Last Updated on April 6, 2023 by John Prendergast
In This Episode
Scott Wetzel, CEO of SkyView Partners and SKYVIEW 1 and Jason Henrichs, CEO of Alloy Labs Alliance and host of the Breaking Banks podcast share how RIAs and independent financial advisors are gaining access to banking solutions for their clients that were previously only available via wirehouse advisors.
The rise of banking as a services for financial advisors holds immense promise for enhancing the wealth management experience for clients.
Jason and Scott also shared their thoughts on the failure of Silicon Valley Bank (SVB) and what it means… or doesn’t mean for banking solutions offered to financial advisors and their clients.
Resources From This Episode:
- SkyView Partners – Offering conventional commercial financing exclusively for financial advisors for mergers and acquisitions, succession, and debt restructuring.
- SKYVIEW 1 – Banking as a service for financial advisors. Launching in May 2023
- Alloy Labs – The only consortium that drives exponential growth for banks by leveraging powerful network effects.
- Breaking Banks Podcast – The #1 global fintech podcast. Hosted by Jason Henrichs.
EP 28 Transcript
Mike Langford: [00:00:00] Hey there, it’s Mike Langford. Welcome to the Augmented Advisor Podcast, where we showcase thought leaders, ideas and strategies to help improve the advisor and client experience in wealth management. The augmented advisor is brought to you by Blueleaf, the all-in-one wealth management platform with best-in-class advisor and client experiences in reporting, billing, and rebalancing.
On this episode of the show, John Prendergast and I invited a couple of our favorite guests to talk about a concept called Banking as a service. That is set to dramatically improve your ability to render comprehensive financial advice to your clients. And of course, we also talked a bit about what’s going on in the banking world at the moment as well.
Who are these guests? You may ask John, and I will tell you in just a second. But before we get rolling, please take a second to follow or [00:01:00] subscribe to the show wherever you are watching or listening so you don’t miss an episode. Buckle up. Here we go. Alright. Hey John, it’s bring your favorite banking buddy to the show week here on the
John Prendergast: Yes, it is.
Mike Langford: I brought Scott Wetzel, CEO of Skyview Partners and Skyview one, which we’re gonna be talking a lot about today. So, uh, thanks Scott for joining us. It’s wonderful to.
Scott Wetzel: You’re welcome. Appreciate it. Appreciate getting to meeting you all today as well.
John Prendergast: And I brought a longtime friend, Jason Henrichs. Jason’s the CEO of Alloy Labs, which is a consortium of banks and. Most awesomely. He is the host of Breaking Banks, the largest FinTech podcast on the planet. Welcome, Jason
Jason Henrichs: Yeah, I need new hobbies is
Scott Wetzel: Mike, look at your guest. I mean, you’re struggling here. I mean, come on. I mean this, come on next time. Bringing a [00:02:00] ringer like John did. I mean, come
Mike Langford: mean, hey, listen, I had to bring somebody. I mean like, but here’s
Scott Wetzel: step up my game
Mike Langford: best hair,
Scott Wetzel: I’ll step it up.
Mike Langford: the best hair of all of us
John Prendergast: Scott. I always wanna win, man. I’m competitive.
Mike Langford: favor.
Scott Wetzel: It’s a, it’s a house of cards up there, my friend. You know what? It’s house cards,
Mike Langford: Well look, I just go with the aerodynamic
Scott Wetzel: having me, everybody.
John Prendergast: So Mike, this is a big week in banking. We got some stuff going on. We probably oughta talk about it a couple of weeks from now. It’ll cool off, but we gotta
Jason Henrichs: You hope
Mike Langford: we ought to talk about.
John Prendergast: I hope it’ll cool off.
Mike Langford: That’s right. So just a quick point of order here before we get started. We are recording this episode on March 14th, 2023. And we don’t normally timestamp these episodes, but there’s some banking news in the past few days that’s bubbled up that we’d
John Prendergast: Three little letters.
Mike Langford: if, uh, we didn’t talk about.[00:03:00]
Jason Henrichs: Oh
John Prendergast: So what’s up with Silicon Valley Bank?
Mike Langford: So Jason, I hear you’re a, a big fan of Hot Takes, so I wonder if you wouldn’t mind coming in off the top rope and, uh, starting us off.
Jason Henrichs: All right, so I think you, you’ve been living under a rock. If you did not know that Silicon Valley. Was taken over by the F D I C. And so the good news for my business is we went from the 18th largest bank in the country to we’re now the 17th. Actually, it’s not good news. It’s not good news at all. Cause it, it went down for the wrong reasons.
So let me give some of the backdrop about what people might, might not have followed. And there’s some misinformation out there just because people who might have made billions of dollars and think they’re the smartest people in the room with the bigger podcasts than breaking banks, doesn’t mean they always have gotten.
So if we think about, you know, why does the banking world exist? And a big part of this is it bridges the fact that you want a place to safely store money and you need another place to [00:04:00] borrow money from. Now when you talk about storing money to get you to store it, large enough sums, I have to induce you to do that, and I pay you an interest rate normally.
And I’m willing to pay you a bigger interest rate, the longer you’re going to store it with me. Why do I care about that? Because most of my loans are not short-term loans. This idea that I could walk into the bank and say, gimme all my money, you know, don’t do the same thing. It’s like, Hey, I’d like to sign up for a mortgage.
And I say, great, Mike, how long of a mortgage you want? You’re like, I’d like a 30 day mortgage please. Right. So there’s this mismatch between timing and what ends up happening. The, the bank and I teach at three of the graduate schools of banking, the number one course you spent your entire first year learning about asset liability management or ALM. How do you actually make sure for the long term you’re generating yield, but you have sufficient liquidity.
Now, all that has been turned into the upside down land for the last 15 years because the federal funds rate the rate at which you can borrow money from. The government has. , basically zero. So a lot [00:05:00] of banks, just gonna call it out, get a little spicy, have gotten lazy, fundamentally lazy and greedy in their approach to ALM, and this is what brought Silicon Valley Bank down, is because they could borrow from the government at virtually no cost. Anytime they needed it, they locked up a whole bunch of money at an average rate of three to five years to eek out a 1.8% guaranteed return in a held to maturity security. Except then they got caught with their pants down.
Can I say that on your podcast? I would probably be more explicit on ours that caught with their pants down cuz they’re like, oh my goodness, we never could have expected interest rates were gonna go up. How dare they raise interest rates to fight. And they did it rapidly. In fact, it’s almost up to where interest, oh man, where interest rates were before they turned themselves upside down. They needed liquidity, they fumbled it, which we can get into because this is not a, not just a bad job of ALM, this is about [00:06:00] communication and managing customer expectations. And that is what brought Silicon Valley down, is they need better communications.
Mike Langford: I
John Prendergast: That is a hot take, man.
Mike Langford: That is a hot take
now. I’m gonna add
John Prendergast: Steam coming out of his ears right now, guys.
Mike Langford: And, and, and, and listen to, to make sure we, we loop Scott into this in, in, in a really relevant way. We’re gonna be diving into Scott’s business, Skyview One, and some of the things that it, it, it means for, uh, members of our audience, namely RIAs and, and, and, and executives at Wealth management.
But, you know, a lot of news has been made, I, I guess in the mass media right about it, because Silicon Bank was so concentrated in one segment, right? That they’re, they’re, they served a niche, right? Namely the tech industry. So anybody who works for a tech industry, chances are they’re doing business with Silicon Valley Bank.
And one of the things that I read that was really interesting this morning, actually kind of digesting what’s been happening. Many of these companies are venture-backed, right? So they [00:07:00] get a lot of money put in with the explicit inten intention of spend that money, quickly, invest that money so that money’s constantly drawing down.
And this is it. It maybe one of you, uh, can talk about this. Scott, I’ll, I’ll tee you up first. They also have something called a, a brokerage relationship. So, so a lot of the funds like a, a venture. Fund may have 100 of its portfolio companies at Silicon Valley Bank, and when the venture fund says, Hey, maybe you should pull your money out
It doesn’t just take one account. Right. So, uh, what are your thoughts, Scott? I mean, we’re, you’re, we’re in a completely different industry, but as you look at it, how do you see what’s happening there?
Scott Wetzel: You know where, where I’m most concerned with this is it’s something like, 57% of US deposits are in the top five banks. Hard to believe, right? Concentrated right there, and Jason can probably speak better to this, but their deposit [00:08:00] loan ratio is not what it, what you find at the regional and community banks are actually out there doing what they’re supposed to be doing and keeping the economy, you know, thriving by actually extending credit to businesses and people who deserve it. Instead, the big banks are making a ton of money off of people, you know, overdrafting, check, stops, whatever. It might be. And really, as I see this, I don’t know what Silicon Valley Bank did wrong, it’s obviously balance sheet mismanagement, which really shocks me because you know, from our vantage point, we’re always trying to get more banks to partner with us to invest in advisor M and A Financing.
And I will tell you to get through the credit departments of these different banks to try to get them to approve this just because it creates too much balance sheet risk. Um, I know it’s top of mind for all these banks. We had not had a discussion with Silicon Valley Bank, but I can tell you that one of the banks that has recently failed or been closed actually rejected our advisor loan portfolio as being too risky, uh, which I [00:09:00] find rather serendipitous today. Because whatever they were doing didn’t work out very well. And we’ve had zero defaults, zero charge offs, and financial advisors are very well behaved borrowers. We’ve had zero late payments since inception and close to a billion dollars in funding. So it’s turned out to be a very good asset for our banks.
Not all banks feel that way, but somehow they mismanaged us in a very, very critical way. But the larger concern for me is getting back to the impact it could have on. The light blood of this country, in my opinion, and I’m not a paid spokesperson for regional community banks, but it’s the truth. They’re the ones that really doing the loans that really matter to keep businesses thriving and you take them outta the equation.
We have a run on the banks of just a few community regional banks. We get some serious problems all the way around. So I think by backstopping this what you know, the Fed did, had they not, we’d had real problems. I actually saw lines outside of first. On Monday morning in Los [00:10:00] Angeles, I’ve always said that when we get to the day that you see lines outside of banks, again, we got real stress.
So we had real stress there for a short period.
Mike Langford: It’s
John Prendergast: So I’m curious, this kind of reminds me of a storyline from a, a famous movie that gets played around Christmas time. Uh, Jason, you know what I’m talking about. It’s a wonderful life and the uncle Misplaces the money and, and then Buddy Sam read, “the F D I C” comes in and backstops the bank and woo, everything’s great, but long term.
Sort of where does this go? Like what, what implications does this have long term for banking in general? And you know, I think specifically around community and smaller banks. Is there any implication here?
Jason Henrichs: I would actually broaden that to say it has the same implications. For advisors as it does for community and mid-size banks, because Scott had set up, [00:11:00] you have this, uh, systemically important banks, right? The top of the money markets that are, you know, quote unquote too big to fail, but also by the way, have enough money that the likelihood they fail, you know, especially now that they’re being much more, uh, conservative post 2008 and they have to do stress testing under Basel and Basel I and II.
If you look at the advisors, you have something similar when you look at the big wirehouses in terms of their ability and propensity to go do new things, right? They get slapped with a million dollar fine here, million dollar fine there, no big deal. So they can keep innovating and pushing the boundaries of what client experience is going to look like, the types of products they offer.
For those that are focused more on safety and soundness and probably more on the one-to-one personal relationship and serve probably a different segment of the market, they’re in danger of being left behind. And I think the part that accentuates this, regardless of which regulator we’re talking [00:12:00] about, we tend to be reactive in nature to win.
Regulation catches up and I would say this is much a failure of regulation. You know, bank runs when it was lines outside of banks, it’s pretty obvious to say, Hey, shut the doors and we’re gonna take a bank holiday and get back to you. When you’re talking about from one of the venture capital Slack channels I’m in, it takes one VC sharing that, one of their startups that it just raised a Series D wired 240 million out.
Right? And then the next one, the next one, when you’re talking about 2 billion flowing out in less than an hour. That’s a problem like regulation and our controls. Were not set up to deal with the impact of social media. People who think they understand ALM and economics who really don’t, but have massive followings pushing out a huge agenda.
Scott Wetzel: Well, yeah. You know what I, I heard there how many regulators are going in to investigate this chase, and I’ve heard like, you know, a bunch of different groups, but you know, we need like one, [00:13:00] one of those cop shows like Internal Affairs, special in investigative unit. Like who is checking the regulators to your point, like.
Is there any oversight committee saying like, okay, who really screwed up here? Because there’s a lot of people involved, right? That got this wrong. I’m certainly not picking on any examiners from any part of the country, from any regulatory body and banking don’t wanna do that. But there were some mistakes you made all the way around.
Right? And from a regulatory standpoint and from obviously from Silicon Valley, but then we found it’s a little bit more systemic than this. We had s. 3 billion. Great bank in New York, it’s gone. It had nothing to do with crypto, you know? Are there others? First Republic started, you know, to show some stress, but I think what we learned that they redefined too big to fail. On Sunday that you don’t have to be a big four big five anymore. They learned that too big to fail is if this what’s not considered historically too big to fail, we save this one [00:14:00] first and don’t spend that much money. It probably won’t get to one of those larger ones and get more systemic. So I think, you know, long term, one of the repercussions, who knows?
But at least in the short term, we fight
John Prendergast: sounds like you’re saying though, Scott, that they’ve gotten a little more savvy about which bank to rescue and that that sounds like a, maybe a net positive.
Scott Wetzel: It sounds like they’ve wise up the fact that if they don’t do something more rapidly and you know, letting Bear Stearns, letting Lehman fail, when they’re gonna start bailing out anyways. they just saved Bear Stearns Lehman, what could have, maybe that would’ve been the extent of the damage. We don’t know.
Mike Langford: It, it’s interesting, you know, you, you, you read a lot of articles talking about, you know, let s v b fail and, and so forth, and it’s like that missed some of the potential repercussions. Like, Hey, guess what? A lot of payroll was due to be paid this week, and suddenly you have,
Scott Wetzel: Well, and keep in mind they, they did fail their equity [00:15:00] holders that, that, that wealth has gone all those, A lot of people aren’t talking about the people that worked at S V B. You know that had nothing to do with this and are doing a great job there. Lost their jobs and probably lost a lot in terms of company stock. One interesting thing I read though, they do own a portfolio of something like 25 million or 22.5 million. I can’t remember the number, don’t quote me on it, of warrants and stock options so much FinTech company, so that’s where some of them is. Somebody someday, right.
Mike Langford: in and buy.
John Prendergast: Tough to liquidate now.
Mike Langford: Exactly. Um, so it’s interesting, you know, I think what a, a knee jerk instinct is to think this is concentration risk, right? So don’t be concentrated and serve a specific niche so people would hear that, oh, Skyview partners, and now Skyview one, which we’re gonna be talking about in, in, in, in, uh, a little bit more in depth.
That’s a concentration risk. You’re serving the wealth management space. But not all niches are created equal , [00:16:00] right? You know, there there’s higher risk
Scott Wetzel: We’re far superior. Yeah.
Mike Langford: but like as an example, like most startups, most venture backed startups are operating at a big loss, right? They, they, and they have no intention on being profitable.
In the early years, it’s all about grow fast, scale up quickly. We will pro be profitable later. And some of them it’s like we don’t even care if we’re profitable as long as somebody comes and acquires us and we take our investment off the table. That’s not the business model that most, most of our audience is dealing with, right?
Most of our, whether it’s an ind, individual solo, r i a, or it’s a multi advisor shop, they’re offer operating for profit and with really aggressive and, and strong cash flows.
Scott Wetzel: Yeah, I think there’s obviously very different business models between the two, and it has been a struggle. I can tell you, since firm inception, the biggest question we had going into this business would, would banks fund [00:17:00] succession and um, you know, movement of a PR practice from one advisor to the next.
And, you know, Banks love tangible assets at the end of the day, and we got a lot of nos. We got thrown out a lot of boardrooms when we used to walk out. My partner and I’d say the same thing, no tractors, no silos. As soon as we get advisors, we start buying tractors and silos. We got something. But as they’ve learned more about our industry, because you know, banks have historically funded legal practice, transition dental, and we used to hear this all the time.
They said, well, people are always gonna get cavities, you know, but what if the stock market goes. I really love that one now cuz after Covid I got a cavity. People still got cavities, but you couldn’t go in and get it fixed. But everybody’s on the phone getting ’em financial advice from their advisor in the financial advisory community, actually we saw an uptick in revenue by the end of the second quarter of 2020.
It was one of the best performing portfolios in the nation in terms of performance during the pandemic.
Mike Langford: Crazy. [00:18:00] It’s amazing.
John Prendergast: Yeah. I think that that goes more generally to all recurring revenue businesses without, you know, tangible assets. Right. Software as a service companies, same thing, right? Tough to get lending in the last decade, and it’s only really in the last few years where you’re able to fund a. Really solid recurring revenue model of any kind.
And, and that’s great. And just more on the whole business model of the businesses Silicon Valley banked, other than the wineries, in mind that most venture backed businesses go out of business. Most of them fail. And, and not by a small margin because it’s a, it’s a hits business. You, you make your portfolio on, you know, one or 2% of the investments you make, um, or 10% rather.
So it’s, it’s wildly different and recurring revenue. I think most banks are coming to realize are much safer investments than, than anything like this. And I, I guess it’s careful what [00:19:00] you concentrate in.
Scott Wetzel: Uh, think about it this way, if the financial advisor’s doing his or her job to diversify that pool of assets and that portfolio for his or her clients, therefore they may not be cognizant of it, they’re actually diversifying their own revenue stream. So, When we talked to banks, he was like, well, you’ve got exposure.
You’ve got exposure to basically every US equity sector, every US bond sector of some sometimes international sectors. This is actually the most diversified recurring revenue stream you can imagine, cuz it touches almost every single equity in this country in some form or some packaged product. If the financial advisor is utilizing modern portfolio theory and diversification, which we have a CFA on staff to make sure they.
So it’s actually an exceptionally diversified revenue stream that’s not just easily quantifiable. If the market goes up, it goes down. Well, we all know, not necessarily,
Jason Henrichs: Wait, markets just don’t go up into the right
Scott Wetzel: oftentimes not as
Jason Henrichs: Wait, like interest rates might go. [00:20:00] Interest
Mike Langford: they’re not, they’re not like Justin Timberlake up until the right, like, life just keeps getting better. . It’s like,
Jason Henrichs: Oh, I wanna push on this concentration for a second and bring us to something that I think is particularly germane to this audience. Most bank failures are because the banks either concentrate in a certain sector, call it housing, and that sector goes down, or turns out they’re really bad at underwriting.
They’ve got a bunch of really bad loans, right? This is what happened, you know, with Bear Stearns and Lehman is, turns out they suck at their job. And it turns out in this case, the person who sucked at their job within Silicon Valley Bank is the person who manages investments. Right? And just didn’t understand that for, you know, the greed of going after 400 extra basis points, they didn’t actually hedge that interest rates could go up.
Right. And the concentration risk, it wasn’t that the underlying tech startups went under, that was not their problem. They actually don’t do as much lending. Tech startups as you’d think. They actually do more [00:21:00] lending to wineries than they do to tech startups where they failed, right? Because they had enough tier one capital.
This should not have taken them down, is they botched the communication plan, right? There were three strategic things they needed to do, is they wanted to increase liquidity, which that meant that when you sell a hell to maturity security, you actually have to mark to market. Before that, if you’re intending to hold maturity. You hold it at a hundred percent. They had to take the write down right tune of 2 billion when they were doing that. Cause they wanted to increase liquidity. Recognizing that, you know, with interest rates growing up, their bond value was going down. They wanted to take the medicine earlier and fix the balance sheet.
That was a actually good, they were being proactive to get themselves out of the mess that they had made. Here’s where they screwed it up though. They needed to go raise, right? And they had conversations going with some of the largest providers, and then they decided to just put it out there as a press release.
No story, [00:22:00] no narrative, no timely communication. You know, as a customer in our portfolio companies, our customers, Silicon Valley Bank, have worked with them for 22 years. I find their investor deck on Twitter right on Monday, and I start to panic, where’s the message around this and the timeliness around this?
Like they just dropped it after they had done their quarterly filings and they like for a tech industry focused bank, do they understand how email works? Do they understand how webinars work? The ability to pull in key segments to communicate financially? Their fundamentals are still strong. There’s no need to make a rush.
The bank, the silence that was then filled by the Twitter talking heads. The bobbleheads overtook their narrative because they were afraid to push a communication out.
Scott Wetzel: They’re the opposite of Game Stop.
Jason Henrichs: exactly. Opposite of GameStop.[00:23:00]
Scott Wetzel: They just did a horrible job of, I mean, who’s okay? One person who’s in charge of their pr, an investor relations, something like, I’m not gonna name any names, but I mean like, I think it’s a very salient, excellent point that no, no one’s really talking about right now. That fumble was enormous and who knows that they would’ve got anywhere near this.
It created the fear that became just contagious amongst our
Jason Henrichs: and I think that takes us back to when we talk about the traditional advisor. And client relationship is our customers are used to getting instantaneous information and feedback from the internet in a, in a real world as is happening moment. And as advisors, I know we’re very hesitant and we have regulators that look over our shoulder related to this, that make sure we’re giving good advice, but the desire to get to perfect advice rather than giving any commentary and being proactive in our outreach that vacuum.
allows the Twitter [00:24:00] sphere, the Facebook sphere, you know, cable news to take over the narrative, right? It takes over the narrative in our clients’ lives, and it’s super stressful, by the way. Once they have that narrative in their head like that the markets are crumbling, or that there’s gonna be a run on their bank, changing the narrative is much harder than if you had planted the seeds to solidify their position on where reality is.
John Prendergast: Proactive communication solves this in every industry.
Mike Langford: Mm.
John Prendergast: So given all this, I wanna pivot just a little bit and think, okay, if I’m an advisor and I think about Silicon Valley Bank and this implosion and how challenging banking has become, Why do I want to get into banking? So, Scott, like why? Why should an advisor want to deliver banking?
Now we know the wire houses have done it and quite successfully, so can you talk a little bit about what this brings to the table for an advisory practice to [00:25:00] introduce banking to their clients?
Scott Wetzel: I, I think you, when you say that it, the wirehouses haven’t done it successfully, I think, uh, in terms of their p and l i’d, I’d say that they would disagree with that statement. Uh, and if you look at the actual penetration rates amongst wirehouse advisors, over 50% of warehouse advisors have actually embraced banking products and services for their clients.
and they recall, you know, when I’ve been the industry too long, and when they roll, kind of rolled out the, the partnerships with the banks, you know, ubs, Morgan Stanley early on, I mean, the advisors, you know, anything that comes from the home office and doing it is different. Like, forget about this, we’re not doing this.
You know, they, they want us to push this, we’re not gonna do this. We don’t even know what it is. But they, they’re asking us to do it there for the answers no. Then they start looking at it a little bit more and said, well wait a second. Uh, I think that’s the way we can make money here. Uh, that kind of got their attention finally, but then also they realized that it goes to something, um, broader, that they can have better view [00:26:00] into their client’s total financial pitcher and offer, you know, really be that primary service provider to more than just investment advice, but also to their banking products and services.
There are only one problem with their model as I. They’re acting at least in a suitability standard of care, or a fiduciary, uh, as to the investments and offering a broad range of investments all at, you know, at benchmark costs and, and performance. And when it goes to banking, they’re offering one bank, here’s the deposit rate, here’s the rate that you get on your loan.
Take it or leave it. So when they switch those hats, it’s a very different experience for the. and what we aim to resolve for is kind of extending that same standard of care that’s incumbent upon the fiduciary registered investment advisor to Why can’t we do the same thing in banking? Why can’t we offer deposits the best possible rate on their deposits?[00:27:00]
And then try help them find the lowest possible rate on their loans. Because we’re not carrying a balance sheet, so we’re not concerned about net interest. Margin is the whole banking, it’s all, it’s about, right. Well, in our world, we’re trying to pay them the most on the loans or the banks, or, I’m sorry, the liabilities of the banks and deposits.
And then charging them the least on the bank’s asset or on the loans taken out by, by the consumer. And that’s flipping banking upside down and doesn’t fit within a fiduciary context. But when you don’t hold the balance sheet, it does. And that’s where we think that financial advisors actually in an excellent place to be that quarterback for banking products and services.
To the extent that we can provide them a platform to extend that fiduciary service, not only to mortgages, but to cash management. Do you really, especially in this environment, do you want to keep all your assets at one bank? You know, we have a suite program, we’ll sweep to four different banks and get up to a million [00:28:00] dollars.
F D I C insured and everyone talks about, well, is this bank safe? Is that bank? After Silicon Valley Bank. I don’t know if you ask me about Citi. I think so. Apparently they’re not too big to not bail out either, obviously, but who knows who’s next and really what you have to fall back on is F D I C insurance. If you look at globally, is there a safer spot to be? I don’t think gold is, so everyone should be trying, attempting to maximize F D I C insurance as much as. Historically banks, they give you your 250,000, that’s all you get. You saw that 93% of deposits at SVB were uninsured, so that could have caused a massive problem, first of all.
But with our program, we want to try to offer heightened F D I C insurance to every single depositor a million for every social, 2 million on joint accounts. Plus we using the same sweep account technology to get them the highest possible rate every night. [00:29:00] But not only are we providing a rate that today would be at about 350, we’re benchmarking that rate every day. That and, and disclosing the rate,
like if I asked any of you, do you know what rate you’re getting in your bank? Asking anybody walking down the street, Hey, do you know what rate you’re getting? You’re gonna say, oh one 2%. The top five banks are between zero and two basis points today, zero and two, not percent basis points. So we actually launched in January the first in US History. Skyview, US National Average Checking Interest Index. Got through it for the first time. And what, what we’re tracking is what are, what’s the average of the banks in this country actually paying depositors today? It sits at four basis points.
It’s four, so at three 50, so we’re, we’re, we’re disclosing the rate every day. This is what you’re getting. Banks only have to do it once and you open the. Second, we’re benchmarking every day. Here’s why you’re [00:30:00] getting, this is what most people are getting. That is unheard of in banking. They don’t, Ben, they don’t benchmark then fees.
Are they transparent with their fees? No. I just see fees all the time. I’m like, what is this? What do I do? So I think that that’s where financial advisors could really act as a disruptor in the banking industry and displaced that bank relationship. Because when you say bank relationship, banks have. They haven’t invested the money in the relationships at the community bank level.
They do, but the big banks are really controlling all the deposits. Does anyone have a, a relationship with the teller at the Wells Fargo window?
Mike Langford: not anymore
Scott Wetzel: That’d be odd, right?
Mike Langford: This is fascinating, Scott, and, and, and it, it opens up the opportunity for dramatically improving the wealth management experience that an advisor offers their clients and it goes into a more holistic financial advisory experience. Right. So, [00:31:00] you know, as you said earlier, we render advice to investors on, on the investments that they have.
Well, you know, most advisors are begging their clients to come in with their bank statements, right? Or to give them some sort of visibility into the loans they have and, and, and into the deposits they have at banks. Not just because they want held away assets and they want them to bring all that a, that money under their roof, but they wanna be able to render that more complete advisory experience.
Cuz I can help you with that type of stuff. So this sounds like it opens a door for that, uh, in a new way.
Scott Wetzel: Well, it, it really hit me over that, that we’re working with, you know, some great tech company entrepreneurs and one just at a liquid event, and he came to me and said, Hey, I, you know, I went into, uh, Morgan Stanley and uh, I don’t get it. I’m like, what do you mean you don’t get it? So I don’t get it? What do they do?
And I’m like, well, you’re a financial advisor. What are you talking about? He goes, yeah, but I think all they do is like manage my investments. That’s it. And I’m like, well, what you looking for? Yeah, that’s it. He said, well, what about, you know, my checking, what about [00:32:00] my credit cards? What about my loans? And that’s really sort of clicked for me that financial advisors are only providing financial advice around investment portfolios, yet they are the epicenter.
You know, 90% of people’s financial world. So for them to now extend that advice to banking products and services, to insurance products and services, the technology exists. The APIs are all out there. We just need to find somebody crazy enough to pull ’em all together, and that’s
Jason Henrichs: is an I. To do because when you talk to an advisor or you talk to a banker, you know, bankers think about the short-term balance sheet and the payments flow. Advisors think about the long-term balance sheet and how do we, you know, grow the investment income that does it. That isn’t how humans actually think about their world.
In fact, they probably don’t think about it as balance sheets. It’s a holistic experience. Right. This is something, John, you and I’ve debated, you know, since the beginning of time that I’ve known. Is [00:33:00] no one wakes up and says, boy, I really hope I can sit down with my advisor at Starbucks or in their office this quarter, and let’s talk about the difference between my alpha and my beta and standard deviations and stuff.
They wouldn’t know, am I okay? Like, am I on track? Am I gonna be able to retire? Can I afford, you know, to have another kid, right? Like, can I afford a new car? Like what are the trade offs? That’s the question they’re looking to go ask. And when we have the silos, and that’s why I’m excited about what you’re building, Scott, is you have the opportunity to give them the holistic kind of advice that they’re actually looking for.
And that advice is what will actually make them comfortable. Because today we are at a skiing the client to be the point of integr. It’s like, well, I can’t tell you if you’re okay cause I don’t know your whole life and all the things that are moving around. So you, let me tell you a bunch of data because that’s what I feel comfortable and slide some big, big old pieces of paper in front of you and like you flip through and it still doesn’t answer the question I’m looking for.[00:34:00]
Scott Wetzel: Well, and, and we’re getting this question, like you said to the, your retirement advice. Like, am I, am I okay for retirement? And I know we’ve all probably had it recently getting questions from my handyman, the guy who waters does my, my, uh, irrigation stuff, you know, from people all over the country saying like, Hey, this is the bank I’m with.
And all of a sudden now I don’t where like, come up with these names, like disclosing to me like, Hey, is this bank gonna be okay? Well all of a sudden that, that there appears to be a real need for banking advice.
John Prendergast: Hmm.
Scott Wetzel: And we actually applied for trademark status on the term banking advice at the beginning of the year.
Not in US history. No one’s applied for that term. Now we probably won’t get it cuz it’s so vague, but we’re gonna keep working on it. But if you think about how and saying that is cuz banks don’t offer advice. They offer products and services their own products and services. But financial advisors, if we build the correct.
Ecosystem for them can offer advice in saying, well, here’s the 12 different [00:35:00] banks you can get a mortgage from. This one appears to be the best. Here’s the 18 different auto loan providers. This seems to be the best. So really a truly comprehensive, holistic financial advisory experience that does include banking advice in our MVP product is simple.
It’s just cash management. I’m putting it at one bank. We’re sweeping into multiple banks getting the best rate and heightened F D I C insurance. Cash management, banking advice.
John Prendergast: But it’s not just advice. That’s the amazing thing to me. It’s, it’s advice and services. It’s, it’s take the actual service and wrap it with advice. So it’s a complete offering. It’s a complete experience. And I think that’s what’s amazing. Now, a, as you said, the wirehouses have been doing this for a while, but if you don’t work for a wirehouse and most of our audience left wirehouses, or if you don’t work for a bank with a wealth management arm, right, this is a new thing to be able to offer.
Right. [00:36:00] Banking as a service. Can you talk a little bit about that concept and sort of, you know, where you see that?
Scott Wetzel: So we, uh, I like to trademark stuff, I guess. I don’t know. We also applied for financial advice as a service because we’re offering a platform to offer. Truly comprehensive financial advice within a banking as a service component. As an example, mortgage as a service. Uh, that’ll be integrated as well, that really financial advisors in a completely customizable, scalable, white labeled solutions so that the advisor owns this in every way to the client can really.
More than just banking as a service. But I mean all these different service providers, it’s just an api. It’s just a different processor. They’re plugging it all together. It is a lot of work to make sure they all cooperate and work together and have a user experience that fits, especially our demographic.[00:37:00]
It’s historically has not been terribly fond of doing a lot of things digitally, but Covid did change that and bringing all together, the financial advisor can truly be a financial. I think you’re coming into, you know, this tech entrepreneur, I think he’s 33, Nelson. He’s got a ton of money and never worked with an advisor.
He thought financial advice meant financial advice, and, sorry, that’s not what it means. It means investment advice. So our goal is to strive towards providing that platform for an advisor to provide financial advice. Comprehensive, not to mention the incremental monetization opportunity it it holds for the advisor. With every single different new
Jason Henrichs: Well, it’s both offense and. If you don’t do it, somebody else will. In all likelihood, they probably take over in the long term your advisory business, and as you said, Scott, is also offense, that it will allow you to not only get new sources of revenue, but also as you [00:38:00] grow up better clients and stick your clients and help them better manage their holistic financial picture, they become better clients For you, is it win-win?
This is not. Just aggregating more revenue from different streams.
Scott Wetzel: You guys wanna hear a scary fact, Jason, you’re probably aware of this one, that, um, after people set up their bill, paid banks retain that account 60% of the time. They hold that account for the rest of their life. So we’re building on a lot of technology and helping advisors get bill paid. Because we’ve all seen when financial advisors leave Wells Fargo or one of the banks, the attrition rate is dramatically higher. Why? Because, ah, I got my Netflix and everything set up at Wells. I don’t wanna change all that.
It’s a big hassle. Well, there’s great technology out there that really facilitates changing direct deposit and bill pay, so we can get it done in a 15 minute phone call, get it all done. You just have to find the right tech providers and they’re out there. And [00:39:00] what’s what we’re seeing today in the tech community is all this new tech is being spent and used and focused on the, on the millennials, God bless ’em as we try to figure ’em all out day to day and what their consumer preferences are.
But the baby boomers and the Gen Xers aren’t seeing this great technology cuz everyone says, oh, the customer acquisition costs too high. Forget about them. They’re not gonna change anyways. Well if, if we’re partnering with the financial advisor, Who’s really directing their financial affairs. That’s really trusted source of, Hey, maybe you should consider utilizing this and look how easy it actually is to.
Mike Langford: That’s fascinating. You know, it, and, and, and the thing is, I think there’s a huge demand for this for people to, like, can you answer some basic questions about what’s going on? Like, Jason, you’re, you know, number one FinTech podcast in the world. I think I heard earlier
Jason Henrichs: In the world, top 1% of all podcasts.
Mike Langford: So you’re, you know, you’re talking to startup founders a lot, and you’ve probably talked to, as I have, you know, dozens of [00:40:00] payment startups, dozens of financial wellness startups and, and, and so on and so forth.
And, and so when the consumer sees this, they have no frame of reference. I mean, John and I were just talking about the. The s e c trying to have the due diligence process be on the advisor for evaluating some of the outsource solutions they use. Right, and John made the, the astute point of like most financial advisors aren’t equipped to do due diligence on a software provider.
They just don’t know the questions they ask and so forth. Well, most consumers have no idea how to evaluate a payments provider, how to figure out is this a good bank account?
Scott Wetzel: I don’t have any idea to do it either, Mike. I’m just hiring really smart people to tell me what to do. Thank God for them. I’ve no idea. I just gotta try to keep them happy. Right? I mean, I have no idea what’s going really, you know? And they’re saying, well, this is the best because of this reason, but you’re exactly right.
And just that time it takes to go out and find all those solutions and started realizing, know I’ve got green light to get my daughter her allowance. I got wells to do this. I got RBC to. I got a mortgage broker, I got a [00:41:00] PNC broker. I don’t want all this. These, I want it in one solution. I wanna go to my financial advisor.
He’s my favorite person. Right. That makes sense. I think for most people that’s the case.
John Prendergast: and if wealth managers don’t do this, the banks are really interested in doing this, aren’t they?
Jason Henrichs: I mean the banks, many of which have very active. Practices. They just historically have said, oh, we’ll have an insurance business and we’ll have a wealth business, and we’ve got a bank, and they never integrate on them. Well, they’re figuring out, wait a second, why do I treat Mike Langford as if he’s three different people depending on which silo I’m touching, and they’re extracting up and saying, Hey, this Mike Langford is three, you know, of the same person doing three different sets of business, or maybe it’s two and he should be part of the third.
And they are bringing those things together now because they’re recognizing there are a good number of FinTech startups coming after that. You know, [00:42:00] really trying to make the holistic relationship and banks and advisors have the opportunity. They have the customer and they have the data. They have the trust.
They need to figure out how do I layer on integrated products and services, or they’re gonna get wiped out.
Scott Wetzel: Well, I think the other thing is, you know, we see a lot of advertisements on CNBC from, you know, Fisher and from Schwab about the importance of the fiduciary standard of. I think what most consumers don’t recognize is that their financial advisor may or may not be a fiduciary, and second, it is not a standard operating procedure in any other financial services industry or an insurance, right?
So to the extent that they can work with their fiduciary financial, Extending that same fiduciary standard of care, not only their investments, but to your banking, your insurance, that they’re actually acting in your client’s best interest. I mean, it’s so simple. I mean, if you’re not doing that, what business, what?
You’re not gonna [00:43:00] have clients for very long. Right. But it’s just not how it’s done. I’m sorry. It’s just not how banking is done. Banking is pay people as little as they can on their deposits and charge as much as they possibly can on the. Make the loan process so miserable that by the time you get to the end of it and they jack up your rate, for some reason that they knew it was already coming and they just used a teaser rate anyways, you’re gonna go with it and you’re gonna hate ’em, but they’re gonna lower what they pay you here, increase what they pay you over here, and that’s banking.
And that’s not a fiduciary. I’m sorry, we got a lot of bank partners, but that’s the way it’s done. And they don’t have any choice. They have to manage a balance.
John Prendergast: but I think what I’m hearing from both you Scott and you Jason, is that RAs and wealth managers in general are in the poll position to deliver this kind of holistic advice, but they’re not in the poll position forever. Right. This is a, this is a lead and an opportunity that will go away over time as others realize that that opportunity didn’t go after.
Scott Wetzel: You think about though the banks aren’t in a position to really execute on this because they have, they have a balance. [00:44:00] That they have to manage and that does not really lend well to a fiduciary standard at the end. I had to Mike. Um, and you’re right though the fiduciary financial advisors in the absolute best position to offer a comprehensive financial advice.
Cuz then, then you don’t have to worry about it. When I go to my PNC broker, I mean, you try to sleep with my ex-wife after we got divorced. I mean, do I really trust him? Yeah. I’m too lazy to change. I don’t care about
John Prendergast: That’s a metaphor, right, Scott?
Scott Wetzel: I still use this guy, but then when he gives me a rate, I’m like, I don’t trust him, but I don’t want to go to rate shopping, right?
If, but if my financial advisor’s doing it, they have to provide me the best options at the best rates. I don’t have to worry about if I’m getting screwed over or not. That’s peace of mind.
Mike Langford: Well, it’s, it’s, it’s interesting too, if you think about your banking relationship generally. It’s somewhat product de de uh, uh, structured, right? It’s, it’s around the product. Are you giving me the loan I need to buy the house, to buy the car, [00:45:00] to buy the inventory for my business or whatever. That’s, that’s the relation, it’s product related, right?
Whereas when I’m talking to my financial advisor, it’s goal related, like, these are the things I wanna accomplish in my life. Let’s make sure we have an investment plan and an overall financial plan that get to me to where I wanna go for my kids’ college education, for my retirement, for. Whatever my estate needs or whatever.
So I think it’s a dramatic, different, dramatically different relationship. And whether that advisor is sitting in his or her own office as an R I A or sitting in a bank’s office, that’s gonna be really interesting to see, uh, how that plays out. Cause I, I agree with you, John. They’re, they’re really in poll position.
Scott Wetzel: Well, it’s, it’s segue into another point. If you look at the customer service experience between the average bank and the average financial advisor, we are worlds apart, right? Like and I see that de de banking is basically they’re shutting down [00:46:00] branches and these branches are ghost downs. People aren’t going in cause they don’t get good service.
You have a one 800 number. I don’t care if you’re platinum or advantage, you’re Chase private client. You’re calling an 800 number with problem. , really. So now you think about if the financial advisor’s office is almost seen as, as a quasi bank branch by the client, they can handle almost any transaction except currency.
Which by the way, we got a private, a, uh, ATM program as well. Technically they could, they just can’t accept cash. That’s a much more palatable experience to go park and, you know, a nice office building park, you know, talk to the financial advisor. They’ll help you out. You know, they know the staff. Mike comes to meet you at the door, John.
Deb’s over here, that’s a great experience, right? Instead like going into a banker calling an 800 number that you never get anywhere and I don’t care what your balance is and what level you’re at. So it’s also a premier service experience that’s extended because the financial advisors aren’t capturing very high ROI of that wealth management book.
They don’t need to capture that much [00:47:00] more R ROI off the banking products and services to con to. They’re already offering the service.
Mike Langford: Fascinating.
John Prendergast: I’ll tell you what, what an episode from talking Massive Potential disaster to massive opportunity for, for wealth managers. I think we’ve sort of covered it all. Scott, if somebody’s. Interested in teeing up this banking service? How do they get in touch with you?
Scott Wetzel: Um, they can visit skyview um.com. And connect with our team. Uh, there, we, we are doing a very piloted group of RAs this year, but we’re always interested in indications of interest until we get this thing launched here in May. So we’ll have a more broader release probably in the third quarter, and we’re looking forward to partnering with
John Prendergast: Super. And Jason, if somebody wants more of that really smart goodness that you dropped on us, how do they get in?[00:48:00]
Jason Henrichs: to us at Breaking Banks anywhere you listen to podcasts or go to provoke.fm. You can check out our entire family. We are the H P O of Financial Service podcasting, and dropping this Thursday, same ex exact time with this one is our recap at South by Southwest.
Mike Langford: Love it. Love it. Well, this has been a fantastic episode, guys. Really appreciate you all on the show. Thank you very much for listening to Andrew watching this episode of the Augmented Advisory Podcast. It was fantastic to have you with us. I hope you enjoyed this conversation as much as we did. Huge thanks to Scott Wetzel from Skyview Partners and Skyview one and Jason Hendrix from Alloy Labs and the Breaking Banks podcast for joining us.
This type of conversation is what excites me so much about our industry. There’s always new innovations popping up that allow financial advisors to serve clients better. Great stuff. [00:49:00] Now, as I mentioned at the top of the show, please make sure you subscribe to the podcast in your favorite podcast platform and uh, swing on over to YouTube and click that subscribe button as well.
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See ya. Bye.