41. Why Liability Planning is the Next Differentiator for Financial Advisors, with Siddhartha Oza of Sora Finance
Dec 12, 2023
Three Crowns Marketing
Liability planning is not one of the usual services embedded in advisory practices, but Siddhartha Oza would like to see that changed – for the good of clients and advisors alike.
According to Siddhartha, this gap is an opportunity for advisors to differentiate their practice and unlock AUM with their clients. Siddhartha is co-founder and co-CEO of Sora Finance, an AI-driven debt financing and management platform.
Siddhartha joins us to discuss the importance of adding liability planning to your advisory practice and how Sora helps advisors do just that. He joins host Johnny Sandquist in a conversation recorded live from the Fearless Investing Summit in October 2023 in Miami.
“On the Circuit” is a podcast where conversation sparks innovation, hosted by Johnny Sandquist from Three Crowns Marketing. Season 2 finds Johnny recording live conversations with guests at industry conferences like Fearless Investing Summit and Nebraska FPA Wealth Management Conference (Johnny loves a good industry conference). In these jam-packed episodes, guests share advice, insights and dreams for the future of the industry.
Want to learn more about how Three Crowns can help you elevate your digital presence? Check out the links below to get started:
Liability planning is not one of the usual services embedded in advisory practices, but Siddhartha Oza would like to see that changed – for the good of clients and advisors alike.
According to Siddhartha, this gap is an opportunity for advisors to differentiate their practice and unlock AUM with their clients. Siddhartha is co-founder and co-CEO of Sora Finance, an AI-driven debt financing and management platform.
Siddhartha joins us to discuss the importance of adding liability planning to your advisory practice and how Sora helps advisors do just that. He joins host Johnny Sandquist in a conversation recorded live from the Fearless Investing Summit in October 2023 in Miami.
“On the Circuit” is a podcast where conversation sparks innovation, hosted by Johnny Sandquist from Three Crowns Marketing. Season 2 finds Johnny recording live conversations with guests at industry conferences like Fearless Investing Summit and Nebraska FPA Wealth Management Conference (Johnny loves a good industry conference). In these jam-packed episodes, guests share advice, insights and dreams for the future of the industry.
Want to learn more about how Three Crowns can help you elevate your digital presence? Check out the links below to get started:
Hey everybody, welcome to On the Circuit Live at Fearless Investing Summit 2023. I'm excited to introduce you to Siddhartha Oza, the co-founder and co-CEO of Sora.
Speaker 1:
Johnny, thank you so much for having me. Yeah, man, pleasure to be here.
Speaker 2:
To have you here. This is our first time chatting I think Dan Bolton from Nitrogen introduced us, so I'm excited to learn more about you, learn more about Sora and just what you've got going on at Fearless this week.
Speaker 1:
I love it, and can we also pause to just talk about what a good guy Dan is?
Speaker 3:
Just such a wonderful human being.
Speaker 1:
And you can cut that out. No, we're leaving that in. I just genuinely made that, yeah, yeah, no, he will love it Fair enough.
Speaker 2:
I've known Bolton for a long time, and that guy is I mean anybody who's been to a nitrogen event knows that he puts on some of the best events in the industry. But also if you've worked with him on partnerships or marketing or anything else like it's just so warmhearted, kind and caring guy. Yeah, absolutely yeah. So we started off with some nitrogen love.
Speaker 1:
There you go. It's good. It's a good place to have that love too. Absolutely yeah.
Speaker 2:
But tell me about Sora, and we're going to frame it, the question, like this I mean, tell me what was Sora? Do Sure? Why should advisors care?
Speaker 1:
Sure, great question. So you know, we really started from the perspective that investment management, while critical, was starting to become commoditized. Advisors need to do more than just focus on the asset side. They needed to start doing other value added services, whether that's estate planning companies like Trust and Will, whether that's tax prep insurance there's all these value added services, but curiously, we thought that one of the most important ones was really missing from that equation, and for us that was liabilities. We looked at that and we said look, part of the goal of a financial advisor is to grow your client's net worth grow or preserve, depending on the stage of where they're at. But net worth is sort of the operational two words there and it's a pretty simple equation. You don't need to have the series 65 to know that equation. It's assets minus liabilities, and liabilities was just missing from that equation for a couple of reasons that we started to dig into, and so we decided to look at those reasons and try to figure out how we could solve them.
Speaker 2:
So let's get into what are those reasons why they're missing? And I understand there's probably a difficulty component of this, but, yeah, what did you? Did it start with, I guess, seeing that advisors were really voicing how, like this is a big lacking component?
Speaker 1:
for us Right. You know it actually didn't start from the advisors saying that this was lacking. Where it came from initially was from the clients themselves. That's even better. They were looking at this and looking for ways to go to their financial advisor for all things personal finance, and liabilities is a big part of that. They expect their advisor to be the quarterback on everything personal finance related, and if you can't go to your advisor and talk to them about your mortgage, well then you're going to go somewhere else. And now suddenly, as an advisor, you're not that trusted financial advisor, and so we saw that as being really critical.
Speaker 1:
There was a study done a couple of years ago by a spectrum group 3% of advisors only 3% of advisors do anything on loan or credit management, but 83% of clients expect their advisors to do that. So huge gap, huge opportunity there. And to that extent, when you look at the number of liabilities, sometimes we get the question law how many advisors clients have debt? It's a huge percentage and actually the more well off you are oftentimes, the more leverage you have, because you're truly using it as leverage.
Speaker 2:
Absolutely, and so, yeah, it's a tool that's not like student loan debt or anything like that, like it's very strategic, right.
Speaker 1:
And I would say even student loan debt. We see sometimes financial advisors with clients who are doctors, surgeons, making high six figures, maybe even seven figures, but they've been in school becoming a we recently refinanced someone's school a med school debt.
Speaker 1:
They had about $200,000 of med school debt. We're earning $850,000 a year, and so it's still a real opportunity there and again. As an advisor, it's a way to insert yourself there, but to that extent advisors didn't have the capability of doing that. And again, we can go into those reasons if you want to, but that's where we went to solve.
Speaker 2:
Okay, so does Sora step in as the point of aggregating those liabilities and then reporting those back? I guess, take me through, let's get a little bit deeper into how you guys deliver that value. Yeah great question.
Speaker 1:
So if we look at the issues that existed in the old way of doing things, financial advisors first didn't have a great way of actually getting access to liability data. So that's problem number one access to the data. If you wanted interesting insights on your client's debt, you had to just ask them for a mortgage statement, which definitely next month that's out of date If they're paying off their monthly Got to update it constantly.
Speaker 1:
If you maybe utilized some of the existing tools that were out there that exists like a Plaid or a Yodely, for example, your client would have to come in, log into a platform connect to every account. If they had a mortgage at Wells and an auto loan at Bank of America and student loans with Nal, they'd have to log into each of those which, by the way, if something happened, they changed their password. That connection is broken.
Speaker 3:
So big issue in just selecting the data.
Speaker 1:
Yeah, exactly, that's issue number one collecting the data. Issue number two is well, what do you actually do with that data? And there's a whole load of insights that you can generate once you actually have someone's liabilities, but it's only useful if you're actually connected to lending institutions and you understand what's happening and you can drive real rate opportunities, whether it's for rate term refinances, cross-factorizations or supporting on new loans. And then the final issue is just how do you do it in a way that's actually beneficial to your margin, not just cutting into the value that you're? I think one of the issues that has existed with these value added services that I was mentioning earlier is they just become cost centers for advisors.
Speaker 1:
We wanted to build something that was actually a profit center, and so what we do? We pull in all the client's liability data. Client doesn't have to do a thing, they don't have to lift a finger. Client shares some basic information and we can pull that in through some APIs that we have, and then it's kept up to date in real time. So no issues with the data getting disconnected or anything like that. Two, we're connected to lenders. We have a pool of lending platform providers on our back end across 150 different types of loans. So whether a client comes to you looking for support on a mortgage or becoming for support gain and Tran private aircraft loan, or they're looking for a commercial loan for their small business because they're a small business owner, suddenly now you can support them and not just send them to a third-party bank which, by the way, that bank is gonna try to poach your client.
Speaker 2:
That's a big deal. Yeah, they've got a wealth management arm. They absolutely think those assets exactly so you guys then help to facilitate that loan process. That's right, absolutely Yep.
Speaker 1:
So we've got the software platform kind of pulls all the data in. Advisors look at that data. We push notifications to advisors when there's opportunities for clients to save on their existing debt and then we also enable it so that advisors can come to our platform to request loans for new loans.
Speaker 2:
That that's really. That's really cool. Are you, are you guys, focused on the RAA markets? How broad is your guys's focus right now?
Speaker 1:
Sure we look broadly at the financial advisory and wealth management Now, I think, in reality, where we see the most opportunity or the most poll right now, it's RIAs and BDs, and part of that is if you think about some of the wire houses. There's inherently a desire to keep your loans in house, so to speak, right.
Speaker 1:
Yeah, and so you know, it's not to say that's necessarily what's always in the interest of the client and that's a behavior that we're trying to change. We're trying to say, look, if you're a fiduciary, you need to be out there supporting your clients, and if you guys don't have the best rate for your client, you should be sending them to someone who does and or or at least trying to support them on the planning side of liabilities and inserting yourself into that equation. But really that the greatest poll has been with RIAs and the BD side, yeah, yeah so what is your background?
Speaker 2:
Do you have a background as a financial advisor? Are you in the tech side or the like Billy's side? How did you get Into the?
Speaker 1:
you're a co-founder, so this is, you know, your idea, sure how did you navigate through your career to come to this?
Speaker 1:
point. Yeah, you know it's interesting. If you look at myself and my co-founder Rohit, both of us have backgrounds in finance and technology Not directly as financial advisors and so that's been a really interesting part of this journey, where we haven't necessarily been a part of the community before and so we're sort of finding our footsteps as as we make them happen now. But really the backgrounds and finance and technology had us looking at well, where was the greatest opportunity to drive impact for individuals? And when you look at the world of debt, it's massive in the United States.
Speaker 1:
And if you look at the world of debt for Financial advisors, financial advisors as clients hold about seven trillion dollars of consumer debt, and that's just consumer right. That's not on the commercial side, that's not small business lending, just consumer things, things that would show up on a credit score, on a credit report, excuse me. And so there's this huge opportunity to help individuals out to ensure that they're not leaving money on the table when they go to take out a loan, that they're actually getting the rate that's right for them, and we just thought that software would be the right way to make that happen, because if you're an individual, you're trying to find the best rate on a on a key lock. Maybe you talk to one, maybe two, three lenders at a maximum. Not a fun process.
Speaker 2:
Like you maybe have been through that.
Speaker 1:
It's not a fun process. It's terrible. But on top of that, there's 13,000 lending institutions in the United States. There's no way that you can reach out to all of them and there's a pretty big spread in terms of what you're eligible for. So on any given day, if you, johnny, if you want to go take out a mortgage today and you went to lender a and Then you went to lender be same exact profile, you and your wife and you're looking for a loan I you might get a rate from lender A that is 80 basis points higher than one that got from under B. That's a huge impact.
Speaker 2:
I mean, I've had that type of experience and you're like this makes no sense, it makes no sense. Right and it's your. You know you have to spend the time researching those different lenders and then by the time you do that research, just to make the outreach and get those two Right, you're almost at that point. You're like, oh man.
Speaker 1:
I'm ready to move on. Well, and we had the experience of you know, personally, of going through this where, when we were starting to build out the product, we obviously did some of this manually, and one of the interesting challenges that you have is when you go to actually call up a bunch of lenders. It's really painful to do that. What's more painful is what happens after that, which is you have 15, 20, 30 lenders calling you back every day for the next five days, spamming you with sort of you know, hey Siddhartha, hey Johnny, are you? Are you, you know, ready to go on this loan? It's not a good system, and so what we wanted to do is make that really seamless because, again, if you're a client working with a financial advisor, you want to outsource as much of your financial life to your advisor as possible, and this is a pretty big part of that.
Speaker 2:
Absolutely Okay. Great rundown of what you guys are doing, how you're doing it, the value of it, like I see it clearly. Sure, you're also speaking at Fearless this week. I am Later today.
Speaker 1:
I am, I think.
Speaker 2:
So you know people listening to this podcast will likely have been people not here, so I want you to kind of break down for me what are you going to be talking about, yep, and what you want people to know about that session who aren't going to have that opportunity to be with you live Right.
Speaker 1:
Right Now. It's a great question. So, fundamentally, what I will be talking about is the importance of liability planning for advisors. Today, I think there hasn't been unlike with estate planning or insurance which, if you look at insurance, even maybe 10 or 15 years ago it wasn't as baked into the process of what an advisor doesn't. Even today it's still not as baked into the process of what an advisor does. And so part of what we're trying to do is really ensure that advisors understand the criticality of this, the importance to their clients, and how this allows you as an advisor, if you're doing liability planning, to differentiate your practice, to actually unlock new AUM.
Speaker 1:
Right, if you think about it and I'll give you a very concrete example here If you're an advisor and you can use Sora to identify a savings of $1,000 a month on someone's mortgage, right. And again, if there's a sudden rate drop next year, sora notices that will alert you to that automatically. It's not like this is additional work that you have to do as an advisor, but you've take that $1,000 a month of savings. Well, that's absolutely meaningful, right. You add that up $1,000 a month times 12 months a year, times 30 years on a loan $360,000.
Speaker 1:
But if you're an advisor, you're looking at that $1,000 a month and you're saying, hey, johnny, I can actually take that $1,000 a month that you're saving on your loan, reinvest that for you and, by the way, at a 6% return, which is highly conservative. Over the next 30 years. You're talking about a million dollar net upswing in your client and that's, you know, aum for you. So, broadly, what we're really looking at as Bucket 1 to talk about today is just, look, this is happening. You need to be looking at your client's liabilities and here's how you can do it in a way that's easy and accretive to your practice. And then, two, we're actually launching a new product today.
Speaker 2:
And we're really excited about that. Can you drop the details? I can drop the details. All right, let's get into it.
Speaker 1:
Yeah, so you know, we're here at Fearless, where Nitrogen has built a really incredible business focused on, in part, helping advisors look at a perspective clients' assets, look at that asset portfolio and generate a unique proposal for their clients, and that's helped advisors convert clients, show their differentiated value, really be able to say to a client I'm doing something that is unique for you.
Speaker 1:
Well, assets are an incredibly important part of a client's balance sheet. It's important for advisors to look at that and, as I was saying earlier on the net worth equation, assets is one of two pieces, and so the other piece here is liabilities, and so we're effectively launching a really interesting product that helps advisors analyze perspective clients' liability portfolio mortgages, credit cards, auto loans, private aircrafts, right, whatever it might be. Pull all of that data in seamlessly. It takes about 30 seconds for us to pull that data in and generate a unique proposal, and we use a combination of human elements along with some generative AI to effectively deliver those insights in a really interesting sort of one-page report for an advisor to take to a client in a second meeting and be able to say look, there are advisors out there who are going to help you on the assets. I will certainly do that, but I've already, in a second meeting, come to you with a proposal on how to look at your liabilities. I'm looking across your entire balance sheet now. How many other advisors are doing that for you?
Speaker 2:
Yeah, really clear way to show that comprehensive planning approach. That's exactly right, awesome, wow, that's exciting. Yeah, yeah, congrats on that product launch.
Speaker 1:
Thank you, it's been a work in progress, I mean congrats on speaking here.
Speaker 2:
Appreciate it. This is big. On the note of Fearless, yes, I want to get your takeaway on this question of the week for us. Okay, what's the number one thing advisors need to be doing to keep clients fearless?
Speaker 1:
Such a good question. Now, for us, it comes down to holistic planning for your clients, and being a holistic advisor means looking across the entire balance sheet. It means thinking about net worth and each of the components of that assets and liabilities. It means not providing a la carte service, because, if you think about it, if you're helping your clients out on their assets but you're not thinking about their insurance or their estate plan, well then there's multiple issues. They're going somewhere else for that support, you don't know what's happening, but, too, you're losing some of that trust with your client that enables them to be fearless, that enables them to feel like they can take the right risk-adjusted moves in their careers or in their families, and you're a part of that equation. And so, if you're looking at that whole thing, that whole picture, if you're really acting as that quarterback, that's the number one thing that enables your clients to be fearless there it is All right.
Speaker 2:
So, D'Arthur, thank you so much for joining me. Really appreciate you stopping by.
Speaker 1:
Johnny, I appreciate your time, thank you.
Speaker 3:
Thanks for listening to today's episode of On the Circuit. We recorded this live at the 2023 Nitrogen Fearless Investing Summit. Make sure you hit, subscribe, hit like, leave a comment on this episode to make sure that you stay up to date with everything happening on the Circuit and we'll see you next time.