Nerd's Eye View blog

3 Ways Financial Advisors Can Get CPAs To Actually Refer Clients

May 8, 2017 07:01 am 13 Comments CATEGORY: Practice Management

Virtually every practice management study for financial advisors indicates that most advisors generate most of their growth through referrals, and that CPAs are a good "Center Of Influence" (COI) for generating those referrals. Except in practice, most financial advisors struggle to actually generate any referrals from CPAs, and referrals given to CPAs – in the hopes of reciprocal CPA referrals in return – often feels like a long walk down a frustrating one-way street.

In this guest post, Dave Zoller - a financial advisor who previously worked in a CPA firm – shares his perspective on what it actually takes for financial advisors to generate referrals from CPAs, how most advisors fail to generate referrals due to a lack of differentiation (from all the other advisors who read the same studies and are asking for the same referrals), and how to establish a proactive relationship with CPAs – that can actually generate referrals – by first working with them proactive to help solve the common problems that arise when they're preparing tax returns for (your joint) clients.

In fact, Zoller suggests that the best way to cultivate a referral relationship with a CPA is to start by deepening the relationship with the CPAs of your existing clients, where you already have a natural introduction – your common client whom you both serve. By showing how effectively you work with the CPA of your existing (joint) clients, the more encouraged the CPA will be to refer new clients to you!

So whether you've been wondering how to break into the world of generating referrals from CPAs, or have been frustrating by months or years of referring out clients to CPAs and waiting fruitlessly for reciprocal referrals that never seem to come as desired, I hope you find this guest post from Dave Zoller helpful to understanding what you need to do to break through from here!

Weekend Reading for Financial Planners (May 6-7)

May 5, 2017 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 look from CFP-and-doctor Carolyn McClanahan about what financial advisors need to consider when it comes to the potential future of health insurance for clients under the American Health Care Act (AHCA), which could substantially impact clients with pre-existing health conditions, and "early" retirees trying to bridge the health insurance gap between the end of employment and the beginning of Medicare.

From there, we have several technology-related articles, from early looks at the new Orion Eclipse rebalancing software and the new RobustWealth rebalancing and client onboarding "robo" tools, to some of the recent FinTech startups in the Envestnet | Yodlee incubator platform that are building new solutions for financial advisors (leveraging Yodlee data), and a first glimpse at a new advisor business intelligence (and advisory firm valuation) tool called Truelytics.

We also have a number of practice management articles this week, including: the rising trend of advisory firm mergers (as an alternative to just selling and exiting the firm); the common crossroads that advisory firms hit at they grow (and how to overcome them); what advisors should do to overcome "succession planning paralysis"; and tips on how to find an ideal buyer for your advisory firm if you're looking to sell (and want to be certain you get the right fit).

We wrap up with three interesting articles, all around the theme of behavior change and improving savings behaviors for clients: the first is a series of recent research studies finding that most consumers actually prefer accounts that impose otherwise "unnecessary" restrictions and penalties on withdrawals (a form of "commitment device" that actually helps us to want to save, knowing the restrictions will help us follow through successfully!); the second is a fascinating look at how to help clients think about and change their spending behaviors by grouping spending into Owe, Grow, Live, and Give categories (where the trade-offs help us weigh decisions between freedom, comfort, purpose, and abundance); and the last is an overview of the research on behavior change that we as advisors can apply in working with our clients, to help them actually follow through on the recommendations that we give them!

And be certain to check out the brief video at the end... a recent new commercial from Schwab Intelligent Advisory, highlighting the financial planning services that Schwab is now offering directly to consumers, as the firm increasingly tries to compete with outside broker-dealers that may be impacted by the DoL fiduciary rule under the tagline "Intelligent Tech, Personal Advice"... but puts itself in a position to compete with the RIAs on its Institutional platform as well!

Enjoy the "light" reading!

Specializing in (Collaborative) Divorce as a CDFA Financial Advisor

May 4, 2017 02:01 pm 3 Comments CATEGORY: Practice Management

As financial advisors move inexorably towards niches and specialization to grow their businesses and differentiate, one of the biggest challenges is simply figuring out which niche to pursue, how to actually get the expertise to pursue it, and what the business model is to serve it well. As the reality is that not all niches fit our "traditional" business models of managing assets for a fee, or implementing financial services products. A case-in-point example is the emerging divorce planning niche, and the unique role that financial advisors can play in the collaborative divorce process.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we talk live from the annual conference of the Institute for Divorce Financial Analysts (IDFA), with Justin Reckers, who has built a successful advisory business focused on the divorce niche.

For those who aren't familiar, the IDFA grants the Certified Divorce Financial Analyst (CDFA) designation, which provides the baseline education necessary to understand the unique financial planning issues involved in divorce planning. Which is helpful not only to better understand the issues a client might face when getting a divorce, but gives the advisor the expertise to become the financial expert in the new world of "collaborative divorce" - a new type of divorce process that is intended to leverage neutral third-party experts, including a financial advisor, to expedite the divorce process without the involvement of a judge or the court system.

In fact, Reckers notes that a major revenue stream of his business is charging financial planning hourly fees - at $325/hour - to serve as a financial advisor "neutral" in collaborative divorce cases, with typical hourly fees totaling up to 10,000 to $12,000 per case, and some ultra-high-net-worth divorce cases where fees can add up to $100,000 or more. A substantial hourly fee specialization opportunity, in a world where most financial advisors struggle just to bill $2,500 of their time to construct a financial plan!

Other business models in the divorce niche include doing expert witness work in divorce cases that do go to court, with the opportunity to ultimately work with the clients in those cases after the divorce has finalized as well. (Just be certain not to solicit clients during the case, which can be a conflict of interest that undermines your credibility as an expert witness!)

In fact, Reckers has had so much success in the divorce niche, that he's launched a turnkey financial planning platform - Wellspring Divorce Advisors - that teaches those who have obtained the CDFA designation how to actually build a successful advisory business in the niche. And with upwards of 2,000,000 people getting divorced every year, there's ample room for more growth amongst financial advisors in this particular niche!

But the bottom line is simply to recognize how financial advisor generalists often struggle to get paid for their time, while those who specialize in a niche - such as divorce planning - have the opportunity to get paid for their expertise, at far higher hourly rates, with the opportunity for much deeper client engagements that "just" a standalone financial plan. And unlike many niches - where the only path to expertise is personal experience and a journey of self-education - the opportunity of the divorce niche is perhaps especially appealing, given both designations like the CDFA program from IDFA to learn the requisite expertise, and financial planning platforms like Wellspring Divorce Advisors that teach how to use that expertise to execute the niche business model!

Excel Spreadsheet Productivity Tips For Financial Advisors

May 3, 2017 07:01 am 12 Comments CATEGORY: Technology & Advisor FinTech

Despite the availability of financial planning software and CRM tools, Excel spreadsheets are still incredibly popular amongst financial advisors to do everything from a "specialized" analysis of a particular client situation (e.g., evaluating internal rates of return when choosing between a pension or lump sum), to keeping track of certain task workflows or even important business metrics.

In this guest post, Derek Tharp – our Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University – provides a few Excel productivity tips for financial advisors, including how to quickly do time-value-of money calculations using built-in formulas, discounted cash flow analyses for evaluating Social Security and pension strategies, as well as some practical keyboard shortcuts for navigating Excel more efficiently.

And so, whether you are relatively new to Excel and want to learn some things for the first time, use it regularly and might want to polish up on some shortcuts to gets things done more efficiently, or need a resource to pass along to associate planners and other individuals in your firm who may have less experience with Excel… I hope that you find this guest post from Derek to be helpful!

#FASuccess Ep 018: Taking Control Of Your Advisory Business So The Business Doesn’t Control You With Angie Herbers

May 2, 2017 07:01 am 3 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the eighteenth episode of the Financial Advisor Success podcast!

This week’s guest is Angie Herbers, one of the leading practice management consultants for financial advisors, who has published numerous research studies on best practices, and authors a widely read monthly column on practice management for Investment Advisor magazine. Her consulting services are in such demand, that she has a stringent screening process to decide who to work with, and turns away almost 90% of the advisors who contact her, in search of a select group of just 15 advisors she will work with at any one time, who she believes she can best help.

What’s fascinating about Angie, though, isn’t simply that she runs an incredibly successful “lifestyle” business as a practice management consultant, but that she approaches the issue in much the same way that we as advisors approach financial issues with our own clients. In the case of our clients, it's not just about the technical planning strategies, but the client's relationship with money, and how that impacts the financial decisions they make. In the case of Angie's coaching and consulting with advisors, it's not just about the technical practice management strategies, but the advisor's relationship with the business itself, and how that impacts their business decisions.

Because in this podcast, we really talk about how the connection between an advisor and his or her advisory firm really is like a relationship. A relationship with a rather selfish entity - the business - that, for the sake of growing itself and maximizing its value, will demand more and more of your time, attention, dollars, and resources. To the point that if you don't manage and try to control the relationship, then the business controls you.

And be certain to listen to the end, where we talk about the growth barriers that financial advisors often hit as their advisory firms grow, why $350,000, $750,000, and $1.2 million dollars are key revenue thresholds that often cause new breaking points in the business, and what it takes to change the business - and sometimes, yourself - to climb over that wall and get to the other side.

So whether you’ve been feeling like your advisory business is controlling you – and wish it was the other way around – or are on the growth path, and want to prepare for the next inevitable barrier that will come, I hope you enjoy this latest episode of the Financial Advisor Success podcast!

The Latest In Financial Advisor #FinTech (May 2017)

May 1, 2017 07:01 am 1 Comment CATEGORY: Technology & Advisor FinTech

Welcome to the May 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 surprising news of two major (and unexpected) leadership changes at the leading financial planning software firms, with Advicent CEO Phil Cunningham and MoneyGuidePro President Kevin Knull both stepping down from their positions this month. In Advicent's case, the news comes as NaviPlan and Profiles continue to lag in market share, and Figlo is not yet making substantial inroads since its 2014 acquisition, while word has emerged that owner Vista Equity Partners is shopping the company for new ownership (after a 6-year hold since EISI's acquisition in 2011). On the other hand, Knull's departure from MoneyGuidePro comes on the heels of major enterprise successes, including a big deal last fall with Cetera (which beat out eMoney Advisor despite former eMoney Advisor CEO Edmond Walters being a Cetera board member!), and the adoption of Knull's brainchild, MyMoneyGuide, as the backbone for Schwab's Intelligent Advisory offering... suggesting that Knull is leaving on a high note (and given his history, will likely resurface in a leadership position somewhere in the industry again soon). In the meantime, though, this means that two of the top three financial planning software companies are experiencing leadership turnover at a critical juncture for the industry, which further opens the door to new players in the current hyper-competitive environment.

From there, the latest highlights also include:

A fascinating new advisor software survey, that looks at not only advisor adoption, but also user ratings, and reveals how often advisors stay with technology they're unhappy with (ostensibly due to the lack of data portability and the challenges of data migration?)
Major new product rollouts from TrueLytics, Orion, MaxForAdvisors, and Snappy Kraken
Oranj acquires TradeWarrior rebalancing software, and AdvisorEngine acquires Kredible
Quovo raises $10M in Series B financing
Investopedia expands its Advisor Insights Q&A platform, even as NerdWallet shuts down their Ask An Advisor solution
Morningstar announces it will launch a Model Marketplace in 2018 to compete with the likes of TD Ameritrade and Riskalyze (and of course, Envestnet itself)

You can view analysis of these announcements and more trends in advisor technology in this month's column, including the emergence of new "robo-for-advisors" platforms Investment POD and ActiveAllocator (which don't appear to be substantively differentiated from today's TAMP and rebalancing software solutions), how doing tax prep is becoming big client lead gen business (and not just for financial advisors getting referrals from CPAs), how Wealthfront is stretching for revenue by rolling out a Securities-Based Lending solution (while telling consumers to stop "getting hung up on the disclosures"), and that XY Planning Network will be running its second annual FinTech competition for financial advisor software (deadline for those who wish to enter: May 31st).

I hope you're continuing to find this new 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 29-30)

April 28, 2017 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 big news that TD Ameritrade has struck a deal with DFA that will cut transaction costs for DFA mutual funds by as much as 67% (down to $9.99/trade), potentially setting off a new pricing war with the other RIA custodians when it comes to asset managers that refuse to pay sub-TA and other revenue-sharing fees back to the platforms.

From there, we have several articles about marketing, including a look at what you should (and shouldn't) be measuring for success when engaging in social media, how a face-to-face request can be 34 times more effective than just sending an email (though with the ability to send a high volume of emails, the latter can still be more productive in certain situations!), and when it makes sense to try to publish a book as a financial advisor (hint: don't do it for the book sales, do it for the credibility it gives you to attract more clients, and get a ghost writer to help you put your thoughts down on paper if necessary).

We also have a number of practice management articles this week, focused around the theme of attracting and retaining next generation talent, including: how advisory firms are starting to formalize their career tracks as a way to compete for young talent, why having clearly written job descriptions (including criteria for advancement) are crucial to become an "employer of choice", why it matters that you formally write down your business' "core values" (and how to get started), why attracting and retaining next generation talent is essential to build an enduring business that has transferable value, and some tips for next generation advisors looking to buy into an advisory firm (and how to think about the risk of doing so).

We wrap up with three interesting articles, all around the theme of personal and professional change: the first is a look at how a key role of the financial planner is helping clients to change and adapt to an uncertain future, but our own role as financial planners is changing as the nature of money itself continues to change and evolve; the second is a look at a financial advisor who was struggling with a near-failing advisory firm, and ultimately went through a process of deep self-reflection to figure out what it would take to turn it around (including a hard look at whether he really wanted to be a business owner or not, and how much income he really wanted and needed to feel successful); and the last is a fascinating look at how the Great Depression was one of the nation's darkest and most stressful times, but also a period of tremendous productivity growth and invention, which helps to serve as a reminder that while it's not always fun to feel stressed, it's actually the stress that helps to drive us forward to achieve the things that ultimately help to bring financial success... and personal happiness, too. (So if you are wishing your life was less stressful... be careful what you wish for!)

Enjoy the "light" reading!

What Does It Take To Really Specialize In Working With Retirees?

April 27, 2017 08:14 am 6 Comments CATEGORY: Retirement Planning

In the world of financial advice, focusing on retirement planning has long been the most popular strategy. And the reasoning is quite straightforward. Just as bank robber Willie Sutton once explained why he robbed banks - "Because that's where the money is" - working with retirees means working with clients who have already accumulated substantial assets, and working with them on the retirement transition in particular means an opportunity to engage a new client when there is "money in motion". Except there's just one problem: really specializing in working with retirees entails far more than just managing retirement rollovers!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we delve into what it really takes to specialize in working with retirees, with expertise that spans far beyond just creating a diversified retirement portfolio.

In part, the challenge is simply that effectively managing a retirement portfolio, and the distributions that occur from it, is about more than just managing the investments themselves. Because retirement portfolios also have to face sequence of return risk - the possibility that even if the portfolio generates the desired long-term return, if it achieves that return with an unfavorable sequence, ongoing distributions could catastrophically deplete the portfolio before the good returns show up! As a result, the best strategy for retirement income isn't necessarily the one that produces the best return.

But frankly, retirement income issues just scratch the surface of what it really means to specialize in retirement and retirees. There are also issues such as planning for the timing of Social Security benefits, retiree-specific tax planning, making Medicare and other health insurance decisions, health issues more generally, housing wealth and reverse mortgages, housing lifestyle choices and whether to "age in place" or utilize a Continuing Care Retirement Community, handling cognitive decline and the problems that come with it, and even the emotional issues associated with death, grieving, and losing loved ones. These are the issues that retirees face, and need help with - and this is the kind of expertise advisors need to truly differentiate themselves as being retirement experts!

Of course, this all raises the question of how you actually learn to be a true retirement specialist in the first place, and where to learn all of this other stuff? Fortunately, there are some retirement-specific designation programs, such as the Retirement Income Certified Professional (RICP) program from the American College, the Certified Retirement Counsel (CRC) program from InFre, and the Retirement Management Analyst (RMA) program from the Retirement Income Industry Association, as well as specialized training programs, and a growing number of specialized conferences, too. In fact, while there are probably too many "generalist" financial advisor conferences already, we may need even more specialized conferences in the future, to support the increased importance of specializing into a niche!

But the bottom line is that if you want to be a financial advisor who truly specializes in retirement planning and working with retirees, it is going to mean doing a lot more than just focusing on a client's retirement portfolio. It's going to mean developing a much deeper understanding of the strategies and issues that are unique to this specialization!

Buying Happiness And Life Satisfaction With Greater Cash-On-Hand Reserves

April 26, 2017 07:01 am 7 Comments CATEGORY: General Planning

The classic view of cash in the world of investing is that it’s something to avoid, or at least minimize. To the extent cash is truly needed for immediate or near-term liquidity, holding some may be a necessity. But the investment goal is always to hold as little cash as possible, and put the rest to work on your long-term behalf.

Except a recent research study by Ruberton, Gladstone, and Lyubomirsky finds that maintaining a healthy level of cash-on-hand (or at least in a checking or savings account) appears to improve our feelings of financial well-being and life satisfaction. And the relationship holds up even after controlling for income, spending, and other investments, as well as age and employment status. In other words, no matter how much total wealth and income we have, we’re just not as happy unless it’s also accompanied by a healthy pile of cash (or at least, a sizable and readily available bank account).

From the investment perspective, it’s purely irrational for anyone to need to hold a substantial cash balance above and beyond what’s needed to cover actual near-term spending needs. But the research results are more understandable given the research on mental accounting, that we tend to bucket our holdings into groups of current income, current assets, and future income (or at least, assets to fund future income). Which means even if we have ample income, and ample assets for future income, we’re just not content until we also have a healthy allocation to current assets. Which in practice, means cash (or at least cash equivalents).

As a result, rather than always encouraging clients to fully deploy their available cash, perhaps instead it would be better for advisors to start by asking clients “how much cash do you need to hold to feel comfortable and sleep well at night”, and then invest what’s left around that constraint. Because in the end, what’s the point of trying to invest a little more cash for a little more return, if in the long run greater wealth buys little additional happiness anyway, but having more-than-enough cash today may have a more positive impact on financial well-being? Or viewed another way, perhaps holding some comfort cash is not “under-investing”, but simply giving up on extra yield as a way to “buy” a little more financial contentment?

#FASuccess Ep 017: Using Social Media and Blogging to Drive Business Growth As A Reformed Broker with Josh Brown

April 25, 2017 07:01 am 9 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the seventeenth episode of the Financial Advisor Success podcast!

This week’s guest is Josh Brown, a financial advisor and CEO of Ritholtz Wealth Management, and regular guest on CNBC’s The Halftime Report, but known to most in the financial advisor community through his prolific presence on social media – including more than half a million Twitter followers – and his popular finance blog, The Reformed Broker.

What’s fascinating about Josh, though, isn’t just that he’s active on social media, but that his firm has been able to turn it into real business growth. As having broken away to become an independent RIA with less than $100M of AUM in late 2013, Ritholtz Wealth Management has grown in under four years to a 13-person firm managing nearly $500M in AUM. In fact, Josh and his team get anywhere from 10-30 inbound prospect inquiries each week now, thanks to the constant publication of valuable (and entirely free!) content produced through the blogs of Josh, firm founder Barry Ritholtz, and several other advisors-who-also-write in the firm.

In this episode, Josh tells the story of how he became one of the best known voices in the industry, after starting out doing cold-calling for nearly a decade in a number of small regional broker-dealers before finally deciding to make the switch to become an investment adviser, and how the trajectory of his entire career was changed when he decided it was worth racking up some credit card debt to accept an invitation to a financial conference where he ended up meeting his future business partner. Josh also talks about how his own role in the firm has shifted and evolved as the business has grown, and the steps he takes to make sure he’s still working on the business and not just in the business.

And be certain to listen to the end, where Josh shares some of the books that have been most influential to his career, and the advice that he offers to anyone – whether a newer advisor, or an experienced one – on how to get started if you want to build your own digital presence with blogging and social media.

So whether you’ve been curious to learn how an advisory firm with a prolific blogging and social media presence turns free content online into real business, or want to hear the story of how a cold-calling broker ultimately broke out to success by becoming an investment advisers, or just want some ideas on how to build your own business with more digital marketing, I hope you enjoy this latest episode of the Financial Advisor Success podcast!