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#FASuccess Ep 171: Transitioning From Successful Wholesaling To Financial Advisors To Becoming One Instead, with Tom Kennedy

April 7, 2020 07:06 am 3 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 171st episode of Financial Advisor Success Podcast!

My guest on today's podcast is Tom Kennedy. Tom is a wealth advisor at Global Wealth Advisors, a hybrid advisory firm based in Houston, Texas where Tom works with a base of nearly 400 clients.

What's unique about Tom, though, is that he made the transition into being a financial advisor from a successful 10-year career of working as a wholesaler to advisors, allowing him to get intimately familiar with the advisory firms in his area and network his way to a firm that was acquiring a book of 400 clients at the exact moment that Tom was ready to make a transition.

In this episode, we talk in-depth about what it's like to shift from the wholesaler business to the advisory business. How the required skillset of wholesalers to meet with and talk to lots of people is a natural fit for working as an advisor as well, the way the advisory business allows for more and deeper relationships than the traditional volume of required meetings for wholesalers, the appeal of shifting into an advisory business where every year doesn't start back at $0 the way the commission-based wholesaling business does, and the real-world challenges of making a transition away from a wholesaling job that typically pays far more in the short run than most advisory firms could feasibly offer, but why it was still appealing to Tom to make the shift anyway, for its long-run potential in the advisory business.

We also talk about how Tom actually made the transition itself. Why he decided to get a CFP certification while he was still working as a wholesaler, the way he approached firms to interview for opportunities, how he assessed the various firms that he was coming in contact with to figure out which would be the best for him to work with as an advisor, and why, even as someone with deep experience and a natural skillset for business development, it was still more appealing for him to find a role where he could take over an existing book of clients and not just start developing his own client base from scratch.

And be certain to listen to the end, where Tom shares why, despite the long-term earning potential of the advisory business, he found it appealing first and foremost as a change in work-life balance from the 10-year grind as a wholesaler, the biggest surprise to him in transitioning from an employee-wholesaler model to becoming an independent advisor, about what it really means to be an independent business owner, and the lessons that Tom incorporated into starting his advisory firm based on what he'd seen as best practices in other firms from all his wholesaling years.

The Latest In Financial Advisor #FinTech (April 2020)

April 6, 2020 07:08 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the April 2020 issue of the Latest News in Financial Advisor #FinTech – 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 and wealth management!

This month's edition kicks off with the news that Vanguard is now actively piloting its “Digital Advisor” robo-advisor platform, which is being positioned as a ‘downmarket’ 0.15%/year fully automated alternative at half the price of its human-CFP Personal Advisor Services (at 0.30%/year)… though by building various custom allocations of existing Vanguard funds, looks in practice more like a “custom target date fund” solution that is actually pricing up Vanguard’s existing funds at 3X the cost (as a fee for designing the asset allocation) instead?

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

Envestnet partners with Compliance Solutions Strategies to build a new “Form CRS Automator” with the June 30^th effective date (and May 1^st first filing date) for Form CRS looming large
Schwab announces that its new PortfolioConnect service has rapidly grown to more than 1,000 RIAs, immediately making it a contender as one of the most popular portfolio performance reporting solutions for RIAs (and free for Schwab-only RIAs!)
Morningstar acquires Canadian financial planning provider PlanPlus to compete internationally, but in the mix, will get the opportunity to scale up FinaMetrica as a competitor to Riskalyze in the US?
fpPathfinder launches a Redtail CRM integration to facilitate interactive financial planning checklists for client due diligence and compliance purposes.

Read the analysis about these announcements in this month's column, and a discussion of more trends in advisor technology, including Addepar raises another $40M of capital as it launches “AddeparGo” to compete with middle-market RIAs and broker-dealers, a slew of companies from Hidden Levers (portfolio stress testing) to AdvisorPeak (portfolio rebalancing) offering free access to their software amidst the coronavirus bear market, and an explosion of open APIs as more AdvisorTech providers relegate themselves to the background as “engines” to power advisor dashboards that are increasingly being built within CRM systems.

And be certain to read to the end, where we have provided an update to our popular new “Financial Advisor FinTech 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 (Apr 4-5)

April 3, 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 news that, even as the country is still absorbing the outcomes of last week's $2 trillion CARES Act stimulus, President Trump has begun to advocate for another $2 trillion round of stimulus, this time focused on major infrastructure spending that both Democrats and Republicans have acknowledged is long overdue, but raising the question of whether the parties can come together to pass such bipartisan legislation on the heels of what has already been the largest economic stimulus legislation in history.

Also in the news this week is a flurry of focus on the new Paycheck Protection Program (PPP) under the CARES Act as it opens its application process today with the potential for small businesses (including advisory firms) to receive up to $10M in tax-free forgivable loans to support their employees (but on a first-come first-served basis and the risk that the $350B allocation will have more demand than dollars to allocate), and the news from the SEC that, despite economic turmoil and business disruptions, it is sticking with its June 30th effective date for Regulation Best Interest (Reg BI).

From there, we have a number of articles about how advisors are managing the current investment environment, including a discussion of how rebalancing software has found its moment to shine amidst the pressure for rapid rebalancing trades where taking days, or even just hours, to queue up trades can result in a material difference in price, and how market turmoil is leading to an uptick of interest in third-party models and even entire TAMP platforms, as small-to-mid-sized advisory firms realize the time challenges of doing both a burst of reallocating portfolios and reassuring clients at the same time.

We also have a few articles on the current work-from-home environment, including tips about how to avoid "Zoom bombing" (where hackers can interrupt your Zoom meeting with offensive material!), tips on how to improve your webcam setup to be a little more visually flattering, and some additional suggestions on how to remain productive when (suddenly) transitioning to a new work-from-home environment.

We wrap up with three interesting articles, all around the theme of leadership in these challenging times: the first explores the importance of developing team members to have their own autonomy to take risks and make decisions (especially in a bear market when there's too much to be done for the firm owner to make all the decisions); the second explores how fear in the midst of business risks can unwittingly cause advisory firm owners to clamp down at the exact moment it's crucial to empower employees more; and the last provides some helpful tips about how to be an effective leader in times of crisis... including recognizing that even if your advisory firm is not in trouble, employees don't necessarily know that, and still need enhanced communication from the leadership, if only to give them confidence that the firm really will be OK!

Enjoy the 'light' reading!

Quickly Maximizing Paycheck Protection Program’s (PPP) Forgivable Loan Opportunity For Financial Advisors

April 2, 2020 11:19 am 28 Comments CATEGORY: Practice Management

Last week, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a $2 trillion emergency fiscal stimulus package with the aim of mitigating the economic damage created by the Coronavirus pandemic by introducing a wide range of provisions for individuals, businesses, healthcare entities, and state and local governments to meet short-term cashflow demands. For financial advisors with clients who are small business owners (including self-employed individuals and independent contractors), or for financial advisors who are business owners themselves, one of the most compelling provisions of the Act is the Paycheck Protection Program, which authorizes up to $349 billion in forgivable loans, allowing small businesses to pay their employees during the crisis.

Small business owners who have 500 or fewer employees (with limited exceptions), including self-employed individuals, may be able to benefit from the program and can request loans for up to 2.5 times the average monthly payroll expense over the previous year (with total loan amount capped at $10M). Applicants must make a good-faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19.

For small businesses and sole proprietorships, applications will be accepted beginning on April 3, 2020, and for independent contractors and self-employed individuals, applications will be accepted beginning on April 10, 2020. Loans will have a maturity period of 2 years and a fixed interest rate of 0.50%. Notably, any amounts spent on certain items during the first 8 weeks after the loan is made may be eligible for forgiveness. As an added benefit, amounts that are forgiven will even be excluded from taxable income for the year! Expenses that will be eligible for forgiveness include:

Payroll costs, including benefits, which include:
- Wages and other compensation capped at $100K per employee;
- Vacation, parental, family, medical, and sick leave benefits; and
- State/local tax on compensation.
Rent pursuant to a lease in force before February 15, 2020;
Utilities which began before February 15, 2020; and
Interest on mortgage obligations incurred before February 15, 2020.

In order to qualify for forgiveness of these expenses, the business must maintain the same number of employees in the eight weeks following the date of loan origination that it had from either February 15, 2019, through June 30, 2019, or from January 1, 2020, through February 29, 2020. However, business owners have the opportunity to restore employment and salary levels until June 30, 2020, for any changes that occurred between February 15, 2020, and April 26, 2020. Additionally, compensation for employees who receive less than $100,000 annually cannot be reduced by more than 25% relative to the most recent quarter. To the extent these requirements are not met, the amount eligible for forgiveness will be reduced.

While loan payments will be deferred for a period of six months, interest on outstanding amounts will accrue during this time. Loans are provided by lenders approved by the SBA and will be guaranteed by the SBA.

Of particular importance is the first-come, first-serve nature of the Paycheck Protection Program. Ultimately, this means that applying soon, as early as tomorrow, April 3, 2020, may give a business the best chance to receive a loan that may ultimately be forgiven.

Thankfully, the Paycheck Protection Program loan application is a fairly straightforward 4-page document that is already available online. Institutions that will be able to accept the applications and originate these loans on behalf of the SBA include SBA-approved lenders, Federally insured banks and credit unions, and other lenders that who are specially approved by the SBA to offer Paycheck Protection Loans.

Advisors should also consider how Paycheck Protection Program loans may impact other benefits available via the CARES Act. Notably, acceptance of such a loan makes a business ineligible for the Employee Retention Credit (of up to 50% of up to $10,000 of wages per employee), while forgiveness of such a loan makes a business ineligible for the deferral of payroll taxes (through the end of 2020) that would otherwise be allowed.

Ultimately, the key point is that the Paycheck Protection Program offers advisors and other small business owners an incredible opportunity of relief from the crisis at hand, and financial advisors can play a key role in helping their clients navigate the process of applying for and managing the use of loan proceeds.

Why More Emotion – Not Less – May Be Needed To Make More Rational Financial Decisions

April 1, 2020 07:47 am 1 Comment CATEGORY: Client Trust & Communication

With the recent market turmoil driven by the coronavirus pandemic, people around the world are understandably worried not only about the safety of their loved ones but also about the status of their life savings. In turn, financial advisors are working hard to help their clients think about (sometimes substantive) mid-course corrections to their plans but, at the same time, avoid panicked emotional reactions that could have even more detrimental effect down the road, and instead try to remain rational about their portfolio decisions. Yet the irony is that, in some circumstances, the process of becoming more emotional may actually play a crucial role in helping us address our irrational beliefs, and therefore the path to more rational decision-making may actually demand that we get more emotional first!

Research has found that emotions can play an important role in influencing decision-making by helping us form predictive models of the world that we are navigating. Our “emotional brains” can associate certain emotions with past memories and experiences that become encoded in our long-term memory (a process referred to as memory “consolidation”). Often this works well (e.g., don’t be mean to my friend, because then they won’t be my friend, and then I’ll be sad), but sometimes our emotional learnings can be triggered even when it is inappropriate for a given context, and this can lead to harmful rather than helpful behavior (e.g., don’t be assertive, because assertive people are rude, and people won’t like me if I’m rude).

In their book, Unlocking the Emotional Brain (UtEB), psychotherapists Bruce Ecker, Robin Ticic, and Laurel Hulley present a model of how emotional learning helps us navigate the world, and, importantly, how we can go about updating our emotional learning when it is leading us astray. According to the authors, we must engage in a process of memory “reconsolidation” in order to modify our emotional beliefs. The key to successful memory reconsolidation is to hold an emotional learning that is harming our decision-making in our consciousness—which involves getting into an emotionally activated state that really brings this emotional experience to the forefront of our mind—while holding some other experiential memory that contradicts the harmful emotional learning in our consciousness simultaneously. While our minds will generally be highly resistant to rationalizing away an emotional learning, the juxtaposition of two experiential memories in our consciousness simultaneously allows us to “unlock” a memory (i.e., deconsolidate a memory) and then change and “re-lock” that memory (i.e., reconsolidate) with some improved predictive model of the world (e.g., assertiveness isn’t always rude; perhaps we should be more assertive in the workplace than we are at a dinner party).

This idea has a lot of overlap with concepts such as Brad Klontz’s “money scripts” (i.e., beliefs about money which are so strong that we just act them out unconsciously). For instance, suppose John believes all rich people are evil (a money script) because some rich landlord wronged his family as a child. While there may be some logical basis for John’s belief in a very narrow context (e.g., perhaps his landlord truly did commit an evil act against his family), he’s currently overgeneralizing and that can be harmful. A key insight of UtEB is that we can’t just point this fact out to John and expect that the emotional learning will go away. Rather, we need to help him both unlock and modify this emotional learning by holding two contradictory experiential memories in his consciousness at the same time. The authors argue that, intentionally or not, many forms of therapy actually facilitate this type of juxtaposition which enables us to change our beliefs.

Similarly, in the current environment of turbulent markets, it may be important to acknowledge that we cannot simply rationalize clients away from their emotional beliefs. If a client is engaging in emotionally-driven investing, that investing may be rooted in some past emotional learning. Logic alone is not necessarily going to be enough to convince clients to stay the course. Rather, advisors may need to be able to help clients reconsolidate their emotional memories, which may require getting more emotional first before clients can update their predictive models of the world to incorporate the wisdom of not jumping ship. This insight may also be useful when we encounter passive non-compliance (e.g., a client who agrees to take action during a meeting, yet fails to ever do so), as passive non-compliance might stem from a client’s ongoing (but perhaps unspoken) struggle with and emotional belief.

Ultimately, the key point is that sometimes more emotion, not less, is first needed to help clients make better financial decisions. Advisors can assist in this process by engaging clients in conversations and exercises which may help both identify the root cause of some problematic behavior (e.g., an emotional learning underlying a money script) as well as lived experiences which contradict this emotional learning and therefore can be used to facilitate a process of updating our predictive models of the world to better align with reality. Advisors who learn to do this well can reap the rewards of truly helping their clients improve their financial decision-making!

#FASuccess Ep 170: Eschewing The Industry’s ‘Growth Imperative’ And Crafting Your Advisory Business With Intention Instead, with Patrick Tucker

March 31, 2020 07:01 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 170th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Patrick Tucker. Patrick is the founder of True Measure Wealth Management, an independent RIA based in Omaha, Nebraska, that oversees nearly $150 million of assets under management for 89 client families. What's unique about Patrick, though, is his background in business operations and financial management, from having started his career at UPS, and how he's translated those business management skills to run his own advisory firm. Not necessarily to grow and scale the largest business he can, but to very intentionally craft an advisory firm to achieve his own personal goals instead.

In this episode, we talk about how Patrick built his very intentionally designed advisory firm. The two niches he forms with executives from transportation companies and small local business entrepreneurs like himself, how he splits his advisory fee structure between AUM fees for clients with portfolios he can manage and three tiers of flat planning fees from $8,000 to $16,000 a year for the clients in this niche who may have significant wealth but not in a liquid form to manage. The key business metrics that Patrick focuses on to ensure he's spending his time and the business resources properly, and the three P's – personality, participation, and profitability – that Patrick uses to evaluate each prospective client to decide if he wants to work with them in the first place.

We also talk about Patrick's journey through the advisory business, why he decided to transition from the independent broker-dealer environment to the RIA channel, how he was ultimately able to nearly triple his business in the first two years after he dropped his affiliation with FINRA to go fee-only, why Patrick chooses to use contractors and outsourcers and to keep his internal team very lean, and how Patrick does regular process reviews internally with his staff member to evaluate whether they're really doing the right thing for clients and whether those things are really being done in the most efficient manner possible.

And be certain to listen to the end, where Patrick shares how he overcame the growth imperative pressure that the industry tends to put on all of us as advisors that we have to grow, grow, grow; even if we don't really want or need to grow anymore for our own personal goals. The way Patrick's own path changed by getting involved with Strategic Coach, and why he ultimately decided to launch his own coaching business for advisors to teach them how to craft their own intentionally designed businesses to serve their own goals as Patrick did with his own firm.