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#FASuccess Ep 162: Efficiently Expanding In-Depth Financial Planning Services To Move Beyond The AUM-Only Model, With Tim Bickmore

February 4, 2020 07:01 am 4 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 162nd episode of Financial Advisor Success Podcast!

My guest on today's podcast is Tim Bickmore. Tim is the co-founder and the director of financial planning for LBW Wealth Management, an independent RIA based in Madison, Wisconsin, that oversees more than $50 million of assets under management for 230 client households.

What's unique about Tim, though, is that despite having rapid success and growing their advisory firm to over $50 million in just the past 5 years, they're concerned that what has gotten them here won't get them there – to the growth that comes next, particularly as the firm is focusing more and more on offering comprehensive financial planning advice and trying to manage the additional time and productivity limitations that come with a deeper financial planning process. Leading Tim not only to share his story of business success in getting to this point but also to ask for advice about what they should be doing to grow profitably from here.

In this episode, we talk in-depth about the evolution of Tim's advisory firm, from their initial five years of building around the AUM model, their decision to shift to a blended model with a base monthly subscription fee for financial planning advice alongside a reduced AUM fee for investment management. The way their new business models, helping them both to ensure profitability for new clients regardless of their assets, while also opening up new markets for non-AUM young professionals and business owners in their 20s, 30s, and 40s. And the real-world challenges and how to position a change in your fees and focus of the firm with all your existing clients who may now face a significant fee increase.

We also talk in-depth about LBW's financial planning process for younger clientele in their 20s, 30s, and 40s; the reason the firm left MoneyGuidePro for eMoney Advisor as a better platform to give advice to next-generation clients; the increasingly cash-flow-based approach that LBW has taken, focusing not on long-term cash flow planning and retirement projections but categorizing and reflecting on the client's short-term household cash flow instead; how Tim is implementing a more “Agile Financial Planning” approach in his advisory firm; and how the reality is that even a highly-efficient and profitable advisory firm will still find it less profitable to scale financial planning for the second or third hundred clients than it is for the first 100.

And be certain to listen to the end where Tim shares the unexpected surprises that hit him as a business owner running a financial planning business. How even though they were challenging, he still believes that they were necessary to go through as part of the learning process to build a business, and why in the end it's all been worthwhile to him, not simply because he's been able to grow a valuable business, but because in the end, financial planning itself is first and foremost psychologically rewarding to us in the opportunity to meet new people from so many different walks of life and help them.

The Latest In Financial Advisor #FinTech (February 2020)

February 3, 2020 07:02 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the February 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 big announcement that Visa is acquiring Plaid for a whopping $5.3B (barely a year after Plaid itself acquired Quovo, a popular account aggregation solution for financial advisors), in a move that will help cement account aggregation as a standard fixture in the financial services landscape, and likely help to standardize (and reduce the frequency of breakages) account aggregation data gathering… though for the price that Visa paid to acquire Plaid, it doesn’t appear likely that serving financial advisors will be a priority, raising questions about what Visa’s commitment will be to Quovo in the long term and leaving the door open for Yodlee’s continued growth in the advisor community.

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

Invesco’s Jemstep announces a major deal with Citigroup to power its new Citi Wealth Builder robo platform… to be funded exclusively with Invesco model portfolios comprised of Invesco ETFs
Fidelity and Schwab announce a series of new enhancements to their own digital onboarding solutions and a long-term pledge to eliminate account application forms altogether
WisdomTree announces that it intends to sell its robo-for-advisors platform AdvisorEngine for a significant loss that amounts to little more than what it originally paid for Junxure, raising questions of where Junxure itself will land when WisdomTree puts the company up for sale
TA Associates announces that it is putting Orion Advisor Solutions up for sale for nearly $2B, in what may become the biggest yet private equity sale of an RIA technology solution

Read the analysis about these announcements in this month's column and a discussion of more trends in advisor technology, including the growing intertwining between risk tolerance assessment tools and rebalancing software, Act Analytics launching a new ESG research platform for advisors looking to more easily analyze and then customize ESG portfolios for individual clients, Whealthcare’s founder splitting off from the company despite recent industry awards as advisor growth appears to have been lagging, and a growing level of integrations and adoption of cash management solutions for financial advisors as the pressure grows for advisors to show value for clients beyond just the portfolio itself.

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 (Feb 1-2)

January 31, 2020 02:51 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the industry news that TD Ameritrade anticipates most advisory accounts will not need to be re-papered in its prospective merger with Schwab... even as the merger itself is now potentially delayed while the Department of Justice begins an anti-trust inquiry as to whether the Schwabitrade merger would lead to an unduly anti-competitive environment (particularly with respect to RIA custody).

Also in the news this week is a planned push from E*Trade Advisor Services to significantly ramp up both its technology and marketing spending in the hopes of capturing a share of however many advisors decide they're displeased with the Schwabitrade merger and begin to look for alternatives, and Fidelity's announcement of new refinements to its onboarding process that cuts the amount of information advisors have to fill out by 40% and reduces the account application paperwork from 9 pages down to just 2!

From there, we have several additional items of noteworthy news this week, including a coming series of changes to the FICO credit scoring system that may boost the credit scores of those with already-good credit but potentially reduce credit scores for those who are already struggling to pay their loans on time (in a deliberate effort to better separate 'good' credit risks from 'bad' for lenders increasingly concerned about the long-in-the-tooth economic expansion), IRS guidance for brokerage firms that unwittingly sent out the 'standard' first-RMD notices to those turning age 70 1/2 this year who in light of the SECURE Act won't actually need to begin their RMDs this year, and a look at the new CFP Board Standards of Conduct that recently took effect (and that the CFP Board will begin to enforce in June).

We also have a few articles on planning for aging clients, from a look at the rising frequency of older couples who are "living apart together" by remaining in ongoing committed relationships where they deliberately do not get married nor move in to live with each other, the ongoing shift in consumer preference to die at home and not in a hospital (as last year, deaths from natural causes were more likely to occur in the home than in a hospital, for the first time in more than 50 years!), and the importance of finding a "new normal" after a major health event occurs, rather than trying to regain one's prior lifestyle that simply may no longer be feasible (and make us unduly unhappy to even try).

We wrap up with three interesting articles, all around the challenging theme of fraud, financial abuse, and bad advisor recommendations: the first explores why and how athletes are disproportionately targeted by swindlers and defrauded (and the rise of lawyers and forensic accountants who specialize in unraveling such scenarios); the second examines the ways that spousal financial abuse are transforming in the technology era (where it's easier to hide assets with cryptocurrencies and surveil a spouse with computers and GPS tracking, but also easier to spot and recover paper trails for assets that have been hidden); and the last looks at a new study that finds, when faced with conflicted compensation while making a recommendation, we may be more likely to try to rationalize after-the-fact why the higher-compensation recommendation may have been good, than de-bias ourselves by being aware of the potential conflict in the first place... suggesting that in the future, regulators may try to limit advisors' own access to information about how some recommendations may benefit themselves or their companies more than others (as when people aren't aware of the conflicts until after the fact, they still give objective recommendations), or increasingly try to focus instead on levelizing advisor compensation (so advisors can still be well-compensated for their work, just not differently compensated for various recommendations).

Enjoy the 'light' reading!

Kitces & Carl Ep 26: Talking Clients Out Of The Bunker Portfolio

January 30, 2020 07:27 am 4 Comments CATEGORY: Kitces & Carl Podcast

Kitces & Carl Episode 26 - Talking Clients Out Of The Bunker Portfolio

Clients often worry about how “the market” may be doing at any given time, which is understandable given the assets they may have invested there. However, there are times when some clients (particularly those who experienced the worst of the financial crisis a little over a decade ago) completely lose faith in the entire economic system altogether and want to abandon their financial plan to go all-in with a ‘bunker portfolio’, investing solely and entirely into select assets (like gold) that they feel will ‘save them’ from the risk of an overall failure of the entire economic system.

The fear that stokes the bunker portfolio goes beyond the typical concern over bear markets or periodic market volatility – it is based on a deeper fear and doubt about the entire foundation of the economic system. And for financial advisors working with such clients, the challenge is in helping them understand that, despite inevitable economic cycles, shifting their portfolio to ‘bet’ on a complete collapse of the entire economic structure is itself a low-odds, high-risk bet, such that even with the potential risk, the best course of action is generally still to stick to their financial plan and stay the course instead.

In our 26th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss how to communicate with clients with extreme distrust of the economic system as a whole, as contrasted with temporary concerns over market volatility (in which case a different conversation around market timing needs to be considered), and present strategies to help those clients from making fear-based decisions.

The first step in talking clients out of the bunker portfolio is for advisors to confirm that clients appreciate the fundamental principles around risk and return and that for more than a century, equities have fared better than fixed income, and fixed income has outperformed cash.

Even so, clients may still feel beholden to escape-hatch strategies to avoid market catastrophe. In these situations, advisors can help them understand the value of diversification by framing hypothetical out-of-market portfolios as risk-based ‘bets’ themselves, considering whether the portfolio the client is proposing would stand the test of time. And by examining the data, the advisor can simply ask (and assess) how often (if at all) the proposed portfolio would have made sense and actually been an appropriate choice. Often, this is enough to convince the client of the merits of their original plan and to stay the course.

For some clients, however, no amount of reason will persuade them that the economic system is not actually about to fail. And while an advisor’s primary role is to help clients meet their goals and to clearly understand the impact of their decisions, the advisor must also consider the overall happiness or dissatisfaction the client may experience as they follow their recommended plan in achieving their goals. Because if the client doesn’t fully agree with their advisor’s recommendation, and becomes so stressed about going along with the plan anyway, the advisor’s plan becomes exactly that – the advisor’s plan, and not the client’s plan. On the other hand, the strategy that the client does want to pursue, in opposition to their advisor’s recommendations, may not be one that the advisor, in good faith as a fiduciary of the client, can stand behind. Accordingly, in such circumstances, the advisor may simply need to acknowledge that the best course of action would be to terminate the relationship.

Ultimately, though, the key point is simply that clients who have completely lost faith in the economy need to be on the same page with their advisor around assumptions and principles of the market for the client-advisor relationship to continue on a healthy path. Because, unless the client is in agreement with the basic assumptions on which their financial plan has been built, it may not be possible to talk them through their fear-based decisions at all.

Distinguishing Financial Stress From Anxiety And Client Communication Strategies To Help

January 29, 2020 07:04 am 0 Comments CATEGORY: Client Trust & Communication

In today’s digital-age culture where nearly all sources of news and media are instantly accessible and information overload is a normal state of being, it is not surprising that stress and anxiety are very commonly experienced in our fast-paced society. And in fact, stress and anxiety about specific financial problems are what most often drive people to seek the help of an advisor in the first place! Which, in turn, means that advisors should have some strategies in their toolbelts to effectively help clients (prospective or otherwise) who might be stressed and anxious. Accordingly, the first step is understanding that, while the terms “stress” and “anxiety” are often used interchangeably, the reality is that they are two very different things, indeed, and require different approaches.

While stress is the result of external stimuli perceived to pose some level of threat (with a corresponding response to the threat that may involve uncertainty about one’s own ability to deal with the issue at hand), anxiety results from internal forces arising from unhealthy attitudes towards a particular idea or concept. Thus, while stress can be eliminated when the external stimuli are removed, the same is not necessarily true for anxiety. While an external stimulus might serve to trigger anxiety, removing it may have no effect on the anxiety since it is the internalized idea that causes the anxiety (versus the actual external trigger).

A recent study released by the FINRA Foundation examined specific differences between individuals reporting financial stress and financial anxiety and found that 44% of all respondents reported experiencing financial stress. Other results provided by the study showed stress levels varied by sex, income level, age group, healthcare concerns, presence of dependents, and retirement status. More detail on these differences can be found in the following figures.

Interestingly, financial anxiety is consistently higher than financial stress across a variety of demographic groups, roughly 10 percent higher. This might be justified by the very definitions of stress and anxiety, whereas stress can be addressed by removing the stimuli acting as the stressor, anxiety will linger as psychological damage even in the absence of whatever stressor might be the initial root of the anxiety.

And while stress and anxiety may appear very similar, the underlying causes are distinct and communication styles to deal with each condition should be adjusted accordingly. For instance, advisors who have clients experiencing stress can most effectively help them by reframing the stressful issue positively (such as by reminding how they’ve successfully overcome similar challenges in the past), focusing on the problem (discussing the specific problem and plan of attack), and making to-do lists for the client. On the other hand, clients with anxiety may be overwhelmed by these strategies. Accordingly, advisors can use a different set of techniques, such as providing a safe place to have conversations about money issues, offering guidance as a teacher and supporter, and recognizing and acknowledging growth and progress. And while stress and anxiety may appear to have similar symptoms on the surface, simple assessment tools can help the advisor assess whether their clients are experiencing stress or anxiety so that communication strategies can be adapted accordingly.

Ultimately, the key point is that while stress and anxiety affect many individuals, financial advisors can best help their clients by having mechanisms in place to help them identify any stress and anxiety they may be experiencing. Additionally, taking care of themselves and managing their own stress and anxiety issues is something else advisors must do; otherwise they run the risk of unintentionally transferring their own emotions onto the client.

#FASuccess Ep 161: Cultivating The Right Firm Culture With A Reality-Based Leadership Approach, with Tessa Felix

January 28, 2020 07:03 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 161st episode of Financial Advisor Success Podcast!

My guest on today's podcast is Tessa Felix. Tessa is the HR and operations lead for PWL Capital, an advisory firm based in Montreal and Ottawa that oversees nearly $3.6 billion in assets under management.

What's unique about Tessa, though, is her particular focus on developing the culture of her advisory firm, and the systems and structure that she's put in place to help hold everyone on the team accountable for their work, in addition to making the firm an enjoyable environment to work in.

In this episode, we talk in-depth about the Reality-Based Leadership system that Tessa has incorporated into her management approach in the firm. Why the emotional expense of employee drama is such an important cost to manage and save for the firm; Tessa's routine of weekly team meetings, internal team podcasts, and monthly one-on-ones that she uses to maintain the culture of the firm; and why in the end, culture is not just about creating a fun workplace, but about the actions and behaviors that are expressed in the workplace.

We also talk about Tessa's own career journey. From joining her advisory firm in an operations role, earning her advisor licenses to shift into a client-facing advisory role, deciding that she actually enjoys the work of managing people and building culture more than working directly with clients and shifting back into an internal operations role, the way she navigated the challenging transition from being a peer of her co-workers to their manager instead, and how she ultimately became not just the HR and operations lead, but the culture lead for her advisory firm as well.

And be certain to listen to the end, where Tessa shares some of the key books that have influenced her journey of learning how to develop and manage people and culture, the software tool she uses to help manage internal team meetings and employee engagement, and the importance of both cultivating a growth mindset in employees and having a growth mindset as a firm where culture itself will always be fluid and evolving.

And so with that introduction, I hope you enjoy this episode of the "Financial Advisor Success" podcast with Tessa Felix.