Today our guest is David Snider. David is CEO and founder of Harness Wealth. I’m very excited to talk about that, but just talk about the profession in general. David, welcome to The Unique CPA. 

Thank you. After having been with you in person out at the AICPA event in Las Vegas, it’s great to join you virtually.

Yeah, I was very fortunate to get invited to lunch with the Harness Group. Just a short walk, although nothing’s a short walk in Vegas, I think you gotta take ten different routes to get there, but short walk from the hotel we were staying at, that was a lot of fun, so thank you for the invite to that lunch, it was fun. 

So, before we even get into—we’re gonna get into the profession, we’re gonna get into ways that we can help the profession in general, things that we see going on in the profession—but before we even do that, I just gave you a quick intro. Why don’t you give us a little more background on you and how Harness started.

Fantastic. Well, I’ve spent probably the last 12 years focused on how technology can enable advisors to be more effective in working with clients and creating value for them. And the first chapter of that was in the real estate space, helping to build Compass, the tech-enabled real estate brokerage. I was the COO, CFO, and they really stumbled into how powerful it can be to create software that enhances the collaboration and the experience of working with advisors, but doing that in a way that is not software-only, but is software surrounded by tech-enabled services that really help advisors and their businesses thrive.

And so that theme was really exciting to me and I’ve had the opportunity through a short stint back at Bain Capital where I’d been earlier in my career to launch Harness and try to do something similar in creating value for tax advisors principally, but also some other areas that can support them as well.

Yeah. So it was interesting what you just said—you were working with advisors, they were in the real estate area, now you’re working with advisors in tax and wealth, and a myriad of other areas as well. You and I talked briefly beforehand, but I’ve heard the story, at least bits and pieces of it before. Harness really was born out of a situation that you had, an event that you had that ran into it. So why don’t you give us that story.

Yeah. What you’re alluding to is a seven-figure personal tax mistake, basically, and it was not fraud, it was not a bad investment. It was listening to two different Harvard Business School professors who I thought were brilliant in the classroom. When I took over the CFO role at Compass, we were exploring whether or not to introduce an early exercise program and it was steered towards an answer that was probably not right for the context, certainly of a post Section 1202 QSBS venture-backed world that I’m not sure these guys even knew had shifted or existed. The fact that really bright people giving what seemed like really good advice was so painfully wrong when it came to actually filing those years of 1040s, that was part of the inspiration, that especially for next-generation business owners, equity holders, there’s just a lot more nuance than I think there was 20 years ago. The ability for technology to help great advisors navigate clients through that complexity, I felt like was a huge and still fairly nascent segment of the ecosystem that intersects tech and tax.

Alright. And you said that you went back to Bain Capital. You were there before and went back after the Compass years were up. And by the way, side note: I remember, I don’t know if it was exactly when Compass came out, but I remember at least early on hearing about this technology-based real estate firm. What would be the right term? What would you call it? 

Depends when you’re asking those that were bullish or those that were pessimists back in 2013, 2014, 2015 as we were building it. I think you looked at it from one side and you’re like, hey, they’re building other brokerages that have raised hundreds of millions of dollars of venture capital. I think if you looked at it from the side that I was using to sell people to put in capital and to grow the business, it was, hey, this is a huge market. It’s one where there’s an enduring demand for the service and where the good professionals are really good and valued by their clients, but the enabling technology is totally absent. And Zillow and Trulia and others did amazing things for elevating the insight of the consumer, but they were not built to be great advisor tools. They sort of grudgingly allowed advisors to pay them for the pleasure of being part of that ecosystem. 

And I think we felt like there was an opportunity to really build technology that would enable real estate agents to be great advisors. And I think that piece has borne out over a long period of time, and Compass now being the largest real estate brokerage in the US on the residential side.

Really? I did not realize that. I mean, I do see them everywhere.

Yeah. 

And I’ve told you this before. My sister is an agent with Compass and honestly, I don’t know the numbers, but like, got to believe she’s probably one of the top ones at Compass. She does a lot of work, and she recently helped me, or in the middle of helping me. We just bought a house, but we’re looking to sell our house too, and I’m just super impressed. I’m getting on a tangent. This is what I do sometimes, we go on tangents. But I was super impressed, and I’m sure a lot of the tools she’s got with Compass have helped her a lot. 

Okay, I’m going to go back. This is not a Compass podcast, this is not a real estate podcast, but it is an accounting podcast. So let’s get into then, you know, so you went back to Bain Capital for a year and then these ideas were coming into your head. I mean, is Bain part of this then with Harness?

Yeah, I mean, I was very fortunate that Matt Harris, who leads the financial service technology practice at Bain Capital on the venture side, invited me to come back to Bain and said, we love having entrepreneurs in the office, sitting alongside the investment professionals. And as I mentioned, I was really excited by this theme of where are there advisory services where clients still care about the advisor and his or her expertise, but no one’s writing home about the quality of the technology or the digital experience for the advisor, the client, the intersection of tax and financial advisory in particular was sort of what piqued my interest. And it actually was a couple of years into the journey where tax really came front and center that we just found consistently for the clients we were trying to serve, tax tended to be the first advisory service needed, came before trust and estate, it generally came before financial advisory because these are people that were getting a slew of K1s when they became part of a partnership at a law firm, or they made principal or junior partner at a private equity or VC firm, or they were getting the alphabet soup of equity from a venture-backed company that they were joining or building, leading, etc. And that just felt like it was an opportunity to build something compelling.

Okay. And so let’s just, because you and I are both passionate about this profession. You have probably become more passionate recently than I have. I’ve been around it quite a while. But we’re always looking for ways that we can be better as a profession at the person level, in my mind, you know—the firm level, obviously, but the person level as well. So let’s get into Harness then. What is the tool? What is it? Who is it going to help? How is it for the tax advisor, the financial advisor? What is it? Give me the background of what Harness Wealth tool is. It’s a tool, right? You can correct me when I’m wrong too. Do you call it a tool?

Entrepreneurs are grandiose. We like platform.

I thought it was platform. 

It sounds grander.

Yep.

The core of what we have built over the last two years with an amazing technology team is a next generation practice management suite. So the entire end-to-end experience of what your tax clients would go through and how you build, shape, and automate that experience to create a more seamless, more insightful experience for you and your clients is the core of what we’ve done. On top of that, we also have a concierge team because we found that for advisors, there still are a ton of administrative questions, whether it’s technology related, or it’s more administrative that we with a centralized team can create a lot of leverage for tax advisors and how they do that, as well as business development. So we felt there was this bizarre mismatch in the tax space that you have extraordinarily high levels of demand, decreasing supply of good advisors, but many of the good advisors, whether they’re recent breakaways from bigger firms or folks building and maintaining small practices, it’s not like you snap your fingers and all of a sudden all these clients you know need tax services are running at the door. And so we’ve built a marketplace component as well that drives high value tax service seekers into the advisors that are powering their practice off our platform as well. And so we think platform makes sense there that there’s really a core software that’s pretty impressive, but we’re also helping advisors to drive their top line as well.

Okay, so you just said you’re able to connect the taxpayer, the client, the person that needs the advisory, with an advisor. How does that role work? I mean, how do they get to Harness first and then go to an advisor? How’s that work?

I’ve been doing this for a while and have a bunch of really effective digital strategies and built a ton of content expertise in the market and the SEO and all that stuff. But really I think what’s most impactful is a growing number of relationships with incredibly large financial service institutions.

Makes sense.

They’re principally financial advisors and have recognized that for financial advice to justify their fees, and hopefully we’ll get to the tax advisor side because I like that. 

I’m about to! 

You know, they have to be really a comprehensive quarterback. And one of the top three issues that come up for good financial advisors, especially those that are introducing private investments or MLP or anything else to their clients is if you create tax complexity, you better darn well have a solution to help them solve it when their CPA retires. They can hear them googling the terms that they need advice on, or they’ve been DIY historically, but now need guidance to navigate.

Keep them out of a seven-figure mistake, huh?

Correct. We hope so. So that makes us a very unique partner in that we have the scale of a regional player because of those that are partnered with us, the technology of what many of these larger scale financial service companies have or aspire to have, but you know, price points that are still a fraction of what a Big Four or a large regional player would charge on average, just because of who we’re partnering with, everyone’s benefit.

Okay. And so when we look at platforms, I got it right that time. When we look at platforms, I’ve seen a lot of… “a lot.” I’ve seen a handful of advisory type platforms pop up in the last few years and I think they’re all growing and getting to a spot where they’re becoming useful. But what are the types of activities that your platform then helps the tax advisor? How’s the tax advisor get involved with Harness and then what do they use within Harness that’s going to help them help their clients and help themselves?

Everything from the way that you interact with a client prospect, engagement letters, dynamic and far more intelligent client questionnaires, what the client is uploading, where they are in the process of doing that follow up documentation, needs, payments, digital signatures, like anything that touches the client experience, we have built in a way that advisors can spend far less time and actually have a far more seamless and slick experience for the client going through that. And then are layering insights coming out of the process on top. That again, makes the advisor seem far more forward-looking in the way that they handle their clients than what many are forced to do because it’s just so much work and so seasonally driven that without good technology, it’s incredibly challenging to deliver the type of experience that people aspire to have.

Yep. And so that’s one of the key things that I love talking about is using technology to create efficiencies within your firm and elevate you to a level of being that advisor rather than that data collector or that follow-up email-er or whatever it is. Let’s free you up to do the things that are most passionate to you and probably more high level fees that you can spend your time on increasing however you bill. Hopefully, it’s not by the hour, but we won’t get onto my soapbox about that. 

And so we mentioned earlier, you’ve seen this profession now for a while, and we’ve talked a little bit, even before this recording, even earlier, this… Wow. We talked, no, that was last week. We talked as well. My mind’s shot. And, um, there’s a lot of things going on in the profession. You just mentioned one five minutes ago, the fact that we don’t have the inventory, if that’s the right word, of new advisors coming in to support the clients. What are you seeing as a, I don’t wanna call you an outsider ’cause you’re an insider, but you came from a different industry. What are you seeing going on with the accounting profession that needs to be addressed?

Yeah, well, I’ll give two semi counter-intuitive thoughts on that front. I think the first is more so than any other advisory service that I’ve been a part of, clients want to pay you more, in the sense that, like, you don’t meet real estate brokers who are like, “Oh, my clients really want to pay me 6 percent or 7 percent versus 5 percent.” You don’t meet a financial advisor with a client who’s like, “I really think you should be getting 1.5 percent, 1 percent,” or whatever it is. Tax is different. There is the opportunity to have real communicable ROI on what you’re doing, and I haven’t met—and I hang out with a lot of people that I think are sort of target clients for a lot of people that want to serve high-value clients—people that aren’t excited to spend more if they feel like the advisor is unlocking more value in the approach, the guidance, the strategies, etc., and that stuff. 

And so that’s a great place to be if you’re an advisor is being in a field where people want to pay you more, but they expect more. And I think that the downside to that is that it’s an industry where for a variety of reasons we can get into, the innovation curve has been slower, and so you have people on the client side that are relying on their tax advisor to do something more and more important in the outcome, but often feeling like, “This is really the experience I’m getting in 2024?” And so that creates this conflict that I think advisors have to make some investment in how they look and feel and operate for the clients to understand that you really are going to leapfrog them forward and to have some tools that create enough workflow automation to have the time to breathe and to sleep, you know, in the four plus months out of the year that it’s really time to do that. 

The second counter-intuitive thing, I was just meeting with two Y Combinator founders that are building a business, helping financial advisors get leads through AI. What they said, which absolutely resonates with our experience with sort of the marketplace in generating new clients for tax advisors is counter-intuitively, to almost every advisor I talked to initially, the more specialized you are, or the more that you can communicate true areas of expertise, the more new business you’re going to get—from referrals, from conversion rate, across the board. And I think that’s really hard. Like we work with a lot of advisors that join our platform. They’re like, well, I don’t want to say I’m phenomenal serving law firm partners and real estate developers with buildings less than 50 million, because there are all these other people, like Randy, they’re podcast hosts that I can also add value for. 

And you’re like, sure. And maybe you’ll get some of those, but if you focus and you demonstrate, you know, every one of those lawyers who like, David knew everything about the K1s at my firm distributing and knew before I read about this change in the law that was going to be meaningful from a SALT exemption standpoint, they’re going to send you every one of the colleagues and friends, etc., in that field. That doesn’t happen when it feels like you’re a generic utility provider. And so that’s something that we also try to reinforce is lean into the differentiation. It may be counter-intuitive. You think you’re decreasing your addressable market of clients. It’s going to have outsized benefit in the speed at which you can grow.

I agree completely. That is, you just hit on two of my passions there. Passion areas I like to talk about. The niche practice, the showing that you’re an expert in a certain area, just is unbelievable how far that can go. And I’ve mentioned this before on the show, but I have a friend who, you know, everybody knows that Josh Lance was a good friend of mine. Unfortunately, he died last year, but he built a practice that was servicing craft breweries. And I’ve talked to him in the past about it. And he said, I would charge probably three to four times more than someone else would for that same client because they know I’m the expert, because I can communicate my value to them through the expertise and the knowledge I’m able to share.

I think that, I think so many of us—I’m going on a rant now, sorry David—I think so many of us in this profession get caught up on the, “I need clients, I need clients, I need clients,” that we don’t do it strategically. We just, anybody that’s going to pay us, we’re going to bring in here. And so I love the fact that you highlighted the fact that, you know, creating this expertise in a small subsection of a client base is the way to go. I’m totally on board with that.

Yeah. And again, you can have multiple areas of expertise, but I think being able to speak to those areas is definitely helpful.

Oh, yeah. And then automated. So you had mentioned, hopefully we can unpack this even more, but the slow adoption of technology and automation integration, why do you think that is in our profession?

Well, you can follow the money. I mean, maybe we’ll get to sort of the recent spate of private equity deals and tax. I think the most obvious areas are things where it doesn’t take a lot of work, in some cases, it takes less expertise and you have big profit margins. So the large area investment were in, a commoditized advisory field. So there were some phenomenal travel agents, there still are, but a whole bunch of people that were doing things that could be totally automated away, big air of investment, etc. You then got that big investment in areas that required the relationship, but the actual work was easier so the margins could be wide and that was financial advisory, which has been sort of a flavor du jour for private equity investing, especially with the breakaway trends that have now been going on for nearly two decades plus. Insurance brokerage as well. 

And I think tax has been trickier because it requires a lot of skills and often specific skills. Harder to have massive margins because you need to really know what you’re doing and run things effectively. And a lot more affinity between the client and the specific advisor than a client and a firm that made investments more challenging, at scale and all different parts of the ecosystem. There’s now a view that automation, probably Gen AI, is going to create enough value and operating leverage that this is a space that clearly, clients care about. Clearly, there is material market opportunity and value. And that if people sort of get everything organized, they are going to be pretty successful around.

So I think part of it too is we are an aging profession as well. And it very well could be part of that. You know, I’m part of the baby boomer generation and I’m a young one, so I’m not the old boomer, but it may be I see automation or integration and technology integration as often, well, let the next person do it because I’m going to retire in five years and I don’t want the pain of dealing with this. And I think it’s just been going on that way too long. 

I was just recently talking, I don’t know if you’re familiar with Roman Villard? Roman’s really cool. He’s been on the podcast a few times. Actually, it’s his birthday today as we record. So happy birthday, Roman, even though this won’t be played on your birthday. He and I had a discussion recently and he said, Gen Z, you know, he was creating a firm culture that’s going to, not cater to Gen Z, but attract Gen Z, and he says the number one thing that they care about is what technology you are using within your practice. So, that alone, you’re going to need to attract the next generation of people into this profession. So what you’re doing is needed, now we just need to get everybody to implement it.

Yeah, well just follow the money, right? So the clients that you want to have because they’re going to increase in complexity and fees over the next decade are ones more often, you know, Gen X on the younger side, on the younger side of Gen X, and older millennials, at least for the next 10 or years. And so I don’t think you need to worry about being on TikTok, but you do want to have a contemporary experience that relates to them because those are the power earners. They’re also the people that will be the beneficiaries of the multi-trillion dollar intergenerational wealth transfer that’s occurring. So they’re more likely to be the ones that are LPs in private equity and other complex instruments that generate a lot of K1s and they’re more likely to be the business creators and really complex and high value clients as well. 

And so, yeah, I think that’s the other piece of this is you didn’t need to shift if your clients would rather drop off paper and see you in person to sign a complex big stack 1040 return and that, I think, was a change, obviously, that, you know, 2020 through 2022 accelerated but was already there on the demographics.

It definitely was, it was a bad way to move it forward, but it needed to be moved forward for sure. Alright, David, so all awesome stuff, anything we can do to help this profession, I want to do. But that being said, why don’t you give us a summary of a success story of somebody that has started working with you, with Harness?

Yeah, I mean, I think it’s incredibly satisfying when advisors who are, you know, truly entrepreneurs, at least the ones that we work with, express really positive shifts in their experience with this industry and their job, from being part of the platform. So an advisor who was at a top 10 firm had toyed for a number of years with leaving and creating his own practice. We got connected and the existence of Harness sort of gave him enough momentum to say, okay, it’s time to break away and create my own practice. And on two occasions, one in the middle of busy season, and one talking about at a point that he had much later, the delta, and how much more positively he felt as someone with ownership of what he was doing rather than someone at that junior partner level where there’s so much pressure put on you from above, there’s pressure sort of from the bottom of the pyramid and managing below that it just felt unsustainable. He talked about in this remote world, he’s still working from the same home office, but how different it felt in the last tax season to be here, in the driver’s seat and accountable only to the goals that he set for himself. 

And I think whether you do this through Harness or through any other platform, I think to have an enabling platform and network to help do that, whether it’s a reset button for a practice that’s bringing in a new partner, generational change, just someone who may be later in their career will say, hey, I’m excited to be doing this for 10 more years. I’m going to make that investment that you think about it holistically. And I think based on the experience that he and many others have had, it is eminently doable to drive very significant growth in top line for that to actually drive even more growth and profitability and to do it in ways that is generating a more positive feeling rather than just feeling, you know, more overworked in a season.

Right. More work-life balance, or as a friend of mine says, and probably he’s not the only one, life-work balance he keeps telling me, you got to say life-work balance. Okay, I’ll say life-work balance. We’ve got to come up with a new term. That’s just generically said, I think, so we’ll figure it out. Basically, what I want to see is people enjoying working in the accounting profession. Anything we can do to make efficiencies fall into that would be great.

So we talked on pretty much, because basically, you were just talking about, you know, his mental health was much better during the tax season. So we’re pretty much touching on all my hot buttons. The only one we didn’t talk about today is the billable hour versus fixed fee or value price or subscription. But I think we’ll skip that one today and, well, we’ll see if you have any comments on that—no, I can’t help myself.

Well, I think, you know, our model is allowing great advisors to charge all they want to. So we’re not prescriptive in how someone positions things. I think clients are looking for clarity. And so again, kind of counter intuitively, I’m going to bill you for my time and people thinking about it like an attorney, probably not going to create the most value for anyone in the equation. So we don’t mandate that, but I certainly think that what you preach, you know, I have observed as being beneficial to both sides of the equation.

I agree. I agree. But that’s because I say it all the time. So I just told you, I agree with myself.

Not the case with everyone. So I think you should pat yourself on the back!

Alright. Well, David, this has been awesome. I really like to see that you have a passion for the profession and that your platform will be, I was going to say tool, I caught myself. I don’t know the terminology. I just talk. Your platform is out there going to help people addressing the things that I think that need to be addressed, at least at some level. So thank you for that. 

One last question before we wrap up. Actually, two last questions. And I ask this of everybody, but you know, we were just talking about all the cool things about the way this profession can change, especially with platforms like yours, but part of that was work-life balance or life-work balance and having a good mental health and outlook on life. So to do that, you need outside-of-work passions. What are your outside-of-work passions? What do you like doing when you’re not building Harness?

I would say it shifts. I’m a relatively new parent. I’ve got a two-and-a-half-year-old and a 14, 15-month-old now. That contracts, you know, your passion time. I’ll say that there’s nothing no more exciting than being able to get your kid or kids into your passions. I’ve always loved, I’ve never been an artist, but I’ve always loved contemporary art. I took a course in college around contemporary art, post World War II, and just kind of fell in love with it. And so now being able to take both kids, or particularly the soon-to-be three-year-old, you know, to an art museum or to see something get created, I think is particularly exciting. Still feels a little early on Duke basketball and a few of the other things. I get a lot more excitement over a Daniel Tiger episode than watching even the Olympics. But there’s time to continue to seed many of my passions, hopefully organically, and only if they opt in, into the next generation.

Yeah, that’s fun. You mentioned basketball. That’s a big passion of mine. And I did see undergrad, Duke for you. Is that correct?

It is. I grew up in the Boston area. I was a UMass fan during the Marcus Camby era, but I stepped on campus at Duke in 2003. They had won in 2001, had an incredibly strong team when I got there. Pretty infectious, hard not to leave a college basketball fan if you go to any of the schools like that, that just have great programs and great coaches help create some longevity in them.

Yeah, well the current coach there is local to my area here, Jon Scheyer. He grew up just a few miles away from us here, so we’re looking for him to do good things. And then last, if people want to find out more about Harness or you, where would they go or look?

You can always feel free to email me directly. I’m David@HarnessWealth.com. We also have a part of our website. So if you went to HarnessWealth.com, that’s kind of the consumer-facing side. If you navigate to the for advisors section, I think it gives a pretty good perspective on what we have built. And there’s a lot more coming in terms of the insights and automations that we’re excited to bring to the advisors that partner with us.

Well, nice. Thank you. Thank you, fairly new dad, for being on The Unique CPA and look forward to running into you again somewhere soon.

Sounds great. Thanks, Randy.