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RightCapital Financial Planning Software Review – Tax-Sensitive Decumulation Planning And A Collaborative Planning Interface

September 17, 2020 07:49 am 32 Comments CATEGORY: Technology & Advisor FinTech

Amid a landscape that has been dominated for nearly a decade by a select group of financial planning software heavyweights – MoneyGuidePro, Naviplan, and eMoney – newcomer RightCapital first launched in 2015 at the XY Planning Network conference. With an eye towards providing a simpler and easier-to-use interface and presenting solutions to clients in easy-to-understand reports, RightCapital (perhaps undeservedly) was labeled as a “light” financial planning software solution by industry publications. But in reality, RightCapital not only fills gaps left by other planning software providers around the intersection of retirement decumulation, tax planning, and Roth conversion strategies – that show, in dollars, the tangible value that financial advisors bring to the table – but also allows advisors to work with largely unserved next-generation client segments with its student loan planning capabilities, and to produce financial plans faster with its more collaborative planning capabilities. All of which has helped RightCapital in just 5 years since launch to jump to 4th in market share amongst financial planning software and, according to the latest Kitces Research study, see the biggest gains in market share for both broker-dealers and RIAs in the past two years.

In the guest post, Craig Iskowitz – CEO and founder of Ezra Group, a financial technology consulting firm – provides an in-depth software review of RightCapital, covering its features and benefits, interface, modules, client deliverables, and pricing.

In a crowded financial planning software marketplace, RightCapital differentiates itself by allowing advisors to help their clients with:

Real-time collaborative planning around retirement planning and goal setting/scenarios by using “levers” to immediately show the dollar impact of different strategies (thus showing the tangible value of the advisor and fostering greater engagement),
The tax impact of various decumulation strategies (whether proportional or sequential across different types of accounts) and the value of proactive tax planning through Roth conversions (for which RightCapital has been the only full-scale financial planning program in recent years to offer such in-depth capability),
Detailed cashflow reporting and asset allocation modeling (thanks to their state-of-the-art calculation engine, which allows advisors to quickly flip through analytics tabs), and
Using either a goals-based or cashflow-based planning approach depending on the client’s personal circumstances and advisor preferences.

RightCapital also offers a Social Security optimization and Student Loan planning modules, as well as accumulation planning and estate planning capabilities, though none of those features necessarily help the software stand out from other full-stack financial planning software providers or standalone vendors providing similar tools. And notably, while RightCapital has expanded its suite of available integrations with popular CRMs, reporting tools, and custodians, it still doesn’t have the breadth of integrations when compared to other providers (which means it’s important to check upfront if it integrates for any particular advisor’s tech stack).

Ultimately, most comprehensive financial planning software is ‘comprehensive’, which means ironically all the available solutions do so much it’s often difficult to differentiate at the margins which is really best at what. In the context of RightCapital, there are several areas that do stand out against its competitors, particularly when it comes to an attractive and intuitive user interface, real-time collaborative planning (and its speed to do calculations, which matters when clients are watching in real-time!), and the ability to choose either a goal-based or cashflow-based planning approach. However, RightCapital’s key differentiator is its detailed and tax-sensitive retirement distribution planning, which helps foster engagement between client and advisor, and importantly, demonstrates the actual dollar value that an advisor can offer... particularly in an environment where advisors are pressured to justify their fees. RightCapital may not offer all the robustness (or complexity) of eMoney, Naviplan, or MoneyTree, in certain areas, but it does provide powerful capabilities (especially for tax-savvy advisors) at an attractive price in a competitive marketplace.

Helping Business Owner Clients Cope With Feelings Of Shame And Guilt Arising From Making Difficult (Or Unpopular) Financial Decisions

September 16, 2020 07:03 am 0 Comments CATEGORY: Client Trust & Communication

Business owners are faced with tough decisions every day that challenge them to run their businesses efficiently and to keep their employees happy. Yet, when it comes to decisions about asking for help, many often experience feelings of guilt and shame. And in the current pandemic environment, with recent government programs like PPP loans available to business owners who are facing financial strain, individuals who feel compelled to apply for these loans may be asking themselves, “Why couldn’t I have managed things more carefully?” or “Have I failed my family/employees because I did not manage the business better?” Accordingly, it is not surprising that financial advisors may find an increasing number of business owner clients suffering from these difficult emotions.

To understand the reason for the shame and guilt that business owner clients (and even financial advisors themselves, who have, in many cases, needed to utilize PPP loans) experience, it is first important to understand that there is a clear distinction between greed (that is often ascribed to PPP recipients) and subjective financial strain. As while the news media has been quick to name greed as a motivator for many business owners who applied for PPP loans, the reality is that greed (which is actually a pathology where an individual has a selfish desire to obtain more than what may actually be needed) is rarely the reason people apply for such support. Instead, subjective financial strain is more often the driving factor that determines when someone may reach out for financial help (including via government assistance programs). By contrast to greed, subjective financial strain is about how a business owner perceives the intensity of the threat facing their business; its subjective nature is influenced by the owner’s own confidence level in managing their business operations during stressful times (which can feel serious, even if ‘objectively’ the business is not necessarily in dire straits, or at least not yet). Nevertheless, a common reason for both shame and guilt associated with asking for financial support is because of the erroneous association with greed.

For financial advisors with business owner clients dealing with these difficult emotions, knowing that shame and guilt have distinct characteristics, and realizing the difference between them, can be key in helping clients cope through difficult times. Shame is an emotion borne out of the belief that one’s own character is somehow deeply flawed, where the individual feels that they are unworthy of acceptance, belonging, or love. When someone feels ashamed, they tend to use language that suggests they somehow feel they are failures or that their character is somehow insufficient. They may say that they aren’t deserving or worthy of merit. Guilt, on the other hand, is an emotion based on remorse; it usually results from an action or decision that is in conflict with one’s personal values. The language used by someone feeling guilt will focus more on an action (or inaction) and could hint that a particular decision was a bad choice. A person experiencing guilt generally doesn’t view themselves as being flawed; instead, they are more likely to express remorse or doubt over some action that was carried out in recognizing that it may not have been consistent with their values (or at least with the values they aspire to represent).

For advisors who want to help clients deal with these difficult emotions arising from such difficult financial decisions, it’s first important to identify the specific emotion being experienced. For clients who are suffering from feelings of shame, the advisor can help the client view the bigger picture and to find ways to reassure the individual that they are indeed worthy, looking to past business decisions or other aspects of their life to support this. For clients with feelings of guilt, advisors can support their client by finding ways to help them ‘right’ the wrong – whether that means reversing the action (e.g., returning loan proceeds taken if they turned out not to be needed, or helping a client apply for a loan if the guilt was because of not applying for a loan), or mitigating the effects of the decision (e.g., making a donation to a worthy cause to absolve their guilt for having otherwise taken the PPP dollars).

Ultimately, the key point is that feelings of guilt and shame are very common when difficult financial decisions are involved. In the case of taking PPP loans, the problem has been particularly acute, because the requirements to qualify for PPP loans were based on subjective financial strain (stipulating that ‘current economic uncertainty made the loan necessary’) and not necessarily objective financial strain (e.g., the business must have experienced a 50% decline in revenue to qualify). Given the subjective financial strain requirement – and the fact that subjectivity is, by definition, in the eye of the beholder – the media has associated greed with PPP loans and their forgiveness provision… resulting in many individuals who have taken PPP loans now experiencing guilt and shame. (And notably, recent proposals for a new round of PPP dollars would specifically shift from a subjective to more objective financial strain requirement going forward.) Accordingly, advisors can support their business owner clients who did pursue PPP dollars by helping them understand that the PPP funds were there specifically to be used to respond to subjective financial strain – they were established to help individuals maintain their business operations during these times of economic uncertainty. Moreover, advisors who express empathy and compassion, instead of sympathy and pity, can most effectively help their clients cope with their feelings, so that they may get back to business as usual as quickly as possible!

#FASuccess Ep 194: Aligning Values To Clients With Sustainable Investing And Becoming B Corp Certified, With Lisa Cooper

September 15, 2020 07:08 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 194th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Lisa Cooper. Lisa is the founder of Figure 8 Investment Strategies, an independent RIA based in Boise, Idaho that oversees nearly 90 million of assets under management for 85 affluent clients.

What's unique about Lisa, though, is that her firm operates as a B Corporation and it's focused on what Lisa calls, 'sustainability-focused equity management', a form of sustainable and responsible investing by building a thematic portfolio of 50 to 60 individual stocks that has helped Lisa to effectively differentiate herself and grow to 90 million of assets under management in just 4 years since launching.

In this episode, we talk in-depth about how Lisa crafted her unique investment approach for clients, the way the firm crafts sustainable investing themes to identify segments of the market to invest in, the screening tools they use to determine what stocks to avoid in their investment approach, how shareholder engagement through proxy voting is a key part of Lisa's investment process, and why and how Lisa's firm uses direct impact investing not to expand its equity reach, but to garner its fixed-income bond exposure instead. We also talk about Lisa's decision to become a certified B Corporation with her RIA, the five key areas of governance, customers and products, environment, team, and community that firms must improve to meet the B Corp requirements, the new processes and procedures that Lisa implemented in her firm to meet the standards, and why she thought it was worth the B Corporation cost and trouble to demonstrate how her business is acting to be a force for good and positive change.

And be certain to listen to the end where Lisa shares the unique types of clients that her firm has been able to attract with this differentiated focus, the challenges that she faced in trying to grow her team and expand her reach as her business grew rapidly, and how the mindset of doing more for more people all the time can be a great way to launch an advisory firm, but ultimately may end up limiting to its growth.

So whether you’re interested in learning about the process of B Corp certification, how Lisa created her business as a force for good, or how to integrate ESG and impact across portfolios, then we hope you enjoy this episode of the Financial Advisor Success podcast.

Creating A Six-Week Onboarding Program To Train New Advisory Firm Employees

September 14, 2020 07:04 am 2 Comments CATEGORY: Practice Management

Financial advisory firms can find themselves struggling to grow their businesses for a wide range of reasons. While some firms have difficulty developing a seamless client service experience, others may find business development strategies difficult to implement (or scale across additional new advisors) to increase their client base, and others yet may feel their executive leadership team is unable to connect with the firm as a whole. Regardless of where the difficulty lies, though, the root problem for most firms struggling with growth often lies in the lack of a well-developed training program.

For many busy firms seeking growth, investing time in establishing an effective training program is not often a top priority, and it can be difficult to even find the time to develop training protocols. However, a well-defined training program is critical not only for providing employees with a solid foundation of specific procedural requirements on how to run a firm that can grow, but also in establishing a unified firm culture that provides the vision required by employees to attract the right clients to the firm and to develop an implicit understanding of the expectations for servicing those clients. And the good news is that a good training program doesn’t have to be built all at once; instead, it can be developed iteratively, often in conjunction with fleshing out an advisory firm’s Operations Manual of processes and procedures.

Through an extensive study of employee training programs across many fast-growing financial advisory firms that were expanding their reach across the country, Herbers & Co. identified certain key characteristics that were consistent across successful training programs. From the research, they optimized an effective six-week program that can be adapted by firms to create a defined and repeatable training program for their new employees.

The weekly focus of the six-week onboarding training program for new employees is as follows:

Week 1. Understanding the company profile and its technology systems;

Week 2. Roles and responsibilities of employees across the firm and administrative procedures;

Week 3. Total client experience;

Week 4. Marketing and the prospective client process;

Week 5. Understanding the Client meeting process and client communications; and

Week 6. Compliance.

The easiest way for a firm to build a training program based on the six-week program is to develop an Operations Manual that encompasses all of the firm’s protocols and values on which training will be based. For firms that don’t already have an Operations Manual in place, it can in turn also be created one topic at a time, and over the span of several months. In fact, firms that aim to address each of the areas outlined in the weekly training topics may need up to 9 – 12 months to establish their training programs (though of course, it will still be updated over time to reflect how the firm’s processes evolve).

In today’s work environment, given our current pandemic state, it is important for remote training to be an available option for new employees. Strategies for an effective remote training program include timing the training sessions in short bursts, mixing in self-paced instructional videos, and assigning ‘homework’ exercises to be completed in between training sessions. Once the instruction and assignments have been completed, the trainer should review the assignment and offer feedback to the new employee.

Ultimately, the key point is that firms who want long-term, sustainable growth of their business need to have a well-developed training program in place. A consistent and thorough training program will ensure that all employees have a clear understanding of the firm culture and its goals, as well as being able to execute within the systems the firm uses. And while establishing a good training program can be a long-term process that may require a significant investment in time and resources, the end result will be a well-trained firm that not only knows how to operate consistently and in accordance with the firm’s culture and values to promote growth, but also is able to delegate training to more employees across the firm, which in turn frees up firm leadership from much of the training responsibilities so that their focus can be on developing and implementing growth strategies!

Weekend Reading for Financial Planners (September 12-13)

September 11, 2020 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 buzzing industry news that Merrill Lynch is barring its brokers from receiving gifts, meals, or entertainment from its wholesalers, in what some see as a shift of even large brokerage firms to begin stamping out more conflicts of interest in the new era of Regulation Best Interest, and critics suggest is simply the new path of brokerage firms to require asset managers and product companies to go through (and revenue share to) the home office instead of its brokers directly (payments which must be disclosed, but are not against the rules for broker-dealers under Regulation Best Interest).

Also in the news this week are some notable new industry studies, including one that looks at what clients actually want to talk about in advisory meetings beyond their portfolios (from protecting against identity theft to new housing decisions), the latest data on which types of consumers are actually using robo-advisors (only 10% of Millennials with <$50,000 of assets but almost 50% of those with >$500,000!), and the latest trends in how advisory firms are investing (showing the continued dominance of ETFs, an ongoing decline in the use of individual stocks, bonds, and REITs, but what is still, at best, just a small minority of advisors who are actually 'passive' as most advisors appear to be using ETFs as their own active management portfolio building blocks).

From there, we have several more interesting investment-related articles, including the launch of the new Long Term Stock Exchange by Lean Startup founder Eric Ries, the growing turmoil in prime money markets as interest rates appear to be pegged near the zero-bound for a long time to come and 'gates' implemented to prevent a 2008-style run on money markets may actually be exacerbating one this time around, growing questions about the long-term viability of the 60/40 portfolio in a persistent low-yield environment and what the future alternatives may be, and a look at how no-commission annuities may be emerging as a bond alternative for advisory accounts.

We wrap up with three interesting articles, all around the theme of being (and feeling) wealthy and what helps us get there: the first is a review of the recent Morgan Housel book "The Psychology Of Money" which explores the differences between being rich and being wealthy; the second examines what it takes to not feel 'rushed' (hint: it's all about delegation to focus on the biggest and most important tasks); and the last explores recent research finding that those who work with financial advisors don't just do better with their money... they're also happier with it, too!

Enjoy the 'light' reading!

Kitces & Carl Ep 42: Overcoming Objections By Asking More Questions To Truly Understand A Client’s Needs

September 10, 2020 07:07 am 1 Comment CATEGORY: Kitces & Carl Podcast

The roots of the financial planning industry are an eat-what-you-kill sales environment, when financial advice existed to facilitate the sale of a product, and initial survival (and eventual success) was predicated on the ability of an advisor to convince clients to buy whatever financial instrument they were selling. Which necessitated not only knowing the features and benefits of any given product, but also learning how to overcome every single objection that prospects could possibly throw at the advisor. In today’s world, though, advisors increasingly are focused on financial advice itself as the value proposition, are paid for the advice directly, and ‘just’ have the obligation to determine the best possible advice to give that helps the client achieve their goals (and keeps the advisor working with the client). Yet in practice, many advisors still think in terms of “overcoming objections” when a client doesn’t want to implement the advice they’re being given.

In our 42nd episode of Kitces and Carl, Michael Kitces and client communication expert Carl Richards discuss the key shift in mindset that advisors must go through when it comes to addressing client objections in an advice-based world, and the necessary strategies to reframe conversations by asking more questions in order to better understand a client’s needs and situation, instead of trying to overcome any resistance to taking an advisor’s advice or engaging their services.

The key to making that shift in mindset starts with understanding that a client’s (or prospect’s) objection doesn’t stem from not understanding how great the advice is that they’re getting, but rather is an indication that the advisor must be missing something important or miscommunicating somewhere along the way. After all, if the whole point of advice is to help someone achieve their goals, then a client who objects to that advice is effectively saying “that’s not going to get me to the goals that I really want to achieve… and so I’m objecting to the advice!”

Yet by taking responsibility for misunderstanding some key bit of information, the advisor can take a step backwards to start asking more questions instead, which starts back at exploring the assumptions that defined the client’s original “statement of financial purpose” (upon which all of the subsequent recommendations were based). From there, questions around what brought a client in on a particular day, or if there’s a specific thing that has changed in their lives to make them reassess their goals, can help move the conversation forward and further uncover any mid-course corrections that might need to be made. Which can even end out shifting the entire context of the conversation to figuring out if the advisor really is still the best fit for the client and their needs.

Ultimately, the key point is that the more “traditional” approach for overcoming objections was built for people that had a thing to sell (and objections to overcome to get it sold), whereas the ongoing shift towards a more collaborative advice-based client/advisor relationship means clients should naturally want to take the advice if it really gets them to their goals. Which means the starting point to overcoming an objection is digging deeper by asking more questions in order to better understand what the client’s goals – even and especially the unstated ones that may be blocking the advice process – really are in the first place.