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Fostering Healthier Advisor-Client Relationships By Mitigating Transference And Counter-Transference

September 23, 2020 07:04 am 1 Comment CATEGORY: Client Trust & Communication

When it comes to connecting with strangers in a new relationship, our minds often jump to associating them with a friend or family member who we know well (“you remind me of so-and-so!”)… something we do without even realizing it. The tendency to do this is part of our brain’s natural shortcuts to making sense of the world; if we can associate someone new as being ‘similar’ to someone we already know, it becomes easier to figure out how to interact with and relate to them. Yet while this is often helpful and poses no problems, in some cases our tendency to substitute in another existing relationship can be counterproductive, blinding us to really taking the time to understand the person in front of us, or even causing adverse reactions when it turns out the person we’re actually relating to is not like the one our brains are associating them with! And this is especially relevant for financial advisors and their clients, where failing to really understand the person in front of us can impair the relationship between the advisor and client, and undermine the open lines of communication that are so important to ensure that the advisor is able to obtain the information needed to provide the necessary advice (and deliver it in a way that the client will actually implement it!).

Drawing from the world of therapy and mental health, this phenomenon of a patient projecting the values and characteristics of someone with whom they are very familiar onto the professional they have engaged, but don’t yet know very well, is referred to as “transference”. Similarly, the professional projecting values of someone else onto their patient is referred to as “counter-transference.” For example, a therapist may remind a new patient of the patient’s own brother. If the patient has had a supportive and caring relationship with their brother, they may immediately feel an unfounded trust for their new therapist, based on how the patient feels about the brother. Alternately, if a patient reminds their therapist of an intensely disliked relative with whom they are always fighting, they may experience counter-transference issues and may find it difficult to empathize with compassion toward their patient. And, like therapists and their patients, financial advisors and their clients are just as prone to engaging in transference and counter-transference behaviors during their relationship.

For instance, when difficult relationships (not with the advisor) in a client’s life remind the client of their advisor, unhealthy transference tendencies can cause the client to have trouble communicating openly with their advisor about important financial affairs, or make them unwilling to accept the advisor’s advice. Similarly, problems can arise for advisors if a client were to remind them subconsciously of a person with whom the advisor has an unhealthy relationship, such as the advisor who struggles to give hard advice to an elderly client that reminds them of their own mother. This difficulty to communicate becomes problematic, not only because it can prevent information crucial to the financial planning engagement from being shared, but can also eventually lead to feelings of frustration and burnout – for both advisor and client.

To address the situation and prevent counter-transference-based tendencies from harming relationships with clients, advisors can use various techniques to practice awareness of any counter-transference behaviors they may be impacted by. As a first step, advisors can identify any of their own personal triggers that may be impacting their client relationships. Recognizing and understanding the differences between the client and the other person being mentally associated with the client, who may be the actual cause of the advisor’s personal triggers, can be helpful for the advisor to see the client clearly as the unique individual that they are. A self-analysis tool that can be helpful for the advisor to work through counter-transference issues is the Money Script Inventory, which helps to identify subconscious beliefs about money (which can itself be a springboard for further investigation into the actual causes of those beliefs, which can often provide clues to identify counter-transference causes). Another technique is for the advisor to assess their own money history by reflecting on their own personal relationship with money and the challenges they have faced around money.

While self-analysis can be sufficient for some advisors to work through counter-transference issues, others may prefer the support and guidance of a mental health professional themselves. Therapists understand and know how to help their patients work through transference issues, and are themselves trained to work through their own counter-transference habits.

Ultimately, the key point is that advisors have access to tools that can help them recognize their own counter-transference tendencies, which can help them maintain healthy relationships with their clients, and that are key to open communication and good financial planning!

#FASuccess Ep 195: Own Your Future By Continuously Reinvesting In Yourself To Build The Advisory Career You Want, With Echo Huang

September 22, 2020 07:05 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 195th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Echo Huang. Echo is the founder of Echo Wealth Management, an independent RIA based in Minneapolis that oversees nearly $120 million of assets under management for 76 client households. What's unique about Echo, though, is the way she's built a niche serving corporate executives and has managed to grow the firm almost entirely by word of mouth by building her reputation within her niche.

In this episode, we talk in-depth about how Echo built her career starting out in the industry from scratch as an immigrant to the U.S. with just $800 in her pocket. How she started studying finance as an undergraduate, then decided that it would help her career to get a CPA license, so she joined a public accounting firm to get the requisite two years of audit experience. Then, transitioned to the personal financial planning division of a regional accounting firm and earned her CFP certification to build her professional credibility and help overcome the fact that she looked young when sitting across from older clients. Why Echo ultimately went out on her own at a cost of losing two-thirds of her AUM to rebuild the vision of the advisory firm she wanted to build. And why, as an already successful advisor in her 40s, she still decided to go back and get her CFA certification on top of juggling the challenges of growing the business and being a parent to her daughter Nina.

We also talk about how Echo actually built her independent advisory firm to serve the clients she wanted to serve. Why she chose TD Ameritrade as her custodian. The reason she selected Salesforce as her CRM of choice despite Redtail and Wealthbox being more popular for solo advisors. Why eMoney Advisor became the hub of her financial planning services for clients. And how Echo structures her fees for clients with an AUM fee that starts at 1% on their first $1 million for portfolio management. And a separate fee of up to $5,000 for the first years' financial planning.

And be certain to listen to the end, where Echo shares the unique challenges of being what she terms a triple minority of being Asian, female, and a new immigrant coming into the financial planning profession. The unique way that Echo views career and business risk to have made some of the key transitions she's made to advance her career. And why she views the key to success as building the confidence to believe in yourself, and your own advisor value. And getting the education, study group peer support, and whatever else it takes to build that confidence in yourself.

So whether you’re interested in learning about the journey that led Echo to starting her own firm, how she created her niche working with Fortune 500 executives, or how she built her tech stack from scratch, then we hope you enjoy this episode of the Financial Advisor Success podcast.

Adapting Advisory Teams To A Hybrid Office/Home Workplace: Leadership, Culture, And Infrastructure For The New RIA Workplace

September 21, 2020 07:06 am 1 Comment CATEGORY: Practice Management

Financial planning advisory firms have traditionally operated as brick-and-mortar establishments, with clients coming to the office to meet with their advisors in person, and where all employees would generally be available on-site every day during normal business hours. However, with the onset of the COVID-19 pandemic, ‘business as usual’ took a dramatic shift to a more ‘virtual’ reality. Businesses around the world were required to shift gears to comply with social distancing requirements to mitigate the impact of the spreading disease. For financial advisors in particular, this meant quickly developing a strategy to implement processes that would accommodate virtual meetings with clients, as well as work-from-home systems in place for employees to continue servicing clients and to maintain everyday business operations. With no immediate end in sight of the current pandemic condition being resolved, however, business owners are now looking to create more permanent workplace solutions that will accommodate social distancing practices.

Sustaining a successful future advisory firm model will require several changes to leadership strategies, including a shift in focus from a ‘presence-based’ management style, in which the key metric to assessing employee productivity is by the very fact that they show up for work in the office, to more of an ‘output-based’ management style, in which productivity is measured more by attainment of company goals and the deliverables required of employees to achieve those goals. Critical to this shift in management style is a clearly communicated career progression strategy, to convey to employees the importance of their role in the organization and how those roles are designed to meet company goals. Another leadership strategy to adapt a successful future model is the cultivation of ‘Team-Based’ (versus ‘Boss-Based’) accountability systems, in which team members themselves have more freedom and autonomy in conducting work as a means to manage their own accountability, instead of relying on bosses to guide the direction of individual workloads. Finally, allowing employees to choose between working environments (e.g., virtually or onsite with other team members) can enhance employee satisfaction and help them work more effectively.

Also important in cultivating a sustainable future advisory firm is the creation of a cohesive culture that includes all employees – including those team members who work remotely. Open and frequent communication is important in reminding employees about the core values and company goals of their organization. It is also important for management to ensure that employees know that they are valued members of the company, intentionally reminding them of this from time to time, allowing for flexible work hours to accommodate personal priorities, supporting employees in setting up comfortable and functional work environments (whether at home or in the office), and finding team-building activities to engage employees while at the same time emphasizing that the workplace can be considered a source of personal support.

Finally, infrastructure must be thoughtfully designed to support firm growth. Functional technology systems are a crucial infrastructure component and are essential for good communication across the organization, especially when employees are working remotely in different locations. Being able to assess all processes and identify the specific steps that employees are working on through the use of a well-designed workflow task management platform can help all team members to determine whether their workloads are being managed effectively (and to tweak processes as needed), and additional channels of communication (e.g., instant messaging applications) can help minimize email inbox overload. Team structures may need to be reassessed as well, such as limiting the number of a manager’s direct reports so that sufficient resources are available to support employees.

Ultimately, the key point is that as financial advisory firms evolve their organizations to accommodate a more remotely based workforce, there are many decisions for enhancing their success. Critical to this process is for firms to self-assess the needs of their individual employees, to decide how best to reshape the practices followed by leadership and management, and to maintain their culture regardless of where employees may be situated.

Weekend Reading for Financial Planners (September 19-20)

September 18, 2020 02:58 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that despite concerns from fiduciary advocates that the Department of Labor's new "fiduciary" rule will undermine consumer protections by allowing "fiduciary commissions", the annuity industry is mounting a challenge to the rule out of a concern that it is still too stringent in attaching a higher standard of care to sales of annuities into IRA rollovers, raising the question of whether a final rule will be issued in the coming months or not (and if it is, whether it will again be challenged and struck down as the last DoL fiduciary rule was).

Also in the news this week are some interesting new industry studies, including a look at the growing interest from industry providers to gain adoption of Health Savings Accounts amongst financial advisors to use as a supplemental retirement savings account for more affluent clientele, and another study finding that 44% of investors (and 68% of Millennials) would consider switching away from an advisor who did not align with their political views (stoking fears amongst some advisors that political discussions will cause lost clients, but signaling an opportunity for others that being more upfront about the advisor's politics can actually better bind clients who share similar political views).

From there, we have a few articles on industry trends around advisor platforms, including a veritable explosion of new recruiting efforts from broker-dealers that have transitioned to virtual recruiting (as it's now easier to vet a new platform from the comfort of your home office!?), the ongoing tension that RIAs face in choosing which RIA custodian on whom they both depend and may compete with (as the Schwab-TD Ameritrade merger creates a veritable oligopoly of mega providers), and the options for advisors to consider if they don't have enough in assets under management to affiliate with one of the mega RIA custodians.

We've also included a number of marketing articles this week, from a look at how anticipated SEC revisions to the advertising and (anti-)testimonial rules could create an upheaval in advisor marketing in 2021, how "expertise marketing" is different than traditional advisor marketing and is all about finding synergies that build compounding marketing momentum over time, and why it's so important to consider the Client's "Lifetime Value" and not just the top-line revenue growth of the firm to understand the health of an advisory firm and its marketing efforts.

We wrap up with three interesting articles, all around the theme of what clients really want from the advisor-client relationship: the first explores a recent Spectrem Group study that finds, despite the rise of robo-advisors and more and more online technology, that more consumers are relying on financial advisors now than in the aftermath of the financial crisis a decade ago (though at the same time, there has also been an uptick in self-directed investors relying on increasingly sophisticated technology solutions); the second provides an interesting perspective from the client's point of view (literally, written by a client who has had many financial advisors over the years) on what really matters when it comes to client retention; and the last recaps a keynote session from this week's Morningstar conference about how the future of the financial advice industry is changing, where the AUM model and in-person meetings won't vanish, but a growing range of virtual meetings and non-AUM fee-for-service business models are opening new doors of opportunity to grow advisory businesses!

Enjoy the 'light' reading!

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!