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Kitces & Carl Ep 24: Improving Work-Life Balance In 2020 And Giving Yourself Permission To Rest

January 2, 2020 07:04 am 0 Comments CATEGORY: Kitces & Carl Podcast

With the beginning of 2020 upon us, we find ourselves not only ringing in a new year, but also welcoming a whole new decade! And with these new beginnings comes the perfect opportunity to review our most important personal and professional goals, set new intentions, readjust (or even abandon) old ones, and explore strategies that might help us reach those goals more effectively.

In our 24th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about their own big goals for 2020 and the strategies they’ll to use to achieve them. And two of their key components to doing so (which can apply as effective practices for all knowledge workers like financial advisors) are 1) getting sufficient rest and 2) clarifying intentions.

As while rest allows the brain to recharge and maintain optimal cognitive function, taking structured breaks from work shouldn’t be seen simply as a reward for doing good work, but also as a vital prerequisite for supporting the mental acuity and creative capacity needed to do good work in the first place! Accordingly, tackling goals with a non-stop “hustle” mindset may not necessarily be the best strategy to use; rather, it may be more effective to prioritize rest and relaxation, scheduling enough of each into one’s recurring routines.

However, the challenge for many busy, ambitious individuals is that they often have so much on their plate that they simply don’t have enough time to get everything done, making it difficult for them to schedule much-needed rest and relaxation into their schedules. One strategy that can help them to organize priorities is to implement the idea of “Big Rocks”, proposed by late author and productivity consultant Stephen Covey, in which the most important tasks are prioritized first (like “big rocks” being placed in a jar representative of one’s available time), and less important smaller tasks prioritized later (like pouring “pebbles” and “sand” over the big rocks, filling the empty spaces in between). This ensures that the real prioritities (including rest!) are tackled first, leaving room for the smaller tasks to come later (which, if they don’t get accomplished because there’s no time after the other work and finding time to rest, are by definition of little consequence relative to the larger goals and thus not as problematic to miss out on).

Ultimately, the key point is that having clarity on which goals are most important is crucial in identifying and prioritizing the “big rocks” that should be tackled first. And whether your goals are to grow your business and expand your team, or to make time to enjoy a daily hike, sufficient rest is paramount to achieving those goals with optimal mental clarity and creative capacity.

Helping Affluent Clients Develop A Money Mission Statement To Facilitate Generational Wealth Transfer

January 1, 2020 07:06 am 5 Comments CATEGORY: Client Trust & Communication

Over the years, study after study has shown wealthy families are often worried about passing along their wealth to children, and the risk that those children may end out being “spoiled”, overly concerned about material things, and generally naïve about the value of money. Which is understandable given the extensive research into the correlation between negative (and sometimes tragic) outcomes and so-called “affluenza” (a lack of motivation and sense of isolation often seen in young individuals who are very wealthy). Compounding these worries, families often have difficulty discussing wealth and money with their children - often out of fear that pointing out the size of a potential inheritance will just amplify the problem – even though this lack of communication may just leave their children with “surprise” large inheritances that they have no idea how to handle.

Financial advisors, however, are in a unique position to help their wealthy clients in such situations by showing them how to have conversations about money with their families. Because while families may be uncomfortable and uninformed about how to talk about money, financial advisors talk about money for a living and often thrive on having these conversations! Moreover, helping clients improve their money communication skills not only serves to strengthen relationships within the family between family members themselves, but it also strengthens the relationship the advisor has with the family as a whole. Which is important when dealing with clients who are planning for wealth transfers, as it is very common for heirs to leave their family’s original advisor once they come into their wealth (and similarly is very common for surviving spouses to switch advisors after their spouses pass away).

When creating a process to help clients with money conversations, advisors can start by focusing on three core components: purpose, practice, and people. Money mission statements are a particularly effective way for clients to crystallize their purpose around money, as they are essentially declarations of the family’s long-term goals, attitudes, and beliefs about money. They can serve as powerful tools offering a framework for families to structure conversations around money and wealth with each other, ideally lasting through future generations. Meanwhile, money mission statements also help families practice not just talking about money, but also using it (and teaching children to use it) in ways that are consistent with the values they identified in their mission statements. Finally, involving the right people into the process – family members and relevant professionals across disciplines, such as tax professionals, estate planners, and financial therapists and/or psychologists – can ensure that support is available in all areas where it is needed.

Some considerations that advisors can take into account when creating a process to use with their clients include: 1) how to structure the actual process – how frequently will meetings with clients be held, at what cost, and which professionals will be included in the meetings; 2) how to market the process – will open client appreciation events be held to facilitate money conversations between families or will the process involve only private family meetings, and what channels will be used to advertise the new services; and 3) how to network with other professionals – which professional associations and resources can be leveraged for expertise and support, and what types of training opportunities might offer relevant experience?

Ultimately, the key point is that helping clients identify their values and beliefs around wealth is an essential starting point for advisors to guide their clients through the anxiety they may have around money conversations. By becoming comfortable with and gaining confidence in talking about money with other family members, families will have an easier time imparting core values to future generations slated to inherit wealth and preparing them to use their own assets responsibly and with purpose.

#FASuccess Ep 157: Building Your Own Personal Brand To Complement And Not Compete With Your Advisory Firm, with Peter Lazaroff

December 31, 2019 07:31 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 157th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Peter Lazaroff. Peter is a shareholder and the co-chief investment officer of Plancorp, an independent RIA based in St. Louis that oversees nearly $4.4 billion of assets under management for almost 1,300 affluent clients.

What's unique about Peter, though, is the way that he's been able to build his own personal brand as he's grown his career, both as a mechanism to build a client base of nearly $100 million of assets under management while still in his 20s and 30s to help him navigate career opportunities as well to build even further.

In this episode, we talk in-depth about how exactly Peter built his personal brand. From simply proactively taking notes on what he was already reading and sharing them with co-workers to launching an email newsletter and pursuing networking meetings as a chance to build his email list, pivoting later to a blog that would further allow him to expand his readership and reach, publishing a book to go even deeper still to reach his target clientele, and how now his personal brand is producing such strong results in generating new clients that his advisory firm is investing into his personal brand to help refine it even further.

We also talk about the practical challenges of building a personal brand inside of a larger advisory firm. Why Peter's original firm was comfortable with him launching a newsletter but concerned about having him own a separate blog, how Peter got his new advisory firm on board with his branding efforts by first spending time writing for the firm's own website to show his value, the way Peter handles his blog content for compliance purposes and why he set up a separate LLC structure to own the intellectual property of his blog content and email list and then licensed it back to his advisory firm, and why Peter, despite the fact that many advisory firms are wary of their employees building personal brands outside of the business, thinks that firms allowing employees to do so will actually have a better chance at attracting and retaining the most ambitious, growth-oriented advisors.

And be certain to listen to the end, where Peter shares why he wishes he had launched his blog website earlier rather than just sending out an email newsletter. The importance of being proactive and getting your firm's leadership and compliance officer on board to be successful in building a personal brand that will complement and not compete with the firm, and the realization that Peter had after getting immersed into the so-called FinTwit community of financial advisors on Twitter, that while it's great to connect with colleagues through blogging and social media, in the end, it's crucial to stay focused on the target clients you want to reach to really have success in the world of blogging and social media.

2019 Highlights – The Top 20 Nerd’s Eye View Blog Posts You Might Have Missed

December 30, 2019 07:04 am 1 Comment CATEGORY: Nerd's Eye View

As we enter the 2019 holiday season and the year (and decade!) comes to a close, I am once again so thankful to all of you, the ever-growing number of readers who continue to regularly visit this Nerd’s Eye View blog (and share the content with your friends and colleagues, which we greatly appreciate!). As we entered the decade of the 2010s, this blog was still in a nascent stage on the Kitces.com website, with just 1,225 people coming to read the entire month of December 2009; today, far more people than that read our blog posts in just the first two hours after each article is published and emailed out to everyone! And I have even more exciting ideas about how we can do more and be even better for the advisor community in 2020… stay tuned for more announcements in the coming weeks!

We recognize that although this blog is a weekly habit for thousands of advisors, not everyone reads every blog post that is released from Nerd’s Eye View throughout the year. As many of you noted in response to our recent Reader Survey, most choose which articles to read based on headlines and topics that are of interest. Yet in practice, this means that an article once missed is often never seen again, ‘overwritten’ (or at least bumped out of your Inbox!) by the next day’s, week’s, and month’s worth of content that comes along.

Accordingly, just as I did last year and in 2017, 2016, 2015, and 2014, I've compiled for you this Highlights List of our top 20 articles in 2019 that you might have missed, including some of our most popular episodes of the Financial Advisor Success podcast. So whether you're new to the blog and #FASuccess podcast and haven't searched through the Archives, or simply haven't had the time to keep up with everything, I hope that some of these will (still) be useful for you! And as always, I hope you'll take a moment to share podcast episodes and articles of interest with your friends and colleagues as well!

In the meantime, I hope you're having a safe and happy holiday season. Thanks again for another successful year in 2019, and I hope you enjoy all the new features and resources we'll be rolling out in 2020, too!

Weekend Reading for Financial Planners (Dec 28-29)

December 27, 2019 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 a deeper-dive look at the SECURE Act (now that it is officially signed into law), as advisors get up to speed on the real-world planning implications and conversations that must happen with clients in the coming year. Also in the news this week is a major across-the-board fee cut from DFA, which ultimately amounts to 'just' 1-8 basis points of fee cuts and an asset-weighted cut of just 8% of their fees, but still sends a signal that even DFA is feeling the growing pressure of fee cuts (though in the end, such cuts may hurt DFA's competitors even more?).

From there, we have several articles on cash flow and spending behaviors, from an "investment pyramid" of the areas to focus on first (i.e., set goals before trying to focus, have good savings habits before worrying about asset allocation, etc.), the second looks at how complex strategies can help create wealth but it's crucial to fix the 'simple' behaviors first (most notably, spending less than we make and having ongoing savings!), and the last examines the research around whether the shift to cashless "e-money" through smartphones will lead us to lose control of our spending (hint: perhaps not, as seeing the money subtracted from our e-wallet immediately may still yield the digital equivalent of the pain of paying [with cash]).

We also have a few articles on marketing, from why email is not dead but buying email lists is (and how to build your own email list instead), what "marketing brand archetypes" are and how they can help you refine your marketing messaging, why paying for "reach" to get your marketing message out more widely isn't necessarily a good idea (it's about reaching the right people, not just more people), and how you can get through a marketing (or writing) mental block by trying to picture one specific person you're aiming to help (and then craft your messaging to be relevant and on-target for that specific person... and likely everyone else similar to them who may also need your help!).

We wrap up with three interesting articles, all around the theme of New Year's resolutions and habit change: the first explores the research about why it is that New Year's resolutions (and habit change in general) so often fails; the second delves even further into the problem with trying to make "SMART" concrete new Year's goals (instead of trying to appeal to our own 'superordinate goals' of what we aspire towards); and the last provides some even more concrete tips about how to actually get more done in the coming year as 2019 comes to a close.

Enjoy the 'light' reading!

Parsing The Difference Between Rollovers And Transfers To Avoid Retirement Account Penalties And Confusion

December 25, 2019 06:50 am 11 Comments CATEGORY: Retirement Planning

When distributions are taken from tax-deferred retirement accounts, ordinary income taxes are due. However, sometimes funds may simply need to be moved from one retirement account to another – perhaps because an employee is retiring or switching jobs and chooses to move their 401(k) from their old employer to another 401(k), or to an IRA account, or because a client wishes to work with a new financial advisor and chooses to move all of their accounts over to the new advisor’s firm. Whatever the reason, there are specific rules for different types of money movement that financial advisors should understand to make sure their clients’ accounts are protected from unnecessary taxable distributions.

There are two categories of money movement between retirement accounts: Indirect and Direct transactions. For an Indirect Rollover, the account owner withdraws funds to be moved from the originating account and takes actual custody of the funds. The full amount of funds withdrawn must be deposited into the target account within 60 days. One caveat for Indirect Rollovers from employer-sponsored retirement plans is that there is generally a mandatory 20% withholding for Federal income taxes that the plan sponsor makes directly to the IRS, with the balance of the funds sent to the account owner. This means that, in order to avoid the tax withholding itself to be considered a taxable distribution from the account, the employee must ‘make up’ for the withheld amount by depositing funds from another source into the target account within the 60-day Indirect Rollover window. This withholding does not apply to IRA accounts, including IRA-based employer plans such as SIMPLE IRAs and SEP IRAs. Taxpayers are also limited to one Indirect Rollover between IRA or Roth IRA accounts every 365 days; any additional attempted Indirect Rollovers would be considered an account contribution and can potentially result in a 6% excess contribution penalty annually until corrected.

In addition to Indirect Rollovers, there are two types of Direct methods to move funds between accounts: Direct Rollovers and Direct Transfers. Direct Rollovers move funds between two retirement accounts, but unlike an Indirect Rollover, the funds are never in the account holder’s custody, nor is there any mandatory tax withholding. For Direct Rollovers, funds are moved from the trustee of one account directly to the trustee of the second account (where each account is a different type of accounts, e.g., 401(k) to IRA or vice versa). Direct Rollovers also have no time limit in which the transaction must take place, and there is no limit to how many Direct Rollovers can be done in a given year. While Direct Rollovers are not taxable events, they are reportable events and as such, are reported on Form 1099-R.

Similar to Direct Rollovers, Direct Transfers are made directly between the trustees of each account and don’t involve the account holder ever having custody of the funds being transferred. What distinguishes a Direct Transfer from a Direct Rollover, though, is that the accounts in a Transfer must be ‘like’ accounts (e.g., IRA to IRA, 401(k) to 401(k), etc.). Like Rollovers (including both Direct and Indirect), Like Rollovers, Transfers are not taxable events, but unlike rollovers, they are not reportable events and thus do not require submission of any forms to the IRS. Transfers are also different from Rollovers as they can accommodate funds designated as RMDs.

Ultimately, the key point is that each of the various ways funds can move between retirement accounts has its own distinct set of rules and requirements. Direct Rollovers are generally preferable over Indirect Rollovers, as they are subject to neither the 60-day time limit nor the 20% mandatory withholding, but do require to be reported to the IRS. On the other hand, Transfers do not need to be reported to the IRS and are used when an individual simply needs to change custodians or consolidate accounts involving the same kind of account.