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#FA Success Ep 272: Streamlining Operations And Workflows With The Advisor CRM As The Centralized Hub, With Kate Guillen

March 15, 2022 07:07 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 272nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kate Guillen. Kate is the founder of Simplicity Operations Management, a consulting firm based in San Diego, California, that specializes in helping advisory firms get the most out of their CRM systems and streamline their internal operations along the way.

What's unique about Kate, though, is the way she utilizes the advisor’s CRM system – not their broker-dealer or RIA custodial platform – as the central hub of their entire business, and then builds multi-system workflows from that base to ensure that everything gets done and nothing falls through the cracks.

In this episode, we talk in-depth about why Kate views the CRM system and its four core components of Calendaring, Task Management, Sales Pipeline, and Contact Management as the center around which all advisory firms should be built, why the key to building good workflows is about not just articulating the steps of a process but also the follow-up to demonstrate that good service to clients, and how firms can start the process of systematizing the key repeatable steps of the business in new client onboarding and ongoing client service.

We also talk about how working for an advisory firm herself and observing their operational systems (or lack thereof) encouraged Kate to first master Redtail and its intricacies, how Kate was inspired to launch her company after discovering how often advisory firms underestimate and underutilize their CRMs operational potential, and why Kate has found that it can take up to 6 months to really go through the process of overhauling an advisory firm’s operations to be more efficient.

And be certain to listen to the end, where Kate shares how her nervousness at launching a consulting business just as the pandemic first broke out (and how her fear subsided once it became clear that the pandemic was actually amplifying the need for advisory firms to better systematize their suddenly now-remote businesses), how Kate believes achieving goals begins with having confidence in one’s own abilities and not being so hard on yourself, and why Kate feels, while it is great to do what you love, she has had to learn to get better at saying “no” to find her own balance between growing the business and enjoying her time with family.

So whether you’re interested in learning about how Kate leveraged her organizational and CRM expertise to start her business, how Kate utilizes Redtail as her operational hub to build and incorporate systems, or why Kate feels it is more important to appreciate the journey in building a business than worrying about the destination, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Kate Guillen.

Not All Equity Owners Will Act Like Owners: 3 Pathways To Create Psychological Ownership

March 14, 2022 07:08 am 0 Comments CATEGORY: Practice Management

When financial advisors help clients with issues related to ‘ownership’, most often it is in the context of the portion of company shares that the client may own, which gives them certain financial and voting rights. But the concept of ownership is not limited to its physical and legal aspects; there is also a psychological dimension as well. For example, individuals often enjoy the sense of ownership of things such as an organization, idea, brand, or object when certain conditions are in place, and even define their identities in relation to those things that they own. The phenomenon of psychological ownership gives rise to ideas about empowering employees to feel and act like owners – because when someone feels like they actually own a part of the business, they become more vested in taking care of the business and ensuring its success.

In order to develop psychological ownership among employees, Finnish management scientist Antti Talonen proposed a three-path framework that can be applied directly to an advisory firm. Under this framework, employees are more likely to feel like owners, particularly over the part of the business they control (e.g., an advisor might feel a sense of ownership for work on their particular clients) if one of three ‘pathways’ to psychological ownership applies to them: 1) they have controlled some part of the business for an extended period; 2) they have generated an intimate knowledge of the business; or 3) they have invested their personal resources or effort into the business. At the same time, the absence of these attributes can lead to a reduced sense of psychological ownership, even among those who might have legal ownership in the firm.

Accordingly, when it comes to advisory firm owners, creating a sense of psychological ownership can arise from having a sense of at least some level of control over the firm, being intimately familiar with and involved in the firm’s operations, or investing significant amounts of energy, time, and effort to the firm. Team members who meet at least one of these preconditions are likely to feel (and behave!) like owners, whether or not they have legal ownership in the firm as well.

While it might be tempting for firms to err on the side of inclusivity and broaden legal ownership in the firm, there are costs involved in doing so. For example, not only can extending ownership to employees increase the legal, administrative, and tax burdens for both the firm and its owners, but it can also raise the risk to employee morale, as high-performing employees may be disheartened if they feel they are being treated the same as those with poor performance. Accordingly, it is important to consider offering actual ownership to those with a strong sense of psychological ownership in the firm, as those employees are likely to be the top performers who deserve ownership the most.

Ultimately, the key point for advisors is that the concept of ownership is multifaceted and goes beyond legal ownership in a firm. Developing a sense of psychological ownership among employees can make them feel more vested in taking care of the business and ensuring its success, even in the absence of legal ownership of shares in the business. And given the costs of expanding legal ownership of a firm, firms that are contemplating doing so might first ensure that the prospective new shareholders demonstrate not just good performance, but also psychological ownership in the firm, that will make them valuable owners in the future!

Weekend Reading for Financial Planners (Mar 12-13)

March 11, 2022 02:17 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 of President Biden’s executive order creating a “Whole-of-Government” policy on digital assets, which (despite its high ambitions for protecting investors, the financial system, and national security) contains few specifics other than setting high-level objectives and ordering over two dozen government agencies to collaborate on filling in the details…. Meaning that concrete regulation on cryptocurrency (and how financial advisors can incorporate it into their services) may be even farther off than hoped.

Also in industry news this week:

The SEC examined 16% of the approximately 15,000 SEC-registered RIAs last year, but it may have trouble continuing that pace as RIA firms continue to grow in number while the agency’s examination staffing levels remain flat
A new research study from Vanguard shows that over 90% of clients of human advisors would not consider switching to a robo-advisor (though there may be future advantages for advisors who integrate digital investment management with human advice)

From there, we have several articles on investments:

Why TIPS funds do not necessarily go up in value during periods of high inflation, and alternate inflation hedges advisors can consider for their clients
The tax implications of investing in cryptocurrencies, and how advisors can help ensure their clients’ gains and losses are reported correctly
How direct indexing has transitioned from a tool of the ultra-wealthy to a strategy available to a wider range of advisors and their clients

We also have a number of articles on practice management:

Why companies are finding new ways to show their appreciation to employees (and to customize that recognition in a way that will resonate best with each employee)
Why advisory firms should focus on encouraging and rewarding their ‘star’ performers in proportion to the value they bring to the company (and not necessarily try to treat every employee equally)
How moving talented employees to new areas or roles within an organization (rather than keeping them in one place) can help organizations better retain top performers as well as attract and breed new talent

We wrap up with three final articles, all about how to live a better life:

How a ‘reverse bucket list’ can help advisors and their clients discover what is most likely to lead to a lifetime of happiness
How advisors can help clients better relate to their ‘future selves’ in order to encourage better financial habits today
The seven books that changed one author’s life, and their lessons on how to become a better person

Enjoy the ‘light’ reading!

Kitces & Carl Ep 81: Increasing Client Touch Points With Asynchronous Client Meetings

March 10, 2022 07:01 am 1 Comment CATEGORY: Kitces & Carl Podcast

Kitces Carl Ep Increasing Client Touch Points With Asynchronous Client Meetings Featured Image

Conventionally, meeting with a financial advisor meant meeting in-person, usually at the advisor’s office. With today’s technological advances, though, compounded by changes in social dynamics brought forth by the pandemic, meeting virtually (or mostly virtually) has become increasingly normalized, which has made it easier than ever before to accommodate more meeting time into busy schedules. But while the capacity to schedule more meetings has also given advisors the opportunity to spend time engaging more deeply with their clients, it has also meant that they may have less time to accommodate touch points with a broader range of their entire client base. One potential solution that can help advisors address this time crunch is to consider using asynchronous meeting strategies to help free up more of their time.

In our 81st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss what it means to meet asynchronously, when it is appropriate to utilize, and how advisors can use asynchronous meetings to increase touch points for clients.

As a starting point, it’s important to recognize that while advisors may still need to devote more time to certain clients with complex financial circumstances who simply require more attention, newer clients often need frequent meetings only initially in the relationship. This is because in-person meetings early on provide a space for dialogue that lets new clients build trust and rapport with their advisor in the first place. But, once a certain level of trust is established, many clients often feel that frequent meetings are no longer necessary and may actually request fewer routine meetings; in fact, they may prefer communicating only on an as-needed basis to ensure that they stay on track with their financial plan.

Furthermore, while there may still be times when synchronous meetings are the most appropriate method of contact, they are not the only way to maintain the right level of touch points with a client. For instance, asynchronous meetings can sometimes be more suitable for situations between in-person meetings or video chat sessions, when a real-time connection is not entirely necessary (e.g., answering a question about how to find information on a platform). Using asynchronous meetings to quickly address lower-priority issues helps free up time for the advisor, as it generally takes less time to record a quick, informal video response than it does to write an email or to meet in person. Asynchronous meetings also don’t require the need to schedule or prepare for an in-person meeting, which can be time-consuming and simply unnecessary (especially when a 5-minute video clip can suffice).

Ultimately, the key point is that asynchronous meetings are not meant to replace all meetings; instead, they can be used to communicate more easily and quickly with clients when an actual meeting isn’t really necessary. While there will always be pressure to maintain a certain level of touch points with clients, advisors can rely on advances in technology that have made it easier and much more affordable for them to use asynchronous strategies (e.g., recording a quick video response) to respond to their clients’ needs without having to schedule meetings. And taking less time to schedule meetings means more time for the advisor to create more touch points and provide a better client experience. Because the more touch points an advisor can have with clients, the more opportunities there are to deepen and maintain long-term relationships with those clients!

Strategies For Maximizing (Or Minimizing!) Rule 72(t) Early Distribution Payments Using IRS Notice 2022-6

March 9, 2022 07:08 am 11 Comments CATEGORY: Retirement Planning

Sometimes there are situations where individuals need access to funds in their tax-deferred retirement accounts sooner than the rules say they can. In fact, except for a narrow range of ‘emergency’ situations, the only way most individuals can access these funds without incurring a 10% early withdrawal penalty tax is by setting up a “Series of Substantially Equal Payments”, otherwise known as 72(t) payments.

Until recently, however, the interest rates used to calculate the amounts of 72(t) payments have been so low that the payments themselves often weren’t enough to meet the needs of individuals who wanted to access their retirement funds. But, with the recent release of IRS Notice 2022-6, the potential amount of 72(t) payments many individuals can make has been substantially increased. Which means that 72(t) payments might now be a more realistic option for individuals who need early access to their retirement funds!

For those who wish to receive 72(t) payments, there are several rules which must be considered. First, those receiving 72(t) payments must take recurring annual distributions for either 5 years or until reaching age 59 ½ – whichever is longer. Second, taxpayers must use one of three methods established by the IRS to calculate their 72(t) payments: RMD, amortization, or annuitization. Regardless of which method is used to calculate payment, the price for altering or canceling a 72(t) payment is steep, usually resulting in a 10% penalty tax on all distributions previously taken – plus interest!

However, IRS Notice 2022-6 sets a new ‘floor’ interest rate of 5% for calculating 72(t) payments, representing a substantial increase over the previous maximum of 120% of the applicable Federal mid-term rate. Thus, for a 50-year-old with a $1 million retirement portfolio, this means the maximum annual 72(t) payment increases from about $37,000 to over $63,000! The scale of the change is significant enough that some individuals may now need to consider ways to reduce their 72(t) payments if they are more than they need to withdraw. For example, someone can consider splitting their retirement accounts into two separate accounts, such that 72(t) payments are only taken from one account, and accessing funds from the other (non-72(t)) account won’t risk creating a modification of their 72(t) payment schedule (and triggering the associated penalties and interest).

Likewise, for those using the annuitization or amortization methods and who may no longer need as much from their 72(t) payments (but who continue receiving them to avoid retroactive penalties and interest), the rules allow for a one-time change to the RMD method of calculation (which generally results in lower maximum payments than either the amortization or the annuitization method) without creating a modification to the schedule. Which can at least reduce taxable income (and the amount drawn from retirement funds) that an individual in these circumstances may not need.

Ultimately, the key point is that with the updates made by IRS Notice 2022-6, 72(t) payments may now be a more practical option for individuals who need early access to retirement funds. Which can give advisors and clients a reason to reconsider this strategy with fresh eyes – either to alter an existing schedule, or perhaps to establish one for the first time!

#FA Success Ep 271: Right-Sizing Your Client Base To Operate As An Intentional High-Margin Solopreneur, With Cady North

March 8, 2022 07:09 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 271st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Cady North. Cady is the founder of North Financial Advisors, a boutique fee-only financial planning firm focused on serving women business owners that is based in San Diego and Washington, D.C., and oversees more than $24 million of assets across 30 client households.

What's unique about Cady, though, is how she right-sized her practice from what was once a much larger number of clients, and now purposefully maintains a limited number of households she serves to create a business that has high earning potential while remaining personally sustainable for herself without the risk of burnout.

In this episode, we talk in depth about how Cady has built her firm to help a younger clientele of women entrepreneurs discover the best uses for their capital and ways to balance their own money goals, why Cady veers away from the traditional corporate full-time philosophy to ensure she has the time and capacity to meet the needs of her clients as well as herself, and how Cady has systematized and automated processes to avoid the pressure of always staying connected as a solo advisor.

We also talk about how Cady’s experience with burnout in her former career inspired her to take a 6-month sabbatical to step back and examine what was truly important to her in life, why Cady believes that being resilient means first recognizing for oneself what is good enough, and how Cady realized after a few years of building her firm that increasing the quality of clients she served was more important than just increasing the quantity.

And be certain to listen to the end, where Cady shares how reflecting on the highs and lows of professional experiences with a support group of peers helped her to learn and grow in her career, the rotating paraplanner program that Cady built to share her knowledge and mentor others to help them find their own paths to success, and how Cady came to let go of the urge to live a life of to-do lists and focus on feeling fulfilled financially and mentally instead.

So whether you’re interested in learning about how Cady helps her clients realize their short-term and long-term money goals, how she organizes her firm to keep a steady work-life balance, or why she enjoys being a guide for women entering the financial advice industry, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Cady North.