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#FASuccess Ep 221: Earning More Client Referrals By Cultivating Community Through Client Events, With Miye Wire

March 23, 2021 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 221st episode of the Financial Advisor Success podcast!

My guest on today’s podcast is Miye Wire. Miye is the founder of her eponymous hybrid RIA based in Reston, Virginia, that manages $200m for about 250 young professional families.

What’s unique about Miye, though, is how she’s developed a referral engine around her work with Microsoft employees, hosting several unique and memorable client events throughout the year to instill a sense of community amongst her niche client base, and how that also ends out driving even more referrals from clients who are excited to share that they’re a part of Miye’s community.

In this episode, we talk in-depth about how Miye has become the go-to benefits and equity compensation expert for Microsoft employees at their hub in Reston (and even gets to provide benefits training for their new hires who have recently graduated from college), how Miye’s clients’ challenges in finding the bandwidth to manage their nearly monthly Microsoft stock events has led her to make her own main client deliverable a simple one-page financial planning summary that just lets her clients know where they stand in relation to their goals and includes her planning recommendations, and why Miye structures those recommendations to be so detailed that clients could even implement them themselves if they wanted (although most have still hired her to do it for them).

We also talk about how Miye structures her fees, starting with a $300/hour fee for creating an initial financial plan for new clients (and how she communicates that fee so clients don’t feel like they’re “on the clock” during the process), why Miye feels that structuring her business as a hybrid-RIA on the AUM model allows her to best serve her clients (even though less than 5% of her revenues are generated from commissions), and how Miye ensures that all client-initiated communication gets a prompt reply from her team by setting up a catch-all “Team” email address that goes to everyone’s inbox at once.

And be certain to listen to the end, where Miye shares the mindset shift early on in her career that helped her to stop worrying about trying to “fit the mold” of a “typical” financial advisor, the key insight around what her value was as an advisor that prompted her to outsource many of her firm’s back-office functions in order to spend more time on client-facing activities, and her ongoing recognition of (and appreciation for) how the hard work that she put in the early stage of building her practice has had a tremendous compounding effect that is now paying real dividends.

So whether you’re interested in learning how Miye has developed a niche of working with Microsoft employees, how operating as a hybrid-RIA allows her to run her business more efficiently and do more for her clients, or how she fosters a sense of community amongst her clients, then I hope you enjoy this episode of the Financial Advisor Success podcast with Miye Wire.

Updating Advisor Marketing For A New Niche Without Alienating Existing Clients

March 22, 2021 07:05 am 5 Comments CATEGORY: Practice Management

Historically, financial advisors have worked with any and every client they could (or at least, any client who was interested in buying their company’s products or could afford to pay their fees), and in turn, advisor websites (and other marketing collateral) were developed to be appealing to anyone and everyone. The caveat, though, is that in an increasingly competitive advisor landscape, it is more and more difficult for advisors to differentiate themselves amongst a sea of sameness, leading to an increasing focus on developing niches and specializations as a way to stand out and attract ideal clients. Except for advisory firms that have already built a broad-based “generalist” clientele, creating a more focused niche offering – and updating the advisor’s website and other marketing materials accordingly – can make existing clients who may not fit the advisor’s more specialized future question their own fit with the firm today. Which raises the question: how exactly can an advisory firm start to focus more on their niche specialization of the future, without alienating existing clients in the process?

The starting point of making a firm’s marketing more niche-focused – without alienating existing clients – is simply to recognize how ineffective most generalist-based advisor marketing is today. Because in practice, most advisory firms struggle to get more than a few hundred visitors to their website each month, and even amongst those visitors, few get more than 1-2 prospects per month from their website (and many get none at all!). Which means, ironically, that by trying to avoid alienating any existing clients or prospects by being so broad-based, the firm is already losing out on most or all prospects who visit their website. By contrast, “just” having a message that connects with a mere 1% of prospects – with several hundred website visitors each month – could actually produce 3 qualified leads every month. Which means the approach doesn’t alienate… it’s actually a significant improvement from the status quo!

In the process of actually becoming more niche with an advisor’s marketing, there are several factors to consider, depending primarily on the size of the existing firm, how many advisors it has, and how focused it already is (or not). For solo advisory firms, the reality is that once the founder/owner/advisor decides to go niche, that’s all the buy-in it takes, and solo advisors who want to get started simply have to choose whether they want to rebuild their current website into their new niche, or alternatively create a “microsite” that is separate from their existing website, target that very specifically to their niche, and over time as their new niche grows, shift to make the new niche-focused site their primary business website over time (while keeping their existing website to avoid making existing clients feel alienated).

When it comes to larger multi-advisor firms going niche, though, determining a niche often requires consensus from multiple advisors willing to narrow their focus and excel in one area. If the multi-advisor firm can come to a consensus, the firm can begin to rebrand accordingly. More often, though, multi-advisor firms end out with multiple niches – rather than choosing just one – which requires the firm to adopt an approach more akin to regional law or accounting firms, which create “Practice Leaders” to lead each niche within the firm, and the firm’s website then highlights its list of specialized “Practice Areas” (not just a list of all types of clients, but a menu of dedicated services each specifically crafted for a particular type of client, with a dedicated Practice Leader with specialized expertise to lead it). Alternatively, for firms that can’t even decide or commit to a particular group of niches – or even whether to niche, because some advisors wish to and others don’t – a multi-microsite approach is more effective, where each advisor specialization creates its own microsite targeted to its own clientele, as a standalone offering “Powered By” the parent firm.

Ultimately, the strategic shift of becoming niche is not an easy or simple one—gaining marketing momentum, experience, and trust takes time. However, transitioning into a niche can – and often is –accomplished incrementally anyway, precisely because it takes time to be known, liked, and trusted in a new area of specialization. And the framework of developing Practice Areas and/or microsites allows advisory firms to make the transition as gradually as they want or need to. Though ironically, the reality is that for firms that already serve their clients well, the risk of alienating existing clients with a new niche focus is low, as in practice it’s more often the clients who are concerned about whether they will be rejected by the firm, and upon being told of the new niche focus, won’t declare they’re leaving and instead will simply ask “will we still be allowed to keep working together, too?”

Weekend Reading for Financial Planners (Mar 20-21)

March 19, 2021 03:00 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the big tax planning news that the IRS is delaying the standard April 15th tax filing deadline until Monday May 17th instead... providing some welcome relief to tax filing deadlines, and more time to implement recent tax law changes (from Recovery Rebate checks to non-taxable unemployment insurance), and creating a quagmire of misaligned deadlines as Q1 2021 estimated tax payments (and many state tax return deadlines) remain with the original April 15th deadline!

Also in the news this week are a few other industry headlines, including:

Sorting through the confusion of how RMDs will work in 2021, between the 2020 suspension of RMDs under the CARES Act, new life expectancy tables taking effect in 2022, and the new age 72 onset of RMDs under the SECURE Act
The ongoing rise of state fiduciary rules is creating a growing patchwork of dissimilar regulations troubling both small firms with clients across state lines and large firms with entire branches that span multiple states

From there, we have several articles on personal and team productivity:

How real productivity is not about getting 'more efficient' with your time, but getting clearer about what the Most Important Thing (M.I.T.) is to be doing with the limited time you have
The results of one company that has been testing out a 5-hour workday to balance productivity and employee satisfaction
How author John Steinbeck achieved epic levels of productivity (including 33 books and a Nobel Prize) by staying largely inactive most of every day

We've also included a number of articles focused on personal finance tips:

The most popular Password Managers to use to keep financial (and other) accounts in good order
Tips on what to keep, shred, or scan as financial records increasingly move online
A profile of Mint.com and how it has unfortunately languished in recent years of non-development (yet remains astonishingly popular)

We wrap up with three final articles, all around the theme of what it takes to become and remain "rich":

How often the pathway to becoming rich involves taking concentrated risks but staying rich is almost always about diversifying away from them
Why being "rich" is a relative phenomenon that's all about comparing who you spend time with (making most of us feel not-rich even if we are!)
The difference between being "rich" and being "wealthy" (and why it takes different skills for the latter than the former)

Enjoy the 'light' reading!

Claiming The Home Office Deduction After A Work-From-Home Pandemic Year

March 17, 2021 07:04 am 1 Comment CATEGORY: Taxes

Financial advisors have used the home office deduction as a valuable tax-reducing tool for qualifying clients with home offices, allowing them to deduct certain work-related home expenses on their tax returns. However, as COVID-19 has led to a dramatic increase in the number of individuals working from home, client questions about the home office deduction have become more common than ever before. Accordingly, advisors should have conversations with clients who work from home to ensure they understand (and make proper use of!) the home office deduction rules.

In order to claim the deduction, a home office must generally pass three key tests. The first is the Exclusive Use Test, which requires that the portion of the home used as the home office is used exclusively for business purposes… 100% of the time; the second is the Regular Use Test, which requires the home office to be used on a regular, ongoing basis; and the third is the Principal Place of Business Test, which requires the home office to be the taxpayer’s principal place of business.

While employees are never allowed to claim the home office deduction, self-employed taxpayers can claim the deduction subject to certain Net Operating Loss (NOL) limitations, provided they pass the three requisite tests. Partners can also benefit from a home office deduction by claiming Unreimbursed Partner Expenses (UPEs) on Schedule E of Form 1040. However, partners seeking to do this should ensure that their partnership agreement expressly states that they are personally responsible for the payment of such expenses.

And while employees per se can’t claim the home office deduction, taxpayers who are both the owner and an employee of the same corporation can instead use Accountable Plans to shift what would otherwise be non-deductible (unreimbursed) employee expenses (e.g., expenses related to a home office) into expenses that can be deducted by the corporation at the entity level.

To calculate the home office deduction, qualifying taxpayers can use either the Regular (Actual Expense) Method or the Simplified Method. With the Regular (or Actual Expense) method, taxpayers eligible for the deduction can claim 100% of the actual cost of direct expenses (i.e., expenses entirely attributable to the home office) and a ratable amount of indirect expenses (i.e., expenses attributable to both the home office and personal, non-home office portions of the home such as taxes, rent, and utilities) associated with the home office. Alternatively, the Simplified Method allows taxpayers simply to deduct $5 for each square foot of the Home Office, up to a maximum of $1,500.

Ultimately, the key point is that financial advisors with clients who are self-employed (or who are partners of a partnership) can determine if those clients qualify for the home office deduction (by passing the three requisite home office deduction tests) and whether they have eligible expenses to claim (and if so, how much of those expenses can be claimed). And given the effect of COVID-19 on taxpayers who have adapted to a work-from-home environment, questions about the home office deduction have become increasingly prevalent. Financial advisors who understand how the home office deduction works can help eligible clients make use of a valuable tax break – potentially freeing up resources for those clients to use towards more enjoyable goals!

#FASuccess Ep 220: Taking A Tech Startup Approach To Building And Pivoting Your Advisory Firm, With Shane Mason

March 16, 2021 07:04 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 220th episode of the Financial Advisor Success podcast!

My guest on today’s podcast is Shane Mason. Shane is the co-founder of Brooklyn FI, a fee-only RIA that Shane and his partner AJ founded in 2018 in Brooklyn, NY (but has since shifted to being fully virtual), that serves 159 next-generation clients charging a monthly subscription fee of almost $500 per month for their ongoing financial planning services.

What’s unique about Shane, though, is how he and his partner have intentionally built their advisory business in the style of a tech startup, acting as de facto product managers within their advisory firm... where their financial advice service offering is a product unto itself, and they continually iterate on that advice product to quickly respond to new client opportunities in the marketplace.

In this episode, we talk in-depth about how Shane and Brooklyn FI first launched into a niche of serving successful creatives operating as high-income sole proprietors, why they decided to pivot away from the creatives niche to a focus on people who work in the tech industry and have complex equity compensation planning needs, how almost all of Brooklyn FI’s new clients are referrals from tech industry Slack channels and message boards, and why Brooklyn FI has been especially successful by publishing their fees right on their website to maximize the accessibility of their highly specialized expertise to the most highly motivated time-sensitive clients.

We also talk about Shane’s early career as a CPA, and the path he took that eventually led him to decide to launch an independent RIA, why (after long consideration) he and AJ intentionally structured Brooklyn FI as a 50/50 partnership from the start despite the fact that he was the only one bringing existing clients and revenue (and how that partnership has turned out to be the “secret sauce” behind the rapid growth of their firm), and how Brooklyn FI communicates with legacy clients in the niche that Brooklyn FI no longer focuses on and who aren't a good fit for the firm anymore,

And be sure to listen to the end, where we talk about how Shane has moved away from actively seeing clients in order to focus on broader business opportunities that the rapid growth of the firm has created, the firm’s internal initiatives to expand its structure to support more scalable growth in the future, and the key lesson that Shane shares around getting comfortable delegating the things that he’s already mastered.

So, whether you're interested in how Brooklyn FI has grown so quickly since launching in 2018, why equity compensation planning is such a ripe opportunity for advisors, or why Shane and AJ structured their firm as a 50/50 partnership from the start, then we hope you enjoy this episode of the Financial Advisor Success podcast.

Announcing The New Kitces Research Study On Advisor Technology

March 15, 2021 07:07 am 3 Comments CATEGORY: Technology & Advisor FinTech

Ten years ago, when robo-advisors exploded onto the scene, their prediction was that they could do what financial advisors do at a fraction of the cost, and put the humans out of business. A decade later, though, the reality is that human financial advisors are still surviving and even thriving, increasingly leveraging “robo” tools and business process automation to make our own advisory firms more efficient. In fact, the irony is that the ongoing rise of technology in financial advisory firms isn’t putting financial advisors out of jobs; instead, it’s replacing back-office jobs with technology and actually elevating the role of the financial advisor within the firm in providing that proverbial “last mile” of service, support, and most importantly advice, to the end client.

At the same time, though, technology itself is taking on an increasingly central role in the advisory firm, making the business more reliant than ever on finding the best and right technology solution to help the firm achieve its own business goals. Which is no small feat, given what are now more than 300 independent advisor technology solutions tracked by Kitces Research across the AdvisorTech landscape, deployed across a wide range of industry channels (from RIAs to broker-dealers, insurance companies to bank and trust companies) and business models (from commissions to AUM fees to monthly subscriptions and other fee-for-service models).

Over the years, industry surveys have attempted to get a handle on trends in advisor technology adoption, exploring the most popular and well-rated solutions. Except most advisor technology surveys in the industry are either too small to form a sufficient sample, unwittingly biased towards some industry channels over others, or implemented via open survey links that anyone can take (which in turn are distributed by the technology vendors themselves and distort the results by whichever companies do the best job at turning out their own power users to participate).

In this context, we’re excited to announce the launch of the latest Kitces Research study, on Advisor Technology. Leveraging our own core strengths – a team of nerdy PhDs trained in research methods and survey methodology – this latest Kitces Research study will be unique in that there will be no open survey links distributed via this blog, social media, or industry technology vendors. Instead, participation in this latest Kitces Research study will be “by invitation only”, through a combination of emails, telephone calls, and even snail mail (yes, really!), in an attempt to gather together the most representative sampling of the true trends in advisor technology across the advisor ecosystem.

Ultimately, our goal is simply to answer the questions most relevant to financial advisors – from solo firms to large-scale enterprises – trying to make their own technology decisions, who want to understand what other firms are really using (or not), and what is actually well-rated amongst advisors (or not) – as well as to glean the trends of what’s becoming more and less popular, where should firms consider developing their own solutions instead of going with what’s available in the marketplace, where might venture capital and private equity firms deploy their own dollars to pursue the biggest opportunities for impact in the advisor marketplace, and what parts of the advisor technology stack are most ripe for innovation and prone to disruption.

In the meantime… please stay tuned for your potential invitation to participate in the Kitces Research study on Advisor Technology!