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Let’s Talk Contracts

Our CEO, Aaron Klein, talks business leader to business leader about the subjects of pricing and contracts in advisor technology. The following is the post on contracts; click here to read the post about pricing.

By Aaron Klein

CEO at Nitrogen

Most financial advisors wear two distinct hats.

On the one hand, they are very focused on the day-to-day work they do to guide their clients to make the right decisions, and help them achieve their financial dreams. That is their core of their mission.

And on the other hand, most of them are also engaged in the pursuit of building a business. Whether they are a solo practice with an employee or two, or on the way to building a billion-dollar team, or already have an enterprise on their hands with multiple offices and a lot of employees…they are entrepreneurs building something of lasting value.

As a fellow business leader, I thought I’d take a few moments and write about our philosophy on pricing and contracts for our services. We consider ourselves incredibly privileged to serve tens of thousands of financial advisors in the noble work that they do.

Those advisors have the duty to build a sustainable practice with solid technology to support their clients. So on the one hand, advisors want strong and growing technology partners that they can rely on; and on the other hand, advisors want the best possible deal so they can take the extra savings and invest in improving their own client experience and competitiveness.

We’ve tried our best to design our pricing and contract philosophy to live within that tension and satisfy both interests on behalf of the advisors that we are grateful to serve.

Let’s talk about contracts. (Or click here to read my post about pricing.)


We’re grateful to be the market leader in our space, with something around 30x the market share of any of our newer quasi-competitors. We’ve built up a tremendous lead in product advantage — in our features, capabilities, securities coverage, and risk methodology.

So from time to time, I’ll have an advisor ask me, “if you’re so great, why in the world do you make me sign a contract to buy your software?” It’s a fair question, and I don’t take offense at it!

We have tested and tried a lot of different approaches in our history, and there’s a few things that we’ve learned.

First, we need some level of predictability as a company, so that we can invest in our client experience. We base our hiring decisions on the number of advisors who have joined, and we consistently add more people to our Customer Care, coaching, relationship management, product, and engineering teams to invest in supporting you and expanding the product’s capabilities for you.

Our investors entrusted their capital to us to build Nitrogen so we could bring these powerful capabilities to your business. Our valuation is solely based on predictable, contracted revenue — we get little to no credit for one-off or month-to-month revenue. Our ability to build a long term, independent technology partner for you hinges on creating some level of predictability in our business.

Technology is inherently not as “sticky” as advisory clients typically are. Imagine for a moment if clients could “ACAT in” and “ACAT out” every other month — it would be pretty difficult to build a great firm! Because we believe you own the data that is stored in your Nitrogen account, you can easily take that data with you, and move to other technology. So we have to earn your business constantly — with a great product and great service — and we believe the right way to do that is earning it one year at a time.

Second, we’ve learned over time that adopting Nitrogen requires “skin in the game” from the advisor. Nitrogen is incredibly easy to use, and any advisor can very quickly implement it into their process, but it does require interrupting the “inertia” and the habit of how you’ve run your client and prospect meetings for years. If you won’t insert the Risk Number into those client engagements, you just won’t get the magical value out of the Nitrogen process.

When we used to do free trials, people would click around, but they wouldn’t actually change their habits and insert Nitrogen into their client process. So free trials only resulted in one thing…a request for more free trial time!

Third, we are very oriented toward the long term. We want to build long term relationships with the advisors we serve, and we want to deliver long term value to their businesses.

We’ve discovered that the best way to maximize long term value is to spend about 18 months of revenue bringing each advisor aboard, and making them successful.

Now, that sounds a bit like a recipe for disaster, right? If we spend 18 months of what you will pay in the first 3-4 months of you joining, how could we possibly build a sustainable firm?

The answer is that we are investing in you for the long term. If we make that investment, we’ve learned that we will keep you as a customer for well over six years on average. If we fail to make that investment, you won’t get the value you expect, and you’ll be frustrated and leave.

So we think it makes a ton of sense to ask our new customers to make a 12 month commitment to us, and in turn, we’re making an 18 month commitment to them. We may lose money on a few customers, but the 12 month contract requirement is a self-selecting process. Advisors who aren’t serious self-select out, and out of the ones who join almost all implement the Risk Number, see the results, and never want to leave.

The antithesis of a long term focus would be allowing those less serious advisors to also join, and pay us a few months of money without seeing any real results. We just don’t feel good about that. We’d rather be patient, play the long game, and wait for that advisor to be serious about making this investment in their business.

I may not have convinced you to love our approach to contracts, but hopefully I’ve helped you understand them, and why they allow us to be deeply invested in your long term success. If you’re still struggling with that initial contract as the reason you’re not sure you can make a bet on Nitrogen, we’ve found a new way to help firms mitigate that risk (we call it the “Nitrogen Challenge”) and we hope you’ll give us a chance to help you with that.

We Love Helping Advisors Grow Great Businesses

Ultimately, our pricing and contracts are all about helping amazing advisors build great, successful businesses with expanding margins and solid growth. We know you need manageable costs while also having a strong, dependable technology partner, and we’ve built everything about our business trying to strike the right balance for you.

To read my post about our philosophy on pricing, please click here.

As a fellow business leader, I’m always happy to chat about this directly with any financial advisor. You can email me any time at [email protected].

We would be honored to serve you and your firm.

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