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#FASuccess Ep 188: Leading With Directly-Held Real Estate Advice To Differentiate Traditional Wealth Management, with Rich Arzaga

August 4, 2020 07:26 am 6 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 188th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Rich Arzaga. Rich is the founder of Cornerstone Wealth Management, a hybrid advisory firm based in Northern California that oversees nearly $70 million of assets under management for 65 affluent clients. What's unique about Rich, though, is that he's one of just a handful of advisors across the country who in addition to being a CFP certificant, also holds the CCIM designation to advise clients on commercial real estate, and in practice has been able to turn his ability to advise on directly held real estate investments into opportunities to gain clients for his traditional wealth management services as well.

In this episode, we talk in-depth about how Rich incorporates advice on directly held real estate into his practice. The APOD, short for Annual Property Operating Data analysis he prepares to clients as part of their financial plan, the tools that Rich uses, from eMoney Advisor to separate Excel spreadsheets, to track and analyze directly held real estate for clients, and why Rich charges an upfront but not an ongoing financial planning fee for his real estate analysis.

We also talk about how Rich was able to turn his directly held real estate advice into a growth engine for his advisory business. The unique networking opportunities he was able to develop through the CCIM organization as a holder of their designation, why Rich used but now stays away from advising clients on REITs as an alternative to directly held real estate, and why Rich views advising on directly held real estate as a great way to open the door for clients, but traditional wealth management is a better approach for generating ongoing revenue as an advisor.

And be certain to listen to the end, where Rich shares how he turbocharged his advisory firm in the early years as a career changer coming into the financial advisor world. Why he pursued the education for both his CFP and CCIM designations before he launched his firm, even though he didn't have the experience to actually use either of the marks, how Rich became an adjunct professor teaching financial planning early in his career as a way to further establish his credibility, and why the financial advisory business can be challenging for career-changing entrepreneurs because in the end, even for successful advisors, the path to growth is rarely a good sprint and more commonly a very long marathon.

The Latest In Financial #AdvisorTech (August 2020)

August 3, 2020 07:05 am 2 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the August 2020 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition welcomes new co-author (and AdvisorTech guru) Craig Iskowitz, and kicks off with a look at the emergence of “AdvisorTech” as a financial technology software category unto itself. As the reality is that while “FinTech” has been on the venture capital and private equity map for nearly a decade now, the focus of FinTech continues to be payments, banking, blockchain, and a number of other applications that may be of great interest for the broader financial services world and their direct-to-consumer marketplace opportunities… but little relevance to financial advisors, with our unique (and uniquely fractured) business landscape, B2B (and B2B2C) provider needs, and specialized regulatory and integration needs. And as financial advisors increasingly shift away from the distribution of financial products and into the world of financial advice itself, “WealthTech” (and its investment-centric) focus is arguably still too narrow to capture the needs of the financial advisor ecosystem. And so, it’s time to recognize AdvisorTech as a category unto itself… a subset of the broader world of FinTech, but itself a label for the broader needs of financial advisors than WealthTech, AdviceTech, or RegTech alone can capture!

From there, the latest highlights also feature a number of other interesting advisor technology announcements, including:

JD Power issues the results of their annual survey, finding that more than 90% of brokers deem their technology platforms as essential, but fewer than half find their broker-dealer’s own technology solutions to be “very valuable” in their businesses!
Envestnet integrates with FIX Flyer to expand individual bond trading capabilities for large RIAs
Refinitiv acquires Advisor Software to expand its rebalancing and portfolio management capabilities to compete for enterprise advisor platforms
With traditional industry conferences on hold, the AdvisorTech community self-organizes its own AdviceTech.LIVE virtual conference!

Read the analysis about these announcements in this month's column, and a discussion of more trends in advisor technology, including Knudge launching a live beta to help financial advisors support their clients to implement ongoing financial planning recommendations, MoneyGuide launches RIA Planning Analytics but may have missed the mark on supporting relationship-based ongoing financial planning, AdvicePay integrates with MoneyGuide as interest continues to grow in offering (and generating advisor revenue from) fee-for-service financial planning, Holistiplan launches new tax planning tools as advisors focus more on the risk of rising tax rates, and Smarsh launches a new archiving solution for Zoom meetings… and in the process, highlights how the more digital advisor communications become, the more compliance expects to capture, archive, and review everything advisors communicate to their clients.

And be certain to read to the end, where we have provided an update to our popular new “Financial AdvisorTech Solutions Map” as well!

I hope you're continuing to find this column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!

Weekend Reading for Financial Planners (August 1-2)

July 31, 2020 02:57 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the latest on the HEALS Act, the proposed legislation from Senate Republicans that may become the 5th economic stimulus bill in response to the coronavirus pandemic but is currently still mired in debate, not only between Republicans and Democrats, but also within the Republican party, and raising questions of how quickly the trillion-dollar stimulus will actually get passed and what form it will end out taking.

Also in the news this week was an announcement by the Democrats of their official "Party Platform" should they take leadership in Washington, which for financial advisors includes a notable provision of lifting the standards for all financial advisors, effectively signaling that if the Democrats win in November, there may be a new movement in 2021 to replace Regulation Best Interest and/or the Department of Labor's proposed Reg-BI-coordinating changes and implement a more full-force fiduciary obligation for all investment advisers and broker-dealers.

From there, we have a number of articles about referral marketing, including the recognition that so few consumers are unhappy with their advisors that just waiting for prospects to ask an existing client "Do you know a good advisor?" (in the hopes of being referred by your client in the moment) probably isn't enough to drive referrals, how even great advisors fail to get referrals because they're not specific enough about the problems they solve, why advisors also often fail to get referrals because existing clients don't know who to watch for that would be appropriate to refer to their advisor (i.e., a lack of clear positioning in the marketplace), and how to increase referrals by (re-)focusing not on getting more referrals from everyone but just a few people who are most likely and interested to refer and may become 'power-referrers' for the advisor.

We also have several articles on insurance, including a look at how advisors and their clients are making health insurance decisions in the face of pandemic layoffs (including how to potentially 'game' the COBRA system with a newly-extended 120-day window to apply for coverage... but only if and when it's really needed?), how the pandemic may ironically be improving the financial health of long-term care insurers by sadly cutting claims short (but at least potentially stabilizing pricing in the process), and the rising concerns of how indexed universal life insurance is being illustrated (or potentially, over-illustrated) given the increased risk that returns for the coming decade will not be nearly as rosy as they were for the past 10 years.

We wrap up with three interesting articles, all around the theme of making slow but steady incremental improvements for ourselves: the first explores how the key to change is not about whether we engage in (new) activities every day or get the desired outcomes but whether we can honestly say we gave it our "best effort" (which creates the kind of 'focused practice' that ultimately leads to results); the second looks at the behaviors that best provide us resiliency in the face of the inevitable life setbacks that may come as we try to achieve our goals; and the last provides a powerful reminder that in the end, long-term success isn't just about going through the right routines but engaging in "practice" that helps us find and regain the focus we need to succeed (while recognizing that, as with any effort that requires practice, it will take time, and setbacks along the way and disruptions to the typical routine are normal and to be expected!).

Enjoy the 'light' reading!

Kitces & Carl Ep 39: Avoid Writer’s Block With Your Content Marketing By (Literally) Talking It Through

July 30, 2020 07:21 am 1 Comment CATEGORY: Kitces & Carl Podcast

Over the past several years, financial advisors have increasingly utilized digital channels as a part of their overall marketing strategies, as the more traditional tactics for generating new leads have become less effective (and especially in recent months amid the ongoing COVID pandemic). Of course, a key ingredient of digital marketing is content (whether it be a book, podcast, blog, video, or any number of content ‘artifacts’). For many financial advisors, however, content creation isn’t something that comes as naturally as, say, comparing decumulation strategies or analyzing Monte Carlo simulations, and it’s easy to hit a roadblock when staring at a blank screen.

In our 39th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards share some actionable steps that advisors can take to create content for digital marketing that can then be used to establish the advisor’s expertise with their existing (or prospective clients). Because the reality is that there are far more tools available for creating all sorts of content in a myriad of formats and packaging beyond simply typing out words one paragraph at a time into a long-form article.

As a starting point, it’s helpful to actively observe internal sticking points that may slow down the advisor’s capacity to create content, and then consciously turn them into ‘features’ instead. For instance, don’t have the capacity or desire to deal with the logistics of booking guests to have on a podcast? Decide instead to produce a short podcast without guests where the primary feature is the listener’s opportunity to hear from the advisor directly. Use the memo feature on your phone to remember stuff or take notes as someone who doesn’t like to write? Upload them to SoundCloud, and share them on social media or with a client newsletter as an audio recording that clients and prospects can listen to without needing to read it!

Another tried and true method for effective content creation is to simply keep track of the questions that clients already ask, and turning the answers into something (appropriately anonymized for the particulars of the situation) to share out with the broader base of clients and prospects. And (importantly) it doesn’t have to start as something that is written down. Instead, it can start as a spoken response, that is then transcribed and edited using any number of tools, or even produced as a podcast... or both! In fact, there are several services where freelance creatives are available to take raw content (the advisor’s expertise answering common client questions) and turn it into polished material, that can then be repurposed and distributed on different platforms.

Because the simple fact is that, for advisors who have decided that they have expertise that they feel would help a broader audience or a perspective on an issue that they want to share, there are a few relatively simple steps to take – track notable ideas and observations, block out just a little time each week to review those notes, record observations, and send that basic commentary along to a freelancer – to start regularly creating content. Because, after all, while many advisors get writer’s block, few get talker’s block!

Successor Beneficiary RMD Rules After The Death Of The Original Inherited Retirement Account’s Primary Beneficiary

July 29, 2020 07:33 am 11 Comments CATEGORY: Retirement Planning

In December of 2019, Congress passed the Setting Every Community Up For Retirement Enhancement (SECURE) Act, introducing substantial updates to the laws governing retirement accounts. Changes to post-death distribution rules resulted in the death of the ‘stretch’ provision for certain (most) non-spouse Designated Beneficiaries of inherited retirement accounts and introduced a new “10-Year Rule” for account distributions, which have important implications, not just for the Designated Beneficiaries of those retirement accounts, but also for their Successor Beneficiaries as well.

Prior to the passage of the SECURE Act, Designated Beneficiaries of retirement accounts were allowed to ‘stretch’ Required Minimum Distributions (RMDs) from the account over their own life expectancies. However, the SECURE Act eliminated the stretch option for most non-spouse Designated Beneficiaries, and instead, requires the account to be emptied by the end of the 10^th year following the year of the original owner’s death. The SECURE Act, however, also created a new category of beneficiaries – Eligible Designated Beneficiaries – that is still permitted to use the ‘stretch’ provision.

Any of these beneficiaries, of course, could, themselves, die prior to emptying their inherited retirement accounts, leaving the balance to a Successor Beneficiary. Accordingly, there are now three potential scenarios for Successor Beneficiaries of inherited retirement accounts: 1) Successor Beneficiaries of post-SECURE-Act-Eligible Designated Beneficiaries, 2) Successor Beneficiaries of pre-SECURE Act Designated Beneficiaries, and 3) Successor Beneficiaries of post-SECURE Act Non-Eligible Designated Beneficiaries.

In scenarios 1) and 2), Successor Beneficiaries will generally be subject to the full 10-Year Rule. One exception to this is if the post-SECURE Act Eligible Designated Beneficiary (or pre-SECURE Act Designated Beneficiary) is the surviving spouse of the original account owner and dies before the decedent would have been required to begin taking RMDs. In such cases, upon death, they are no longer be considered a “Designated Beneficiary” of the account, but instead, are treated as if they had been the original account owner. Thus, the Successor Beneficiary wouldn’t be treated as a Successor Beneficiary and would not be automatically subject to the 10-Year Rule (i.e., if they were able to qualify as an Eligible Designated Beneficiary, they could qualify to take advantage of the ‘stretch’ provision).

For scenario 3, Successor Beneficiaries who inherit from post-SECURE Act Non-Eligible Designated Beneficiaries are, like other Successor Beneficiaries, subject to the 10-Year Rule; however, unlike other Success Beneficiaries, they will not have their ‘own’ 10-Year timeframe. Instead, their distribution period is a continuation of the 10-Year period that started when the Successor Beneficiary inherited the account.

Although the SECURE Act may negatively impact some Successor Beneficiaries by limiting the time they are allowed to prolong their Required Minimum Distributions, some Successor Beneficiaries may actually be able to benefit from the Act’s changes. In some instances, the number of years a Successor Beneficiary may have to empty their inherited retirement account may be extended, while in other instances, they may simply have a similar amount of time, but more flexibility than was previously allowed prior to the passage of the SECURE Act.

For example, for a Designated Beneficiary who ‘stretched’ RMDs and lives for a long time yet still dies with a substantial account balance, their Successor Beneficiary may have been left with only a few short years to distribute the remaining assets had it been under pre-SECURE Act rules (as they would have been required to use the original beneficiary’s remaining Single Life Expectancy). However, the 10-Year Rule of the SECURE Act now allows these Successor Beneficiaries up to 10 full years to distribute their accounts.

Ultimately, the key point is that while most of the attention on the SECURE Act’s impact on retirement account rules has focused on Primary Beneficiaries, the reality is that Successor Beneficiaries are impacted by the SECURE Act changes as well. While Successor Beneficiaries who inherit accounts from beneficiaries taking RMDs using the ‘stretch’ provision will get the 10-Year Rule (from scratch), some Successor Beneficiaries (i.e., post-SECURE Act beneficiaries of Non-Eligible Designated Beneficiaries) will ‘only’ be able to step into the initial beneficiary’s shoes, and will have to empty the balance of the IRA by the end of the 10-year period established by the original 10-year rule (i.e., the Non-Eligible Designated Beneficiary’s 10-year window). For both the original account beneficiary and their own named Successor Beneficiaries, the SECURE Act has created changes and potential opportunities that impact them both.

#FASuccess Ep 187: Adopting Alternative Fee Models To Expand Your Clientele And Change The Complexion Of Wealth, with Emlen Miles-Mattingly

July 28, 2020 07:03 am 3 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 187th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Emlen Miles-Mattingly. Emlen is the founder of Gen Next Wealth, an independent RIA based in Madera, California, that provides wealth management for 70 client households. What's unique about Emlen, though, is the way he's decided to focus his advisory firm on working with underserved communities of color, as an advisor of color himself, and in the process is moving his advisory firm business model away from assets under management and toward a monthly subscription model that allows him to expand who he serves, all in pursuit of Emlen's goal to change the complexion of wealth.

In this episode, we talk in-depth about how Emlen structures his monthly subscription business model. How he started out charging $100 a month but quickly raised it to $300 a month, how he developed bronze, silver, and gold tiers that all provide a baseline of advice but vary in the depth of their tax, insurance, and estate implementation support, why Emlen decided to include filing annual tax returns for clients in his ongoing advice fee but then outsourced the tax preparation work itself, and how the change in business model is now accelerating his growth path.

We also talk about Emlen's actual financial planning process itself. The key question he asks at the beginning of every introductory meeting to support his sales process, the technology he uses to automate his new client onboarding process, and the outsourcing provider he hired to help build it, why his initial planning process starts not with retirement projections but analysis of the client's monthly household cash flow and budget, and the ongoing client service calendar that Emlen is developing to support clients year-round and earn the ongoing monthly fees he charges.

And be certain to listen to the end, where Emlen shares the real-world challenges of trying to succeed as an advisor of color serving communities of color. The ups and downs of trying to build your career in the early years and find the personal confidence to charge what you're really worth, and the importance of finding a support network of advisor peers to get through the inevitable ups and downs of building your firm, and in particular, where to look as an advisor of color.