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#FASuccess Ep 209: Launching Your Own (Niche) Practice As A Pathway To Becoming A Partner In A Larger Advisory Firm, With Forrest Baumhover

December 29, 2020 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 209th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Forrest Baumhover. Forrest is a financial advisor and partner with Lawrence Financial Planning, an independent RIA based in Tampa, Florida that oversees more than 100 million of assets under management for 70 affluent clients. What's unique about Forrest, though, was his path to partnership as a financial advisor, having launched as a career changer coming out of the military with the niche of serving other military veterans in transition, only to find that his options and opportunities to become a partner in an existing advisory firm grew even more quickly than the niche that he had started out building on his own.

In this episode, we talk in-depth about how Forrest set the stage for his career-changing transition from the Navy into financial planning, why Forrest chose to complete his CFP education, his Enrolled Agent license, his Series 65, and even the creation of his RIA entity all before he even finished his military service and reached his transition date. How Forrest further set the groundwork for his initial stages of business development by setting up a blog and beginning to write articles in his prospective niche, and the organizations that Forrest joined early on, from Toastmasters to the Alliance of Comprehensive Planners and his local Chamber of Commerce, all to begin the networking that he would need to do to be successful when he launched his firm.

We also talked about what led Forrest towards a path of merging his advisory firm into a larger one just as his niche was starting to gain traction, how he weighed the decision of whether to stick with his current independent practice or walk away from it in order to be a part of something even larger instead. The way that the work that Forrest had done in preparing for and then building his own firm ended out accelerating the trust curve when he decided to merge and how Forrest structured the partnership buy-in with his current firm to become a partner.

And be certain to listen to the end where Forrest shares his thoughts on the challenges of launching an advisory firm from scratch, even when you think you're prepared and still have to adjust when reality hits, the importance of having a plan and sticking to it but also being prepared to pivot if a new opportunity comes along. And his philosophy that in the end, it's not about whether your firm ends out being exactly what you'd envisioned from the start, but simply whether you finish in the general ballpark of where you were trying to get in the first place.

So whether you’re interested in learning about why Forrest decided to pursue a career in financial planning after leaving the military, how he started writing articles in his niche that eventually led him to publish a book, or how he pivoted from firm owner to partner, then we hope you enjoy this episode of the Financial Advisor Success podcast.

2020 Highlights – The Top 20 Nerd’s Eye View Blog Posts You Might Have Missed

December 28, 2020 07:02 am 0 Comments CATEGORY: Nerd's Eye View

As a challenging 2020 comes to a close, I am once again so thankful to all of you, the ever-growing number of readers who continue to regularly visit this Nerd’s Eye View blog (and share the content with your friends and colleagues, which we greatly appreciate!). This was certainly not the year that most of us anticipated when it began; personally, I changed advisory firms for the first time in 17 years, had the longest stint at home that I’ve had in 16 years (as in-person events were shut down!), and at the same time had a near-doubling of the Kitces.com team as we’ve focused on expanding our work with the advisor community with new Resources, new Webinars, new Office Hours, and changes to our back-end website infrastructure to better scale for the future… all in service to our mission of Helping Financial Advisors Be Better And More Successful.

We recognize (and appreciate!) that this blog is a weekly habit for thousands of advisors, but that not everyone has the time or opportunity to read every blog post that is released from Nerd’s Eye View throughout the year. As many of you noted in response to our recent Reader Survey, most choose which articles to read based on headlines and topics that are of interest. Yet in practice, this means that an article once missed is often never seen again, ‘overwritten’ (or at least bumped out of your Inbox!) by the next day’s, week’s, and month’s worth of content that comes along.

Accordingly, just as I did last year and in 2018, 2017, 2016, 2015, and 2014, I've compiled for you this Highlights List of our top 20 articles in 2020 that you might have missed, including some of our most popular episodes of the Financial Advisor Success podcast. So whether you're new to the blog and #FASuccess (and Kitces & Carl) podcasts and haven't searched through the Archives yet, or simply haven't had the time to keep up with everything, I hope that some of these will (still) be useful for you! And as always, I hope you'll take a moment to share podcast episodes and articles of interest with your friends and colleagues as well!

In the meantime, I hope you're having a safe and happy holiday season. Thanks again for another successful year in 2020, and I hope you enjoy all the new features and resources we'll be rolling out in 2021, too!

Weekend Reading for Financial Planners (Dec 26-27)

December 25, 2020 02:18 pm 5 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the big industry news that the SEC has finalized new advertising and marketing rules for RIAs that will, for the first time, openly permit advisors to use client testimonials (and also to highlight third-party ratings) in their marketing materials.

Also in the news this week is a deep-dive look at the new "Coronavirus Stimulus 2.0" legislation that is winding its way through Congress (with everything from stimulus checks, to a new round of forgivable PPP loans, and a bevy of financial-planning-related changes from a lower AGI threshold for medical expense deductions to a coming reworking of the FAFSA form for student financial aid), and a look at the final version of the Department of Labor's fiduciary rule (and whether it may be delayed or unwound when the Biden administration takes office, given its controversial provisions permitting ERISA fiduciaries to begin to receive commission compensation for advice recommendations).

From there, we have several articles on client communication, including a discussion of how virtual/online meetings with clients are likely to evolve in 2021 (when they're no longer a requirement, but may still be a proactive choice for many client meetings), a look at what the research says about how best to engage prospective (and current) clients in meetings, and why one of the biggest drivers in creating positive rapport with clients and prospects is not how the advisor presents themselves or what they say but the energy they bring to the meeting in the first place.

We've also included some articles on gathering client feedback to refine your advisory firm, including some tips on how to gather client feedback (hint: surveys are great, but so are old-fashioned 'spontaneous' phone calls to check in with clients about how the firm is doing), the benefits of creating a Scorecard to track client feedback over time (and be able to spot trends), and why it's especially important to gather client feedback on sensitive subjects (even though it may feel awkward because of the sensitive topic... if it's potentially going to upset clients anyway, better to do so in a format where you can still get their feedback to shape a better outcome!).

We wrap up with three interesting articles, all around the theme of charitable giving (during this holiday season!): the first is a look at the recent announcement that MacKenzie Scott has donated a whopping $4 billion in just the past 4 months to organizations in need (and highlighting the unique data-driven approach taken to identify 384 different organizations that received financial support); the second explores the social dynamics of sharing your charitable giving and similar good deeds with others and when "virtue signaling" is a positive (or not); and the last shares the fascinating story of Chuck Feeney, who accumulated nearly $8 billion of wealth building a business empire (in the form of the Duty-Free Shops you see at international airports around the world!)... and has spent the last 38 years giving it all away, living now as an 89-year-old in an apartment he rents in San Francisco, and having inspired other billionaires (including Bill Gates and Warren Buffett) to create the Giving Pledge to donate the majority of their wealth to charitable causes as well!

Enjoy the 'light' reading, happy holidays, and Merry Christmas (to those who celebrate!)!

Coronavirus Stimulus 2.0: Analysis & Planning Opportunities In The Consolidated Appropriations Act of 2021

December 23, 2020 01:52 pm 23 Comments CATEGORY: Taxes

After months of debate about providing additional economic relief in response to the coronavirus pandemic, the latest “Coronavirus Stimulus 2.0” bill passed out of Congress on December 21, 2020, as an attachment to the larger 5,000+ page Consolidated Appropriations Act of 2021, which provides Federal funding through September 2021, extends and amends various expiring tax provisions, and addresses several other financial planning-related issues.

The relief legislation includes a fresh round of $600 stimulus checks and extensions to unemployment benefits (including another $300/week of unemployment insurance relief for 11 weeks). In addition, small businesses will also gain access to a greatly expanded Employee Retention Tax Credit (potentially up to $7,000/employee/quarter) if they experienced at least a 20% decline in quarterly revenue and a new forgivable Paycheck Protection Program (PPP2) loan opportunity if revenue was down by at least 25% in any quarter of 2020.

In addition, the Coronavirus Stimulus 2.0 legislation includes a wide range of Personal Income Tax planning relief provisions, from an extension of the 100%-of-AGI limit on cash contributions to a charity into 2021, the opportunity to carry forward unused Flexible Spending Account balances in 2021, a reduction in the hurdle for Medical Expense Deductions to ‘permanently’ return to 7.5%-of-AGI, the ability to deduct meals and entertainment expenses at restaurants for 100% of the expense, the elimination of the Tuition and Related Expenses deduction for education to be replaced with an expanded (and even more generous) Lifetime Learning Credit, and more.

On the other hand, it’s notable that some widely discussed potential changes were not included, from additional relief on Required Minimum Distributions, to further relief on student loan deferrals (though the legislation does authorize a substantive change to FAFSA forms for Financial Aid in the future!).

Fortunately, the Coronavirus Stimulus 2.0 legislation does not introduce a number of ultra-short-term end-of-year planning needs – as some prior end-of-year tax legislation has in the past – but does set the table for significant planning opportunities with clients (especially small business owner clients still suffering from the pandemic) as 2020 comes to a close and into 2021!

#FASuccess Ep 208: Offering In-House Tax Preparation To Supplement Revenue And Enhance Client Retention, With Debbie Freeman

December 22, 2020 07:06 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 208th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Debbie Freeman. Debbie is a partner with Peak Financial Advisors, an independent RIA based in Denver, Colorado, that oversees 175 million of assets under management for 105 client families. What's unique about Debbie, though, is the way her firm does not only offer tax planning for their clients but also in-house tax preparation, a service for which they charge separately but view as an essential component to both add value for clients and better retain them with the firm.

In this episode, we talk in-depth about how Debbie and her firm actually handle operating a tax-preparation business within their wealth-management firm, the cumulative amount of staffing hours it takes to collect and input data, prepare the return, review the return, and file the return. How the seasonality of tax preparation, with April 15th and October 15th deadlines, forces the firm to engage in meeting surges during the off months for their non-tax-planning regular review meetings with clients, why Peak Financial has decided to keep its tax preparation in-house and not work externally with other CPAs, and how the real return on tax preparation for clients may not just be the additional 5% of revenue it generates but the additional 5% increase in retention rates it provides for Peak's core advisory business.

We also talk about Debbie's own journey through the financial-services industry, how she started out at a Big Four accounting firm but quickly realized that she didn't enjoy traditional accounting work, the way she proactively reached out about a potential opening at a local advisory firm to find her first planning job, the stresses that Debbie faced in her early career in trying to prove her worth to the firm, when she wasn't in a revenue-generation role, and the change in mindset that came after Debbie took her first maternity leave that, ultimately, helped her contribute to her becoming a partner in the firm. And be certain to listen to the end where Debbie shares how different the mentality really is when you go from an employee to an owner of an advisory firm, how seemingly black-and-white planning strategies for clients take on shades of gray, as we get more experienced in our careers and better appreciate the human nuances, and the way challenges in our personal lives, and sometimes personal tragedies, can alter our career trajectories in ways that turn out positive.

So whether you’re interested in learning about why Debbie decided to transition from accounting to financial planning, how she uses meeting surges to manage client meetings around her busy tax season, or how tax preparation makes an advisory firm more "sticky" for clients, then we hope you enjoy this episode of the Financial Advisor Success podcast.

Offering Student Loan Planning As Part Of An Advisory Firm Business Model

December 21, 2020 07:03 am 4 Comments CATEGORY: Debt & Liabilities

With Federal student loan debt in the United States currently exceeding $1.5 trillion, there is a huge market of borrowers who are in need of advice on managing their (potentially very sizable) debt… especially because often those with the largest student loan debts also have the highest post-graduate-school earnings (e.g., doctors, lawyers, etc.), which makes decisions about student loan repayment a very high-stakes proposition. And because of the complexity of student loans, many of these borrowers are looking for professionals with the right expertise to help them avoid heading down the wrong path. As while there are many moving parts inherent in the myriad of Federal student loan programs that impact borrowers, borrowers themselves are often unsure of how different life changes (e.g., marriage, a job change, or living in a different state) may further impact how their student loan plans will affect their financial future.

In this guest post, Ryan Frailich – Founder of Deliberate Finances in New Orleans, Louisiana – discusses how financial advisors can offer value to their clients who have significant student loan debt by acquiring the right expertise, designing a systematic student loan planning process, and developing a business model that incorporates student loan planning into their menu of services offered. After all, the reality is that a thorough student loan plan may potentially help a borrower save tens or even hundreds of thousands of dollars, leaving ample room for advisors to earn a substantive fee for the value they provide (which still amounts to a cost that is a tiny fraction of the potential debt savings). Not to mention the benefits of helping clients understand the different options available to them, how their choices may impact their student loan repayment plan, and how their career and life decisions can affect their overall student loan debt.

In order to offer their clients the most effective student loan advice, advisors need to acquire the appropriate depth of knowledge on the various student loan programs and their rules. While self-study is one option for financial advisors to obtain the subject matter expertise required to provide in-depth student loan planning services, others may wish to pursue the Certified Student Loan Professional (CSLP®) program. The CSLP is the first student loan planning designation designed to guide advisors through the process of helping clients navigate their student loans and addresses essential planning topics, including types of student loans, Public Service Loan Forgiveness, analysis of various student loan programs, and how student loan planning relates to broader financial planning topics. Once advisors acquire the requisite core knowledge, they can then work to design a repeatable process to screen and meet with clients, gather and analyze client data, and develop an in-depth student loan plan.

Depending on their firm's structure, advisors can choose to build student loan planning into their firm’s own service model, develop student loan planning as a component of ongoing comprehensive financial planning, or offer standalone student loan plans as short-term planning projects. This is often very appealing to high-income, high-debt young professionals, which can be of value for early-stage firms working to build a millennial client base.

A variety of fee models are available for advisors to consider as well, each with distinct benefits and drawbacks. Some commonly used fee models used by student loan planners include flat fees for one-time projects, fees based on the amount of student loan debt (a “debt under management” approach similar to the industry’s popular Assets Under Management approach for more affluent clientele), hourly fees, and fees as an additional expense included as part of a comprehensive financial plan. Accordingly, some advisory firms will build student loan planning to be a profitable service line unto itself, while others may focus on it as a way to profitably serve younger clients now while also planting seeds for later firm growth (as some clients who initially seek one-time project-based plans may come back as long-term comprehensive planning clients, and/or become AUM clients as their student loan debt is repaid and they become asset accumulators, especially in the case of high-debt high-income clients).

Ultimately, the key point is that student loan planning offers financial advisors a wide realm of business opportunities, either for shorter-term or longer-term engagements. For many firms, offering student loan advice can be an important differentiator to attract higher-income, upwardly mobile next-generation clients (i.e., those with high earnings but currently facing high debt burdens, where the impact of student loan advice is significant and so is the long-term client potential). Additionally, establishing expertise in the subject matter can yield client referrals (by becoming known in a niche of student loan planning), and opportunities to collaborate with other financial advisors who need student loan planning expertise – all of which can potentially turn into valuable, long-lasting relationships!