Jack Sharry: Hello, everyone. Thank you for joining us on this week’s WealthTech on Deck podcast. One of things I love about our business is how many smart thoughtful people there are, who have committed themselves to helping consumers enjoy a better experience and improve financial outcomes, while at the same time helping advisors and firms deliver on what consumers want and need, and don’t always know how to get or ask for. So today we’re gonna talk with someone I have known and respected for many, many years. Laura Varas is the founder and CEO of Hearts & Wallets. Hearts & Wallets tracks consumer and competitive buying patterns for the saving and investing industry in the US. I’ll let Laura fill you in on the depth of the research her firm provides to some of the leading wealth and asset management firms in our industry. Laura, my friend, welcome to WealthTech on Deck.

Laura Varas: Thank you very much, Jack.

Jack Sharry: Good to have you here. So let’s start with a high level description of Hearts & Wallets. Who do you serve? What do you research? How does this all play out for your clients and their clients and prospective clients?

Laura Varas: Great. Well, again, thank you so much for having me here. It’s great to be here. So Hearts & Wallets is the independent data and benchmarking company that specializes in saving, investing, and financial advice. And how it plays out for our clients is that leading firms use our resources to grow faster in their wealth, retirement, banking, investing, insurance, since we kind of look at it from the household’s perspective, there’s lots of ways into the household finances. So it applies to many business units. And they achieve growth by using our data to make things that people want. And that advisors like to use.

Jack Sharry: Terrific. So let’s go a little deeper. What are you especially excited about in your current work? I know you have looked at every which way but loose around all this kind of stuff. So there’s always stuff that I know you’re interested and excited about pursuing. So can you provide some examples of your work and the kind of results you produce for your clients? Because I know you do some really important work for some of the biggest names in our business.

Laura Varas: Well, I’m excited about a bunch of things. As you know, I’m always excited a lot as are you. And you ask about what I’m excited about, and then also how it helps our clients. So I might start with that first, because that’s what we’re going for, right? We want to be able to help our clients grow. And we’re super proud of the fact that that, it seems to be working hard. Hearts & Wallets trends subscribers are actually twice as likely to be in net positive flows, than the remaining top 80 firms. And so that’s what we’re going for. So I’ll come back to what I’m excited about the two things, but first, how we help our clients grow. Every firm’s competitive position and objectives are different. So there’s lots of stories. But I think the three that come to mind first are a firm that recently passed a trillion in assets under administration said that over the 10+ years that they’ve been subscribing to our trends research, they wouldn’t have made the same progress without H & W. And I’m really proud of that. It’s always difficult to be able to pinpoint exactly what attributes… what contributes to what, but the fact that they think that was part of their recipe really means a lot to me. Another example is a firm that was focusing on the wealth management grew their market share in four years, right, these things take tons of time, as you know, in four years they grew their market share among households with a million dollars or more, there’s 11 million of those households and their assets share is up 50% in four years. And then there’s personal things too like, one thing I love is about eight years ago, there was a marketing manager at a very large bank, who saw in our research that build up my emergency fund is a bigger need than making IRA contributions. And this person revamped their campaign, knocked the ball out of the park with great flows and actually got a promotion from it. So it’s really cool to be able to help companies and the individuals working at their companies succeed with their objectives. And that’s, that’s very exciting to me, in terms of how we help our clients, so I don’t know if you want me to stop here and keep going with the two things.

Jack Sharry: No, no, those are great. I’m gonna ask a intervening question. So I’m not at all surprised, I’m familiar with your research, have been for, I hate to say it, decades, so I know that the quality of the work. Maybe for our audience who you know, they see all sorts of research and “research smee-search,” I don’t know if there’s such a word, but, you know, it’s all the same, right? It’s a commodity, what’s the big deal? But your insights are not that. You are… it’s incisive is I guess the best way to describe it. So maybe for our audience that may not be familiar what high quality research looks like in our space, talk a little bit about if you would, describe that… those insights that you’re able to generate, help people make better use of what it is that you offer.

Laura Varas: There’s a couple of ways to think about that. I mean, I think the most important is that, in order to do great research, you actually have to know what you should be measuring. So, you know, having had positions of increasing responsibility, starting in strategy, consulting, and then packaged goods, and then most of my career in finance and in banking and investing at Citibank and Fidelity, but you figure out what to measure when you know it from the inside. So that’s part of what leads to great research. And I appreciate that you say that the research is great. Thank you for that, Jack.

Jack Sharry: Well it is. It’s easy.

Laura Varas: It always amazes me that our industry is so analytical about so many things, right? We track alpha, we track data, we’re looking for performance attribution, we’re accurate in transferring millions of dollars, rolling things in kind, which share classes. It’s so precise, but we tolerate utter nonsense when it comes to consumer and competitive buying patterns.

Jack Sharry: Yes.

Laura Varas: Right. And so I mean, that’s where I got the idea for starting Hearts & Wallets, because in consumer packaged goods, you have a lot of data at your fingertips, right? You’re using Nielsen, you’re using MRI, you know, you’re not making decisions in a vacuum, you know, exactly who’s buying what, where, at what price. And so that’s what I wanted to build for our industry so that our wonderfully analytical industry would have good data to base really important capital allocation decisions on. I recently saw a stat, Jack, where it said $68 trillion is going to change hands in the wealth transfer. Now, our firm has calculated from bottoms up that it’s going to be closer to 17, say in the next five to 10 years, trillion. But you could know right away that 68 is a ridiculous number, because 68 is the total market. And there’s absolutely no way that all, you know, 120+ million households would change all their money in five years. So I don’t understand why our industry tolerates bad research in terms of consumer and competitive buying patterns.

Jack Sharry: Well, we’re piling on here, of course, we will exclude your clients because they were smart enough to hire you. But I make the same observation of what, what you do with the research was namely how you package, position, market. Our industry is not known for its… certainly it’s like places you’ve worked like Colgate and Fidelity and some others that make a science of marketing and science of research. Talk a little about that, because that’s what you do. And frankly, very few, as you well know, I’m paying attention all the time to who’s doing what well. And you do that and I don’t see too many others that do, so talk about that. How is it that you take that research? And then how does that then translate into action where you help consumers get better outcomes, you help firms get better results, talk a little bit about that process, that dynamic?

Laura Varas: Well, I think you hit the nail on the head when you talk about the five P’s: position, place, pricing, persona, whether there’s four or five, you know, I went to Kellogg, you can go either way. But at the end of the day, you’ve got to make things that solve actual problems in the ways that the people that you’re trying to help want them to be solved. And you look at this tens of thousands of investment solutions. And frankly, also thousands of different advice experiences out there. And an awful lot of them don’t solve a problem that a consumer household or an advisor has. And there are a lot like $15 bottles of Merlot. The world does not need another $15 bottle of Merlot, there’s plenty of those. The world does not need another mid cap value fund, right? Being able to frame your solutions in terms of actual problems and position and price them in a way that makes sense enables people to buy them and your distribution partners to sell them more effectively.

Jack Sharry: Interesting. So let’s talk a little bit more. Let’s dig in here a little bit more. This is fun. So one of things I’m observing is you and I have been around long enough to know the old mutual fund days and that evolved into SMAs. And, oh, who knows ETFs and UMAs and all the different ways that we could put initials together to confuse the marketplace, our consumers for sure. But over time, product by itself is insufficient. Not that you don’t need them, you do I guess, but it’s not the point anymore. It seems to be much more about how you put it together, how you put together what clients can and should do around saving for retirement, saving for their goals and objectives around education or whatever there, there might be. Or people who are retired about how they’re going to pass on to to family members? So I know you work in all these different ways. Talk a little bit about what the trends that you’re seeing around that, because it seems to me, we’re moving much more toward a solution orientation as opposed to a pure product play.

Laura Varas: Right. And I think a lot of the work that you’ve been doing, you know, has been on the forefront of this, but absolutely. Again, going to the bottle of Merlot, right, a bottle of Merlot by itself doesn’t make any sense, right? It’s in the context of the meal. And so this is why customer advice experiences are really essential to helping households achieve better outcomes, which is really… when it’s done well, finance is a helping profession. We’re trying to help them achieve better outcomes. We’re trying to make money along the way, and there’s nothing wrong with that. And nothing is free, right? There’s no such thing as a free lunch. So nothing should be free. Cash drag, and some of these other, you know, pricing mechanisms, obscure the economics of how products get delivered, and that hurts trust, right, our research shows that the number one driver of trust is an understanding of how the firm’s sponsoring the solution makes money, right. It’s not anything in terms of whether it’s high priced or low priced, maybe low prices helps a little bit on trust, but not nearly as much, it’s just understanding that. So to your point about advice, and, and putting these solutions in the context, that’s actually one of the two things I’m most excited about is a framework…

Jack Sharry: Sure.

Laura Varas: For understanding all of the different options for advice, and we can talk more about that.

Jack Sharry: Yeah, please, because we skipped over the stuff you’re excited about. And I had a hunch it was in this realm. So, so please tell us more.

Laura Varas: Yeah, one of the two things I’m most excited about is something that we’ve been working on for over 10 years. And it’s a framework for understanding all of the different options that are out there to get help with one’s money. And eventually, it will be important for consumers to understand this. But at the moment, the people who most need to understand it are those of us who develop advice solutions, right? We hear often though, you know, “Let me see a competitive set, but I only want to see RIAs,” or “Let me see a competitive set, but I only want to see managed accounts through the workplace.” Okay, our data can handle those requests. But that’s not the competitive landscape.

Jack Sharry: Sure.

Laura Varas: The competitive landscape is new entrants coming in with new ideas. It’s big firms who are consolidating and have deep pockets for marketing and tech. And so what this framework does, is it makes it as easy to choose among solutions as different as a robo, to a full service advisor, to a workplace coaching, as it is to choose a car. Right. And I can tell you a little bit more about how financial advice connects to cars, if you want to talk about that.

Jack Sharry: Yeah, yeah. Please, please.

Laura Varas: So the Morningstar style box, you know, really revolutionized choice of investment products back in the day, when I was running product management and development for the equity funds at Fidelity. And it made it really simple, but behind it, it was complex. So the same thing applies to customer advice experiences. And our framework, again, that we’ve been developing in partnership with our subscribers and others, input from around the industry, is pretty simple on the surface. It’s a three by three, where one dimension is the breadth of the experience, right? The breadth and the depth, the features of it, we call that scope. And the other one is the service. And what happens is, when you look at things in a three by three is you can understand where things fit together. And more importantly, you can understand why they’re priced the way they’re priced. Because if you think about cars, you can think about cars in the same way. On a two by… three by three framework. So one would be features, one dimension would be features. And one dimension would be how luxurious the brand is. So the bigger cars, the bigger the car and the more luxurious the brand, the more help and bells and whistles you get with it, the more expensive it’s going to be. Right? And so nobody sends angry letters to Congress, that an SUV from Audi costs more than you know, a compact car that’s pretty basic. And so when you see advice and all the options that are out there in the context of the three by three Inside Advice grid, all the pricing makes sense. And it’s easy for consumers to choose, “How much do I want to buy in terms of service and help?” and “How complicated is my situation?” So it makes it less about, “Should I go with a full service advisor? Should I go with a robo? What are these things?” And it puts it in the context, to your point, of how it helps them achieve a better outcome.

Jack Sharry: Interesting, and how is this being deployed? How are you using this? Is this something that your clients use? Or how do they use it?

Laura Varas: Yeah, our clients use this extensively, internally at the moment, for thinking about their different advice experiences and how their portfolio of options fits together. Many big firms will compete in all nine categories on the Inside Advice grid. In other words, they’ll offer some pretty light things in a self-service model. They’ll be offering some things in mid service models, and they’ll be offering things and full-service models. And those things will be either very feature laden and rich breadth and depth, or there’ll be somewhere in the middle, or there’ll be quite light. All nine of those categories, though, is probably only the realm of the largest firms in the US. Most firms compete in a few categories. And they’re beginning to expand to the newer categories, which are more advanced self service tools, which a lot of rich people want, right? A lot of rich people want that. And then on the other side, much more hand holding that’s available than ever before.

Jack Sharry: Sure.

Laura Varas: For lower balance people who have less complicated situations. So a lot of the most exciting innovation is happening in the corners of the inside advice grid.

Jack Sharry: Interesting. And is this used in the formulation of the experience? Or is it used in public? Or where’s it in terms of its evolution?

Laura Varas: Right. At the moment, it isn’t being used in the formulation of the experiences too much, although that’s starting to happen. We’re starting to hear some firms say, “Hey, I’d like to have something in this category.” At the moment, it’s being applied to understand what’s already competing in the marketplace. And some firms have used it externally to talk with advisors or talk with plan sponsors or talk with consumers about their solutions. So we expect more of that to happen as more firms license and participate in this. It has to be across the industry, Jack, right. Carmakers have to agree what an SUV is, you know, or what a truck is, and what a compact car is. There has to be some agreement across the industry. And fortunately, we have a really great group of very influential and significant firms who are excited about this too.

Jack Sharry: I would be excited about… I am excited about this, this is great. I love this. Leave it to you to figure out something like that. So I can’t wait to hear more as things evolve. Anything else that you’re excited about, you want to share with our, our audience?

Laura Varas: Yeah, I’m excited about getting our platform in the hands of more users. I’m excited every time we get an inquiry, every time there’s a firm who comes in has a problem or something that they’re trying to achieve, and that we have data to be able to help them do is thrilling. So, you know, like I said, in consumer packaged goods and strategy consulting and other fields, there’s lots of data. In the car industry, airline industry, people are not operating in a vacuum, without any information about who’s buying what, where, at what price. And it’s really rewarding for me to be able to give this information to what’s become my industry, which is saving, investing, and advice.

Jack Sharry: I have to say, I’m encouraged by what I’m seeing across the industry, as we are becoming more professional in that way. It’s… before it was very much single product sales culture, hide the price, which is just not very attractive, I would say. Not something to be very proud of. But what I’m seeing now is that more holistic and beyond the buzzword of that truly trying to understand what the client is trying to achieve and what the issues are at hand. And if they don’t have those particular services, where they can outsource those to those that do those sorts of things. So it seems to be moving in a positive direction. Is that your take? Is that what you’re seeing evolve here?

Laura Varas: Yes, and I think it has to because if people aren’t choosing to buy our products and services, then they haven’t really bought them. And this approach of cramming things down channels and getting, you know, access to people’s money without them really realizing that we’re helping them. That’s not going to work in a technology empowered consumer choice environment. So the only solution is to make things that people want to buy through whatever distribution channel it is, right. Because it’s not all direct, for sure, right. Two thirds of our industry is intermediary sold, and will continue to be.

Jack Sharry: Sure.

Laura Varas: But at the end of the day, when I worked at Colgate-Palmolive, never once did we go into Walgreens and ask them how people want to brush their teeth. The maker of the solution has to be the thought leader and the market execution leader on bringing things to market that actually work.

Jack Sharry: So one last question just occurs to me as you’re speaking about all this. One of the things I’m excited about for our industry is what I call the convergence of workplace and wealth. By that I mean a lot of what’s been done in the wealth management side, because that’s where the money is and that’s where people get paid well, is a lot of that technology is now creeping over to the workplace side and then all that’s being done around around financial wellness. Not that I love that term because I still don’t know what it means because it’s different by… seems to be different with everyone. But I think that we can all agree it’s all about how can we help participants, consumer do a better job with their money, whether it’s budgets or loans, or all the different ways that people have to make financial decisions. But I’d love to hear your thoughts on that. Do you see that as well?

Laura Varas: Yes. And I love that you made that point. In the past, maybe five to ten years ago, when we would benchmark experiences for the workplace, they were pretty bad. Advice coming out of the workplace usually looked like this… it was: “Put all your money in the 401k plan that I sponsor and get my proprietary products.” Consumers aren’t dumb, right? They know that that can’t possibly be the best possible advice. And so we are seeing in the last five years, a lot of improvement in the workplace. And honestly, Jack, it’s things as basic as you know, there’s a lot of work done on women, right. I happen to be a woman who loves men and works in finance and technology and races ocean going sailboats, I spend a lot of time with men. I don’t necessarily identify solely as a woman. And I don’t mean anything by that other than that just people, right, people are interesting. And so the thing though, that happens is when you exclude people in the fields of data, right? There’s a lot of advice experiences that don’t yet include the spouse or the partner, whatever gender or non gender they do or don’t identify as, it doesn’t include the children. Right. And so in the workplace, we would see a very singular focus on the participant and the retirement goal. Well, only about half of households have a goal, currently, to retire. They probably ought to have more of them have that goal. But you can’t have that kind of like narrow focus, and deliver a better outcome.

Jack Sharry: Yeah, we are over time, but I’m glad we are. Because this has been fascinating as always. So as we look to wrap up, first of all, thanks. It’s been a wonderful conversation, no surprise there. That happens every time we talk, but I would like to, if you would, share three key takeaways you’d like our audience to be aware of, as we look to say farewell for now. I second that. So one last question before we say farewell for now. What do you do outside of work? I think I know the answer to this. But what do you do outside of work that you are particularly excited or passionate about that might… people might find interesting or surprising?

Laura Varas: Well, the first thing is market information works, right. Markets need information to function. And when people and their firms have more information, it works better for them. When consumers have more information, it works better for them. So again, we’re just so proud that subscribers are twice as likely to be growing than nonsubscribers. And the second thing is that it’s really important to broaden the competitive lens past these little sets that people consider. Innovation can come from all points on the horizon. The third, I guess, would be, we’ll be able to serve the industry better when there’s more, more and more people are engaging with us. More and more ideas on the table and questions and things like that. So I hope people will reach out and join us in trying to get better information into the hands of people building solutions. I love ocean racing. Sailboats, you know, ocean yachts.

Jack Sharry: Cool, cool.

Laura Varas: I started sailing as a child with my father who taught me how to navigate while we were cruising in Maine. Then I raced competitively at Yale on the varsity team for four years. And now, you know, that I’m several decades here into the middle of life, the kind of ceiling that I love is, is ocean racing yachts. And it’s 12 people that have to work together in unison, your lives are literally in each other’s hands. It’s a dangerous sport. And what I love about it is everything in the boat has to work perfectly. All 12 people have to work together, they do their own jobs at the same time, they understand what the other teammates are trying to do. And while you’re getting everything perfect in the boat, you got to keep an eye on the horizon for storms for the other competitors. So I love it. It’s exhilarating. I love being at sea. Jack, thank you so much.

Jack Sharry: Laura, thank you. This has been great fun. We’ve been friends for a long time. It’s been too long since we last chatted. So we’re gonna have to do this again. I’ll find another pretext to get you on WealthTech on Deck or some other good reason. So, for our audience, if you’ve enjoyed our podcast, please rate, review, subscribe, and share what we’re doing here at WealthTech on Deck. We’re available wherever you get your podcasts. Laura, again, thanks. It’s been a real pleasure. Really enjoyed it.