Morningstar Magazine - October/November 2017 - 86

Investors

Investing in Youth
Sophia Bera is focused on millennials
and thinking long term.

USER PROFILE

Ilana Polyak

Between memorizing lines for upcoming
student productions, Sophia Bera would steal
away to the local Barnes & Noble near
Minnesota State University at Mankato and head
straight to the personal finance section.
There, she immersed herself in the finer points
of student loan repayments, the beauty
of compounding, and 401(k) investing strategies.
As a women studies and theater arts
major, she says she was "determined not
to be a starving artist."
Her diligence paid off. In 2005, at the age of 21 and
three months after graduation, she bought her
first home. Soon, friends were coming to her to ask
for advice on their own finances.

"People were going through these big life
changes," she says. "They were getting engaged,
getting married, buying homes, wondering
if they should buy a car or lease a car. Should they
be putting money in a Roth IRA? Their careers
were growing, and they were starting to make
more money."
She itched to work with her own clients. That
chance came in 2010 when Bera was hired at
LearnVest, an early entrant into the digital advisor
space geared toward young women. LearnVest
offered its clients remote access to a fee-only
advisor and charged a subscription fee. Like her
friends, her clients were just starting out and
facing life's big financial decisions. There
were lots of opportunities to steer them toward
better financial decisions. But something was still
missing. She wanted to strike out on our own.
Making Millennials Profitable

"They wanted to know, should I put money
into my company's 401(k) plan? How do I make
a budget?" Bera says.
Bera realized she could make a career of
offering advice, and she began to study for the
Certified Financial Planner exam. By 2010, Bera
was working at Cahill Financial, a financial
planning firm, in Minneapolis.
"My friends kept coming to me and saying, 'I really
want to work with you,'" she recalls. "But
the firm had minimums that they couldn't meet."
Bera saw the potential market in these young
professionals. Though they hadn't yet amassed the
mountains of assets that financial advisors
require to begin offering advice, they had potential.
And they needed professional help.

86

Morningstar October/November 2017

In 2013, Bera formed Gen Y Planning. From the
start, her focus would be on millennials and
younger Gen-Xers. At 33, she's right in the middle
of both those demographics.
Working with younger clients early in their
careers, Bera says she's creating a sustainable
practice for the long term. Coaching her clients
on critical financial decisions today helps
them lay a solid foundation that can have a direct
correlation with how much money they will be
able to amass. And as their wealth grows, so will
her business, Bera says. Though she offers
a simple menu of services, that's likely to change
as her clients' needs become more complex.
"I don't even know if what I do will be called
financial planning in 20 years," she says. "I'm more
like a money therapist."

Most advisors aren't keen to work with clients
still building their wealth. They want to work with
them when they've already accumulated
substantial assets. Under the traditional assets
under management model, it's hard to turn
a profit with millennials. At a fee of 1%,
the industry standard, it would take a minimum
of at least $500,000 to make it worthwhile.
With that in mind, Bera offers a different model.
She charges a planning fee at the beginning of the
relationship and a monthly retainer, an increasingly popular fee structure. Monthly retainers are
an easy sell because millennials are used to
subscription services such as Netflix and Amazon
Prime. Bera's typical client pays $1,500 at the
outset of their engagement and then $149 to $499
a month, depending on the complexity
of the services the client needs. With 50 clients,
Bera says her yearly gross is in the six figures.
"The industry is so focused on AUM, and that's
going to be a problem for many advisors because
all of these robo-advisors are coming in and
pushing down the fees you can charge on AUM,"
she says. "The industry average is 1%, but
what happens when a decade from now you can
only charge half a percent?"
The retainer model provides a more stable
revenue stream, she says. And it allows Bera
to focus her clients' attention on where the real
value is: the planning.
"Right now, people are giving the planning
away for free and chasing assets," she says.
"That makes no sense. Advisors are giving
up a lot of money they could be making if they
used a monthly retainer."
A New Type of Office

What millennials prize, Bera believes, is flexibility.
And her business provides it for both her
clients and herself. As such, there's no physical
office for client meetings. Though she launched
her business in Minneapolis (she has since
moved to Austin, Texas), her clients reside all over.
Instead of in-person meetings, Bera conducts hers
by video conferencing, usually after her clients
have put their kids to bed and can focus on their



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