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Weekend Reading for Financial Planners (July 3-4)

July 2, 2021 02:55 pm 2 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a discussion of some recent White House proposals that would crack down on popular high-net-worth estate planning strategies, including dynasty trusts and IDGTs, as the administration increasingly focuses not on increasing estate tax rates or reducing the estate tax exemption, but on tightening enforcement to just make it more difficult to avoid the estate tax system as it currently exists.

Also in the industry news this week are a number of other interesting headlines:

A Spectrem Group study finding that what clients value most now is "unbiased advice" and expertise ("having knowledge [the client] is lacking"), while "helps me avoid emotional financial decisions" is actually one of the least valued services according to consumers themselves
How the IBD model is evolving away from being a broker-dealer altogether, as the entire advisory industry continues the transition from commissions to fees

From there, we have several interesting articles on communication with clients and prospects:

Tips on 'icebreaker' questions to ask in an initial prospect meeting to get the conversation going
How to prepare for a difficult conversation with a client (e.g., when it's time to raise your fees!)
How to accelerate the trust-building process with new prospects in the first meeting

We've also included a number of articles on practice management, including:

Why it's so important to manage client capacity to avoid burnout (and what's a realistic number of clients/advisor before hitting the capacity wall)
What it takes to scale an advisory firm from a small practice into a large business
Why the fastest path to achieving scalability may not be implementing better technology, but instead in reducing the number of service options offered to clients in the first place

We wrap up with three final articles, all around the theme of the ever-evolving office of the future:

Why the idea that "offices are necessary to promote spontaneous interactions for innovation" may not actually be valid
How firms are shifting to "bonding trips" as a way to promote team connection in the absence of offices
Why we may miss the daily commute even if we prefer to work from home (because it was actually more beneficial as a time to clear our heads than we may have ever realized?)

Enjoy the 'light' reading, and happy 4th of July weekend!

Kitces & Carl Ep 63: Delivering A One-Page Financial Plan And A Full-Plan ‘Technical Appendix’

July 1, 2021 07:08 am 4 Comments CATEGORY: Kitces & Carl Podcast

Back in 2015, Carl Richards made a bit of a stir in the financial planning community when he published his book, “The One-Page Financial Plan”, which suggested that most important aspects of a full financial plan could (and should) be delivered to clients on a single page (effectively a form of executive summary). The appeal of this approach was offering a useful and easy-to-produce deliverable for clients (that could be updated on an ongoing basis to account for the fact that conditions and circumstances are in constant flux), and more generally was a way to reframe the concept of the ‘full’ financial plan by drilling down to just the most actionable points of advice (which is all the client really ‘needs’ to implement in the end anyway). Yet if advisors are really going to encapsulate their entire recommendations into a single-page financial plan, the question arises: can financial advisors really get away with eschewing a full financial plan, and if most clients never read the full plan after it’s presented anyway what is the real purpose of producing the financial plan in the first place?

In our 63rd episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the origin story of the one-page financial plan, the key elements of a good one-page financial plan, and why it’s not meant to be a replacement for a full financial plan (which then exists as a form of “technical appendix” to provide in-depth support to validate the one-page summary), but instead, act as an executive summary of the full plan as well a reference-point that advisors and clients can use when making decisions.

As a starting point, it’s important to understand that the full financial plan is incredibly important. The breadth and depth of the work that financial planners do cannot fit on one page. But it’s equally important to acknowledge that the full financial plan becomes ‘outdated’ the instant that a client walks out of the presentation meeting, and in the end, most clients simply can’t absorb the full extent of numbers and details that are encapsulated in a comprehensive financial plan (which really functions more as support calculations to ‘prove’ that the recommendation itself is technically accurate).

Accordingly, one approach to address the full financial plans that some financial planners have adopted is to also include an executive summary, or, one-page financial plan, that is meant to provide not only a quick reference that advisors and clients to use as a guidepost, but as a living document that is easily updated as life happens and things evolve. Beyond which the entire remainder of the financial plan serves as a “technical appendix” for that executive summary.

While various planners have adapted these one-page plans to fit their needs, items that are commonly found on such a document include: a Statement Of Financial Purpose, which acts as a sort of guiding star, or overarching “Why”; a list of goals, which can be listed in such a way that prioritizes those goals which carry the least desirable outcome if not achieved; and finally, a list of the things that need to happen over the next 90 days. Put another way, the one-page plan summarizes the Why, What, and How of the larger plan, and is a tangible deliverable that advisors and clients can use as a yardstick against which financial decisions can be measured and that can (and should) be regularly updated as action items are completed and goals are achieved (or get shifted).

Which, again, isn’t to say that the full plan doesn’t (or shouldn’t) have a place in the planning conversation. Rather, the action items on the one-page plan are necessarily the result of a rigorous analysis of the client’s situation to demonstrate that it is technically accurate. And while a relatively low percentage of clients have an interest in digging in to examine the nitty-gritty of how final recommendations are calculated, for newer advisors (in particular) who are still establishing their credibility, the full plan can act as an audit trail of sorts to not only show where “that number” came from, but as a tool to boost an advisor’s own confidence levels.

Ultimately, the key point is that one-page summaries of the most meaningful and actionable information in a financial plan (i.e., the Why, What, and How) can be a powerful tool that financial advisors can use both as a living document that can be regularly updated as “life happens” and as a filter through which advisors can help their clients navigate important financial decisions as they arise. Which, at the end of the day, acts as an executive summary of the valuable analysis in the full plan and as a way to keep advisors and clients focused on what matters most.
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Recognizing Financial Survivorship Guilt And Strategies To (Help Clients) Cope

June 30, 2021 07:03 am 0 Comments CATEGORY: Client Trust & Communication

Survivorship Guilt is the experience of emotional distress that can result after having survived a traumatic event when others did not. These feelings can have an adverse effect on behavior, such as reduced motivation and irritability, and when left untreated, can manifest in much more serious and harmful behaviors, including suicide. Given the trauma and tragedy that people have experienced because of COVID-19 around the world, Survivorship Guilt is unsurprisingly on the rise.

The nature of the K-shaped recovery from the pandemic (i.e., how certain parts of the economy have started to recover when others have not, or continue to get even worse) has faced financial advisors with clients who may be experiencing their own form of financial Survivorship Guilt, where they may be financially ‘okay’ (or possibly even better off than they were before the pandemic), but who feel ashamed or guilty for being okay as they witness (and empathize with) others suffering extreme hardship. These feelings of discomfort may cause their clients to do things with their money they would not normally do, and that may not be in alignment with their overall financial goals. For instance, clients with financial Survivorship Guilt may feel uncomfortable about the idea of enjoying or spending money, which manifests in unusual spending habits or even emerges as suddenly-drastic charitable giving. Thus, advisors will want to be on the lookout for signs of financial Survivorship Guilt in clients as COVID-19 continues to take its toll.

Given the financial advisors’ position in their client’s lives, they may be the first people to see or recognize these issues arising. Clients may indicate that they’re feeling guilty, ashamed, or disgusted because of their wealth, or they may lament the dramatic disparity that exists between the wealthy and the poor. Fortunately, though, for advisors who suspect that clients may be experiencing financial Survivorship Guilt, there are some things they can do to help.

First, advisors can highlight the benefit of and normalize the grieving process for clients with unresolved grief. While the pandemic has interfered with the traditional ways many of us normally grieve, grieving is still an essential part of healing, and failing to bring closure to the process can cause individuals to reconcile unresolved feelings by shifting their emotions to guilt and shame. Second, advisors who have clients that are philanthropically inclined and who want to use giving as a way to process grief can ensure that they give responsibly and in ways that have personal meaning for them. Third, advisors can encourage clients to group together (virtually if need be) for social support, perhaps through a giving drive where they can share stories of their grief, talk about their giving goals, or maybe to listen to a speaker on a topic of interest (e.g., Survivorship Guilt, philanthropy, etc.). Ultimately, the key point is that advisors have tools to help clients who may be suffering from financial Survivorship Guilt cope in healthy ways. By watching for signs of shame and guilt, advisors can recognize when their clients may need support, whether from the advisor directly or where appropriate via a mental health professional. Importantly, advisors must also recognize the critical importance to take good care of themselves too, both physically and emotionally, during these difficult times, which can only help them to serve their clients even better!

#FA Success Ep 235: Aligning Your Advisory Firm With Your Own (Progressive) Values, With Georgia Lee Hussey

June 29, 2021 07:08 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 235th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Georgia Lee Hussey. Georgia is the Founder and CEO of Modernist Financial, an RIA in Portland, Oregon that offers deep financial planning services to 46 affluent households for a combination of retainer and AUM fees with a $17,500 minimum fee just to get started.

What's unique about Georgia, though, is how she actively seeks to align her own personal values with the values of her advisory firm, the values of the clients that she serves, and the impact that she creates not only for the community she lives in, but on the broader financial services industry as well.

In this episode, we talk in depth about how Georgia went through the rigorous process to qualify as a Certified B Corporation in order to create a structure that would keep herself and her firm accountable for its decisions and actions, Georgia’s “conscious capitalism” approach that prioritizing having a positive impact and running a profitable business are not, contrary to popular belief, two mutually exclusive goals, and why Georgia's clients, more often than not, view her not just as someone to whom they can delegate to, but as someone who can hold them accountable and to be more intentional with their money and financial decisions.

We also talk about Georgia’s planning process itself, which leverages the Money Quotient framework across a series of five onboarding meetings, why Georgia engages in two full-day retreats with new clients specifically to give them the space and time to discover their goals, envision what they want their lives to look like, and figure out how to align their financial decisions with those goals, how Georgia proactively discusses politics in her client meetings as a way to broaden the discussion around how the financial decisions that we make affect the world around us (and as a means of helping her clients gain better clarity around their own relationship with money), and why Georgia’s favorite part of the entire planning cycle is in helping her clients actually implement her recommendations, which can take some clients up to three years to complete because of the depth of the firm’s planning recommendations.

And be certain to listen to the end, where Georgia shares her own background as an artist coming into the financial services industry and how her own involvement with opening and running community events translated directly into generating business as an advisor, how Georgia’s first two jobs in the industry helped her figure out the sort of business she wanted to build and to prove to herself that clients would pay what she felt her time was worth as an advisor, and how that, although being the CEO of a successful advisory firm can sometimes be lonely, Georgia has found fulfillment and satisfaction by building a community of entrepreneurs and business leaders with shared experiences.

So whether you’re interested in learning about Georgia’s focus on having a positive impact both in her community as well as the financial advice industry, how she incorporates the Money Quotient framework into her planning process, or how she’s intentionally building her business to align with her values, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Georgia Lee Hussey.

Client Checklist On Document Retention: What To Keep And What To Shred

June 28, 2021 07:07 am 3 Comments CATEGORY: Practice Management

Despite the ongoing shift to an increasingly digital world of automatic electronic verification of everything from transactions to identity, the reality is that today, there are still a number of documents that individuals must be able to provide to various companies, regulators, or government agencies. In some cases, those entities will at least accept digital copies of the relevant paperwork or supporting documentation, while in other cases “original” hard-copy versions are required. Which in practice has made it extremely difficult for many households to even figure out what to keep in physical form, what can be scanned and retained digitally, what can be discarded, and what must be shredded.

In practice, though, there is no hard-and-fast rule about what documents should be retained (or not). The process of figuring out “what to keep” (in physical or digital format) and “what to shred” depends on the nature of the document and what it will be used for.

For instance, tax documents generally only need to be kept for 6 years (the statute of limitations, even if there is a substantial misstatement of income), and under Revenue Procedure 97-22, such documentation can be retained entirely in digital (and not physical) format, as long as the scanned/photographed copy contains all of the relevant information.

On the other hand, documents pertaining to personal identification (e.g., Social Security card, birth certificate, and Driver’s license) must be kept in original physical form (and should be kept permanently), along with key legal documents (e.g., Wills and trusts and Powers of Attorney), in order to be able to help prove their authenticity.

When it comes to the documentation of assets and liabilities (from real estate or other ownership records, to credit cards, mortgages, and other debt), records must be retained as long as the asset is owned (or the liability is owed). Or in the case of documentation like insurance claims, as long as the claim remains open.

Storage of key documents in practice will vary by household, but important physical documents are typically stored in a home safe, a safe deposit box (though important legal documents should not be held there, as they may be necessary to access the box, which is impossible if they’re in the box!), or even the safe of an attorney’s office. For those that prefer digital storage (for documents that can be stored digitally), external hard drives and thumb drives have long been popular, although cloud-based solutions are increasingly popular (particularly for their redundant back-ups, and the ability with some systems to designate Trusted Contacts to access the information in the event the primary owner is deceased or incapacitated).

Ultimately, a checklist of key documents to retain (and how long to retain, and in what form) can be helpful as a way to be certain that all the important documents are covered. For financial advisors, this can actually be a pathway to reinforce value for clients, by actually going through such a document checklist with clients, helping them determine what to keep and what to discard, and even offering ‘shred-it’ days for clients to help them get their own financial households better organized!

Weekend Reading for Financial Planners (June 26-27)

June 25, 2021 02:59 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a look at the big media buzz around how Peter Thiel managed to built a whopping $5 billion Roth IRA by 'stuffing' it full of pre-IPO shares of his companies and early stage startup investments (first PayPal, then Palantir, as well as Facebook), which as part of a ProPublica investigative journalism expose is already raising questions on whether the IRS needs to further crack down on how illiquid private investments are valued when being contributed to Roth accounts?

Also in the industry news this week are a number of other interesting headlines:

A recent study on consumer preferences in retirement shows that what retirees actually care about is very different than what they expected in the years leading up to retirement, with a major focus on health, family, and purpose, and not 'just' retirement finances alone
FPA hires a new "Chief Membership Experience Officer" as incoming CEO Patrick Mahoney attempts to change the tone and focus to turn around the beleaguered membership association

From there, we have several interesting articles on the rising focus on operations and the 'business' side of advisory firms:

PFI Advisors (an operations consulting firm) launches a new "COO Society" for advisory firm operations staff to learn and train
Angie Herbers launches a new practice management Academy for advisory firms focused on the core areas of business management for a scaling advisory firm
Why COOs are increasingly becoming a partnership-track role in larger advisory firms

We've also included a number of articles on the growing focus of 'data' in advisory firms, including:

A consumer study that shows consumers are very willing to share their data with their wealth managers (more so than their own financial institutions)
How "Chief Data Officer" may soon become a key role in larger enterprise advisory firms that manage their data as an asset
The trade-offs in being a data-driven leader (and why there is such a thing as being 'too' data-driven, such that the firm misses out on innovation by looking only in the rear-view mirror)

We wrap up with three final articles, all around the theme of learning from the past to inform the future:

How "The Office" itself has evolved over the past 100 years, and why repeated calls for it to decline in popularity haven't materialized for decades
Why it's becoming increasingly popular to (once again) look to antiquity for insights about what's healthy and best for us
The fascinating link between walking outside and improving our mental health and creativity

Enjoy the 'light' reading!