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Applying The New “Fiduciary-At-All-Times” Obligation For CFP® Professionals Providing Financial Advice

June 17, 2020 07:07 am 10 Comments CATEGORY: Ethics

By definition, “advice” is a recommendation to someone about a prudent course of action to improve their situation or achieve their goals, which by its very nature is delivered by the advice-giver in the interests of the person receiving the advice. As a result, professionals from law to medicine to accounting to investment advisers have long imposed a “fiduciary” duty of professional advice-givers to provide advice in the best interests of the person receiving that advice.

Since 2008, CFP® professionals have similarly been required to provide fiduciary advice in the best interests of their clients… but only to the extent they were actually doing Financial Planning (or material elements of Financial Planning), as simply being a CFP® professional did not necessarily trigger a fiduciary obligation (to the extent that the CFP® professional was implementing or selling a product without providing broader financial planning advice).

Under CFP Board’s new Code of Ethics and Standards of Conduct (“Code and Standards”) that took effect in October of 2019, and which were first enforced after June 30^th of 2020, CFP Board has for the first time imposed a “fiduciary at all times” obligation on CFP® professionals – whether providing comprehensive Financial Planning, or non-Financial-Planning Financial Advice.

In turn, CFP Board’s new Code and Standards require that CFP® professionals meet both a Duty of Loyalty (to put the client’s interests ahead of their own) and a Duty of Care (to act with the care, skill, prudence, and diligence of a professional), while still following their fundamental Duty to Follow Client Instructions (even in situations where clients choose and ask the CFP® professional to implement a course of action that the advisor did not recommend). And to the extent that Material Conflicts of Interest are present, they must be disclosed by the CFP® professional (even if the CFP® professional’s Firm does not impose such requirements).

Ultimately, CFP® professionals that fail to adhere to CFP Board’s fiduciary and other Duties to Clients (and the associated Financial Planning Practice Standards when delivering financial planning) may be subject to disciplinary action, including a Private Censure, Public Censure, suspension, or even permanent revocation of the CFP® marks. Which, notably, may apply even to CFP® professionals who otherwise adhere to other regulators’ lesser standards!

#FASuccess Ep 181: Pivoting To A New And Better Marketing Approach After Your First Niche Misses, with Benjamin Brandt

June 16, 2020 07:03 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 181st episode of Financial Advisor Success Podcast!

My guest on today's podcast is Benjamin Brandt. Benjamin is the founder of Capital City Wealth Management, an independent RIA based in Bismarck, North Dakota that oversees $60 million of assets under management for nearly 80 households. What's unique about Benjamin, though, is the way he initially developed a focused niche after going out on his own as an independent, and then had to pivot when he discovered that there weren't enough people in that original niche in his small Midwest town to fill his desired client base.

In this podcast, we talk in-depth about how Benjamin initially selected and established his local niche, the way he optimized his website to maximize local search engine optimization opportunities, how he pivoted to launching a podcast to broaden his reach beyond his local market, the way he adapted his website SEO to draw attention to his new retirement podcast, and the marketing funnel that Benjamin has developed to turn his podcast listeners into email subscribers, into webinar watchers, and eventually into an introductory meeting as a prospective client.

We also talk about how Benjamin is building his advisory firm to fit his own lifestyle goals, the way he runs meeting surges with all of his clients twice a year to maximize his focus and also his time off, the ongoing financial plan update and monitoring process he uses with clients to stay efficient, and why he intends to cap his practice once he achieves his goal of 100 clients and $100 million in assets under management by age 40.

And be certain to listen to the end, where Benjamin shares the 5-10-15 rule he developed to figure out for himself what topics to cover on his podcast, the importance of creating forcing mechanisms for yourself to ensure that you stay focused on really following through to achieve your goals, and why Benjamin believes that the key to long-term success as an advisor is giving yourself permission and the financial foundation to be able to grow slowly so you don't feel the pressure to take on clients who aren't a good fit but can be hard to let go of later.

Increasing Client Referrals By Scaling Your Internal Marketing Brand

June 15, 2020 07:03 am 1 Comment CATEGORY: Marketing

Established financial advisors who aim to accelerate the growth of their firms often look to increase their marketing efforts to attract more prospects and bring in additional new clients. In practice, this is often done by taking the main components of a firm’s brand – value, verbal messaging, and visual design – and refining, in particular, the firm’s visual design, with a new website and new marketing materials designed to instill new and faster growth. Yet, in reality, the biggest driver of accelerated growth is often to improve verbal messaging first… and upon doing so, many advisory firms discover that it’s even more appealing to leverage that new messaging as internal marketing to generate more referrals from existing clients instead!

In this guest post, Angie Herbers – Chief Executive and Senior Consultant at Herbers & Company, an independent management and growth consultancy for financial advisory firms – talks about the core components of a brand, and why these components are important to drive firm growth. As while the value of a firm lies in its services offered, the client experience as a whole, and how the firm delivers on both, many advisory firms make the mistake of investing too early and heavily in visual design upon recognizing the value they provide, without first working out the verbal messaging which defines and communicates their own identity and values. The end result of this disconnect between the value and the messaging about it is lackluster lead flow; accordingly, the visual design should actually be defined by the verbal messaging and will be most impactful when it can serve to communicate the firm’s values and convey its identity. Which is only possible when the firm’s verbal messaging has been clearly defined in the first place.

The two primary modes of marketing communication are internal and external. All new firms must start out with external marketing efforts to grow their client base in the first place – in other words, they need to target strangers, website visitors, and prospects to simply convey that the firm exists and to identify the services available. In addition to prioritizing the main components of a firm’s brand, understanding the firm’s different audiences and knowing how to effectively communicate with each are paramount to effective external marketing to increase lead generation.

However, for existing firms, especially those with well-established client bases, internal marketing can be a much more valuable marketing approach, if done correctly. Internal marketing targets existing clients exclusively, providing not only updates about the firm’s growth and progress, but also reminders of the firm’s value through educational content and the ongoing provision of outstanding client service. In fact, ideally, internal marketing strategies should provide exclusive marketing value and messaging that is only available to existing clients. If done right, internal marketing can leverage clients themselves as promoters who generate referrals for the firm. Because with the right branding, client service experience, and exclusive internal marketing outreach efforts, clients will be enthusiastic about telling other people they know about the firm and will eventually become the firm’s own best marketers!

Ultimately, the key point is that firms who are just starting out will need to rely on external marketing efforts to cultivate clients in the first place, but firms with a well-established client base can leverage their own clients as effective promoters of the firm by using an internal marketing strategy that targets clients exclusively. However, this is only effective if the firm has invested in creating a well-defined brand with verbal messaging that clearly conveys their identity and values (which is then communicated consistently with internal scripts for client review meetings), developing employees as part of the brand, and specializing their marketing communications… all available only to existing clients who may then refer the advisory firm (even more often than they did before!).

Weekend Reading for Financial Planners (June 13-14)

June 12, 2020 02:56 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with a hard look at the current state of advisor technology surveys, and the challenging question of which survey(s) advisors can and should even trust as an indicator of industry trends (and which are not sampling enough advisors or in a consistent enough manner to really know).

Also in the advisor technology news this week is a look at how wealth management firms at large held up with their digital tools in the midst of the coronavirus pandemic (finding that most firms are lagging badly, but that in general, independent wealth management firms and the platforms they use actually fared better than most), and a reminder that the coming new CFP Board Standards of Conduct will require them to actually understand the details of their financial planning (and other) software and cannot rely on 'black box' solutions when crafting recommendations to clients anymore.

From there, we have a number of articles around succession planning, including a recent industry study showing the majority of mid-to-large-sized advisory firms still aren't confident they'll be able to transition the firm to the next generation without at least a lot of bumps along the way, a look at how 'sick' many succession plans became through the midst of the pandemic turmoil (from next-generation owners who can no longer afford to make payments on their equity purchases, to both buyers and sellers getting cold feet to do the deal), and some tips for both founders and next-generation advisors on how to start the succession planning conversation (particularly if they're concerned the 'other side' isn't picking up the conversation themselves).

We also have a few marketing-related articles, from tips on how to handle 'Negotiator' clients and develop the confidence to avoid yielding to those asking for fee discounts, advice to new advisors about where to focus first on marketing (hint: local marketing, local SEO, and LinkedIn), and a reminder that, in the end, clients don't hire an advisor for what the advisor does but for what the advisor can do to help clients become who they want to become (which means marketing should be all about the transformations that advisors can create for their clients to achieve that vision for themselves!).

We wrap up with three interesting articles, all around the theme of office culture and team-building in the virtual world: the first explores the dynamics of whether business cultures can survive if they 'stay' virtual and don't go back to being in-person as offices reopen; the second looks at the value of playing games during work hours as a way to build team connections and culture (especially during the remote pandemic environment); and the last explores how to build a strong Virtual Culture (from the authors of the book by that very name!) for those who are thinking that they do want to remain more virtual, but are trying to figure out in practice how to do so while sustaining a strong culture.

Enjoy the 'light' reading!

New Disclosure Obligations For Informed Consent And Other Reporting Requirements Under CFP Board’s New Standards Of Conduct

June 10, 2020 07:03 am 1 Comment CATEGORY: Ethics

Social Image How CFP Professionals May Disclose Material Conflicts Of Interest

One of the fundamental challenges that professionals face when providing recommendations to consumers is that the recipient may struggle to fully understand the ramifications of their decision about whether or not to accept and follow the recommendation in the first place. After all, professionals tend to be engaged with respect to matters that are especially complex or challenging – such that the average person cannot make the decision quickly or effectively on their own, and must rely on the services of a professional. Yet, in a world where consumers still must give their consent to pursue recommendations that may have adverse outcomes, it’s hard to be certain that the consumer really understands enough to give their “informed” consent in complex matters in the first place. Accordingly, various professions have evolved over time the framework of what it takes to ensure a consumer is giving “informed consent” – to act on a recommendation made by the professional with full awareness of the potential risks that it may entail.

And in its latest update to its Code of Ethics and Standards of Conduct (“Code and Standards”), CFP Board will now require that CFP® professionals obtain informed consent with respect to any recommendations they make to clients that may entail a Material Conflict of Interest, to be certain that the Client truly understands the prospective conflict before deciding whether to engage the CFP® professional. In practice, this will entail not only providing upfront information about the CFP® professional’s services and compensation (which may be delivered orally for Financial Advice engagements but must be written for Financial Planning engagements) but also disclosures of the CFP® professional’s Material Conflicts of Interest (which may be oral or written), and obtaining the Client’s informed consent (by any means desired, though clearly for professional liability protection, CFP® professionals will likely want to document this in writing!).

Fortunately, the reality is that for most CFP® professionals individually, such disclosure documents will have already been created by their RIA as their Form ADV Part 2 (for an investment adviser representative), or by their broker-dealer (as a registered representative), along with their respective Form CRSs, such that few will have to create new and separate documents themselves. Nonetheless, being aware of the obligation to provide such information and disclosures, and, in particular, the burden to obtain informed consent (and a likely desire to document it, either with contemporaneous notes in the advisor’s CRM or perhaps with a delivery-and-acknowledgment receipt), means CFP® professionals will still need to be cognizant of what it takes to comply with the new rules.

In turn, CFP Board’s new Code and Standards also expand the obligations of CFP® professionals to report external disciplinary matters to CFP Board, comply with CFP Board investigations, and adhere to CFP Board’s Terms and Conditions. Recognizing that, in the end, the CFP® marks are not a formal license (and CFP Board is not a government-sanctioned regulator), but CFP® professionals who pay CFP Board to use the CFP® marks still, in the process, agree to adhere to CFP Board’s rules… providing CFP Board with the means to ensure that CFP® professionals uphold rules of professionalism, or risk having their CFP® marks suspended or permanently revoked!

#FASuccess Ep 180: Getting A Year’s Worth Of Growth Every Month By Going All-In On A Clear Target Market, with Ryan Inman

June 9, 2020 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 180th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Ryan Inman. Ryan is the founder of Physician Wealth Services, an independent RIA based in San Diego that serves over 140 physician clients. What's unique about Ryan, though, is the way he's gone all in on the niche of serving physicians to the point of renaming his advisory firm, launching a "Financial Residency" podcast, and restructuring his entire financial planning process into ‘inpatient’ and ‘outpatient’ services, to the point that now in his fifth year of business, he's adding more clients every month than he added in his entire first year as a generalist.

In this podcast, we talk in-depth about how Ryan chose the niche of working with physicians, the mindset shift he had to go through to get comfortable narrowing the focus of his practice, how going to the FinCon Financial Bloggers Conference gave him the inspiration to actually market to and reach his niche, and how he has ultimately found that having a focused niche is making it easier to market because you don't actually need to reach a lot of people to get new clients when your niche marketing is focused.

We also talk about Ryan's financial planning services themselves. His unique fee structure of charging clients either $500 a month or $833 a month (those are his only two options), the unique expertise in student loan planning he had to develop to really serve his niche effectively, what he does for his clients upfront and on an ongoing basis to earn those monthly fees, and why Ryan ultimately had to go outside of traditional financial planning software and to use tools like YNAB to actually help his clients in the areas that they needed advice most.

And be certain to listen to the end, where Ryan talks about the importance of having your own financial foundation set before you launch your own firm and why he waited almost two extra years before going out on his own. Why even though Ryan is glad he waited to launch his firm, he regrets not focusing into a niche earlier on, and how if he could do it over again, the only thing he'd really change is finding a business partner sooner rather than later, because, in the end, it can be pretty lonely launching an independent advisory firm from scratch.