Transforming the Wealth Management Business
On episode 33 of The Wealth Cast, Chas speaks to Sebastian Jersch, CEO and founder of Neo Consult, a financial planning company based in Marburg, Germany. Sebastian discusses the long road still ahead of financial planners in Germany who, tired of the conflict created by “free” financial planning services, have established fee-only advice. He explains how the experience and guidance of planners in the U.S. and U.K. that had already undergone this transformation helped him develop the vision and mindset needed for his business to become a success.
The summary below has been created by a professional transcription vendor upon review of the recorded presentation. Please excuse any typos as well as portions noted to be inaudible.
Hello, and welcome to The Wealth Cast. I’m your host, Charles Boinske. On this podcast, we bring you the information that you need to know in order to be a good steward of your wealth, reach your goals and improve society. Today, I’m really pleased to welcome Sebastian Jersch, who is a wealth manager—an entrepreneur from Germany. Sebastian is going to share his experiences building a business in Germany, and sort of being on the forefront of the wealth management industry, and its move towards financial planning, and fee-only advice in Germany.
As you may know, I spent quite a bit of time over the last ten years or so in Germany working with advisors and speaking about the evolution of their industry, and Sebastian has always impressed me as being one of the advisors on the forefront of that movement. I hope you enjoy the conversation, and let’s get at it!
Sebastian, welcome to The Wealth Cast. I’m so pleased that you join me today.
I’m so excited you’re having me on. And I was really looking forward to our conversation today.
Well, thank you. Me too. So why don’t we start, you know, we’ll break this conversation, I think into two parts. Let’s start first with some of your thoughts about the entrepreneurial spirit and being an entrepreneur, and then we can talk about the financial services industry in Germany and your contribution and where you think the improvements have come from, and where do you think maybe you’re going as an industry?
So let’s start at the beginning. You know, just talking about entrepreneurs. We’re both entrepreneurs, we both started our own businesses. I think the listeners may be curious about how that may be different in Germany, if at all, than it is in the U.S. And so why don’t you give me your thoughts?
So maybe for first thought, let me try to explain a little bit how I entered the industry. Because not many people know. Before I studied economics, and finally started my career as a financial planner 20 odd years ago, I actually worked as a professional musician in classical orchestras. And so I was highly trained in listening carefully, but not only to what has literally been said, but also what you can feel underneath. So I call it “the metaphysics of nonverbal conversation by music.” And even though I have been falsely dismissing this phase of my life, I later came to realization that there is this tremendous power in this unique ability of connecting with people non verbally. Or more precisely, I feel the real potential of financial planning resides exactly in the combination of the soft side that lies in the communication skills, with the hard facts, or the technical knowledge—the tax rules, the investment and retirement details—that we as financial planners, feel knowledge belongs.
But there was another aspect that has financial implications, and that I encountered at the end of my musical career: the success of a financial musician, particularly in classical music, is not only dependent on the high standard of your physical or your musical abilities, but also with the limitation that comes with your instruments. To be a high professional, or to buy a high professional instrument, is a very costly issue. And this is a real material battle, and for many talented people, a situation they often cannot compete with.
And so I found myself in that kind of restrictions, and I decided not to be part in that circus anymore. And hence, the profound finding for me here was, money can be a tremendous enabler. And so I got deeply involved in the question, how I can help individuals to fulfill their dreams, and how money can support their ideal picture of their life.
And so, I studied economics and started my career as a financial planner 20 odd years ago with a financial corporation. And I still can hear one of the leading managers telling us as trainees: “Just do what we tell you and you will be alright. You will be successful.”
Well, soon I had to find out that it was true—it would be alright—but at the cost of my clients: the ones that have given me the trust for their financial future. And so I found out it was not real financial planning they had in mind, but if you’re a commission-driven financial sales business disguised as financial planning. As you can imagine, this was kind of a disappointment to me, and so I left and founded my own company.
Yeah, that’s a disappointment that we both shared in our careers. I’ve had this very, very similar experience, without being a talented musician, as a prequel.
But that’s a really unique story, and I have to say, Sebastian, I think you’re the only person I know, in our industry, who started out as a musician, went back to school and became, you know, an advisor, which is fantastic. And I think, you know, logic would say to me that the precision that is required—and I’m an absolute novice, in terms of music, I don’t really have any musical talent—but my understanding of that skill is that it requires extreme precision—
And a sense for, or a feeling for the music as much as the notes themselves. And so I think that’s really interesting. And I think something that you said earlier rang really true that being successful in this business—and success, I would define as having the ability to get your clients to their goals; that would be how I would define success—is really a combination, as you really clearly stated of the soft skills and the hard skills. And that’s a really keen observation.
Absolutely, I agree totally. And this is likewise the biggest obstacles I met later on. You know, by even within within our own company in Germany these days, and to a large extent, until today, I have to acknowledge that it is a hard business with a financial planning consulting approach with a pure financial planning approach, surrounded by huge financial industry and business models that are purely commission-driven.
And there are particularly two aspects to that, that turned out to be an obstacle and that I want to highlight a little bit. First, the missing understanding and acceptance of fee-only advice within German society. You know, over the years, people have been accustomed to the fact that they get advice for free: accepting, and even knowing the advisor is finally paid by the bank, or the insurance company, from which the advisor has sold the product to the client. And this is crazy in so many ways, because people are just not knowing how much in fact, they’re paying without seeing it.
Yeah, having the transparency to the costs and in the relationship is really, really important.
Absolutely. And why is it so important? Because the costs are reducing the net income for an investor. So exactly what the clients needs as cashflow to maintain their lifestyle. In addition to that, higher costs in relation with financial products have no quality promise. This is the point where it is somehow counterintuitive for the investor. In the rest of the economy, we expect better quality for higher costs, isn’t it?
And with financial products, it’s the contrary: we see an overwhelming number of research that is showing us that higher costs are not related to high investors’ outcome over a long period of time—or in other words, costs have a negative impact. And in the US and UK, I feel you have already, an understanding of the impact of costs to the investors’ outcome. And hence, you have a quite different advisor receiving public discussion and foremost, legislation, whereas in Germany, there is still a legal system intact that supports the old commission-driven business models. As you might know, we just had our elections in Germany, and from the exploratory talks we hear through the industry, that the advisor receives compensation today will certainly not be the subject.
Well, if such topics come up at all, they expect drafts of a bill that would not lead to an immediate ban on commission—but rather if so, then to an exit from the commission-based system. That tells you enough on how long we have to go. And you know, this thinking still prevails in the industry and society at large. If it comes to investing money, people still would go to the big financial institutions, to the banks, instead to an independent wealth management firm like ours, even though they’ve heard about the cost issue and ETF solutions, for instance. But what I hear is, again, driven by the industry in the media, and in many cases, not very helpful to take sound financial decisions for the future.
So you can also detect the herd instinct of people here, you know, it seems to be like a risk reducing risk, and mitigating attitude: better to do what others are doing, you know, what’s the mainstream, so why to go to an independent advisor, instead of the big banks that supposed to have the unique access to financial instruments, the experience and the manpower? You know, so there’s still a lot of information needed about “What is the difference—a real financial planner, what an independent wealth management firm can deliver to individuals?”
Yeah, I think that’s really interesting, Sebastian, because it’s similar to what we experienced 25 or 30 years ago in the US. And while our industry has been evolving fairly rapidly, here, it still has a ways to go.
So that’s always been part of the interesting, interesting part of the conversation with you and the other German advisors that I’ve had the good fortune to know, over the years—just understanding a little bit of the frustration that you feel, because you’re very, very sure that the new way, the new business model, is better than the old business model, principally, because it’s better for the client, right? It’s clear, they understand their costs, you’re sitting on the same side of the table with them, all those all those important considerations. Yet, there’s this infrastructure in the financial services industry that makes that evolution difficult.
So with that background, it makes it really interesting to hear why you decided despite those things, despite that difficulty, why you decided to take the risk, and build your own company, which is at its core, the entrepreneurial story.
I think, a big eye opener—and this is the second point I really like to talk about, and I feel it’s even more important—and this relates to integrity. You know, we are in the people’s business, and we all expect mutual trust. So you’re in the trust business. But how can we expect a trustful relationship with our clients, but also with our friends, family members, business partners, literally with everyone, when there is no integrity?
I’ve collected this wonderful definition of integrity from George Kinder, someone who in the financial planning scene in the English-speaking world is a well known and highly acknowledged personality. And he says, “Integrity is acting from a place of wholeness and clarity in regard to one’s values. It is a natural state of ethical balance. We all know when we are acting in integrity. We also know right away when we lack integrity, even for a moment—we flinch internally, we feel at the very least a moment of doubt, shame, guilt, or remorse. It is like a wave of disturbance that moves through us. Actions that lack integrity cause far more damage internally than we can imagine, particularly if we try to pay for them up with rationalizations or explanations. We unconsciously begin to think of ourselves as liars, or cheats. Our relationships are robbed of real intimacy, and our business activities are plagued with frustration, inefficiency, and a lack of clarity.”
And this actually, was an eye opener to me: I realized that particularly in our industry, it seems to be a common attitude to justify our own wrong behavior by blaming the circumstances, referring to the legal framework, or to what others are doing as well. But all that doesn’t make the wrong thing a good underwriting, does it? “And here, it’s not on me to say what is right or wrong.” But I saw the great opportunities that comes when we as advisors, with our business models would think differently.
Yeah, and I think that’s very similar to how those of us that were in this industry in the US 30 years ago saw it. The parallels are pretty remarkable, even though we’re thousands of miles apart.
You know, the hard part for those of us again in the industry 25 or 30 years ago was this constant feeling that you were at odds with your client. And wondered how, you know, when you first started your business, what the biggest challenge was. Because intellectually, you knew that it was better, right? You knew—you had a lot of confidence that it was better. But that doesn’t make it successful right out of day one, right? You had—still have—to do all the work to set the stage for success. So what was the biggest challenge that you think you faced beyond just the public acceptance of something different? Because we all face that, right?
You know, the biggest challenge was exactly what I just talked about: defining about the own integrity.
Defining of your own purpose, if you will. Yeah. Until that point, I actually knew I was doing, you know, the wealth management, the best I can—I mean, with all the blueprints I collected from all over the world. You know, that’s why I went out to the US, to the UK, to connect with people like, great financial advisors in huge firms that actually have shown that there must be a different way. And, but it all comes down, are you yourself? Are you ready to talk to clients, from your heart?
So, as usual, when you know your biggest challenges, you know your biggest opportunities. And it feels counterintuitive at first, but what happens? When you manage to take yourself out of the equation, when you manage to be courageous enough to transform your heart, to be courageous enough to listen to your clients without intention, without a hidden plan.
So you know, it’s so hard, if you think of a business model that is designed to sell products. And I certainly don’t want to derogate in a traditional advisor. I mean, I think there are so many good people out there that want to do good for their clients, but the industry, the legal framework, and so, the business models, have trained them in a completely different way that makes it nearly impossible to detach from the pure selling attitude. But if you position yourself and this is something I had to do with myself—instead, as firstly a good listener, who is able to really listen with empathy, then you really connect with your clients, and everything else follows—the trust, the enthusiasm, the willingness to work with you—and based on that you will find so much bigger success for your own business development, because your personality shines and helps your clients to free up from their underlying worries when it comes to like, their financial futures solely in your hands.
For instance, one of the reactions to various clients we see is typically advisors’ diversification. I don’t know, I’m not sure about the situation in the U.S., but here in Germany, a lot of clients have this strategy in order to mitigate total loss—to separate the money and let it be managed by different advisors. You know, which would be a great idea, if they actually knew who of the advisors is specialists in world equity, the one who is knowledgeable about small caps, the other one who knows about emerging markets and the one who’s a specialist in fixed income, for instance. And following the logic, now, the client must know his financial plan, and should accordingly divide and put the money in the adequate proportion that fits perfectly to his own needs. But what happens instead? Being reluctant to give all the information that is needed to do it properly, clients do not open up. And in a way, every single advisor that manages the trench of the hole, just tests the bit of information the client decides to give at that moment. And consequently, the advisor must do mistakes in setting up a proper portfolio that is designed to support the dreams and goals of the client.
And instead clients end up with cluster risk induced by missing trust.
So to sum it up: finding a business model that really puts the client first. I mean, we often see it as a marketing slogan or hear it as a lip service. But I mean really open you up as a human being, connecting with another human being—without any prejudice, unbiased, being really interested in the life of the other one. Educating yourself with communication skills that allows you to build up an ongoing, profound, lasting relationship, and helping your clients with your financial planning expertise. And they need this kind of expertise. I mean, that’s why we are so desperately needed in this society: to use their resources wisely, their wealth, their lifetime, their energy, to lead the most fulfilled life they can imagine.
So this might be a guide for not only a bit of client experience, but also much more satisfying business success for ourselves as an advisor. And so this in a way, this was my approach. First, when I found about this kind of communication to really relate with clients, you know, the success was following automatically.
Yeah, we’ve found that, you know, separating yourself—separating your interests from the outcome of the client—is really, really important. Making sure—that allows you to always put their needs ahead of yours. And if you do that, while it sounds counterintuitive, it actually builds a better experience for the client, it builds a better experience for you, and it builds a better business. And it’s the long way, it’s not the—there’s no shortcut there, right?
It’s the long way of doing it. But in my personal experience, it’s the much more rewarding way of building a business.
And not only numbers-wise, I mean, it’s personally so rewarding. If you really feel the gratitude, if you really feel the energy of your clients when they are fulfilling their dreams, and seeing you as the trusted advisor who has enabled them to free up, you know, as you probably might know, through your long-lasting experience as financial advisors, it’s not about the numbers of the value they have, whether people live a free life. You know, you have clients with millions, and they still restrict themselves, because money is such an, this is such a weird concept in so many ways. And there are so many connotations and so many paradigms, where we grew up with and to help clients to help other people, basically, human beings to let go of that and use these resources wisely. This is an ability you have to develop in yourself. And there are certain ways to do it, you know, and probably there are a lot of different ways to do it perfectly.
I mean, you know, the most efficient way I got a new method of financial life planning, that’s the method we are using, or what I used with George Kinder, but it doesn’t matter. It’s a question, “Are you really able,” as you said, “to relate with your clients, to connect with your clients intentionally?” And this is so hard, particularly in service-driven business. “How am I closing the deal?” You know, this is really an obstacle. But you have to overcome it as a human being, as an advisor, as a personality here.
And I think from, you know, as an entrepreneur, there are different obstacles that you face, right? There’s the obstacle of regulation and industry structure. There’s the obstacle of you personally, getting comfortable with change and taking risk. That’s an obstacle. There’s an obstacle in terms of creating an organization that has appeal to a marketplace. And all of those things you’ve done very successfully, you’ve overcome the obstacles very successfully. And it’s really interesting for me to watch you and other advisors in Germany go through something that we went through, maybe two decades ago.
And let’s be clear, we’re always learning right? You’re the day you stop learning and improving is, you might as well give it up. So I don’t mean to say that we’ve reached the finish line on this. What I mean to say is, it’s really affirming and rewarding to see smart folks like you make this transition for your own country. Because at the end of the day, what you’re doing, and what you’re professing, I think is good for society. It’s good for society to have transparency. It’s good for society, for the individual participants, to have better returns. All of these things are very positive, and you’re making your own contribution to that goal to that result. And I think it’s fantastic.
On the other hand, just to say one thing: without the support of people like you, without, you know, seeing that this world can be different—you know, sometimes we are so limited, you know? Amongst all the things I’ve learned, I would say the most important thing I would recommend and I’ve learned is stay open and curious for the impossible things. You know, we often find ourselves too quickly in our so-called “Real World,” where we judge our situations and dismiss possibilities. We’re so quick in saying “that’s not realistic, that is not possible.”
Our thinking is too often superimposed by the deterministic framework that comes with our environment. But more often, and even more profound, with our own judgmental attitude towards ourselves. And that keeps us from doing things we can do, regardless of the circumstances. So I like more, thinking of what we can do instead what we cannot do.
And so reflecting back: when I came with the idea of changing my business model, ten years ago, I was surrounded by people that either weren’t believing that it is possible, or in the best case, they were just asking, “But how do you want to do this? How could that work out for you?” And I found that by just going your way, and staying curious for the wonderful things in the world, you meet automatically, on your way to help. You meet the people that help you to reach your goals.
And I mean, that’s what I did. I went out to the U.S., to the U.K. And I met, experienced people like you. And I listened. And I finally got tremendous help, and a blueprint, on a business model on how a business model could look like here in Germany as well. And that’s something as you said, you know—this development never stops.
And so, you know, I can’t really say, you know, “I’m finished” just like you. But now I feel I’m so advanced in comparison to other advisors. They’re so desperately seeking, they’re trying to get orientation, on how could it look like?
So I find an attitude as described as the spirit of open curiosity best, is the beginner’s mind. You know, beginner’s mind is always fresh, new, seeing things as if it is for the first time. Sometimes we are so expert, that our mind is so full of our expertise, but that leaves us without any realm of novelty or new possibilities, you know? And in the mind of an expert, they say, there are only a very few possibilities, whereas in the beginner’s mind, there are infinite possibilities, because we come to it fresh. This is a kind of discipline to bring the beginner’s mind to every aspect of our life, and not to be stuck in our own opinions about how much we like this, or dislike that, or what the outcome of a particular situation might be.
And so I think this is a really challenging thing to do. And you know, when you’re talking to people, for instance, and no matter what you say, they react straight away with, “Oh, yes, I know.” And you can actually see their faces and you feel that they haven’t understood at all. Not to mention that they haven’t listened properly. Moreover, they have just interpreted what you said, into their world and their paradigms. And you can feel how every conversation is killed in an instant.
When instead we come with this freshness of the beginner’s mind, when the reaction, their reaction would be “Oh, interesting. Tell me more.” And so it has a tremendous transformative quality that is associated with it. You’re open with people, and you don’t insist they have to be as they were the last time, or when you met them the first time. And so you leave space for personal evolution. And as a consequence, they feel seen and recognized and met in a way they haven’t experienced, and that benefits them and also us.
And I think this is so much true for our clients, for the work with our clients, but it is so much true for development with other advisors in Germany. I see people who are really open minded, that have this kind of beginner’s mind, and are ready to listen to you in new ways and thinking about the impossible, making it possible.
I mean, the thing is, if you don’t know what you’re talking about, impossible, people have no picture of what is possible. And this is the weird thing. And so this is the biggest challenge, but I think we all can develop some kind of attitudes that help us to develop personally and to free our thinking up to think in certain terms. I mean, this was something I really had a great benefit from, and again, with a great support of my friends and colleagues from all over the world, I mean, just to see that it’s possible. That’s how a business model could look like. It’s so inspiring.
So thank you very much. On the other hand, for the support over the years. And I always remember a conversation when we were in Schladming in Austria, and you know, you were the one who was listening. And you said something that suddenly struck me. You said something like, “I can see how desperately you want this.” And you were totally right. You were totally right. And this kind of building up a relationship was the clue. You have no idea how much you helped me on my way, Chas. So thank you very much. If I might say this publicly here.
We’ll, you’re very welcome. I’m honored and flattered that you would say that.
I think that one of the best experiences I’ve had in my entire career has been, and perhaps, of course, the best experience is helping clients reach their goals. But the second-best experience has been my interactions with advisors in Germany and all the experiences that I’ve had there—Germany and Austria, and in the UK—just trying to help where I can help has been very, very rewarding.
But I think going back to your comments about the beginner’s mind—I think that that’s key, whether you’re in the financial services industry, or you’re making, you know, semiconductors, whatever business you’re in, looking at things with a broader perspective, and the idea of, “there are no real rules, there are only opportunities,” I think, is really important to success.
So I think, first, there’s a couple things. First, I’d like to thank you for joining me on this podcast—your comments have been very well said, and your explanations have been very clear. And I’m sure that the listeners have gotten a lot out of those comments. I look forward to having further conversations with you and seeing the development of your business from afar. And hopefully, as the pandemic lessons and travel becomes easier, etc., we’ll get a chance to see each other face to face again.
But in the meantime, let’s stay in touch, and hopefully we can do this again, and I can check in with you to see where things are, and you can share your insights with the listeners.
Thank you very much, Chas, for the opportunity to talk to your listeners. Thank you very much, you know—that you are helping the way you’re doing it to make it seeable for the rest of the world that there’s another way, and a better way to do financial business, or wealth management business. So it’s a great work you’re doing, and thank you very much for you know, having given me the chance to talk and talk about it. It was really a pleasure for me. Thank you.
Well, you’re very, very welcome. We’ll talk again soon.
Brilliant. Thanks, Chas.
Thank you so much for joining Sebastian Jersch and myself on today’s podcast. I hope you found his perspectives on both the entrepreneurial spirit and wealth management interesting and helpful. Please feel free to reach out to me with any questions or comments. I’m always interested in hearing feedback from the listeners. And I really appreciate you taking time out of your day to listen to our conversation. Thanks very much and until the next time, stay well.
Sebastian Jersch is CEO and founder of Neo Consult, a financial planning company based in Marburg, Germany, and founded in its original form in 2004. A classical musician by training, Sebastian left music due to the financial pressures placed upon musicians, and realizing the transformative power of money, retrained as a financial planner. Sebastian’s wealth management practice is based on a merging of three aspects: Asset management—evidence based investments and portfolio management; advanced planning—which includes transition planning, business succession planning, retirement planning, targeting aspects of wealth enhancement, asset protection, taking care of the heirs and charitable giving; and relationship management—acting as the trusted advisor to clients to help them accomplish their goals.
As the managing director of Neo Consult, Sebastian oversees its strategic direction and portfolio management process. He studied business administration in Hamburg and received university certificates as a Financial Advisor (ebs), an Honorarberater (ebs) and a Testamentsvollstrecker (ebs) (Executor of wills) at the Private Finance Institute of the EBS Financial Academy in Östrich-Winkel.
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