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#FASuccess Ep 164: Making The Hard Transition From Financial Advisor To Business Owner Of Your Advisory Firm, With Julia Carlson

February 18, 2020 07:05 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 164th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Julia Carlson. Julia is the founder and CEO of Financial Freedom Wealth Management Group, a hybrid RIA based in Newport, Oregon, that oversees nearly $300 million of assets under management for almost 1,000 client households.

What's unique about Julia, though, is the way that an unfortunate car accident that her daughter was in led Julia to transition very quickly from being the lead advisor that ran her own firm to expanding her staff and becoming the business owner of the advisory firm instead, if only out of sheer necessity of finding the time she needed to support her daughter's recovery, but in a way that allowed the firm to more than quadruple in the eight years since.

In this episode, we talk in-depth about Julia's journey through her advisory career. From her challenges early on gaining professional credibility as a young female advisor where a prospect once told her she was too pretty to be a financial advisor to the way she got her foot in the door talking to small local business owners about their retirement plans and building wealth outside of their businesses. How reading Dave Ramsey's "Total Money Makeover" launched Julia's path towards a more holistic planning-centric approach to clients and the way that she built her client base in the early years with Ramsey's Endorsed Local Provider referral program, now known as SmartVestor Pro.

We also talk about the transformation that Julia's business had to go through, almost literally overnight, when she got the call from her own client appreciation event that her daughter had been struck by a drunk driver and was being airlifted to the hospital in critical condition. How the pain of being forced to try to run her business from the ICU while being with her daughter during recovery led Julia to hire a president to take over running the firm on a day-to-day basis, the way that shift ended out allowing Julia's firm to double in size from $60 million to $120 million just 2 years later, as her time and focus were freed up for growth, and how the firm's adoption of Gino Wickman's Entrepreneurial Operating System has allowed the business to run even more efficiently as it more than doubled again over the past several years.

And be certain to listen to the end, where Julia talks about the real-world challenges of trying to let go of having so much control in your business, or as Julia puts it, how to stay in charge even if you're not in control anymore, the way that she took a hard look at everything that does and doesn't energize her, from week-to-week, to figure out her own strengths and where she should be focusing her time, and how the hardest thing to do in the end was letting go of client relationships but how, once Julia acknowledged that it was a crucial step, the firm quickly figured out how to create an internal training program to ensure that other advisors would service clients up to Julia's standards.

How Advisory Firms Can Leverage EOS To Systematically Manage And Grow Their Firms

February 17, 2020 07:03 am 2 Comments CATEGORY: Practice Management

As the RIA industry’s continued growth has catapulted more and more firms across the $100M (or even the once-unthinkable $1 billion) AUM threshold and transformed many practices into true businesses, many advisors are finding themselves as “accidental business owners” as their firms have grown beyond themselves as the original founders and into professionally managed sustainable enterprises.

The challenge, of course, laid out perfectly in Michael Gerber’s eMyth, is that as our industry has professionalized, it has required many “accidental business owners” and their firms of all shapes and sizes to elevate virtually every aspect of how their businesses are run, now that it’s no longer just the firm owner themselves and perhaps an assistant or associate. Managing even a small RIA of a half dozen individuals and beyond now requires firm owners and/or management to be able to effectively develop and communicate a compelling vision, foster a culture centered on execution of key objectives, build processes for identifying and solving key issues, and, most importantly, implement a framework for managing and leading people.

Enter Gino Wickman’s Entrepreneurial Operating System, outlined thoroughly in his seminal book, Traction. The incredibly simple, yet highly effective framework (if implemented correctly) has gained momentum over the last five years across small to mid-sized businesses, and has specifically gained popularity with RIAs across the country in recent years as a means of professionalizing their businesses as they hit that 6+ employee mark, and drawing focus to the six key aspects of managing any business: vision, people, data, issues, process, and traction.

In this guest post, Matt Cosgriff, Wealth Management Group Leader at BerganKDV Wealth Management, shares his unique insights on how to leverage EOS to professionalize an RIA, having been through the process in his own firm. In his role leading a $1 billion-plus RIA inside of BerganKDV (a regional professional services firm offering tax, audit, payroll, and technology solutions), traction has not only allowed the wealth management business to stay fully integrated with the broader organization which uses EOS, but has produced Traction—sustainable results—over the last ten years of its use.

In his firm, Matt and his team have successfully implemented all six components of EOS starting with “Vision”, by implementing the Vision/Traction Organizer (V/TO) tool to clarify and communicate the firm’s core values and focus, long- and short-term organizational goals (including “Rocks”, the important 90-day goals identified each quarter), marketing strategies, and key issues. Focusing on the “People” framework, the firm has been able to identify the right people for the right roles by finding those who “get it” (i.e., they understand the role), “want it” (i.e., they have a genuine desire to do the job successfully), and have the “capacity to do it” (i.e., have the skill and ability to do the work). The “Data” component has been used to create and customize “scorecard” systems for leadership, departmental teams, and individual employees to benchmark performance, which in turn facilitates identifying and addressing the “Issues” that may deter from achieving goals.

The development of documented and agreed-upon core “Processes” in the firm is fundamental to achieving consistent and excellent customer client experiences, which, taken together with the other EOS components, ultimately leads to creating the last EOS component, “Traction” – the continual organizational momentum that allows a firm to grow and achieve its goals – monitored continuously through weekly “Level 10” check-in meetings.

Whether you’re a CEO, Director of Operations, new advisor, or client service associate inside an RIA of any size, Matt’s breakdown of EOS outlines practical insights for how to leverage the key aspects of Traction to professionalize your organization.

Weekend Reading for Financial Planners (Feb 15-16)

February 14, 2020 02:54 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the ongoing industry drama of the prospective "Schwabitrade" merger, with a new public "Pledge" from Schwab that it will accept all RIAs regardless of AUM and without any custody fees, buzz that Fidelity will soon require a larger subset of least-profitable RIAs to begin paying a platform custody fee, and Pershing rethinking its prior $250M AUM custody minimum as it too positions to capture potential "NeverSchwab" RIAs that have been rejected by Schwab in the past when they were small and may not want to return from TD Ameritrade to Schwab in the prospective merger.

Also in the Schwabitrade news this week is the fresh revelation from a recent Schwab mid-quarter Business Update to Wall Street that, for the sake of acquisition expediency, they will not likely retain TD Ameritrade's popular (and most open architecture) VEO platform and instead anticipate keeping their own Schwab systems at the core, simply augmenting them with TD Ameritrade technology as it deems appropriate, amidst the latest buzz of what's worrying the advisor community as the Schwabitrade deal continues to ripple (beyond just RIAs themselves on the TD Ameritrade platform, and the broader potential impact to the entire advisor technology ecosystem).

From there, we have several articles on industry regulation, including some pushback from advisor industry associations about the SEC's proposed relaxing of the RIA advertising rules as being a welcome change but one that may put too much compliance burdens all at once on RIAs (as virtually all client communication may be scooped up as being 'advertising' under the new rules), a newly approved model regulation from the NAIC on a "best interests" standard for annuity agents that in practice simply repeats FINRA's existing non-fiduciary suitability requirements, positive progress on NASAA's recent model rule to prevent financial exploitation of seniors (making it easier and safer for advisors to intervene on their clients' behalf), and a new proposal from NASAA to potentially require all advisors under an RIA to obtain 12 hours per year of continuing education credits.

We wrap up with three interesting articles, all around the theme of trying to clean up the advisor industry: the first highlights how lobbying firms representing Wall Street brokerage firms and insurance and investment products continue to drastically outstrip the spending of actual financial advisor advocacy organizations like the IAA, FPA, and NAPFA; the second looks at the emerging regulatory challenge of 'fake comment letters' that create the impression of widespread support or opposition for proposed regulation but in reality are simply fake spam (and may have played a role in the DoL fiduciary rule); and the last is a frustrating profile of an "advisor" who has repeatedly been barred and fined (by both an individual state and then nationally by the SEC), and even convicted of a felony for securities fraud, with an obligation to pay more than $4M in restitution that hasn't been repaid, yet still continues to maintain a state insurance license for the past several years, and holds out to the public as a financial advisor providing retirement income plans to clients to facilitate annuity sales... begging the question of when the various regulators that oversee financial advisors will finally ever get better about coordinating to ensure that bad actors already convicted repeatedly under one regulator don't simply set up shop again as "financial advisors" under a different regulator and continue doing potentially-problematic business with consumers?

Enjoy the 'light' reading!

Kitces & Carl Ep 27: Handling The ‘Required Minimum’ Conversation Without Being Awkward

February 13, 2020 07:11 am 0 Comments CATEGORY: Kitces & Carl Podcast

Many financial advisors have asset minimums to ensure that they generate enough revenue from each client to be compensated appropriately for the value they provide (and the business cost to deliver it). But when it comes to having conversations about net worth with prospective clients to find out if they qualify for those minimums – especially those who are friends and family - the situation can quickly become awkward given the highly personal relationship individuals have with their money.

In our 27th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about some ways to broach the sensitive and potentially difficult conversation about assets and net worth with prospective clients, and how to gracefully defer from taking on prospective clients who don’t meet the firms’ requisite minimums. Because even while the natural inclination for many financial advisors is to help anyone who asks, regardless of net worth, doing so often becomes increasingly difficult as an advisor’s firm grows and the capacity to spend time with clients who don’t actually meet their minimum fees becomes smaller and, in many cases, non-existent.

The first issue to consider when requiring asset minimums is simply to recognize that it’s not always apparent who may qualify (or not), which means it’s crucial to meet with prospects, conduct an initial discovery meeting to learn about goals and values, and to get a rough idea of the prospect’s balance sheet to safeguard against making premature assumptions about what the client is really worth. And in the event that a client does not meet the firm’s minimums, the advisor can still conduct a brief follow-up meeting to provide a few basic recommendations and resources to the prospect without much effort, and then describe to the prospect what the firm’s typical clientele generally looks like and what the minimum fees are… a simple act of goodwill to help the client, and also an effective marketing strategy, as prospects who are grateful for the guidance they received from the advisor may still be able to refer people in their network who are appropriate clients (having been given a description of who the firm does work with, in the process of being helped themselves)!

However, while spending time with prospective clients and running through a complete discovery meeting can be a rewarding process for both the client (for the free guidance they receive) and the advisor (for the opportunity to help someone in need and the creation of a new, potential referral source), it is also a time-consuming process and an advisor’s capacity may not often permit them to meet with all prospects without some screening mechanism in place. One potential remedy is to help people better understand who the firm works with before even reaching out to the advisor… which can be achieved through the firm’s website. Details about the typical clientele or specific niche served by the firm, together with the firm’s asset minimums and fees published directly for all to see, can help deter unsuitable prospects from reaching out to the firm in the first place (effectively allowing them to self-select out themselves). And including some potential resources (e.g., books, white papers, etc.) for individuals who may not be a good fit can again leave the individual with something of value from the firm, even though they may not be a suitable client.

Ultimately, the key point is that even though the ‘required minimum’ conversation can be awkward, there are ways for financial advisors to have these discussions as a meaningful discovery process that can even serve as an effective marketing strategy… and even (briefly and time efficiently) help those who might not be ideal clients in the process. Furthermore, maintaining a website that includes a profile of the ‘ideal client’, together with a clear description of the firms’ fees, can also keep discovery meetings with prospects who are unable to meet the firm’s required minimums to a manageable minimum!

The (Partial) Death Of The Stretch IRA: How The SECURE Act Impacts Inherited Retirement Accounts

February 12, 2020 07:08 am 33 Comments CATEGORY: Taxes

Passed into law in December 2019, the “Setting Every Community Up For Retirement Enhancement (SECURE) Act”, introduced a plethora of substantial updates to longstanding retirement account rules. One of the most notable changes was the elimination (with some exceptions) of the ‘stretch’ provision for non-spouse beneficiaries of inherited retirement accounts. As prior to the SECURE Act, beneficiaries of inherited retirement accounts were able to ‘stretch’ out distributions based on their own entire life expectancy, but now most non-spouse beneficiaries will be required to deplete their accounts within ten years after the original owner’s death. (Unlike RMDs, though, the new 10-Year Rule offers flexibility around the timing of distributions, as it does not require annual withdrawals – funds can be withdrawn in any amount, at any time over the course of the 10-year term – as long as the entire amount is withdrawn by the end of the 10^th year.)

However, 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, minor children of decedents, or “See-Through” trusts), and Non-Eligible Designated Beneficiaries (i.e., any individual who qualifies as a Designated Beneficiary but is not on the list of Eligible Designated Beneficiary).

This distinction matters because Non-Designated Beneficiaries and those who are part of the newly created Eligible Designated Beneficiaries group are generally subject to the same rules prior to the SECURE Act (either the 5-year rule or stretching over life expectancy, respectively), it is the Non-Eligible Designated Beneficiaries that are now subject to the new 10-Year Rule, from trusts to adult children and more. Fortunately, the 10-year rule does still facilitate at least some flexibility – as the rule simply requires that all funds be distributed by the end of the 10^th year after death of the original account owner, but the beneficiary has discretion over when to take the dollars out over that time window – though such a mandatory distribution window may introduce new challenges for certain types of See-Through trusts (where the flexibility eliminates ‘automatic’ annual conduit distributions to beneficiaries and could trigger the sudden liquidation of both the IRA and trust at the end of the 10-year window).

Ultimately, the key point is that, while there are now three distinct groups of beneficiaries under the SECURE Act, only one of these groups (i.e., the Non-Eligible Designated Beneficiaries) must now contend with the new SECURE Act 10-Year Rule for inherited retirement accounts. For the other two groups (i.e., Eligible Designated Beneficiaries and Non-Designated Beneficiaries), very little has changed for Non-Designated Beneficiaries, and Eligible Designated Beneficiaries still follow the same rules (with few exceptions) as the pre-SECURE Act Designated Beneficiaries.

#FASuccess Ep 163: Building A Fast-Growth Practice Without Prospecting By Working Under A Credit Union, with Michael Gennawey

February 11, 2020 07:03 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 163rd episode of Financial Advisor Success Podcast!

My guest on today's podcast is Michael Gennawey. Michael is a financial advisor and program manager for SoCal Wealth Management, a hybrid advisory firm in Southern California that oversees $260 million of assets under management for nearly 1,800 clients.

What's unique about Michael, though, is the way he's been able to build SoCal Wealth Management under the umbrella of the Credit Union of Southern California, which itself has nearly $1.6 billion of credit union assets serving almost 120,000 members across 18 branch locations and feeds a continuous flow of prospect referrals to Michael's advisory firm, with the caveat that as part of the credit union, they have to take every client that is referred to them.

In this episode, we talk in-depth about the unique structure of credit unions as customers or, rather, member-owned financial institutions, and how the member-centric culture of credit unions can be so complementary to the client-centric culture of advisory firms. The way that Credit Union of Southern California structures its referral program and trains its Member Service Officers across branches to identify members with client needs and steer them towards SoCal Wealth Management at a pace of nearly three new clients per week, and the way SoCal Wealth structures its offering on the LPL platform to keep it efficient enough to run this kind of high-volume client business.

We also talk about the way that Michael's firm uses an internal team member supporting the financial advisors to both set initial appointments with referrals but also to help screen them to ensure they're a fit for the firm in the first place, SoCal Wealth's financial planning process and their two-meeting approach that delivers the plan interactively with MoneyGuidePro, not only to engage clients but to save significant time in the plan preparation process, and the way that Michael's firm segments clients for ongoing services, given the incredible range of who the credit union refers to them, from multimillionaires to those opening their first IRA.

And be certain to listen to the end, where Michael shares how to figure out which credit unions have the right client-centric culture and which are just offering wealth management as a product-based profit center, the typical payouts that advisors receive in a credit union environment in exchange for having to do little or no business development, and the unique structure that SoCal Wealth has built for its advisors where clients that are referred through the credit union must stay behind, but advisors can still have their own personal clients that the advisor can take with them if they leave in the future.

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End-of-Year And 2025 Tax Planning

Presented by Jeff Levine, CPA/PFS, CFP®, CWS®, AIF®, MSA, Lead Financial Planning Nerd for Kitces.com & Chief Planning Officer at Buckingham Wealth Partners

#FASuccess Ep 164: Making The Hard Transition From Financial Advisor To Business Owner Of Your Advisory Firm, With Julia Carlson

How Advisory Firms Can Leverage EOS To Systematically Manage And Grow Their Firms

Weekend Reading for Financial Planners (Feb 15-16)

Kitces & Carl Ep 27: Handling The ‘Required Minimum’ Conversation Without Being Awkward

Want CE Credit for reading articles like this?

The (Partial) Death Of The Stretch IRA: How The SECURE Act Impacts Inherited Retirement Accounts

#FASuccess Ep 163: Building A Fast-Growth Practice Without Prospecting By Working Under A Credit Union, with Michael Gennawey

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Kitces Webinar

End-of-Year And 2025 Tax Planning

Presented by Jeff Levine, CPA/PFS, CFP®, CWS®, AIF®, MSA, Lead Financial Planning Nerd for Kitces.com & Chief Planning Officer at Buckingham Wealth Partners

Want CE Credit for reading articles like this?

Nerd’s Eye View Praise

Showcase YOUR Expertise

Stay In Touch

Questions?

Presented by Jeff Levine, CPA/PFS, CFP®, CWS®, AIF®, MSA, Lead Financial Planning Nerd for Kitces.com & Chief Planning Officer at Buckingham Wealth Partners  