Kitces.com - Advancing Knowledge in Financial Planning

#FASuccess Ep 225: Generating A Positive Marketing ROI With Direct Mail Seminar Events, With Matt Gulbransen

April 20, 2021 07:06 am 3 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 225th episode of the Financial Advisor Success Podcast!

My guest on today’s podcast is Matt Gulbransen. Matt is the President of Pine Grove Financial Group, an RIA in Minnesota that manages over $550 million for about 325 families.

What’s unique about Matt, though, is that despite the widely held belief that direct mail and educational seminars have gone the way of the dinosaur, he has continued over the past decade to see positive marketing results from using direct mail to fill seats at in-person seminar events geared towards educating people about planning for the plethora of life transitions they face as they approach retirement… and then convincing them to work with him to navigate those retirement transitions.

In this episode, we talk in-depth about the ROI that can still be generated from a marketing funnel built around direct mail seminars, Matt’s key realization around why fear-based marketing will only get you so far and doesn’t ultimately help clients move forward to do business, the reason Matt started to charge an upfront planning fee for new clients as he gained traction with his seminars as a means of demonstrating that the work he and his team was doing had value, how Matt has adapted his process in a world where in-person events haven’t happened for a year, and why Matt feels that pre-retirees and retirees are still an attractive target market despite the level of competition in the niche.

We also talk about the way Matt has been able to leverage a relatively lean (at least by industry standards) team of nine people to service $550M of AUM by building out workflows and integrations within their tech stack in order to become ultra-efficient at their most common tasks, why the firm’s desire to focus on tax-savvy household-level allocations led Matt to choose 55IP as their core portfolio management software instead of more popular alternatives, and the various other technology tools that Matt’s firm has implemented to support “tax alpha” as a key value-add they bring to their clients (especially given that Matt and his clients live in a high-tax state).

And be sure to listen to the end, where Matt shares the challenges of starting his career as a young advisor at a wirehouse, how the challenges of prospecting led Matt to shift to the bank channel that had a more captive audience of prospects that could be referred to him, how it was Matt’s initial success with seminar marketing and the realization that he could grow an advisory firm without having a big-name brand behind him that eventually led him to launch his RIA, and how Matt has started to further scale the efficiencies he’s already built in his practice by bringing on outside advisor teams who are able to bolt on seamlessly to his system.

So whether you’re interested in learning how direct mail is still a viable means of attracting qualified prospects, how advisors can still use seminars to demonstrate the value of financial planning, or how Matt has been able to manage a relatively lean team with workflows and automations, then we hope you enjoy this episode of the Financial Advisor Success podcast with Matt Gulbransen.

Announcing The Kitces Digital Marketing Summit To Highlight Real Advisor Marketing Success

April 19, 2021 07:01 am 6 Comments CATEGORY: Nerd's Eye View

While the shift to digital tools and platforms has been underway for more than a decade, from the growth of blogging and social media to the rise of the robo-advisor, the coronavirus pandemic of 2020 will likely forever mark a turning point that rapidly accelerated the digital shift for financial advisors. Yet while the forced digitization of the financial advice business has been most noticeable of the realm of digital paperwork (i.e., eSignature adoption) and meetings themselves (e.g., Zoom and the like), it is the marketing and growth of financial advisory firms where the digital shift has been most disruptive to the advisor status quo.

After all, as the latest Kitces Research on advisor marketing has previously shown, even before the pandemic it was a category of “digital” marketing in particular that showed the greatest disparity of “haves” and “have-nots”, of a select few firms that were having outsized marketing success while the remainder were struggling greatly. And even within the digital marketing strategies, some, like SEO and paid social media advertising, are showing far more success on average than others like blogging and social media. Which only raises even more questions in the current pandemic environment about what digital marketing strategies are really worth pursuing (or not).

In this context, we’re excited to announce the launch of the first Kitces Digital Marketing Summit – a virtual conference focused not on Telling financial advisors what they “should” be doing, but instead to simply Show what real advisory firms are actually doing that works in the realm of digital marketing. From SEO to paid social media advertising, to blogging and email marketing, online scheduling, and CRM systems to manage the sales process of turning prospects into clients in a digital world), this Kitces Summit will showcase what really works across the top, middle, and bottom of the digital marketing funnel. No sponsors. No vendors. Just advisors providing a behind-the-scenes look for other advisors about what they’re doing that’s driving real results. (Though we will provide some curated and crowdsourced recommendations at the end of potential vendors that advisors might use if they see something they do want to implement!)

This “Show, Don’t Tell”-styled Kitces Digital Marketing Summit will run for “just” an action-packed 4 hours on the afternoon of Thursday May 13^th from noon to 4 PM EST (replays/recordings will be available for those who cannot attend live). So if you’re still curious about what it really takes to do digital marketing successfully, and want to actually see what success looks like, I hope you’ll check out our new Kitces Digital Marketing Summit, and “See What’s Possible!”

Weekend Reading for Financial Planners (Apr 17-18)

April 16, 2021 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 Gary Gensler, known for his aggressive enforcement at the CFTC a decade ago, has officially been confirmed by the Senate as the next SEC Commissioner... setting the stage for what may be a significant uptick in the enforcement of Regulation Best Interest amongst broker-dealers as the world of brokerage and investment advice continues to converge.

In addition, there are several other notable regulatory news items this week, including:

Robinhood sues the state of Massachusetts to overturn its state fiduciary rule, claiming that Massachusetts' recent enforcement actions against Robinhood's trading practices aren't valid because the firm is "just" a self-directed brokerage firm and not providing retail advice
The Department of Labor issues a new FAQ on the recently updated ERISA fiduciary rules signaling more aggressive enforcement of its fiduciary framework on brokers that recommend IRA rollovers

From there, we have several interesting consumer and advisor studies:

How generational preferences for financial advice are increasingly gapping apart according to J.D. Power, with 52% of those under 40 preferring an advisor committed to ESG and 73% preferring to pay for advice on a monthly subscription basis (compared to only 24% and 34%, respectively, of those over age 40)
Unlike prior bear market cycles, the majority of investors who made portfolio changes became more aggressive in 2020 (not more conservative)
A new consumer survey from Cerulli finds that 44% of consumers would prefer to invest according to their ESG preferences, while 'only' 14% of advisors indicate their clients have a moderate preference for doing so

We've also included a number of articles on investment trends:

Steps that advisors can begin to take to implement an ESG investment approach with their clients (on more than just a one-off accommodation basis)
What to do if parents accumulate "too much" money in their 529 college savings plan
Real-world results of a firm that implemented Direct Indexing in 2020 and got to see first-hand how much additional tax-loss harvesting can occur in volatile markets

We wrap up with three final articles, all around the theme of adapting ourselves for greater success:

Why it's important to have "strong opinions, weakly held" by being confident in what we know but also very open to new information that could change our recommendation
How "feedback" is crucial to making long-term improvements beyond just trying to research for ourselves what we "should" do
Why the long-term key to success in growing a business is all about staying as close as possible to the end client, and not allowing your team or various intermediaries to put too much distance between the advisor and their end clients

Enjoy the 'light' reading!

The Overlooked ROI Of Return Of Premium Term Insurance

April 14, 2021 07:08 am 8 Comments CATEGORY: Insurance

Philosophically, financial advisors can have quite polarized viewpoints when it comes to the relative importance of protection and accumulation benefits of life insurance. On one end of the spectrum is a “buy term and invest the difference” philosophy that prioritizes protection above all else at the lowest cost possible. On the other end of the spectrum, the philosophy relies heavily on the accumulation aspects of life insurance, promoting insurance as a primary (if not the only) vehicle for saving for retirement. As is often the case, it is possible to go too far in either extreme.

Return Of Premium (ROP) term insurance offers a unique ‘middle ground’ strategy that might warrant more attention than it currently receives. ROP term insurance offers standard term life insurance coverage with a rider that returns all premiums paid (tax-free) in the event that an insured outlives the term of their life insurance coverage. So, for instance, if an insured buys a 30-year term policy for $1,000 per year and outlives the entire term of their policy, the full $30,000 premium paid will be returned to the policyowner tax-free.

While the mechanics of ROP term insurance are straightforward, the potential ROI from such policies is often misunderstood. A common criticism of ROP term is that a policyowner is “…just getting the money you paid toward premiums” and it is, therefore, “money that has lost out on years of compound interest.” However, this is the wrong way to think about ROP term insurance, because it is neglecting the value of the insurance that was obtained throughout the term of the policy. A fairer comparison would be to back out the cost of comparable term coverage and then treat the difference in cost between the two policies as the effective ‘investment’ that ultimately results in receiving the tax-free return of premium at the end of the policy term. And when ROP term insurance is looked at through this lens, the ROI can actually be quite attractive.

The return potential of ROP term insurance is attributed to various factors, including (a) the tax-free nature of the return of premium, (b) a form of mortality-credit-enhanced yield inherent to ROP riders (i.e., some insureds will pay for the ROP rider and pass away without receiving anything from the rider), and (c) an element of lapse-supported pricing within ROP term policies (i.e., many policyowners will purchase coverage and either intentionally or unintentionally let it lapse, resulting in premiums paid without receiving any return of premium benefit).

As a result, for those who know they want to purchase term coverage and keep it in place for the full term, adding an ROP rider is effectively an opportunity to add a side accumulation account to term coverage with some unique investment characteristics that can be quite attractive (similar to the attractiveness of mortality credits within income annuities). Some caveats to consider as well. First, since you do have to keep the coverage in force to reap the benefits, insureds may lose some flexibility to replace a policy with a cheaper alternative that may become available in the future or just let the policy lapse because they decide they no longer want the coverage. Second, the dynamics described above actually result in longer-term policies generally being cheaper than shorter-term policies, so the ROI tends to be most attractive for 30-year term policies. Third, and perhaps most important of all, the market is quite thin and at the time of writing this, there appears to only be one carrier in the market.

Ultimately, for clients who want term coverage and are willing to commit to maintaining coverage for the full term, ROP term insurance has some unique characteristics that can make it an attractive consideration. In addition to the financial benefits, the return of premium may give peace of mind to clients who are otherwise averse to carrying prudent coverage due to the ‘use-it-or-lose-it’ nature of term insurance. So although ROP term insurance may fall in an awkward middle-ground of providing both protection (primary) and accumulation (secondary) benefits that is not particularly popular among advisors, ROP term insurance may be worth a closer look!

#FASuccess Ep 224: Crafting A 5-Step Process To Add Value As A “Thinking Partner” For Clients, With Amy Mullen

April 13, 2021 07:07 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 224th episode of the Financial Advisor Success Podcast!

My guest on today’s podcast is Amy Mullen. Amy is the President of Money Quotient, a company based in Portland, Oregon that has developed tools and training to help advisors have better and more meaningful conversations with their clients.

What's unique about Amy, though, is that her Money Quotient solutions give advisors the tools not just to help their clients achieve their goals, but to help clients get real clarity around what's most important to them in their lives in order to create the clearly defined goals that they're actually motivated to work towards, and in the process, help the advisor to become a "thinking partner" who journeys alongside their clients as they ultimately realize those goals.

In this episode, we talk in depth about how Amy’s firm helps advisors guide their clients to gain self-awareness around their values and what’s most important to them, why with that understanding it becomes easier for clients to make financial decisions that will move them closer to the vision they’ve created of a fulfilled life, and the reason that, in contrast to the current behavioral finance framework, Amy posits that people are perfectly capable of making good decisions on their own despite their “irrational” biases… as long as they have a process to help them understand the possibilities that are available to them and properly weigh the pros and cons of the financial choices they have in front of them.

We also talk about the Money Quotient system itself, and how each step of the process has been tailored to each of the various stages of the financial planning process (creating both awareness for the clients as well as a conversational framework for the advisor), the questionnaires, exercises, and even templated deliverables that Money Quotient has developed for advisors to use with clients, all organized around the concepts of Explore, Engage, Envision, Enlighten, and Empower, and how Amy helps advisors leverage this process to create a fully developed client experience and value proposition to grow their businesses and validate why they’re worth the fees they charge.

And be certain to listen until the end, where Amy shares her own journey to becoming the president of Money Quotient and the challenges she’s faced along the way, the work that their sister company, MQ Research And Education, is doing in partnership with various universities to better define the factors that influence financial wellbeing and life satisfaction, and the satisfaction that Amy has gained herself by seeing the positive outcomes of advisors who are not only having better conversations with clients but who all go through the Money Quotient process themselves as part of their training and benefit from the impact of it personally when they gain more clarity on their own true financial planning goals.

So if you're interested in learning more about how to make more meaningful connections with clients, how Amy's process helps clients follow through with recommendations, or why helping clients visualize what their lives look like after they've reached their goals creates better buy-in, then I hope you enjoy this episode of the Financial Advisor Success podcast with Amy Mullen.

Alternative Custodian Options For Independent RIAs In The Wake Of Schwabitrade

April 12, 2021 07:05 am 3 Comments CATEGORY: Practice Management

Bob Veres Alternative Custodians Graphic

For most independent RIAs who want to manage client portfolios (and be compensated for doing so), having an independent RIA custodian to work with is a necessity. As in practice, RIA custodians not only actually hold client assets (an important consumer protection) but also provide the core technology platform to open client accounts, to make deposits into and withdrawals from those accounts, to keep track of and trade in client accounts, to bill advisory fees from client accounts, and to integrate client investment data to the advisor’s CRM and other key components of the advisor’s technology stack.

Because of the similarities in these core investment functions from one RIA custodial platform to another, though, it’s often hard to differentiate between them. And because RIA custodians make very little (and now, for many, absolutely nothing) from each trade in a client’s account, the businesses must operate with enormous volume to achieve the requisite economies of scale to be able to compete. Which in practice has led to a wave of RIA custodial consolidation in recent years, from E*Trade acquiring Trust Company of America (and then being acquired by Morgan Stanley), to TD Ameritrade acquiring Scottrade Advisor Services and then being acquired by Charles Schwab to form the largest RIA custodian that houses the majority of all RIA assets.

Yet in practice, while RIA custodians often seem substantively similar, there are differences from technology to service to culture. Such that the mega-merger of TD Ameritrade and Schwab in particular – two firms that in the past had very opposite approaches to technology and very different cultures – has left many RIAs (from those already at Schwab or especially TD Ameritrade, to those looking to form an RIA and decide on a custodian, or break away from a broker-dealer and get started with a new platform) wondering whether “Schwabitrade” is the right place to be in the future. And if not, where else to go and how else to choose between Schwabitrade, Fidelity, and a litany of mid-sized-to-smaller RIA custodial options available.

In this guest post, industry commentator Bob Veres shares his perspective on 5 of the “lesser-known” alternatives to Schwabitrade (and Fidelity) for RIA custodial services, including BNY Mellon’s Pershing Advisor Solutions and its “Menu of Models” approach, Shareholder Services Group’s (SSG) high-touch service approach for advisors with no AUM minimums, TradePMR’s custom-built advisor technology platform, SEI’s all-in-one investment platform for RIAs, and newcomer Altruist’s efforts to build a ‘next generation’ RIA platform unencumbered by the legacy constraints of today’s existing RIA custodians.

Ultimately, the reality is that Schwab is the dominant player in the marketplace because the RIA custodial model is one where size and scale matters, allowing the company to provide the widest breadth of services at the lowest cost (for “free”, as Schwab only makes money on clients’ underlying holdings and doesn’t charge advisors directly). Nonetheless, the reality is that like the financial advice business itself, one size rarely fits all, many clients (and their advisors) have unique needs that necessitate a more specialized solution… and many advisors still see the value in sometimes paying a little more in order to get the service and/or capabilities that are most meaningful for their RIA firm and the clients they serve.