Nerd's Eye View blog

Optimizing Operational Experience To Influence Growth

June 22, 2020 07:06 am 1 Comment CATEGORY: Practice Management

Growing and improving a financial advisory business is a continuous and iterative process, and in general, firm owners tend to first look for new and better ways to attract and retain clients when taking the next developmental step. However, in order to really capitalize on those efforts, advisors should first ensure that they are also consistently optimizing the operational aspects of their businesses as well.

In this guest post, Angie Herbers – Chief Executive and Senior Consultant at Herbers & Company, an independent management and growth consultancy for financial advisory firms – explains how Operational Experience (OX) is a crucial element in all business processes as it is the mechanism that ensures consistent delivery of service. It consists of the back office activities that outline business processes and, for each step of every process, identifies every action that needs to be followed, who is responsible, how long it should take, and any technology requirements. In order to define a firm’s OX, two categories of key processes must be considered: those that involve client processes, and those that involve employee processes. Whereas client processes involve marketing, sales, and the actual client experience, employee processes involve the steps needed to recruit, onboard, and train employees.

The effectiveness of key processes can be measured by various performance indicators, such as those that examine metrics that are most impactful to revenue and profits. These can include factors such as client referral rate, close-ratio, and gross profit margin. As such, process frameworks should be developed in alignment with the overall business goals, ultimately to enhance financial performance, using three key steps: focusing, aligning, and optimizing.

Identifying focus is the first stage of developing an OX framework, and it should be targeted on the reason for making improvements to the process (e.g., to expand the number and rate of client referrals). Next, the framework should be fleshed out with areas that need improvement so that they better align with the focus (e.g., annual meeting reviews are not being conducted consistently by different advisors across the firm, and some clients have expressed that they are upset by the unequal treatment). The final stage is the optimization stage, in which repairs are made to the broken processes identified in the alignment stage (e.g., a three-phase process for conducting annual client meetings is developed to systematize the client meeting experience, which all advisors will be required to follow).

Ultimately, the key point is that having a strong operational experience is the basis on which to build efficient client experience, marketing, and employee processes that will facilitate the successful growth of a firm. Because by establishing a sound, functional operational experience, a firm will be able to develop processes that will facilitate efficient marketing efforts and exceptional client service provided by a team of employees who excel at and enjoy their jobs.

Weekend Reading for Financial Planners (June 20-21)

June 19, 2020 02:57 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 Washington is now seriously considering a potential $1T+ infrastructure bill, as President Trump indicates a trillion dollar proposal will be coming soon and Democrats are drafting their own $1.5T version, in the collective hopes that a second round of stimulus spending will help to support the economy as it continues to struggle from the impact of the coronavirus pandemic (not to mention accomplishing some long-overdue infrastructure projects for the country!).

Also in the news this week is a fresh look at what is really changing (or not) in the pandemic and whether current predictions (e.g., the death of cities, the end of colleges) are really likely or simply over-projections of trends that were already in place (while ignoring what may actually be more 'real' long-term changes occurring quietly in plain view), and an interesting exploration of how the divorce rate appears to be spiking in the aftermath of the pandemic (with real implications for advisory firms that may lose clients in divorces, or that could refine their value proposition by crafting a divorce expertise!).

From there, we have a number of articles around the challenges and opportunities in networking in a virtual world, from strategies to focus on quality over quantity (i.e., using the pandemic environment to eschew wide-net networking events and simply focus on more targeted quality networking opportunities instead), running your own virtual study/mastermind group to create networking opportunities, and how to effectively do outreach on LinkedIn to engage with connections and deepen the relationship.

We also have a few marketing-related articles, from the importance of looking at local media as a PR opportunity (rather than trying to get onto national media like CNBC that is more crowded and harder to sustain impact anyway), why email newsletters are still an effective marketing approach (even as it feels like we're suffering from more email overload than ever), and tips on how to market for advisors who 'hate' marketing (hint: don't put on the marketing mask and do what others tell you you 'should' do to market, and instead simply be your authentic self and try to make personal connections to the people you want to connect with).

We wrap up with three interesting articles, all around the theme of life lessons and finding what makes us happy: the first is a fascinating look at how books and articles from our past can take on new relevance and provide additional wisdom when we read them again a decade later; the second provides some insights about the conflicts between what we think will make us happy and what actually leads to happiness and life satisfaction; and the last explores the rise of the "Passion Economy" and the rise of platforms that support unique opportunities in the modern era to monetize our passions (including the ability to be a successful solo advisor who helps a focused clientele we want to serve profitably!?).

Enjoy the 'light' reading!

Kitces & Carl Ep 36: Protecting Your Own Self-Confidence As A Financial Advisor

June 18, 2020 07:01 am 0 Comments CATEGORY: Kitces & Carl Podcast

When markets turn volatile and clients get stressed, at best, financial advisors face their own stress in trying to help clients stay the course; at worst, they absorb the ‘blame’ from clients who are unhappy with economic and market outcomes beyond the advisor’s control. And when clients turn negative, it is easy for mental exhaustion to set in and for confidence levels to take a hit. Yet when self-confidence suffers, so too can our motivation and productivity. Accordingly, taking measures to protect our self-confidence not only helps to preserve our ability to function optimally at work, but also helps to maintain our mental and emotional well-being by ensuring we focus our time on activities that bring us energy and positive engagement.

In our 36th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss how advisor self-confidence can impact productivity, offering some ideas for financial advisors to protect their personal confidence and keep a positive mindset. As for financial advisors, in particular, healthy confidence levels can help them to avoid ‘imposter syndrome’ (which can distort an advisor’s sense of personal value), grow through the business challenges they’re facing, and support their clients with the ‘rational overconfidence’ they sometimes need to display as effective leaders.

Confidence also plays a crucial role when the advisor needs to establish appropriate pricing levels for their services and value, where a lack of confidence can result in advisors discounting their own value because they fail to realize that clients are willing to pay the price the advisor is actually worth. On the other hand, advisors who are able to preserve a high level of confidence tend to price themselves and their services more fairly and will naturally find themselves facing more business opportunities. Confidence also helps advisors deal with difficult situations, such as losing clients or key employees, with more positivity and the ability to see the circumstance as an opportunity versus a setback, which can ultimately be the key that potentially distinguishes between business growth and stagnation.

Being able to recognize one’s ‘unique abilities’ (like those identified by Dan Sullivan’s Unique Ability Discovery Process program) or key strengths (such as those identified by Gallup’s StrengthsFinder assessment) – activities that a person enjoys and excels at, and that are energizing – are key to maintaining one’s confidence and improving productivity at work. And once these ‘unique abilities’ are identified, finding the time to intentionally do those things as much as possible can help to stabilize energy levels and foster a positive mindset, which in turn tends to help maintain higher confidence levels. Equally important for protecting one’s confidence are recognizing the factors that erode energy levels and identifying how to take counteractive steps against the effects of those factors. For example, spending time outside in fresh air, going for a walk, and getting more sleep are some activities that can help prevent energy levels from dropping and, in turn, keep confidence levels from deteriorating.

Ultimately, the key point is that by taking steps to identify activities that not only drain energy levels but also increase them, financial advisors can protect their energy levels from falling, which is an important step in preserving confidence levels and a positive mindset – key elements of fruitful client relationships, successful career advancement, and overall business growth!

Applying The New “Fiduciary-At-All-Times” Obligation For CFP® Professionals Providing Financial Advice

June 17, 2020 07:07 am 10 Comments CATEGORY: Ethics

By definition, “advice” is a recommendation to someone about a prudent course of action to improve their situation or achieve their goals, which by its very nature is delivered by the advice-giver in the interests of the person receiving the advice. As a result, professionals from law to medicine to accounting to investment advisers have long imposed a “fiduciary” duty of professional advice-givers to provide advice in the best interests of the person receiving that advice.

Since 2008, CFP® professionals have similarly been required to provide fiduciary advice in the best interests of their clients… but only to the extent they were actually doing Financial Planning (or material elements of Financial Planning), as simply being a CFP® professional did not necessarily trigger a fiduciary obligation (to the extent that the CFP® professional was implementing or selling a product without providing broader financial planning advice).

Under CFP Board’s new Code of Ethics and Standards of Conduct (“Code and Standards”) that took effect in October of 2019, and which were first enforced after June 30^th of 2020, CFP Board has for the first time imposed a “fiduciary at all times” obligation on CFP® professionals – whether providing comprehensive Financial Planning, or non-Financial-Planning Financial Advice.

In turn, CFP Board’s new Code and Standards require that CFP® professionals meet both a Duty of Loyalty (to put the client’s interests ahead of their own) and a Duty of Care (to act with the care, skill, prudence, and diligence of a professional), while still following their fundamental Duty to Follow Client Instructions (even in situations where clients choose and ask the CFP® professional to implement a course of action that the advisor did not recommend). And to the extent that Material Conflicts of Interest are present, they must be disclosed by the CFP® professional (even if the CFP® professional’s Firm does not impose such requirements).

Ultimately, CFP® professionals that fail to adhere to CFP Board’s fiduciary and other Duties to Clients (and the associated Financial Planning Practice Standards when delivering financial planning) may be subject to disciplinary action, including a Private Censure, Public Censure, suspension, or even permanent revocation of the CFP® marks. Which, notably, may apply even to CFP® professionals who otherwise adhere to other regulators’ lesser standards!

#FASuccess Ep 181: Pivoting To A New And Better Marketing Approach After Your First Niche Misses, with Benjamin Brandt

June 16, 2020 07:03 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 181st episode of Financial Advisor Success Podcast!

My guest on today's podcast is Benjamin Brandt. Benjamin is the founder of Capital City Wealth Management, an independent RIA based in Bismarck, North Dakota that oversees $60 million of assets under management for nearly 80 households. What's unique about Benjamin, though, is the way he initially developed a focused niche after going out on his own as an independent, and then had to pivot when he discovered that there weren't enough people in that original niche in his small Midwest town to fill his desired client base.

In this podcast, we talk in-depth about how Benjamin initially selected and established his local niche, the way he optimized his website to maximize local search engine optimization opportunities, how he pivoted to launching a podcast to broaden his reach beyond his local market, the way he adapted his website SEO to draw attention to his new retirement podcast, and the marketing funnel that Benjamin has developed to turn his podcast listeners into email subscribers, into webinar watchers, and eventually into an introductory meeting as a prospective client.

We also talk about how Benjamin is building his advisory firm to fit his own lifestyle goals, the way he runs meeting surges with all of his clients twice a year to maximize his focus and also his time off, the ongoing financial plan update and monitoring process he uses with clients to stay efficient, and why he intends to cap his practice once he achieves his goal of 100 clients and $100 million in assets under management by age 40.

And be certain to listen to the end, where Benjamin shares the 5-10-15 rule he developed to figure out for himself what topics to cover on his podcast, the importance of creating forcing mechanisms for yourself to ensure that you stay focused on really following through to achieve your goals, and why Benjamin believes that the key to long-term success as an advisor is giving yourself permission and the financial foundation to be able to grow slowly so you don't feel the pressure to take on clients who aren't a good fit but can be hard to let go of later.

Increasing Client Referrals By Scaling Your Internal Marketing Brand

June 15, 2020 07:03 am 1 Comment CATEGORY: Marketing

Established financial advisors who aim to accelerate the growth of their firms often look to increase their marketing efforts to attract more prospects and bring in additional new clients. In practice, this is often done by taking the main components of a firm’s brand – value, verbal messaging, and visual design – and refining, in particular, the firm’s visual design, with a new website and new marketing materials designed to instill new and faster growth. Yet, in reality, the biggest driver of accelerated growth is often to improve verbal messaging first… and upon doing so, many advisory firms discover that it’s even more appealing to leverage that new messaging as internal marketing to generate more referrals from existing clients instead!

In this guest post, Angie Herbers – Chief Executive and Senior Consultant at Herbers & Company, an independent management and growth consultancy for financial advisory firms – talks about the core components of a brand, and why these components are important to drive firm growth. As while the value of a firm lies in its services offered, the client experience as a whole, and how the firm delivers on both, many advisory firms make the mistake of investing too early and heavily in visual design upon recognizing the value they provide, without first working out the verbal messaging which defines and communicates their own identity and values. The end result of this disconnect between the value and the messaging about it is lackluster lead flow; accordingly, the visual design should actually be defined by the verbal messaging and will be most impactful when it can serve to communicate the firm’s values and convey its identity. Which is only possible when the firm’s verbal messaging has been clearly defined in the first place.

The two primary modes of marketing communication are internal and external. All new firms must start out with external marketing efforts to grow their client base in the first place – in other words, they need to target strangers, website visitors, and prospects to simply convey that the firm exists and to identify the services available. In addition to prioritizing the main components of a firm’s brand, understanding the firm’s different audiences and knowing how to effectively communicate with each are paramount to effective external marketing to increase lead generation.

However, for existing firms, especially those with well-established client bases, internal marketing can be a much more valuable marketing approach, if done correctly. Internal marketing targets existing clients exclusively, providing not only updates about the firm’s growth and progress, but also reminders of the firm’s value through educational content and the ongoing provision of outstanding client service. In fact, ideally, internal marketing strategies should provide exclusive marketing value and messaging that is only available to existing clients. If done right, internal marketing can leverage clients themselves as promoters who generate referrals for the firm. Because with the right branding, client service experience, and exclusive internal marketing outreach efforts, clients will be enthusiastic about telling other people they know about the firm and will eventually become the firm’s own best marketers!

Ultimately, the key point is that firms who are just starting out will need to rely on external marketing efforts to cultivate clients in the first place, but firms with a well-established client base can leverage their own clients as effective promoters of the firm by using an internal marketing strategy that targets clients exclusively. However, this is only effective if the firm has invested in creating a well-defined brand with verbal messaging that clearly conveys their identity and values (which is then communicated consistently with internal scripts for client review meetings), developing employees as part of the brand, and specializing their marketing communications… all available only to existing clients who may then refer the advisory firm (even more often than they did before!).

Weekend Reading for Financial Planners (June 13-14)

June 12, 2020 02:56 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with a hard look at the current state of advisor technology surveys, and the challenging question of which survey(s) advisors can and should even trust as an indicator of industry trends (and which are not sampling enough advisors or in a consistent enough manner to really know).

Also in the advisor technology news this week is a look at how wealth management firms at large held up with their digital tools in the midst of the coronavirus pandemic (finding that most firms are lagging badly, but that in general, independent wealth management firms and the platforms they use actually fared better than most), and a reminder that the coming new CFP Board Standards of Conduct will require them to actually understand the details of their financial planning (and other) software and cannot rely on 'black box' solutions when crafting recommendations to clients anymore.

From there, we have a number of articles around succession planning, including a recent industry study showing the majority of mid-to-large-sized advisory firms still aren't confident they'll be able to transition the firm to the next generation without at least a lot of bumps along the way, a look at how 'sick' many succession plans became through the midst of the pandemic turmoil (from next-generation owners who can no longer afford to make payments on their equity purchases, to both buyers and sellers getting cold feet to do the deal), and some tips for both founders and next-generation advisors on how to start the succession planning conversation (particularly if they're concerned the 'other side' isn't picking up the conversation themselves).

We also have a few marketing-related articles, from tips on how to handle 'Negotiator' clients and develop the confidence to avoid yielding to those asking for fee discounts, advice to new advisors about where to focus first on marketing (hint: local marketing, local SEO, and LinkedIn), and a reminder that, in the end, clients don't hire an advisor for what the advisor does but for what the advisor can do to help clients become who they want to become (which means marketing should be all about the transformations that advisors can create for their clients to achieve that vision for themselves!).

We wrap up with three interesting articles, all around the theme of office culture and team-building in the virtual world: the first explores the dynamics of whether business cultures can survive if they 'stay' virtual and don't go back to being in-person as offices reopen; the second looks at the value of playing games during work hours as a way to build team connections and culture (especially during the remote pandemic environment); and the last explores how to build a strong Virtual Culture (from the authors of the book by that very name!) for those who are thinking that they do want to remain more virtual, but are trying to figure out in practice how to do so while sustaining a strong culture.

Enjoy the 'light' reading!

New Disclosure Obligations For Informed Consent And Other Reporting Requirements Under CFP Board’s New Standards Of Conduct

June 10, 2020 07:03 am 1 Comment CATEGORY: Ethics

One of the fundamental challenges that professionals face when providing recommendations to consumers is that the recipient may struggle to fully understand the ramifications of their decision about whether or not to accept and follow the recommendation in the first place. After all, professionals tend to be engaged with respect to matters that are especially complex or challenging – such that the average person cannot make the decision quickly or effectively on their own, and must rely on the services of a professional. Yet, in a world where consumers still must give their consent to pursue recommendations that may have adverse outcomes, it’s hard to be certain that the consumer really understands enough to give their “informed” consent in complex matters in the first place. Accordingly, various professions have evolved over time the framework of what it takes to ensure a consumer is giving “informed consent” – to act on a recommendation made by the professional with full awareness of the potential risks that it may entail.

And in its latest update to its Code of Ethics and Standards of Conduct (“Code and Standards”), CFP Board will now require that CFP® professionals obtain informed consent with respect to any recommendations they make to clients that may entail a Material Conflict of Interest, to be certain that the Client truly understands the prospective conflict before deciding whether to engage the CFP® professional. In practice, this will entail not only providing upfront information about the CFP® professional’s services and compensation (which may be delivered orally for Financial Advice engagements but must be written for Financial Planning engagements) but also disclosures of the CFP® professional’s Material Conflicts of Interest (which may be oral or written), and obtaining the Client’s informed consent (by any means desired, though clearly for professional liability protection, CFP® professionals will likely want to document this in writing!).

Fortunately, the reality is that for most CFP® professionals individually, such disclosure documents will have already been created by their RIA as their Form ADV Part 2 (for an investment adviser representative), or by their broker-dealer (as a registered representative), along with their respective Form CRSs, such that few will have to create new and separate documents themselves. Nonetheless, being aware of the obligation to provide such information and disclosures, and, in particular, the burden to obtain informed consent (and a likely desire to document it, either with contemporaneous notes in the advisor’s CRM or perhaps with a delivery-and-acknowledgment receipt), means CFP® professionals will still need to be cognizant of what it takes to comply with the new rules.

In turn, CFP Board’s new Code and Standards also expand the obligations of CFP® professionals to report external disciplinary matters to CFP Board, comply with CFP Board investigations, and adhere to CFP Board’s Terms and Conditions. Recognizing that, in the end, the CFP® marks are not a formal license (and CFP Board is not a government-sanctioned regulator), but CFP® professionals who pay CFP Board to use the CFP® marks still, in the process, agree to adhere to CFP Board’s rules… providing CFP Board with the means to ensure that CFP® professionals uphold rules of professionalism, or risk having their CFP® marks suspended or permanently revoked!

#FASuccess Ep 180: Getting A Year’s Worth Of Growth Every Month By Going All-In On A Clear Target Market, with Ryan Inman

June 9, 2020 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 180th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Ryan Inman. Ryan is the founder of Physician Wealth Services, an independent RIA based in San Diego that serves over 140 physician clients. What's unique about Ryan, though, is the way he's gone all in on the niche of serving physicians to the point of renaming his advisory firm, launching a "Financial Residency" podcast, and restructuring his entire financial planning process into ‘inpatient’ and ‘outpatient’ services, to the point that now in his fifth year of business, he's adding more clients every month than he added in his entire first year as a generalist.

In this podcast, we talk in-depth about how Ryan chose the niche of working with physicians, the mindset shift he had to go through to get comfortable narrowing the focus of his practice, how going to the FinCon Financial Bloggers Conference gave him the inspiration to actually market to and reach his niche, and how he has ultimately found that having a focused niche is making it easier to market because you don't actually need to reach a lot of people to get new clients when your niche marketing is focused.

We also talk about Ryan's financial planning services themselves. His unique fee structure of charging clients either $500 a month or $833 a month (those are his only two options), the unique expertise in student loan planning he had to develop to really serve his niche effectively, what he does for his clients upfront and on an ongoing basis to earn those monthly fees, and why Ryan ultimately had to go outside of traditional financial planning software and to use tools like YNAB to actually help his clients in the areas that they needed advice most.

And be certain to listen to the end, where Ryan talks about the importance of having your own financial foundation set before you launch your own firm and why he waited almost two extra years before going out on his own. Why even though Ryan is glad he waited to launch his firm, he regrets not focusing into a niche earlier on, and how if he could do it over again, the only thing he'd really change is finding a business partner sooner rather than later, because, in the end, it can be pretty lonely launching an independent advisory firm from scratch.

Summer Reading List Of “Best Books” For Financial Advisors – 2020 Edition

June 8, 2020 07:01 am 3 Comments CATEGORY: Personal/Career Development

In a ‘normal’ year, summer is the season of vacation and family trips, as client meetings tend to slow down (if only due to the clients' own vacations), and advisors get a little more time for rest and relaxation. Unfortunately, the coronavirus pandemic has disrupted a lot of family and vacation plans for 2020… yet the need for getting some rest remains, as it is arguably even more important to find time to recuperate from the client and business stresses of recent months. Which in practice, often includes finding a little time to catch up on some good books!

The question, of course, is then to figure out “what’s a good book to read these days?” As a voracious reader myself, I'm always eager to hear suggestions from others of great books to read, whether it's something new that's just come out, or an "old classic" that I should go back and read (again or for the first time!). And so, in the spirit of sharing, a few years ago I launched my list of "Recommended (Book) Reading for Financial Advisors", and it was so well received that in 2013 I also started sharing my annual "Summer Reading List" for financial advisors of the best books I'd read in the preceding year. It quickly became a perennial favorite on Nerd's Eye View, and so I've updated it every year, with new lists of books in 2014, 2015, 2016, 2017, 2018, and a fresh round last year in 2019.

And now, I'm now excited to share my latest Summer Reading list of top books for financial advisors in 2020, including some suggestions from our growing ‘team of nerds’ here at Kitces.com (including Derek Tharp, Erica Crane, and Matt Nelson), with suggestions on books about building a virtual culture (if you decide to keep your advisory firm virtual even after businesses are permitted to re-open in person!) or alternatively hiring a virtual assistant, how to refine and focus your marketing message by figuring out exactly what your value is to clients (in essence, what ‘job’ your clients are really hiring you to fulfill) and how to more effectively differentiate (under the philosophy that for branding purposes, “it’s better to be different than [just] better”), tips on how to better communicate with clients and help them change their behaviors to achieve their own goals, ways to take small steps to improve your own life (and why it’s easier to improve yourself by taking small steps instead of making big change resolutions), a discussion of whether we’re focusing on the wrong measures of economic growth and wealth in setting economic policy, and a look at how various government policies over the past 200 years have limited the ability of many minority populations to be able to accumulate wealth in the first place (which, due to two centuries of compounding – or the lack thereof – have amplified the racial wealth gap in America, with profound implications on the diversity of financial planners and who we serve as well).

So as the summer season gets underway, I hope that you find this suggested summer reading list of books for financial planners to be helpful… and please do share your own suggestions in the comments at the end of the article about the best books you've read over the past year as well!