team. They just didn't want to have their picture taken for whatever reason.

"We're thinking our audience would be about 75% female."- Dennis Hooks, President of Plynty

If we look at the stuff we're getting on the beta, we haven't done the demographic matches on who completed the plan, but we all got bets based on what those percentages fall out to be.

John Gilroy: Dilma, you have to jump in here. You're the woman in the room.

Dilma: Sure, why not. Given that your product is in the beta phase, what challenges do you see in the next coming 6 months?


img_8304 Dilma


Dennis Hooks: I've got two challenges. That's a great question. The first one is just getting enough people through the process and having a plan people complete. The metric I'm looking at, I'm solely focused on is that completion rate. If I keep a plan that is designed and people finish it 25% of the time, which is what we're running right now, I've got an absolute home run because no one's doing that. They have this huge funnel for financial planning, and a company that sold recently in the news had a huge amount of money behind it. They had 2 million plans. They had 10,000 financial planning customers. So just to give you a feel.

My planning process is briefer. It's easier to complete, but I think the information is just as valuable. The one metric I'm looking at right now is that completion metric.

John Gilroy: Chris Davis, any questions?

Dennis Hooks: I said there was two, I'm sorry. The second one is we're looking at the areas of response. What are the demographics around the people completing the plans? What are their assets? We're buying a bunch of different test markets that have millennials in it, people with money, people without money, etc. We're just trying to build up a basic marketing plan which was the question you asked at the start, Chris.

John Gilroy: Yeah. That's good.

Chris Davis, are you one of those without money or with a lot of money? Which one are you?

Chris Davis.: I'm somewhere in the middle, but that leads me to another basic question. You're a new business. Where is your money going to come from? Who are you targeting for revenue?

Dennis Hooks: That goes back the question I didn't fully answer the first time you asked it, Chris, which was we're building out these target markets and understanding on the consumer side. We're also working with several partners that have been waiting for our plan to be finished on the insurance, banking, and affinity group side. We have distribution partners that are waiting for the plan to be finished. I've actually got enough distribution right now I think I'd like to get the plan in their hands to see how it works before getting in an airplane to start flying around the country.


img_8327 Dennis Hooks


The plan is designed to be useful for these institutions to see the products that they need to sell at a lower cost which in a B2B market and I expect to be paid technology fees for that. That will fund money to go more thoroughly after the consumer market, which is why I'm doing all these tests now.

Chris Davis: Did I accurately hear that your integrated Plynty app will be the opportunity to actually buy investment products or buy into investment products?

Dennis Hooks: Let's say I go to a bank with a brokerage firm. They would supply that section of the product. If I didn't like that section of the product because of their fees or whatever, they would also supply the Plynty ... They would have their logo and their colors and all that. I would be a technology provider in that case.

Chris Davis: How does the ongoing rule about the implementation in the fiduciary role actually impact you or not impact you?

Dennis Hooks: It impacts us in an awesomely positive way. We're designed to support that rule. Everything we do, we would do without the fiduciary standard, but that helps us in two ways. One is it cleans up a lot of what's going on in the marketplace, but not all of it. It gives us a favorable environment to market in because when we can have a fiduciary standard that we easily meet, it's good.

The second thing it does though, and this is much bigger, is the large financial services companies are having a hard time meeting that fiduciary standard, and they are particularly having a hard time meeting it in the mass market where their level of training is relatively low, their turnover is high, and their fees are high.

I've designed the app to be able to fit in there and answer a lot of these questions for the customer and let them meet that standard. That's my ambition.

John Gilroy: . . . PMP Chris?

Chris Ajira: I know you already talked about differentiating yourself between the bigger investment firms that charge a lot of fees. In this space, do you have any competition in terms of people or companies that are currently doing this type of ... that have the same strategy?

Dennis Hooks: We started this, yes. The short answer is yes. I will give you guys a couple statistics. We started this about 3 years ago and have been through several iterations to get this right, the way we like it. We also had, compared to our competitors, relatively limited capital, so the amount we could invest in technology stretched the timeframe out. Since I started with Plynty, a little over 600 million dollars has flown into this space, specifically with internet startups that do financial advice. Yeah, we have quite a bit of competition.

John Gilroy: Wow. Interesting. Chris Davis?

Chris Davis: I can ask, so what is the magic behind this app? What are the mechanics? I'm assuming not everybody who enters their information has that going to a dedicated financial planner who's going to sit there and crunch the numbers. Do you have algorithms?


img_8346 Chris Davis


Dennis Hooks: Yes, it's all algorithms. We have a really experienced ... We have three people that have been financial planners at one time or another. We have a registered investment advisor with 30 years of experience. Then we have our mathematician and investment advisor by the name of Michael Edesess that is locally you will be seeing him because he has just been ... Michelle Singletary appointed him to be on her financial planner for her article.

John Gilroy: In the Washington Post?

Dennis Hooks: Yeah, from the Washington Post. He has also been appointed on the Wall Street Journal panel. A very well-known guy. You can read about his resume on the internet. With our technology people, we've built a bunch of algorithms around a financial plan. I mentioned earlier the prefilled data sources. We're using models on what your financial income will be based upon a lot of labor statistics and a lot of models around your Social Security and what your estimate is going to be, what your income is going to be so you don't have to go and look it up if you're not willing to do that. A lot of analytics is underneath. The plan looks simple. It's easy to use, but there's a lot of analytics under it.

John Gilroy: Dilma, do you have any questions?

Dilma: How long do you think it will be before someone will offer to buy your company?

Dennis Hooks: That's interesting. The parent company, AEM Corp, is owned by Sharon deMonsabert. I don't know how many times someone has tried to buy her company, but she's been saying no for 30 years, as far as I know.

"She's very much behind this mission to bring financial advice to everybody that is useful, meaningful, and honest."- Dennis Hooks, President of Plynty

John Gilroy: She has a reputation for being very generous in this community.

Dennis Hooks: Yeah.

John Gilroy: This is the altruistic spirit behind this, which I think it is, isn’t it?

Dennis Hooks: Yeah. As we service consumers, yes. We're trying to do the lowest cost possible, best advice possible, for as long as possible.

Chris Ajira: Just to add on, in the next 5-10 years, what is your long-term strategy? Where do you see yourself in this space?

Dennis Hooks: In 10 years, I expect that we'll be a nice, big division of Plynty, I mean, excuse me, AEM Corp, and paying the company back for the investments they've made and being innovative in terms of the financial advice space. I know one of our engineers is onto the next idea which is using ... I guess I shouldn't say.

John Gilroy: You'll get in trouble here, huh?

Dennis Hooks: We think we were ahead on the mobile curve. It was frankly a pain in the rear end to do it this way, but we think we have a working mobile financial planning app, and if you look at our competition, you won't see that. I just want to be the most innovative financial advice company, and I don't anticipate selling. I just anticipate grinding this out. I would not have gone the way I went with the concept of selling the company because that's what is destroying the value that you see with the competition.

The combination of technology and venture funding, most of our competitors have switched to pricing model by now, and they're jacking up their prices. We don't want to do that.

John Gilroy: Mr. Davis?

Chris Davis: How long does it actually take somebody to actually complete ... Sorry, it's sounding kind of like a TurboTax type questionnaire, to gather the information you need to crunch the numbers and generate a plan for somebody. How long does it take your average person to get all that data put into the app?

Dennis Hooks: It is exactly what it is. TurboTax is a good comparison. I think if you know what you're doing. Like I don't have  . . . I have some complicated financials, but they're not that complicated, I can do it in 5 minutes.

Chris Davis: Wow.

Dennis Hooks: Yeah.

Chris Davis: I assume you're hoping that this company is going to be around for years and years to come and everybody in this field that used the mobile app forever and ever. How does somebody take that information after they put in the time to get this plan created, take that information ... Can you get it out of the app if for some reason somebody decides that Plynty is no longer the right thing for doing my management and we're going to swear off smart phones, how does somebody can somebody port that data out and have a paper plan, for example?

Dennis Hooks: We have not gotten that far. I'll be real honest with you. I like that question though because I'm going to have to take notes on it.


img_8337 Dennis Hooks


The problem with the way it would work is we wouldn't update it. The value of the app is when we're analyzing your funds and your fees and we're monitoring where you are in your retirement plan, it's always being updated. Any enhancements that are going into the app because we have a development schedule through the summer, you get the advantage of that. I would think if we shut down, you wouldn't get those updates, but I don't see why we would just pull the app out.

It's a great question because we need to finalize that. I knew I'd learn something today.

John Gilroy: Quick 1 minute question?

Chris Ajiri: I went on the website, and I saw a couple of the blocks that are constantly being updated. How is that driving your business in terms of  . . Is the website right now just for informational basis or are you converting ... are you able to convert customers by the information that is being offered?

Dennis Hooks: It's a soft sell, as you've noticed. The funnel right now is working really well though. About 11-12% of people that go to the website will download the plan, and about 26% of the people that download the plan will finish it, which we love that. If we can keep that up, we've got a consumer business. We don't even have to worry about the B2B.

John Gilroy: Great job, students. Great job, Dennis.

Dennis, if people listening want more information, what website would they go to?

Dennis Hooks: Plynty.com.

John Gilroy: We're running out of time here. I'd like to thank our founding sponsor, the Radiant Group, our host, Eastern Foundry, and our monthly sponsor, Nutanix. Signing off from high atop a nondescript building in lovely downtown Rosslyn, Virginia, I'm John Gilroy. Follow me on Twitter @RayGilray, and thanks for listening to Students Versus Startups, Showdown on the Potomac.