Get ready for an enlightening conversation as we welcome Rory Henry, director at Arrowroot Family Office and co-host of the Wealth Management forward podcast. 

This episode takes a deep dive into Rory's journey from constructing tax technology to creating a program aimed at equipping CPAs and financial advisors with the tools to dispense holistic advice. He shares his insights on the importance of face-to-face interactions for comprehending client's intrinsic value and his excitement when he discovered the potential of estate planning technology.

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For more information about Rory Henry, follow him on LinkedIn, or visit Arrowroot Family Office.

For more information on Responsive AI’s solutions for advice providers, please contact us.

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Day Wachell:

Welcome to Advice Architects. This is Day from Responsive, and today we are speaking with Rory Henry, Director at Arrowroot Family Office and co-host of Wealth Management Forward podcast, and just a great mind working at the intersection of accounting and wealth management worlds. Rory had me on his podcast a few weeks back, and we had a great time talking about AI, advice, and even life itself. Rory, glad to be back in the box with you so soon.

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Rory Henry:

Thank you so much for having me on your show. I got such a great response from the clip I posted on LinkedIn if you're a listener go on responsive AI or Day's LinkedIn and you can see him talk about his journey from being broke in New York to now talking to Larry Fink of Black Rock. It was a tremendous clip I got a great response from people in my circle

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Day:

A lot of fun. Okay, so at the start of the show, we do our advice architects questionnaire to get to know you better and sort of understand your relationship to wealth and technology. So to start, what's your job title and what do you actually do?

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Rory:

That's a good question. Sometimes our CEO here asks the same thing. But I am the director at Arrowroot Family Office and, Day, we’re a family office in the sense that we manage the assets of the people here at Arrowroot, as well as high net worth families, individuals. And then we're a big believer in the transformative power of technology to really provide our family office level services to not only the ultra-affluent, but the mass affluent, the everyday client, the nurse, the teacher, the construction worker.

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And I'm a big believer as well in the behavioral finance, the human side of advice. I've had a number of different thought leaders on my podcast because I believe the future is really gonna be having that human to human interaction that shared experience where it can help people get to where they wanna go in life but really uncovering what's valuable to them. So I have a program that I developed called AFO Wealth Management Forward. We educate, partner with CPAs, accounting professionals, so they can start offering holistic wealth management, what I call our virtual family office model.

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Day:

And how long have you been in this business for?

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Rory:

Well, so if we want to do an origin story day, in 2016, I set out to build a tax practice management technology. I saw an opportunity in the marketplace that wasn't being filled by the intuits of the world, by the Thomson Reuters. There wasn't a modern day CRM that tax professionals were using. And I was solving the pain I was having for my own firm in being able to service the clients. I was using Salesforce. And Intuit had come out with their cloud tax prep software, but they didn't really have a document management system, an Irish transcript delivery system, a way to communicate with clients. So I set out to build this tax technology, and during the same time, there was a player in the space called Canopy Tax, and they had raised $77 million, and they blew it all on sales and marketing and failed tax prep software. And so my dreams became dashed to building a tax technology. And I pivoted, and the pivot happened during the pandemic. And we saw this acceleration of being able to do business virtually. And I was speaking with our CEO, Rob Santos, here at the family office. And I said, why don't financial advisors and CPAs work together? Taxes affect investments, there's insurance component, there's estate planning, all the stuff that Rob was doing here at the family office can really be had by the accounting professional. They have that trust of the client. They provide valuable business advisory services. There's just a few best practices, some technology implementations away from really providing more holistic advice to their clients. So during the pandemic, we create a program and partnership and a podcast to help accounting professionals start moving away from being reporters, doing the compliance work to start doing tax planning, financial planning, wealth management and estate planning. I call it a financial flywheel, really helping the client out from womb to tomb. So you talk about when a client's born or a kid's born, you could do a college savings plan, you can help them start a business, grow their business, have that exit and that liquidation event, manage those assets, do estate planning. So there's just so much opportunity there for accounting professionals and even wealth advisors to really handle the many needs of a client, their family and a business.

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Day:

When and where were you happiest relating to tech or fintech or wealth tech?

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Rory:

I think when I saw the opportunity, when I made that pivot, I was doing research for my software and I was looking at Thomson Reuters, which was one of the main players in the tax software space.They had a practice forward program.

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So Day, I think it goes back to that pivot I made during the pandemic. I saw the WealthTech space and the ability to serve clients in this holistic family office type of way, serving their many needs. I think that aha moment happened. And I think it was the estate planning technology trust and well that I saw. And I saw, oh my gosh, you can now provide estate planning guidance to clients allowing them to do this from the comfort of their own home. Most clients, as you know, don't have complex estate plans. So I saw the ability for an accounting professional not to just do financial planning, but incorporate that estate planning into their practice. And that, I think, allowed us to then start providing other advice and integrating more the wealth management and the financial planning aspects of it. But I think that aha moment came when I saw the tax, the trust and will tax, I'm sorry, when I saw trust and will, the estate planning technology platform that allowed really to provide, I call it a family office level of care by incorporating that estate planning aspect into a practice.

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Day:

The connecting the dots moment. Why do you care about wealth management technology?

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Rory:

Not everybody has a financial advisor. Let me go back to the tax aspect of this day. Everybody's gotta file taxes. Not everybody has a financial advisor. And that's why I believe the accounting professional, a person who does someone's taxes, they're uniquely positioned to start the process early for clients, especially those who have businesses. And that's why I'm big into behavioral finance because I think training people early on, doing financial literacy, helping them make better decisions when it comes to money can happen earlier in the financial journey and life cycle of a client. We as financial advisors don't necessarily start working with clients until they have significant income or assets to be managed, but it's those accounting professionals that do the dirty work and the grinding of helping people start businesses and grow businesses, really in the trenches with their clients and helping them, you know, start having a nest egg or start really growing their wealth. And so I think it's really the ability to provide that advice and integrating wealth tech early on in the process that can set people up for success later in life.

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Day:

Okay, so your usual audience is tax planners and accountants, but today we're speaking to the advisor and wealth manager world. You and I are kind of like those stereotypical miners digging in the tunnels towards each other, and today we're gonna meet in the middle. So flipping kind of the view around, we've landed on planet wealth management, planet advice. Why and how are taxes and tax expertise valuable to wealth management?

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Rory:

I think it's the easiest sell for advisors out there is the value you can provide through tax planning and tax savings. I've dealt with so many CPAs and accounting professionals and then also on the advisor side, being able to show the tax savings is the here and now. People don't wanna pay, they'll go save a dollar more than they should. You know, combining that with a long-term financial plan is providing really true value to clients. That's why I think wealth advisors, they should be providing that tax planning advice to their clients that's within that long-term financial plan. So I think it's just a great opportunity to lead with that tax planning to, because from the CPA or the accounting side, we're seeing the integration of these two worlds today. And if they have a CPA or an accountant that starts to do the financial planning or the wealth advisory, that business is something that maybe you've taken from them. So I think it's owning that relationship. I go back to the book that I'm writing here today, and I have trademarked the term advised ROAR, and the ROAR stands for return on relationship. So it's providing for the many needs of that client. And I think that relationship, an important part of that, is the tax efficiency, is the tax planning, is the tax savings of the here and now.

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Day:

So one thing super tangible, the client's gonna have savings. That means more assets, win-win. And then the second is you're supporting that relationship and getting that trust and that care on your side of the fence versus letting it maybe wander outside, outside get campground. Okay, you talk about holistic wealth. In your own words, what is holistic wealth?

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Rory:

Oh, it's a loaded question today. So I say that a family office really is the embodiment of holistic wealth management. If you think about it, the JP Morgan's, the John D. Rockefeller's, the Jeff Bezos, the Elon Musk, they would have professional service providers working collectively to advise that business, to advise the family on their personal finances. I believe it's really integrating that CPA, that wealth manager, to ensure that their client is growing that business, but also having that long-term financial plan, protecting their family in case of any unforeseen circumstances, having the insurance, have the estate plan put in place. So I go back to the fact that I think that having a virtual family office, so if you're an advisor out there, really incorporating those other subject matter experts, because I think that CPA, and I go back to it, I'm sorry that I'm harping on it today, but they're advising these small and medium sized businesses, which are really the backbone of our economy. And I think we need to be working together to ensure that one decision is making, that one decision affects really another, and that they're working collaboratively to ensure that holistic advice is being properly given to the client.

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Day:

So one piece of holistic advice is like, it's what's on the product shelf in terms of services, more of a one-stop shop, more in the bag, okay? But the other piece that seems to be like you're saying is, when tax experts and advice experts work together, there's something unlocked here. And so can you talk about sort of what happens from that synthesis of these two kinds of professionals working together and why that can be a deeper value than just say, estate planning advice as standalone services.

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Rory:

I think it's because you have the brightest minds working in their lanes but making decisions collaboratively that can put the client in the best position possible. I mean, sometimes it's not in the client's best interest to put more money in the business. Maybe they do need to put this into an investment account. So I think it's uncovering and you could be the wealth advisor, can be the person that is doing that discovery or the CPA can be doing that discovery, but it's really uncovering what matters most to that client. And this goes to the behavioral finance aspect of it. Day nine, I know you know about this, but it's really uncovering the values, finding out what those goals and those aspirations are for that client, and that's why it's important to do that deep dive and the discovery on what matters most to them. Do they wanna grow their business? Do they want a lifestyle business? Do they want to have a life where they're traveling. So I think it's just important to really doing a deep dive on the more qualitative measures of a client, not so much on the quantitative ones.

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Day:

So you kind of elevate above providing this simple service to integrating discovery, integrating the relationship with the client, integrating the service and strategy to a level where you're serving the client, not serving the service. I think that's a really cool idea. So you've been mentioning BFI, behavioral finance. There's a lot of businesses that are putting this out front, like Orion's starting to put this out front. Talk to us about what is a behavioral financial advisor and what are the knobs that a behavior, we know a planner does projections, we know a portfolio manager, optimized portfolio. What knobs does a behavioral financial advisor have to play with?

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Rory:

Yeah, oh my gosh, it's the life aspect of the advisement. And that's where I gravitate towards day. I love people, that's why I have a podcast. I get to talk to interesting people and learn through osmosis. But it's really uncovering what matters most to people. I've stated it here on the podcast. Our values drive our goals, our goals drive our behaviors. In turn, our behaviors will reflect our values. One of the thought leaders who has a great podcast, that I've interviewed on mine is Brendan Fraser. And he talks about goal shift, values persist. So it's really uncovering what matters most to people. And I don't think we do that introspection enough. I had Dr. Chrissy Archuleta, she is the head of financial planning at Georgia. She started the Financial Therapy Association. And she says, Rory, we just don't ask ourselves what money means to us. And uncovering that relationship with money which many times obviously you know days formed early in life, is very important because it helps illuminate on how we make decisions moving forward. So I'm a big believer in that behavioral side really uncovering what matters most to us doing a values-based planning exercise with clients.

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And then we can get to the investments or the numbers and the plans and the pie charts. But let me know about Day and his family and his tremendous wife who many times advises him on decisions. Let's learn about that stuff. Let's see what's carrying Day forward. I wanna know more about that and what do you aspire as far as a business and where you wanna go as a family. That stuff interests me. And I think that's what carries that relationship forward because as technology continues to evolve, a lot of, like I said, a lot of the work can be done by AI or the compliance work or the financial plan or the state plan. We're going to see that increasingly being done by technology. It's going to be the human side of advice, a shared human experience, that therapist type role that'll win out over the course of time.

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Day:

That's interesting. We had Scott Riddell from Accenture's wealth management and markets practice in New York on last episode. And he was sort of echoing the same sentiment that there's an IQ component and there's an EQ component and it's the intersection of those two sort of capabilities that's going to really make the highest powered advisor or expert. So to turn a drill down into that, can you think of examples or walk us into a situation

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Rory:

Yeah, let me think. So I just recently interviewed Hal Hirschfield. He is the, he went to Stanford Day, I don't know if you know him. Do you know Hal? Okay, he's probably around our age here, and he wrote a book called Your Future Self. So he's the foremost authority on this concept of our future selves. And his research showed that we see our future selves as no different than a stranger.

And so we don't make decisions with that future self in mind. He referenced a psychological term called projection bias. We've all suffered from it. We go to the supermarket and we're hungry, we buy way more food than we should. And we're not taking consideration that person in the future that's not very hungry that might not use all those groceries or we get a tattoo of a loved one that we might not be in love with 10 or 15 years down the road. So, he has some fascinating research. He says the way to make better decisions for that future self day is to paint a vivid visual picture of that future self so you can start identifying with it. And we are riffing back and forth with technology advancing as far as it is. You know, there's only a point in time where we'll put on VR goggles or AR and we'll have a future version of ourself and we can start having conversations with that person. So we can start identifying with them. So we start exercising more or making better decisions when it comes to our nutrition and our health habits. So I found that fascinating research. He also talked about the end of history illusion. It's research done by Dan Gilbert and he is the head of psychology at Harvard. And it's this concept that

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We believe that we've changed a whole lot in the past. So our teenage years, our 20s, our 30s, we believe we've changed so much, but we think where we're at now is kind of who we are gonna be. We may change, but it won't be incremental. But the research shows that is just not true. That we will change as much as we did when we were 20 to 30, as when we're 40 to 50. So I'm sorry. So we'll change as much as we will from 40 to 50 as we did from let's say 20 to 30 day. So I found that to be very interesting and it's hopeful. If you wanna make a career change, if you wanna start becoming a financial planner, or get into behavioral finance, or start doing tax planning, or do a career change and start traveling the world, that's welcoming it to me. It was welcoming to me to think that we talked about this, we have a change mindset in that there's opportunities out there to change your life if you want to.

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Day:

So at the root of holistic finance, it's really understanding the person, their behavior, what guides them. You need a map, but you also need a compass, right? And I think that's what behavior's about. So I wanna try and bring it back to the hard vision of the family office you have and how that could be democratized. Talk about how we democratize the family office model and then specifically like, why taxes are so critical to that, why they might be. Yeah.

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Rory:

Day, I think it's the work that you're doing with Responsive AI that will be the leading edge to potentially unlocking this holistic or virtual family office model, integrating these two solutions, the tax efficiency with the long-term financial planning and the wealth management aspect. People want to go to a one-stop shop if they can. If the service is good, they want that trusted person to provide for the many needs that they have. I mean, accounting firms are, for 132 years, there was two services that accountants offered, taxes and financial statements. Over the last three years, there has been an explosion of offering ancillary services, cybersecurity, payroll, HR, financial planning, M&A advisory. So the opportunity here is to really provide for the many needs of that client. Creative Planning, which is an RIA, just bought a $100 million accounting firm called Bergen KDV, 100 million in revenue day, not assets, which is very significant. So we're seeing this integrated world of taxes and financial advisory to serve the many needs of the client. I think I answered that question. Was that the question, Day?

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Day:

Yeah, yeah. And I think the critical question is like, why does tax become so valuable when we're looking at these integrated offerings and the technology? Like, what does tax enable? If tax isn't in the room, what do we lose when we're trying to set up this family office?

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Rory:

Well, tax is a requirement. Are we gonna file our taxes? I think it's, and I go back to this, I've talked to others in my podcast, it's really a mental accounting, right? You're just helping people pay the least amount of taxes possible. And that tax savings is something that you can provide as a value at offering. And those who don't have, so I talked to a number of people on podcasts and the accounting profession is suffering from a capacity issue. And the capacity issue, just like we're having talent shortage on the wealth side, capacity issue is really a pricing issue. And a pricing issue is really a value and service offering issue. And that value and service offering issue is just a self-esteem issue. So what they do is they have 2,000 clients paying 500 to 750 for a tax return. Well, they can't focus on the probably 200 clients that are high net worth or massive fluent that they can do financial planning for, that you do estate planning for, that would greatly increase their revenue with higher margin services. So they can't, it's almost like being, it's between a concierge doctor and someone who's just funneling, you know, hundreds of patients in a day. You have to be detailed, you have to do that discovery, you have to understand the ins and outs of those clients and provide that high level strategic service to them.

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Day:

So the tax service, the tax data, the tax expertise actually can become the foundation for this much richer, higher value service model.

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Rory:

Well don't you agree Day that that's a great lead in? I mean look, you can come from the financial side and do the investments or the life planning is the entry point. But tax is a great entry point as well. I mean whatever angle you want to come at, you know it's just providing for the many needs of the financial needs of that client.

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Day:

It's also the Lord's truth, right? At least, well, at least, or the IRS's truth, which is pretty close, right? So, you're working on a book right now called, sorry, you're working on a book right now that's called Holistic Guide to Wealth Management. And for our listeners who maybe want to dive deeper on this conversation, can you just give us a little teaser as to what's in the box there and what they might be able to learn?

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Rory:

Yeah. So I had a number of great thought leaders on my podcast, from accounting to wealth management, like I said, to behavioral finance, technology. So I've taken 24 of those luminaries and have them start contributing to the book. Let me repeat that one more time. That's a good question, Day. So I took the great podcast guests that I've had, and they have contributed to this holistic guide to wealth management for accounting professionals because we see an inflection point in the accounting profession to be able to start offering wealth management, financial planning, these future facing services. So private equity has gotten involved in accounting because they see a tremendous opportunity in a model that is broken. So the traditional CPA model that had, let's say those two services, tax returns and financial statements, they can now disrupt that and start offering financial planning, wealth management, HR, payroll, cyber security. They can become investment bankers. So they see this tremendous opportunity because CPAs accounting firms have the trust of the client. So I put together 24 of the great podcast guests that I've had on.

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They contributed to the book to really illuminate this virtual family office model to serve the many needs of the client. So like I said, we're at an inflection point, I believe in the wealth management as well, but more importantly in the accounting profession to provide for the many needs of that business, that client and their family. I believe that in the end, everybody should have a family office. It's not just for the ultra-affluent, the $100 million families. Everybody should be able to take care of their family in case of any unforeseen circumstances. Have an estate plan put in place. As you know, 60% of the population does not have an estate plan. Make sure they have the correct insurances. And then having the ability to grow your wealth. And many times, that's being your own business owner. And the CPAs can be that guide to help them grow that wealth. On the financial advisory side, we can map out that financial plan, give them that future self where they can start meeting their goals and their aspirations.

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Day:

So at the end of the episode, we do a deep question. It's deeper than the others. You recently published an article on Intuit, and you're over there offering great advice about tax pros and the great wealth transfer opportunity. And it seems like a lot of the model you're discussing around holistic wealth and family office and the themes you're talking about would put people in a position to maybe seize on this opportunity. So to get inside of that, why is implementing this model of holistic wealth and family office a way for wealth advisors and for tax pros to take advantage of this massive generational opportunity?

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Rory:

I mean, the 68 trillion dollars will be transferred to the younger generation. And I think that we have a tremendous opportunity to serve the many needs of that client. And I think what you're doing with responsive AI and identifying those opportunities, and we call them, I think we talked about on the podcast, I liked it, those memorable moments, those moments that can create deeper conversations, whether it's a child getting into college or a child leaving college and having life after no dependence. I think it's helping to uncover those opportunities. And as we continue to move forward, the technology will be able to identify those. It'll be you the advisor that can communicate the value proposition, help people understand more about what matters most to them, their values, helping them uncover that. And then being that guide, I had Dr. Daniel Crosby on my podcast and he talked about the three E's of behavior change day. And I remember this to this day. He says that in order to have real behavior change, you need education, environment, and encouragement. So education alone isn't going to change somebody he cites that 13% of the people smoke, population smokes, 14% doctors, 27% of nurses. You need that environment. So making sure you put the shoes at the bottom of the bed if you want to work out or keeping the junk food out of the pantry. And then lastly is the encouragement. It's having that therapist, having that coach, having that CPA, having that wealth advisor to help you and guide you to make those decisions to stay on track so you can meet your goals and your aspirations.

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Day:

Amazing. So taxes, the family situation, behavioral coaching, really being there for the client's story. It's a lot different than doing their paperwork every year. Yeah.

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Rory:

Their plans in pie charts, right? Or just doing their tax returns. Like, I wanna know what day's family. That's, right? That's what matters.

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Day:

Thanks so much, Rory. Really great to have you on the show today. Love the conversation and awesome to keep connecting. Really appreciate you coming on.

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Rory:

Thank you, Day, appreciate it.

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Takeaways

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The concept of holistic wealth is about providing comprehensive financial services that cater to all aspects of a client's financial life. This includes not just investments, but also tax planning, estate planning, insurance, and more. Rory’s concept of a virtual family office model is a democratized version of the traditional family office, aiming to provide these comprehensive services to a broader range of clients, not just the ultra-wealthy. He emphasizes the importance of integrating tax expertise with wealth management, as taxes are a constant and significant aspect of financial planning.

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Rory Henry and other experts believe that the future of financial advising will lean heavily on understanding clients' behaviors and values. By doing so, advisors can provide more personalized and effective financial strategies. The concept of "future self" was highlighted, emphasizing the importance of making financial decisions that benefit one's future self. The three E's of behavior change – education, environment, and encouragement – were also discussed as essential components for effective financial advising.

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All of this points to a huge wealth transfer opportunity: an impending transfer of $68 trillion to the younger generation – a significant opportunity for wealth advisors and tax professionals. By adopting a holistic wealth approach and understanding clients' behaviors and values, professionals can better position themselves to assist clients during this massive generational wealth shift. The emphasis is on building deeper relationships with clients, understanding their stories, and providing guidance beyond just annual paperwork.

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