Nerd's Eye View blog

The Best Of Weekend Reading 2024: Top 24 Articles You Might Have Missed

December 30, 2024 07:02 am 0 Comments CATEGORY: Weekend Reading

Each week in Weekend Reading For Financial Planners, we seek to bring you synopses and commentaries on 12 articles covering news for financial advisors including topics covering technical planning, practice management, advisor marketing, career development, and more. And as 2024 draws to a close, we wanted to highlight 24 of the most popular and insightful articles that were featured throughout the year (that you might have missed!).

We start with several articles on retirement planning:

Why considering a client's retirement time horizon and spending flexibility could lead to more accurate (and often higher) safe withdrawal rates than the simpler "4% rule"
Four unique risks retirees face when drawing down their assets, from sequence of returns risk to tax risk, and how financial advisors can help clients mitigate them
Practical considerations for advisors when engaging in (partial) Roth conversions, from assessing the "effective marginal rate" paid on the conversion to deciding when during the year to complete the conversion(s)

From there, we have several articles on tax planning:

How financial advisors can help clients avoid (increasingly punitive) estimated tax penalties, such as determining the amount they owe and leveraging strategies to pay the taxes efficiently
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
Why the tax benefits of investing in 401(k)s compared to taxable brokerage accounts might not be as significant as might be assumed in certain circumstances

We also have a number of articles on cash flow planning:

Five ways that can help financial advisors give hesitant clients 'permission' to spend more in retirement
Why the relationship between spending and happiness is not linear, and what this phenomenon means for client spending and life satisfaction
How to decide how much to spend on a vacation, from planning out a year's worth of trips in advance to being aware of "luxury creep'"

Next, we have a few articles on estate planning:

Five ways that clients can simplify their estate to ensure that their goals are met and that they don't create additional stress for their survivors
How creating a "digital death-cleaning" plan can give a client peace of mind that their digital affairs will be in order after their deaths and ease the burden on their survivors in the process
While providing a "living inheritance" can be a tax-efficient way to give money to loved ones, it comes with a range of potential considerations, from the sustainability of the giver's financial plan to the potential intra-family conflict it could cause

We continue with three articles on insurance planning:

How advisors can help clients choose between traditional long-term care insurance policies and hybrid policies that combine long-term care coverage with life insurance
Five mistakes individuals make when it comes to Medicare, from underestimating expenses to missing important deadlines, and how advisors can help prevent them
How financial advisors can help clients evaluate the health insurance options available in early retirement, from staying on their previous employer's plan through COBRA to obtaining a (potentially subsidized) plan on their state health insurance exchange

From there, we have several articles on financial advisor marketing:

Financial advisory industry veteran Joe Duran offers a four-part framework for advisors to achieve greater organic growth in the years ahead
How advisors can effectively ask for client referrals without coming off as too 'salesy'
How advisors can boost the relevancy and effectiveness of the "Calls To Action" (CTAs) on their website

We wrap up with three final articles, all about practice management:

A seven-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
A step-by-step guide to the process of buying or selling an RIA, from the due diligence undertaken by both the buyer and seller to the legal documents that can protect both parties
A survey indicating that being proactive with planning strategies and communication could be more important than portfolio performance for financial advisors when it comes to client retention

Thanks for letting us be a part of your reading list each week and we'll look forward to highlighting more insightful articles in 2025!

Weekend Reading For Financial Planners (December 28–29)

December 27, 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 according to a recent study by DeVoe & Company, only 42% of RIAs surveyed have written succession plans and either have begun to implement them or have already done so. The report suggests this might be due in part to increased RIA valuations and the assumption of some firm founders that next-generation employees won't be financially able to buy out the firm from them, though additional data indicates that many firms don't have career paths in place that could help next-generation advisors envision their path to firm ownership.

Also in industry news this week:

According to a recent survey, advisors are putting an increasing share of client assets into model portfolios, allowing for customization and time savings that advisors appear to be using to provide more comprehensive planning services
RIA M&A deal volume saw an annual record in 2024 as a lower cost of capital, increased valuations, and continued competition among RIA aggregators encouraged more transactions

From there, we have several articles on retirement planning:

Morningstar has released its annual estimate of the safe fixed withdrawal rate for new retirees, though the analysis suggests retirees (perhaps with the help of an advisor) could increase this rate through a more flexible withdrawal strategy
How certain retirement savers between the ages of 60 and 63 will be able to make "super catch-up" contributions in 2025 and beyond
A recent study indicates that most retirees claim Social Security benefits in the year they stop working, though those that delay can potentially benefit from a larger monthly check and tax planning opportunities

We also have a number of articles on insurance planning:

Why some wealthy homeowners have been unable to secure sufficient property insurance coverage
Why some clients might reevaluate their umbrella insurance coverage options amidst elevated claim expenses
How advisors can add value for clients by helping them consider the relationship between deductibles and the "pseudodeductibles" on their insurance policies and the premiums they pay

We wrap up with three final articles, all about sleep health:

While some of the 'hottest' sleep trends of 2024 might be tempting to try, most are relatively untested, and some could potentially lead to worse sleep
While exercise and good sleep can be part of a healthy lifestyle, the interaction between these two activities can be complicated for some individuals
Why some individuals' efforts to maximize the quantity and quality of their sleep can sometimes backfire, leading to more stress and worse sleep

Enjoy the 'light' reading!

Kitces & Carl Ep 154: The Limits Where Technology Can’t Scale Financial Planning Advice

December 26, 2024 07:03 am 0 Comments CATEGORY: Kitces & Carl Podcast

Just a few decades ago, giving financial advice was largely a manual process – printing lengthy financial plans, processing physical checks, and managing paper files. Then, technology evolved, introducing tools like Excel, the internet, and sophisticated financial planning and CRM software that transformed how advisors deliver financial advice. Today, AI is poised to drive another transformation in financial planning – but where will AI create the most change, and where is the human advisor still indispensable?

In the 154th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the opportunities and limitations of AI in financial advice, exploring how technology can enhance advisors' work and where its boundaries lie.

AI offers exciting possibilities as a brainstorming partner, editor, and copywriter. Advisors may find it particularly useful for drafting meeting notes, creating summary emails, generating marketing ideas, and analyzing client data for actionable insights. However, while AI programs excel at addressing technical tasks and making data-driven decisions, they often fall short in areas of ambiguity. Many client concerns are deeply personal, requiring empathy, trust, and a nuanced understanding of complex emotional and financial situations. Questions like "What's the best way to divide my estate among grandchildren with different life circumstances?" don't have clear, calculable answers. Instead, they demand thoughtful conversations rooted in the client's values. These conversations are often emotional and vulnerable, requiring a sense of safety built on years of trust that technology simply can't replicate.

Despite the significant efficiencies technology has introduced, the time saved by advisors has often been reinvested into enhancing plans and services, raising the bar for client expectations while leaving advisory firm margins relatively unchanged. While the advisor's role has remained remarkably consistent, even as support tasks have been streamlined through automation, there is still a real opportunity for advisors to use technology to focus on relationship-building and delivering unique personal value. Delegating and automating routine tasks allows advisors to spend more time guiding clients through the emotional and complex challenges of financial planning – work that requires an intimate connection and a deep understanding of each client's unique situation.

The key point is that AI and other technological tools can provide significant support, they ultimately cannot replace the empathy and personalized problem-solving skills that form the foundation of the client/advisor relationship. As technology continues to evolve, advisors can seek opportunities to delegate or automate tasks, freeing up more time to do what only they can do: applying their financial knowledge to provide personalized guidance, while navigating complex emotions and building lasting relationships!

Why Don’t Prospects Commit? How “Negative Close” Can Be A Powerful Way To Help Prospects Move Forward

December 25, 2024 07:02 am 0 Comments CATEGORY: Client Trust & Communication

The core question in the prospecting process is often one of mutual fit – balancing personality compatibility with the advisor's value proposition versus the problem to be solved. The typical prospecting process involves multiple meetings, and a fairly common response for advisors to hear after giving their 'pitch' is that the client needs some extra time to think about it. However, challenges can arise when a client continues to delay making a decision – either by not responding or continuing to ask for more time. Advisors then face a dilemma: How do they follow up politely, without being overbearing, and still help the client either make a decision or voice their real concerns?

One potential tool to address this challenge is a tactic called the "negative close". This sales technique involves asking a "negative" question such as, "Joining with a financial planner can be a really scary jump to make, right?" where the ideal response would be negative ("No, it's not scary! Let's do this!"). When used thoughtfully and in the right context, the negative close can be a powerful way to lower the stakes for a prospect to surface and address any reservations they may have.

There are a few techniques that can strengthen negative close questions. First, as demonstrated above, negative close questions can be used empathetically to acknowledge the high emotions that often accompany big decisions. Second, they can aid in self-persuasion by giving prospects the chance to affirm why they were interested in working with the advisor in the first place. Finally, a negative close can invoke scarcity, where a deadline or an advisor's limited capacity is used in the context of the question (e.g., "I can only onboard 3 clients in a given quarter. Are you interested in onboarding this quarter, or should I reach out to others who are looking to onboard?").

Advisors can use negative close questions at different points after the presentation meeting. In the early stages, gentler self-persuasion questions may help prospects remind themselves of why they sought out an advisor in the first place. If, after a week or so, a decision has not been made, an empathy-based question may probe deeper into a prospect's underlying concerns. Finally, if the prospect has had a few chances to decide and has not moved forward, a scarcity-based question with a hard deadline may be necessary in order to achieve closure, one way or another.

Ultimately, the key point is that the negative close – and the rhetorical tools surrounding it – can be a powerful way to help ambivalent prospects move forward by creating clear opportunities for them to voice reservations or ask deeper questions. When used effectively, these questions can help advisors reveal a prospect's true concerns, demonstrate their value, and hopefully gain more clients in the process!Read More...

#FASuccess Ep 417: Establishing Your Authority As An Expert By Following A Short Book Formula For Authorship, With Paul G. McManus

December 24, 2024 07:04 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome everyone! Welcome to the 417th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Paul G McManus. Paul is the CEO of More Clients More Fun, a marketing company that helps financial advisors conceptualize and publish their own book in a consolidated 6-week process.

What's unique about Paul, though, is how he counsels advisors not to write books for the potential royalties they could earn, but rather as a means to establish themselves as an authority in the marketplace, to differentiate themselves for competitors, and raise awareness of what they can offer prospective clients…and how those goals can be accomplished with a relatively short book, making it easier and less expensive for advisors to get through a book-writing process.

In this episode, we talk in-depth about how Paul works with advisors to produce short books that can be read in 1 to 2 hours (which increases the chances that it will actually be finished), why Paul recommends advisors self-publish their books on Amazon (both because of its lower price point than using a traditional publishing firm, and because of the flexibility the platform provides to produce copies of the book and make updates as needed), and how Paul’s 6-week book production process and staff support uses an interview-based approach to give advisors the chance to communicate their expertise to prospective clients and other readers (without having to actually sit down and write out the entire book themselves).

We also talk about how Paul recommends that advisors give advance copies of their book to top clients to both gather book testimonials that can be used for social proof and to provide these clients with a vehicle to be the advisor’s advocate when using the book to make referrals, why Paul counsels advisors to consider asking centers of influence such as accountants or attorneys to write a foreword for the book (which can then be sent to their clients as an additional form of social proof for the advisor), and how Paul has seen advisors have success promoting their book by pursuing guest appearances on podcasts (that are relevant and listened to by the advisor’s target clientele).

And be certain to listen to the end, where Paul shares how advisors can build trust and familiarity with prospects by sending them their book before actually meeting for the first time, why Paul recommends that advisors build a standalone book website that allows visitors to download the book for free in exchange for their name and email address (allowing advisors to better track who is reading the book and build out their email marketing list in the process), and how Paul has found success by publishing his own book and following the steps he recommends for advisors, not only in building his own business but also in being able to give back to the advisor community.

And so, whether you’re interested in learning about how writing a book can be an effective advisor marketing strategy, the different ways to leverage a book to attract clients, or how to write a book without having to take a sabbatical, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Paul G. McManus.

2024 Highlights – The Top 24 Nerd’s Eye View Blog Posts You Might Have Missed

December 23, 2024 07:01 am 0 Comments CATEGORY: Nerd's Eye View

As 2024 comes to a close, it is a time of reflection on the year… and leaves me so thankful once again to all of you, the ever-growing number of readers who continue to regularly visit this Nerd's Eye View Blog (and share the content with your friends and colleagues, which we greatly appreciate!).

We recognize (and appreciate!) that this blog – its articles and podcasts – is a regular habit for tens of thousands of advisors… and that the sheer length of our articles and podcasts means that not everyone has the time or opportunity to read every blog post or listen to every podcast that is released throughout the year. Nor do we expect everyone to read and listen to everything – thus why we make the titles and headlines as clear as possible, so you can decide for yourself what to invest your time into (and skip the rest)! However, this does mean that an article once missed is often never seen again, 'overwritten' (or at least bumped out of your inbox!) by the next day's, week's, and month's worth of content that comes along.

Accordingly, just as we did last year, and in 2022, 2021, 2020, 2019, 2018, 2017, 2016, 2015, and 2014, we've compiled for you this Highlights List of our top 24 articles in 2024 that you might have missed, along with a few of our most popular episodes of 'Kitces & Carl' and the 'Financial Advisor Success' podcasts. So whether you're new to the blog – and #FASuccess (and Kitces & Carl) podcasts –and haven't searched through the Archives yet, or simply haven't had the time to keep up with everything, I hope that some of these will (still) be useful for you! And, as always, I hope you'll also take a moment to share podcast episodes and articles of interest with your friends and colleagues!

Don't miss our Annual Guides as well – including our list of the 18 Best Financial Advisor Conferences To Attend in 2025, the ever-popular annual 2024 Reading List of Best Books For Financial Advisors, and our increasingly popular Financial Advisor "FinTech" Solutions Map and AdvisorTech Directory!

In the meantime, I hope you're having a safe and happy holiday season. Thanks again for the opportunity to serve you in 2024, and I hope you enjoy all the new features and resources we'll be rolling out in 2025 (and beyond!), too! Stay tuned for our State-of-the-Blog update in January with more details of what's to come!

Weekend Reading For Financial Planners (December 21–22)

December 20, 2024 02:25 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 the CFP Board announced a series of proposed changes to its certification requirements, including an increase in required Continuing Education (CE) hours for current certificants to 40 hours every two years (up from the current 30 hours) and, for candidates for certification, a tightening of the Experience requirement (so that qualifying experience for the 6,000-hour "Standard Pathway" would be required to address at least three (rather than just one) of the seven primary elements of the financial planning process to ensure that candidates are engaged. Together, these proposed changes (which are currently open for public comment) suggest CFP Board is seeking to ensure that those with the marks not only have sufficient education and experience upon receiving them, but also maintain and sharpen their skills over the course of their careers.

Also in industry news this week:

A benchmarking study from Charles Schwab shows that median compensation for financial planners at RIAs is well into the six figures, though actual salaries appear to vary widely
The U.S. Senate appears poised to pass legislation that would eliminate the long-established WEP and GPO provisions and increase the Social Security benefits of many state and local workers in the process

From there, we have several articles on investment planning:

While index funds are often viewed as 'passive' investments, advisors can add value for their clients by exploring the key differences in how certain funds are structured
A review of the academic literature on whether historical prices can help determine future investment returns
While the use of model portfolios can be a time-saving alternative for advisors compared to creating custom portfolios for each client, a study of return data suggests that those using them to improve performance could be disappointed

We also have a number of articles on advisor marketing:

How creating a marketing calendar can help advisors improve their efficiency and prevent important tasks from falling through the cracks
Three advisor marketing tactics that don't come with a hefty price tag for advisors
How advisory firms can align their websites to match the needs and personalities of their ideal target clients

We wrap up with three final articles, all about financial lessons for children:

Financial literacy lessons parents can offer at each stage of their children's development
How parents can approach talking about their own financial situation with their kids, from the time they are in elementary school to when they become adults
Why the greatest gifts parents can offer their children might not come with a bow on top

Enjoy the 'light' reading!

A Recordkeeping Checklist For Financial Planning Services: Proactive Documentation Of Service Delivery To Reduce Regulatory Scrutiny

December 18, 2024 07:01 am 0 Comments CATEGORY: Regulation & Compliance

Maintaining adequate books and records is a cornerstone of compliance for all investment advisers. While state and Federal regulations clearly outline recordkeeping requirements for areas like financials, advertisements, and trading records, there is a notable gap when it comes to documenting the delivery of services – especially financial planning services – necessary to justify the fees charged for those services. This lack of specificity can result in regulatory deficiencies or scrutiny, even for firms providing substantial financial planning value to clients, if records fail to consistently demonstrate that fees are 'reasonable' in relation to the services provided.

To minimize regulatory concerns regarding the reasonableness of advisory fees, firms can establish internal standards for service-related recordkeeping. For investment management services, documenting the entire client engagement – such as onboarding, reviewing and recommending portfolio adjustments in line with collected suitability information, opening and funding accounts, conducting periodic reviews, and rebalancing – can help clearly evidence the services provided.

For financial planning services, a similar approach to documentation can be applied to support regulatory compliance from the start of client engagement through all the steps that follow. This includes tracking the information-gathering process during the client discovery phase, followed by the research and development of a financial plan. Next, firms can document the delivery of the plan, check-ins throughout the year to support plan implementation, periodic meetings to work on or execute various aspects of the plan, and the annual review of the client's situation. The review should also include updating the plan to account for significant changes and seasonal "to-dos", assessing any advised assets that aren't under the firm's direct management, and responding to other financial planning questions that arise throughout the year. NASAA's Fee Guidance highlights the importance of detailed recordkeeping for emerging fee models and provides practical context for advisers navigating these challenges.

A client service calendar can be an excellent tool to illustrate these services. It provides a structured outline of the firm's service delivery, sets client expectations, and serves as a framework for systematizing processes as the firm grows. It also helps demonstrate to regulators what the firm's ongoing financial planning services entail (though advisers will want to be certain that client files reflect that the adviser did everything the firm committed to in the client service calendar!).

Ultimately, the key point is that while the books and records requirements for financial planning services are less prescriptive than for investment management, advisers can take proactive steps to systematically document the services they provide to clients. This reduces the risk of regulatory scrutiny during examinations and helps regulators better understand what strong service delivery and comprehensive documentation for financial planning should look like!

#FASuccess Ep 416: Avoiding The Compliance Headaches When Going RIA By Choosing A ‘Supported Independence’ Corporate RIA Platform, With Fran Toler

December 17, 2024 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome everyone! Welcome to the 416th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Fran Toler. Fran is the CEO of Toler Financial Group, a DBA firm under the RIA Rossby Financial, in Silver Spring, Maryland, that oversees nearly $200 million in assets under management for 280 client households.

What's unique about Fran, though, is how she decided to transition from the independent broker-dealer model to a 'supported independence' corporate RIA platform in order to avoid the compliance headaches involved in being a totally independent RIA while reducing the drag of platform fees on her firm's profitability by finding a platform that wouldn't charge her for services that her staff were already performing in-house anyway.

In this episode, we talk in-depth about the moment of realization Fran had when she line-itemed out the annual costs of operating under her previous broker-dealer and discovered that it added up to $500,000 per year (or 25% of her revenue) when accounting for grid payouts, technology fees, and the cost of their trading platform, how Fran's desire to not have to be responsible for her own compliance responsibilities (based on her lack of interest in taking them on and the time involved in doing so) led her to choose to operate under a corporate RIA instead of pursuing independence as her own standalone RIA, and why Fran chose a relatively streamlined supported independence model that provides just the key compliance and software tools she needs rather than alternative offerings that provided more service but were more expensive and redundant to the staffing she already had in place.

We also talk about how Fran's decision to be upfront and public about her progressive social and political stances has allowed her to attract both employees and clients seeking a firm with these values (helping her 10X her AUM in just the past 9 years… after it had taken her 14 years to get her first $20M using the traditional approach), why Fran believes that building a more diverse advisor team will help her firm be better prepared to serve a more diverse range of clientele in the decades to come (as the demographics of those seeking financial advice change over time), and why Fran, instead of taking an 'eat what you kill' approach with new advisor talent, pays her newly hired financial advisors a livable base salary in order to attract potential candidates who might be talented but lack either natural connections to wealthy prospects or simply don't have the financial means needed to get by while they build their client base and revenue to be long-term successful with the firm.

And be certain to listen to the end, where Fran shares how she has laid the groundwork for a succession plan where team members (including both advisors and other key personnel) buy multiple tranches in the firm before she eventually steps aside, how Fran serves both her firm and the community by being willing to meet for an hour with any prospect who reaches out to her (but is very firm about her minimum pricing to work with each client so the business remains profitable and sustainable in the long run), and how Fran's previous work as a midwife has helped her nurture long-term trusted client relationships as she has navigated successfully into the world of financial advice.

So, whether you're interested in learning about transitioning from a broker-dealer to a 'supported independence' model, how to choose among available corporate RIA platforms, or how a firm can generate prospect leads by being vocal about its values, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Fran Toler.

Building An Inclusive Hiring Process To Decrease Bias And Find Your Firm’s Ideal Candidate

December 16, 2024 07:01 am 0 Comments CATEGORY: Practice Management

When a financial planning firm is hiring a new employee, it naturally wants to find the best candidate to fill the role. However, some firms may unintentionally limit the applicant pool by using a promotion and selection process that doesn't focus on the most important traits or that introduces biases, which can lead to missing out on candidates who might otherwise have been well-suited for the position. But by taking a structured, inclusive approach to the hiring process, firms can attract a diverse talent pool and increase the likelihood of finding the right person for the job.

Inclusivity starts with a firm's website and marketing materials, which can influence the pool of applicants who apply for an open position. If all of the individuals featured on a firm's site look similar in age, ethnicity, and/or gender, potential applicants (and prospective clients!) who don't identify the same way might feel uncomfortable about joining the firm. Additionally, carefully choosing the requirements and qualifications to include in a job description can attract skilled individuals without excluding those who might not meet non-essential criteria (like having a bachelor's degree). Further, including salary details and growth potential in the job listing, as well as avoiding the use of industry jargon or gendered language, can further broaden the pool of people excited to apply.

When promoting an open position, firms can benefit from advertising beyond their personal networks and local geographic areas. Posting available positions on industry career centers and job boards (e.g., CFP Board Career Center, FPA Job Board), on general interest sites (e.g., Indeed.com, Monster Jobs, LinkedIn), and with groups that target specific populations (e.g., Association of African American Financial Advisors) can improve the chances that the listing will be seen by the widest possible group of potential candidates, thereby strengthening the applicant pool and increasing the chance of a great hire.

Another approach for helping the firm choose the right applicant is to implement a structured interview and selection process, which can mitigate the impact of unconscious bias and increase the odds that new hires will have the necessary skills. Such a process can include standardized work sample exercises to assess the candidate's competencies and an interview process that asks each candidate the same set of questions to ensure a uniform experience for each individual. A standard scoring rubric for work samples and interviews ensures that candidates will be scored on the traits being assessed (and not just by their ability to charm interviewers!).

Ultimately, the key point is that given the time and cost involved in hiring and training new employees, selecting the most qualified individual is a business imperative. Which means that taking the time to create a structured, inclusive hiring process that allows a firm to access the broadest possible pool of potential candidates and evaluate them effectively can be an investment that pays off for a firm for years to come!