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Values, Purpose, Action: A 3-Part Approach To Establish A “Statement Of Financial Purpose” And Unlock Deeper, More Meaningful Planning Conversations With Clients

November 6, 2024 07:01 am 0 Comments CATEGORY: Client Trust & Communication

In the early days of financial planning, serving clients often meant developing transactional relationships focused on facilitating trades and selling insurance. Over time, advisors shifted toward more analytical approaches, such as investment management and retirement planning. Today, the industry has evolved further, with a growing emphasis on aligning financial decisions with clients' personal priorities and life goals. While this shift from numbers-based strategies to a more holistic, values-driven framework has opened the door to deeper, more meaningful conversations, it also presents a challenge for clients who may struggle to define their values or articulate a sense of purpose.

In this article, Jeremy Walter, founder of Fident Financial, and Andy Baxley, founder of Two Trails Financial Planning, discuss how advisors can follow a 3-part framework to help clients craft an informative, values-based statement of financial purpose.

The process begins by helping clients define their core values. This can involve asking reflective questions, such as "What does a perfect day look like to you?" or "How do you define success, security, and a life well-lived?" These questions encourage clients to uncover important themes – such as business growth, building a legacy, or prioritizing simplicity and family time – that guide their decisions. Typically, these values fall into 2 categories: realized values, which are already present in a client's life, and aspirational values, which represent qualities they want to embody. Advisors can then ask follow-up questions to further explore and deepen these themes, helping clients gain even greater clarity.

Once the client's values have been established, the next step is to articulate a statement of financial purpose – a concise expression that captures the "why" behind the client's financial decisions. This statement should go beyond superficial goals or what the client believes they should say, instead reflecting their true, deeply held priorities. Advisors play a crucial role here by helping clients draft, refine, and finalize a statement that feels authentic and actionable. This statement of financial purpose serves as an anchor for the client, providing clarity and direction as they make future financial decisions.

After the statement of financial purpose is created, the focus shifts to taking action. Advisors can help clients use their statement as a guide for assessing financial goals – both existing and future ones. Clients can reflect on whether their current goals are helping them get closer to living out their values or whether they need to revise their plan to better reflect what truly matters. The statement can also be used to establish new goals, ranging from more immediate, short-term objectives to larger, more ambitious stretch goals that, while challenging, may ultimately be more fulfilling. As clients begin to articulate and live by their values, advisors can revisit the statement periodically to ensure it remains relevant and aligned with evolving goals, and to assess whether adjustments are needed to better reflect their client's reality.

Ultimately, the key point is that understanding a client's values and purpose can unlock deeper, more meaningful financial planning conversations, enabling more fulfilling client discussions and allowing clients to do more with their money. And by aligning financial decisions with a clear statement of purpose, clients can foster a more intentional and meaningful relationship with their wealth!

#FASuccess Ep 410: Delivering Financial Planning Profitably To Every Client With A Focus On Accountability Over ‘Just’ Meetings, With Emily Biehler

November 5, 2024 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Emily Biehler Podcast Featured Image FAS

Welcome everyone! Welcome to the 410th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Emily Biehler. Emily is the co-founder of TrailWise Financial Partners, an RIA based in Golden, Colorado, that oversees approximately $80 million in assets under management for 200 client households.

What's unique about Emily, though, is how her firm ensures every client can be served profitably through a combination of a complexity-based minimum fee arrangement, coupled with a structured data gathering, plan delivery, and client communication processes that encourage client accountability and follow-through on action items recommended by their advisor so every client really sees the value they receive for the fees they’re paying.

In this episode, we talk in-depth about how Emily’s firm created a custom workbook that asks clients to explore their goals and values, on topics ranging from education and travel, to whether they expect to need follow-up from their advisor regarding their follow-through on action items, allowing their advisor to get permission to give nudges to actually implement their recommendations, why Emily’s firm chose to build a custom software program to present her planning analysis, findings, and action items in a more digestible way for clients than just the output of off-the-shelf financial planning software alone, and how Emily’s firm evolved from focusing on full-length financial plans that could reach more than 100 pages to providing clients with a one-page document that clearly explains their advisor’s planning findings and more importantly the action items for them to take during the next year.

We also talk about the meeting and communication cadence Emily designed to further boost client accountability to follow through on their planning recommendations, why Emily’s plan delivery meetings are often split into 2 meetings in order to keep clients focused and engaged (with the first covering overall plan health and cash flow and the second focusing on more specific planning areas such as tax and insurance planning), and how Emily uses what she calls "Accountability Personal Podcasts", 3- to 5-minute videos sent to each client every 90 days during their first year with the firm, to keep them on track with required action items and to remind them that their advisor is there to hold them accountable to getting it all done.

And be certain to listen to the end, where Emily shares how her firm developed a complexity-based fee model that combines both the number and types of planning services they require and the level of complexity in their overall financial situation, to ensure that each client can be served in a profitable manner, how Emily uses a fee calculator not only to clearly demonstrate to clients how their fee is based on their unique planning needs, but also to explain why some clients really might price significantly higher than others (and remove the temptation for her to offer fee discounts to big clients), and how Emily and her business partner faced a failed succession at their previous firm based on their inability to steer the larger firm in the planning-centric direction they desired and decided to start their own firm to give them the freedom to create the accountability-based client service model that they thought was best for their clients.

So, whether you’re interested in learning about creating structured data gathering and plan delivery processes that encourage client accountability, using asynchronous videos to efficiently communicate with clients between meetings, or implementing a complexity-based fee model to ensure each client can be served in a profitable manner, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Emily Biehler.

Holistiplan Launches Estate Plan Document Extraction Tool (And More Of The Latest In Financial #AdvisorTech – November 2024)

November 4, 2024 07:04 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the November 2024 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that Holistiplan has announced the rollout of a new estate plan document extraction tool to stand alongside its highly popular tax return scanning tool – which highlights how advances in AI technology have allowed tools like Holistiplan to go beyond tax returns and scan nearly any kind of document to locate and pull out the key information within; but at the same time raises questions about how much demand there truly is for document extraction beyond tax returns, given how (relatively) infrequently households create and update estate planning documents?

From there, the latest highlights also feature a number of other interesting advisor technology announcements, including:

Advisor sales enablement platform Nitrogen has announced its own feature for extracting information from prospects' investment statements that can be automatically fed into Nitrogen's analysis and proposal generation tools, which raises questions about the future of standalone tools like VRGL that have built much of their value proposition around document extraction but could become redundant if more of the platforms advisors already use start to build those features "in-house"
CurrentClient, a text messaging platform that aims to offer a more modern and streamlined solution for advisors to communicate and engage with their clients via text, won the "Best In Show" award at XYPN's recent AdviceTech competition, standing out as a potential solution to what has been a longstanding pain point for advisors in efficiently managing and archiving their text communication
Quivr, a CRM overlay centered around advisor-specific workflows and automation, won the "Advicer's Choice" award at XYPN's AdviceTech competition, reflecting its emerging popularity among advisors who increasingly rely on workflows to scale their business but remain frustrated with the limitations of the current legacy CRM platforms in delivering effective workflow capabilities

Read the analysis about these announcements in this month's column, and a discussion of more trends in advisor technology, including:

Farther, one of an emerging crop of "digital RIAs" aiming to achieve better growth and profitability through a purpose-built and integrated technology infrastructure, has raised $72 million in Series C funding – which on one hand reflects the enthusiasm among investors for the possibilities of a highly efficient advisory firm enabled by technology; but on the other hand raises questions about how that efficiency will turn into profitability when the last 30 years of advances in tech-enabled efficiency have actually seen advisory firms become less profitable than they once were?

Freewill, a consumer-facing estate document preparation service, has launched an advisor-facing version called Estately that combines both tools for clients to self-direct their own estate planning documents as well as capabilities for clients to work with a "live" attorney to get their documents done, allowing advisory firms to more efficiently offer estate planning to both complex high-net-worth clients (who need to rely on the expertise of a live attorney) and more simple "mass affluent" clients (who can be more efficiently served with the self-directed option)

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!

Weekend Reading For Financial Planners (November 2–3)

November 1, 2024 02:00 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that SIFMA, which represents broker-dealers, investment banks, and asset managers, released a white paper that argues that CFP Board "increasingly functions as a de facto private regulator for CFP certificants" and proposes that CFP Board eliminate rules and standards that duplicate, conflict with, and/or impose in addition to existing SEC and/or FINRA rules and standards. At the same time, CFP Board has noted that advisors pursue the certification voluntarily and that its standards, which cover the entire financial planning process (unlike SEC and FINRA regulations that largely focus on investment management), help to raise standards for the industry as a whole at a time when advisors increasingly offer comprehensive planning services.

Also in industry news this week:

A recent study suggests that while a majority of financial advisory clients surveyed have only had 1 advisor, deteriorating client service is a key risk factor that could sway certain clients to leave for a different advisor
RIA M&A activity in 2024 is poised to surpass the total number of deals seen in 2023, according to one analysis, as lower interest rates and continued interest from private equity-backed firms could as tailwinds for dealmaking

From there, we have several articles on retirement planning:

How advisors can support clients who want to retire early, including quantitative analyses that can show whether it's possible and initiating qualitative conversations about how they plan to thrive amidst this major life change
While followers of the Financial Independence Retire Early (FIRE) movement are often portrayed as penny-pinchers looking to ditch their careers as soon as possible, in reality there are several 'flavors' of FIRE that could be appealing for a wider range of clients
12 tax planning principles for early retirees, from balancing the 0% long-term capital gains with partial Roth conversions, to being aware of how different income levels can affect various subsidies and tax credits

We also have a number of articles on practice management:

How bringing on new clients can offer a variety of benefits for an advisory firm, even if it isn't looking to grow significantly
5 growth strategies for independent RIAs, from building strategic partnerships with centers of influence and hiring a diverse team with a wide range of strengths
A 7-step process for building an efficient, thriving advisory practice, which starts with the firm owner crafting a vision for what they want their client base and personal lifestyle to look like

We wrap up with 3 final articles, all about persuasion:

Why being comfortable with silence can help an advisor build better relationships with prospects and clients
Research-backed tactics for being more persuasive, from eliminating filler words to asking more follow-up questions
How financial advisors can persuade prospects to become clients by leveraging "influence" techniques

Enjoy the 'light' reading!

Kitces & Carl Ep 150: When The Early Years’ Scarcity As A Financial Advisor Prevents You From Growing To The Next Level

October 31, 2024 07:02 am 0 Comments CATEGORY: Kitces & Carl Podcast

Kitces & Carl Ep When The Early Years Scarcity As A Financial Advisor Prevents You From Growing To The Next Level

For many years, the traditional career track for financial advisors has been an 'eat what you kill' model – where advisors must independently find, convert, and manage their own clients. As such, it isn't uncommon for an advisor's first few years to be characterized by long hours, high rejection rates, and low pay. For many, this can be a stressfully prolonged period that typically eases only as advisors build their client base and establish themselves in the industry. However, the scarcity-driven habits that helped them survive their stressful early years may not serve them effectively in their current state. In fact, these habits may even inhibit their growth, making it harder for them to scale their firm in alignment with their long-term vision.

In the 150th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore how advisors can acknowledge the psychological habits formed during prolonged high-stress periods and intentionally move beyond them to continue to achieve sustained growth.

When stress arises, especially in the early years, many advisors often do whatever it takes to pull through and build their business. But a scarcity-driven mindset can linger, long after the immediate pressures have faded. This mindset might manifest in subtle ways – like the reluctance to raise client minimums out of fear that new clients won't come, even when capacity is maxed out. At this point, the narrative of survival can keep advisors tethered to past habits, even when logistically, an advisor may be well past that point and their current reality calls for a different approach.

To shift from survival mode to a mindset geared for growth, a first step might be to take stock of the firm's logistical reality: cash flow, client load, and overall business capacity. This can help advisors move from reactive habits to proactive strategies. A helpful question that advisors can ask themselves is, "What would it take to feel secure in this scenario?" Sometimes, a few targeted risk-hedging steps can provide a sense of security. In other circumstances, it may be more helpful to acknowledge the gut-level response to stressful situations – the same survival instinct that got the advisor 'here'. However, getting 'there' – to the next stage of growth – requires noticing, acknowledging, and then rewiring those instinctive responses.

Importantly, it's not just about making technical adjustments; it's more about a shift in mindset. It's the ability to internalize success and recognize that the survival instincts, once crucial, might now be holding back progress. Letting go of those old habits means freeing up mental and emotional space to envision new possibilities for the firm's future.

Ultimately, the key point is that survival strategies, while essential in the early stages of an advisor's journey, may not align with the realities of a growing and thriving firm. Sometimes, internalizing that an advisor has 'made it' is not always easy, but it's a milestone worth celebrating. Embracing this recognition allows advisors to ask the more exciting question, "What comes next?" This shift isn't just about growing a business – it's about building a vision that truly aligns with long-term goals, creating the freedom to innovate and adapt with clarity and purpose!

Why Advertising “Conflict-Free” Advice Could Violate The SEC’s Marketing Rule

October 30, 2024 07:01 am 0 Comments CATEGORY: Regulation & Compliance

As fiduciaries, financial advisors are required to disclose any conflicts of interest that exist between themselves and their current and potential clients. The conflicts themselves can range from compensation models that impact how much money an advisor might earn as the result of a recommendation (such as specific product recommendations for advisors compensated on commission and 401(k) plan rollover recommendations for AUM-based advisors) to less direct conflicts such as 'soft dollar' benefits provided by custodial platforms that could incentivize advisors to recommend one platform over another.

But no matter the size or directness of the conflict, it still needs to be disclosed to clients, at a minimum on the advisor's Form ADV Part 2A brochure. And given the sheer number and scope of potential conflicts that do exist in the advisory industry (where a wide range of providers seek to incentivize advisors to recommend their products and services to clients), there's a vanishingly small number of RIAs that don't have at least some form of actual or potential conflict to disclose.

However, despite the large number of potential conflicts that exist for advisory firms, much of the financial media and the general public tend to focus specifically on the conflicts caused by commission-based fee models. Which, in turn, has led a small but growing number of RIA firms to describe themselves as "conflict-free" on their websites and advertising materials as a way to distinguish themselves from other firms that may have more directly conflicted business models.

But the downside to using the "conflict-free" label was put into sharp focus recently, when the SEC announced that it had fined several RIA firms for violating its Marketing Rule. Specifically, the firms had all used some form of "conflict-free" to describe themselves on their website, while at the same time, each firm's Form ADV Part 2A described multiple conflicts of interest – or in other words, the firms' claims of being "conflict-free" were directly contradicted by their own required conflict of interest disclosures!

At a high level, the SEC's cases illustrate that it can be highly problematic for an advisory firm to call itself "conflict-free", since doing so violates the Marketing Rule's prohibition on making any material statements that the advisor can't substantiate when the firm really does have conflicts that it discloses in its own regulatory filings. And given that almost every firm has at least one conflict to disclose, there are almost no firms that could accurately (or compliantly) describe themselves as "conflict-free" – meaning it really might be best for advisory firms to avoid the label altogether.

If an advisory firm wanted to highlight its distinction from the commission-based compensation model, it could, in theory, use a more technically accurate term like "commission-free". However, in a landscape where the number of fee-only, fiduciary advisory firms has grown – making "commission-free" less of a differentiator for any one firm – it's worth questioning whether it makes sense for firms to describe themselves in terms of their relative lack of conflicts of interest at all. Because doing so shifts the client's focus away from the advisor's expertise and the value they provide, and instead draws attention to how their conflicts of interest compare with those of other advisors.

The key point is that with the sheer number of potential conflicts of interest in the advisory business, it's better for advisors to be transparent about their own conflicts (and how they work to minimize them) than to downplay their conflicts in comparison to others in the advisory industry. Not only does this help them stay compliant from a regulatory perspective (as the recent SEC cases showed for firms that called themselves "conflict-free") but it also helps build a foundation of trust with their clients – who are ultimately more interested in how their advisor can solve their financial problems than in questioning which practices pose more of a conflict of interest than others!