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Kitces & Carl Ep 28: Email Productivity Hacks And Getting More Done In Your Day

February 27, 2020 07:07 am 3 Comments CATEGORY: Kitces & Carl Podcast

Just about every financial advisor is intimately familiar with the overwhelm induced by an overflowing email inbox. From emails from clients inquiring about basic service requests and financial plan priorities, to team members scheduling staff meetings and service meetings, not to mention the plethora of industry newsletters, helpful educational blog updates, networking group announcements, wholesaler product reviews – on top of all the outright spam – can easily amount to hundreds of emails coming in on a daily basis!

And in addition to simply finding the time to keep up with just looking at all the email that comes in (and reading at least some of them), financial advisors also find themselves responsible for dedicating large chunks of time to actually responding to emails. Which can make it seem nearly impossible to keep up with the deluge of information that comes into an advisor’s email inbox every day! Fortunately, though, there are a few ‘tricks’ that can help keep things under control.

In our 28th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about some simple strategies they use to manage their own own sometimes-overflowing email inboxes, and the cognitive relief that a well-organized (and well-managed) email inbox can bring.

For instance, Michael has specifically configured his own system to manage the tremendous volume of email that comes in on behalf of the blog. Specifically, he has implemented a system of multiple email addresses (to route inquiries by category to different team members), inbox folders with Outlook-based “Rules” to sort email into them (for separating out newsletters to review, informational items requiring no follow-up, and follow-up items that are low- or high-priority) and a routine where email is reviewed on a daily basis.

Delegating email management can also be a very effective means to stay on top of large volumes of email, especially for busy advisors who don’t have time to review every message that comes in. An executive assistant not only can ensure that spam messages are kept at a minimum, but can also make sure that high-priority items get a timely response and, depending on the level of responsibility delegated, can even send responses on behalf of the advisor. They can also ensure that any messages that can (or should) be delegated to another team member are routed as quickly as possible.

There are also some tech tools that can aid with email efficiency, such as TextExpander (for Mac users) and PhraseExpress (for PC users), which both quickly create template language for commonly repeated email responses (which can be most useful for advisors who aren’t particularly fast typists). Microsoft Outlook has a built-in feature that allows an email account owner to designate a second person as an Assistant, who can then access the email account simultaneously from a different computer to share the responsibility of sorting through email, and helping an advisor review only the messages they really need to see.

Ultimately, the key point is that having a well-managed, organized email box allows a financial advisor to spend less time on the distracting busywork that reviewing email can be, and more time to spend on tasks that require cognitive focus and concentration – like preparing financial plans and meeting with clients. Or even to enjoy more time with friends and family!

When A Client’s Financial Problems Are Beyond Financial Advice: How (And When) To Refer Clients To A Mental Health Professional

February 26, 2020 07:02 am 3 Comments CATEGORY: Client Trust & Communication

As financial advisors know, talking to clients about money can get emotionally charged, especially when the discussion concerns major (and potentially traumatic) life events. And sometimes, clients can become so distraught or unable to face the challenging issues in their past… even as the failure to deal with those issues prevents them from moving forward in their financial future. Which can also be distressing for a financial advisor who is striving to help, but who may recognize that the help the client needs is beyond the scope of what the advisor can provide and that referring the client to a mental health professional is the best course of action.

In practice, though, the point when a referral should be made is not always clear. As while it might be obvious that a client who has expressed (for instance) suicidal thoughts, or is otherwise in acute mental or emotional distress, is in need of a mental health professional’s services, how can a financial advisor tell when a client might just be “sad” (and who might simply need an empathetic ear to move forward with their financial planning recommendations)? And when a referral is in order, how does the financial advisor actually give that referral in the first place, without offending the client and potentially driving them away?

To understand when and how to involve an outside mental health professional, it is helpful to consider how money issues can impact an individual’s emotions across a spectrum of stress/anxiety. On the one hand, even common, everyday issues such as basic retirement planning or changes in income levels may be mildly stress-inducing, while more serious issues such as a death in the family or divorce can be very upsetting. On the other hand, at the farthest end of the spectrum are issues that involve disorders and conditions that are psychologically diagnosable, such as addiction, clinical depression, and hoarding behaviors.

To decide whether a referral to a mental health professional should be offered, the first factor to consider is the financial advisor’s own comfort level with the client conversation. Some firms have specialized models designed for clients working through emotionally-charged issues (e.g., divorcees, widows/widowers, etc.); these firms often already have processes in place that can more easily accommodate these clients’ needs, which, in turn, may make it easier for advisors to work with clients themselves, versus offering a mental health referral. On the other hand, if the financial advisor is uncomfortable with a client’s emotions that arise during a conversation, the best course of action can simply be to recognize and acknowledge the client’s distress, and to offer a referral for the client to see someone who is better-equipped to help the client with their stress or anxiety. And even if an advisor is comfortable working with a client who is experiencing high levels of stress, it may still be better for the advisor to refer the client to a mental health professional if they don’t actually have the time capacity (and thus ability) to fully service the client’s needs.

Of course, there’s still the challenge of just bringing up a mental health professional to a client in an unawkward way in the first place. One way to normalize the referral process is to discuss mental health referrals to clients as part of any other referral resource (e.g., CPAs, estate planners, etc.) early in the relationship, and reviewing those resources periodically during annual service meetings, which can then help clients be more comfortable accepting the referrals should the need ever arise. For advisors uncertain who to refer to, a helpful way to identify suitable mental health professionals is for them to personally make use of the mental health professional’s services themselves, which can give them the opportunity to discuss with clients, from firsthand experience, precisely what clients can expect when making referrals to see those professionals. However, some advisors may not have time to vet a network of referrals, or may have clients in need of immediate attention from a mental health professional. In these instances, advisors can work directly with the client to make calls together to find a suitable professional (or ask the client for permission to reach out to friends and family who can help with this).

Ultimately, the key point is that financial advisors should not be afraid to refer clients to mental health professionals, and that it’s perfectly OK to recognize that there is a level of emotionally-charged issues that clients experience, which advisors are not necessarily trained and equipped to handle (especially when those issues impact, but themselves are outside the purview of, financial planning itself). Advisors who are able to identify a network of mental health professionals that they can have on hand to use as referral sources, can, over time, develop a strategy to broach the subject of making referrals with clients in the first place, and make the process of providing mental health referrals a natural and comfortable process not only for themselves but for their clients as well.

#FASuccess Ep 165: Navigating Broker Protocol When The Firm You Start With Isn’t The One You Want To Stick With, with Steve Kampschmidt

February 25, 2020 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 165th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Steve Kampschmidt. Steve is the founder of Freedom Found Financial, an independent RIA based in northern New Jersey that oversees just over $20 million in assets under management for 30 affluent clients.

What's unique about Steve, though, is that he just recently formed his advisory firm having broken away from the training program at a major wirehouse after realizing that with an entrepreneurial mindset and a goal of building a lifestyle practice with good work/life balance, it was simply far more economical for him to operate his own firm and control his own expenses than to give the majority of his income up to the grid.

In this episode, we talk in-depth about how Steve built his initial base of clients at the wirehouse through modern cold-calling techniques leveraging ZoomInfo, the salary base that the wirehouse provided while he built his initial base of clients, the type of alternative non-AUM business model he decided he wanted to create that necessitated a shift away from the wirehouse, and why he's now operating with the blend of annual retainer fees and monthly subscription fees for various client types.

We also talk about where Steve went to find the information and consulting support he needed to make the transition smoothly. What Steve actually went through to comply with the Broker Protocol when leaving his firm, the factors that led him to select Fidelity as his custodian of choice, the way he built out his advisor technology stack, and why he chose not to purchase any kind of portfolio performance reporting software and to rely solely on eMoney's financial planning portal instead.

And be certain to listen to the end, where Steve talks about realistic expectations and how many clients will stick with you if you choose to leave a large firm and its national brand, his tips for career-building in the early years especially as a career changer, and why in the end, the biggest key to success is simply having the confidence in yourself, and being willing to make whatever changes it takes to service your clients the way that you want to serve them.

The One Meeting Close: Reducing Business Development Costs By Restructuring The Advisory Firm’s Sales Process

February 24, 2020 07:05 am 4 Comments CATEGORY: Marketing

For most financial advisory firms that seek to grow, it takes a significant commitment of time to market to, attract, and ultimately close prospective new clients. But as advisory firms grow, the cost of that time it takes to attract clients through marketing efforts and close them through sales efforts becomes commensurately more expensive as the business owner’s own time becomes more valuable. Which can be problematic for firms that want to grow, and the cost to acquire new clients becomes more expensive as the business (and cost of that time) grows, becoming inherently less scalable the larger the business gets … unless the firm updates its marketing and sales methods to match the firm’s (newfound) size and resources.

In this guest post, Angie Herbers – Chief Executive and Senior Consultant at Herbers & Company, an independent management and growth consultancy for financial advisory firms – explains why advisory firms need to adapt the sales engagement methods that they use if they want to continue growing in a sustainable (and time-cost-effective) manner. As notably, while industry benchmarking statistics suggest that an average financial advisory firm will spend about 3% of revenue on marketing, these numbers only include direct marketing expenditures (e.g., online ads, consultant expenses, etc.), and don’t include the actual value of the advisor’s potentially-quite-costly time spent on acquiring clients (e.g., attending networking events, meeting with prospects, etc.). Furthermore, as a financial advisor’s firm grows and the advisor gains experience and expertise, their time generally becomes more valuable; thus, if they spend the same amount of time on client acquisition as they did when their time was worth less, the total cost actually spent on marketing can significantly increase!

In light of this growing premium on an advisor’s time as a part of the marketing and sales process, how should an advisor most efficiently spend their time on business development efforts? To address this, it’s important to consider the three primary processes in any financial advisory firm: A Marketing process to establish awareness that the firm exists, a Sales process to engage prospective clients, and a Client Service process, to cultivate lasting trust with clients and to give them a reason to stay with the firm. While many firms focus primarily on the Marketing or the Client Service process to address growth problems, the reality is that, more often than not, problems with growth (and time-cost-consuming nature) reside mainly in the Sales process – the stage in client acquisition that begins when a prospect schedules a first appointment, and ends with a signed contract.

For most advisory firms, there are generally three methods of engagement an advisor can use in the sales process. The best method for any firm to use will often depend on the approximate revenue of the firm. The “Do” Method involves actually doing something for the prospective client to show them what they might expect to receive from the firm and is most valuable for newer firms (generally those with less than $750,000 in annual revenues) who have not yet established a brand identity. Clients seeking these firms are looking for value and are most interested in what the firm has to offer them. The “Show” Method is less labor-intensive and involves showing samples of what the firm has to offer to the client (e.g., a sample financial plan or investment policy statement); in other words, these firms are typically well-established and can rely on their brand value with compelling stories, supported by “showing” what they offer. While this is more efficient than the “Do” Method, it does still require time to prepare samples to show a target clientele and is often more appropriate for firms with annual revenues between $750,000 and $3 million. The “Tell” Method is the most time-efficient and relies on an advisor’s own confidence in the firm to tell the client specifically how they will address the client’s needs. There is no “free work” done or samples offered because an advisor in a firm with more than $3M in annual revenue can generally rely on their firm’s brand value and the story behind the firm alone to establish trust with a new client. Which is important, because considering the high value of an advisor’s time at this level, (still) using the “Do” or “Tell” methods can be exponentially more expensive (than it may have been when the firm had less revenue and the advisor’s cost of time was less).

Ultimately, the key point is that the Sales process is a distinct step from the Marketing and Client Service processes and that, for many firms, growth problems can most effectively be addressed by adjusting how the Sales process is carried out. While newer firms with less revenue can benefit most using the “Do” method of offering free work to prove to clients they are worthy of their trust and engagement, firms with more revenue can benefit from the more efficient “Show” method of offering work samples and demonstrations to back up their firm’s brand identity, while firms with revenue generally over $3M are often the most well-established and generally have widespread brand recognition… that advisors can leverage to simply “Tell” a client why they should be engaged, ideally (and cost-effectively) ‘closing’ the deal after just one meeting!

Weekend Reading for Financial Planners (Feb 22-23)

February 21, 2020 03:00 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 industry news that wirehouse Morgan Stanley is acquiring E*Trade for $13B, in a major shift for the wirehouse to move (back) towards the mass affluent with a more online digital offering via E*Trade, which opens a new pathway to E*Trade's significant business of administering employer stock plans (that can now be referred to Morgan Stanley's own advisors)... and that raises significant questions about whether E*Trade will even remain in the RIA custody business (and/or whether independent RIAs would want a custodian owned by a wirehouse competitor), and in turn, whether the potential loss of E*Trade as an RIA custody option could put even more pressure on the Department of Justice's view of the prospective Schwab-Ameritrade merger (which may have even been a factor in Morgan Stanley's timing to announce the E*Trade deal in the first place?).

Also in the news this week is a new FINRA exam sweep of how brokerage firms (including the ones serving as RIA custodians) plan to make their money in a zero-commission future and whether the prospective conflicts of interest in their alternative revenue streams are being sufficiently disclosed to clients (and their advisors), and the emerging surge in a new kind of "Registered Index-Linked Annuity" (the "RILA") that is becoming an increasingly popular risk-managed variable annuity alternative to the living benefit riders of old.

From there, we have several practice management articles, including a review of the big themes from the recent T3 advisor tech conference (from more mobile apps and integrations to an outright focus on advisor time efficiency), the ongoing rise of virtual firms (from young advisors to more senior, small firms to large), and a fresh look at other ways to measure what constitutes a "good" advisory firm (beyond just rankings of their AUM and recent growth).

We also have a few investment-related articles, from a look at the new SOFR rate that is expected to replace LIBOR in two years (and the complications that loom between now and the end of 2021 for that transition to happen), the concerns of a recent proposal from the mutual fund industry to shift more of their disclosures to be online (instead of mailed or emailed out directly), and a candid look at whether direct indexing is really a threat to the ETF industry (or "just" a kind of alternative product for certain client needs... albeit one that might still soon become a trillion-dollar AUM opportunity?).

We wrap up with three interesting articles, all around the theme of better communications with clients: the first looks at what it takes to finally see clients who are difficult to schedule for meetings (recognizing that the real problem may be that the advisor's 'check-in' meetings aren't really actually all that valuable to the client and that a better purpose is often necessary!); the ways that advisors sometimes unwittingly damage their empathy with clients in an attempt to prove or defend their own professionalism; and some tips on how to have and get through the sometimes-difficult conversations with clients that arise (and how best to introduce a difficult conversation where there's never a 'good' time to bring it up)!

Enjoy the 'light' reading!

Strategies To Mitigate The (Partial) Death Of The Stretch IRA

February 19, 2020 07:04 am 13 Comments CATEGORY: Taxes

Passed by Congress in December 2019, the “Setting Every Community Up For Retirement Enhancement (SECURE) Act” introduced substantial updates to long-standing retirement account rules. One of the most notable changes was the removal of the ‘stretch’ provision for certain non-spouse designated beneficiaries of inherited retirement accounts and the introduction of a “10-Year Rule” requiring those beneficiaries to deplete the entire balance of their inherited retirement account within ten years after the original owner’s death.

Notably, though, not all beneficiaries will be impacted by this new “10-Year Rule”. Instead, the SECURE Act identifies three distinct groups of beneficiaries: Non-Designated Beneficiaries (i.e., non-person entities such as trusts and charities), Eligible Designated Beneficiaries (i.e., individuals who are spouses of account holders, those who have a disability or chronic illness, those not more than 10 years younger than the decedent, and minor children of decedents or certain “See-Through” trusts benefiting such persons), and Non-Eligible Designated Beneficiaries (i.e., any individual or “See-Through” trust that qualifies as a Designated Beneficiary but is not an Eligible Designated Beneficiary). While Non-Designated Beneficiaries and Eligible Designated Beneficiaries are generally subject to the same rules that were in place prior to the SECURE Act (either the 5-year rule or stretching over life expectancy, respectively), Non-Eligible Designated Beneficiaries are now subject to the new 10-Year Rule, from trusts to adult children and more.

Given these substantial changes, there are many strategies that advisors can use to help their clients impacted by the new more-restrictive stretch rules, whether they be the (Non-Eligible) designated beneficiary of an inherited retirement account (trying to manage the compressed time window for distribution) or the original account owner themselves still planning for the future (to minimize the tax burden of account distributions in what is now a non-stretch world for many).

Some options available to Non-Eligible Designated Beneficiaries include spreading distributions out across a time frame for as long as possible to reduce annual income from the account, strategically timing withdrawals such that larger distributions are made in years with lower taxable income (e.g., after retirement), or simply leaving the account balance alone for as long as possible (and withdrawing everything at the end of the tenth year when required to do so).

Account owners themselves also have options to mitigate the tax impact for their heirs, including increasing the number of beneficiaries on their accounts to spread out and therefore decrease taxable income received by each beneficiary, and strategically allocating account shares based on beneficiaries’ anticipated income tax brackets to maximize the tax efficiency of those distributions. Alternatively, lifetime partial Roth conversions of tax-deferred retirement accounts can reduce (or eliminate altogether, if converting the full account) the tax burden on beneficiaries, though a careful analysis should accompany this strategy to determine how much of the original accounts should be converted to begin with (to avoid simply causing an even-higher tax burden today). Charitable Remainder Trusts can also be used to provide a potentially steady income stream for the beneficiaries (along with providing a gift to a qualified charity at the end of the trust’s term).

Ultimately, the key point is that, while Non-Eligible Designated Beneficiaries must now contend with the new SECURE Act 10-Year Rule for inherited retirement accounts, advisors can use several strategies to help clients minimize the tax impact of distributions from those accounts. Some can be implemented for the beneficiary after they inherit the account, while others can be used by the account owner themselves during their lifetime before the account transfers to the beneficiary. Although, in some cases, the best strategy may be simply to accept the 10-year rule as is, leave the account alone for as long as possible, and liquidate the inherited retirement account as required at the end of the 10-year window!