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#FASuccess Ep 156: Establishing Next Generation Career Tracks And Business Development Training For Long-Term Sustainability, with DeLynn Zell

December 24, 2019 07:05 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 156th episode of Financial Advisor Success Podcast!

My guest on today's podcast is DeLynn Zell. DeLynn is the Co-Founder and CEO of Bridgeworth Financial, a hybrid RIA based in Birmingham, Alabama that oversees nearly $1.6 billion of assets under management for almost 2,000 clients.

What's unique about DeLynn and her firm, though, is the way they decided from the start to build an advisory firm that would be sustained past the founders, and have taken steps over the years to establish the necessary career tracks, and equity and compensation structures to attract and retain next-generation talent for the firm in order to be sustainable for the long run.

In this episode, we talk in-depth about the four-tier career track that Bridgeworth has created. From a planning coordinator who focuses on the technical work for a base salary, to associate advisors who are involved with client meetings but also have the responsibility to start networking to establish themselves in the community; lead advisors who have the primary responsibility of relationship management and some incentives for business development; and partners who have not only a heavier responsibility for business development but also a greater financial participation to incentivize their ongoing efforts to keep growing the firm and its equity value.

We also talk about how Bridgeworth structures its compensation for partners. The unique way the firm allocates partner salary based on credits for both their business development and revenue or other leadership responsibilities to compensate their ongoing work in the business as separate from their equity ownership of the profits, which in turn is based on what they originally brought to the business when it was formed, how and why Bridgeworth is reinvesting into the business development training for its next-generation advisors so they too can become eligible to become a partner in the future, and the way the firm is developing advisor teams that each have their own specializations to support their individual business development activities under one common firm-wide umbrella.

And be certain to listen to the end, where DeLynn talks about how, even with the long-term success in the business, it was still incredibly difficult in the early years. Why she thinks in the long run, the advisory business is an especially good fit for women; how the gender split of CFP professionals may shift in the future; and why the most important thing when selecting an advisory firm to build your career is not the firm's compensation or particular role, but instead, its culture and whether it's a place you want to be in the long run, and then to let the role and your opportunity evolve as it may over time in a firm and culture you trust.

SECURE Act And Tax Extenders Creates Retirement Planning Opportunities And Challenges

December 23, 2019 07:35 am 129 Comments CATEGORY: Retirement Planning

Sweeping legislative tax or retirement reforms typically happen only once every decade or so, but the final weeks of 2019 brought the second major piece of Congressional action in the past 24 months, as the SECURE Act (along with a series of year-end tax extenders), which was passed in the House this past summer, finally made its way through the Senate and was signed into law by the President. The legislation will have substantive repercussions as financial advisors help clients plan for their retirements for years to come.

In the context of financial advisors and the clients they serve, the first, and probably most notable change resulting from the SECURE Act, is the elimination of the so-called “stretch” provision for most (but not all) non-spouse beneficiaries of inherited IRAs and other retirement accounts. Under current law, non-spouse designated beneficiaries can take distributions over their life expectancy, but for many retirement account owners who pass away in 2020 and beyond, beneficiaries will have ‘only’ 10 years to empty the account. On the one hand, without any other distribution requirements within those 10 years, designated beneficiaries will have some flexibility around the timing of those distributions; however, certain types of “see-through” trusts that have been drafted to serve as beneficiaries of retirement accounts may find that they’re no longer able to make annual distributions to the trust under the new rules (only to suddenly have both the IRA and trust forcibly liquidated at the end of the 10-year window).

Other notable retirement planning changes under the SECURE Act include lifting the restriction on making contributions to a traditional IRA after age 70 ½ (as long as there is earned income to contribute in the first place), and an age increase for the onset of RMDs from age 70 ½ to age 72. However, as was the case with the IRS’s recent proposal to update the RMD life-expectancy tables, since only about 20% of retirees take no more than only the amount that they’re actually required to take, any changes in the rules around RMDs will have little effect on the remaining 80% who are already withdrawing more out of their accounts than the IRS requires. In addition, the SECURE Act does not change the age at which an individual can make a Qualified Charitable Distribution from their IRA, which remains at age 70 ½ and now creates a unique 1- or 2-year window where IRA distributions may qualify as charitable contributions, but not as RMDs (that haven’t yet begun).

Beyond the changing or elimination of various age-based thresholds for retirement accounts, the SECURE Act also includes an allowance for a penalty-free distribution up to $5,000 for a qualified birth or adoption, the creation of a Fiduciary Safe Harbor for selecting a “Lifetime Income Provider” (i.e., annuity company) for ERISA fiduciaries (thus assuaging at least some liability concerns around using lifetime income annuities in qualified plans), a substantial increase in the tax credit available to small businesses when establishing a retirement plan (as well as a brand new tax credit for small businesses that adopt an “auto-enroll” provision in their retirement plans), an increase in the allowable auto-enrollment “default” 401(k) plan contribution, improved access to employer plans for long-term part-time workers, and a significant reduction in the barriers to creating and maintaining Multiple Employer Retirement plans (which in theory will help to create economies of scale for lower plan costs when a group of small employers band together to provide a retirement plan)… as well as several other miscellaneous, smaller retirement provision changes.

Other notable non-retirement provisions attached to the SECURE Act include a repeal of the TCJA-introduced Kiddie Tax changes (reverting away from a requirement to use trust tax brackets and back to using the parents’ top marginal tax bracket), adjustments to the medical expense deduction threshold (back to 7.5%-of-AGI again for 2019 and 2020!), expanded provisions for 529 college savings plans to be used for Apprenticeships and (up-to-$10,000 of) student loan repayments, and a series of Tax Extenders for the mortgage insurance premium deduction and the higher education tuition and fees deduction.

Ultimately, the key point is that, although not nearly as sweeping as the Tax Cuts and Jobs Act of 2017, the SECURE Act of 2019 makes numerous updates to the rules around retirement plans in an effort to increase access to employer-sponsored retirement plans, and (hopefully) takes a positive step towards addressing the so-called retirement crisis. But as with other legislation in recent years, what legislation may give with one hand, it takes with the other, and in practice, many financial advisors may spend more time dealing with what is lost under the SECURE Act – in particular, the stretch IRA – than what is gained. At the very least, though, financial advisors will be busy in months ahead as they re-evaluate plans for clients impacted by the new and updated provisions introduced by the SECURE Act.

Weekend Reading for Financial Planners (Dec 21-22)

December 20, 2019 02:53 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the news that after months of delays, the SECURE Act is finally being passed as an extension of a year-end Congressional spending bill, opening up the potential for Multi-Employer Plan (MEP) 401(k) offerings and more annuities in defined contribution plans... and notably for most advisors, severely curtailing the use of the popular "stretch IRA" strategy to generally no more than 10 years (instead of the full life expectancy of a much-younger beneficiary).

Also in the news this week is the release of the results of the CFP Board's independent task force on enforcement that found "significant failures" in its enforcement processes that must be reformed in the future, and the news that the SEC is looking to expand the Accredited Investor rules beyond the current income and asset test (including, notably, a broad-based permission that would allow all financial advisors themselves with a Series 7 or Series 65 to participate as an Accredited Investor).

From there, we have several technology-related articles, including a look at how the growth of advisor technology for the past decade is reaching the point where now the primary challenge is that advisors have 'too many' choices (and not enough time to wade through options, evaluate how they'll integrate, and do due diligence on vendors), a review of the recent InVest West FinTech conference that is taking an increasing focus on not just UX (user experience) and CX (client experience) but also AX (advisor experience), and a review by Bob Veres of a new wave of "financial planning software" companies that are not producing comprehensive planning software but instead increasingly more specialized 'niche' solutions around everything from tax return reviews and tax planning to Social Security timing, Medicare, and other elder care planning issues.

We also have a few articles on marketing, from tips on how to diligently follow up with a prospect after an initial meeting (without being too pushy), to a reminder that in the end clients don't want to hear your story (as the advisor) but want to tell their story (as we all like talking about ourselves!), and some suggestions on how to handle that moment in a prospect conversation where they say "I'm sorry, I already have an advisor".

We wrap up with three interesting articles, all around the theme of gift-giving ('tis the holiday season!): the first looks at how from an economic perspective, gift-giving is remarkably inefficient (as people try to 'guess' what non-financial gift will provide the appropriate amount of satisfaction and relationship-building with the recipient, with one study estimating $13B per year of 'economic waste'); the second looks at the rise of experiential gifts, which may be compelling to the recipient but are exponentially harder to organize and 'give' in the first place; and the last explores recent research finding that when it comes to family and close friends, a sloppily-wrapped gift is actually better than a neatly-wrapped one (as it lowers the expectations of what's inside and is more likely to have an upside surprise when opened!), but for more distant acquaintances it's still important to neatly wrap the gift (as an expression of your commitment to the burgeoning relationship)!

Enjoy the 'light' reading!

Kitces & Carl Ep 23: Following Through On Your Business Creativity By Saying ‘Yes’ And Figuring It Out Later

December 19, 2019 07:14 am 1 Comment CATEGORY: Kitces & Carl Podcast

No matter how well a financial advisor may understand and is able to explain a concept, the fact is that different people have different learning modalities, and oftentimes, advisors need to incorporate a variety of presentation methodologies in order to help clients understand important concepts relevant to their financial lives. Sometimes it takes creativity and innovation to discover how clients learn best, and by staying open to novel ideas and saying “yes” to unusual experiences, advisors may be surprised to find not only that they might come up with effective ways to communicate effectively, but also that they can uncover exciting opportunities for themselves along the way.

In our 23rd episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards talk about how a simple back-of-the-envelope Sharpie sketch was Carl’s solution to helping one client eventually achieve the “Aha!” moment of understanding a difficult financial concept. And how continuing to practice his sketch work as a way to simplify complex topics unexpectedly landed him a long-running (10 years and counting!) stint as the New York Times’ “Sketch Guy” columnist and ultimately opened up the world of international art exhibitions showcasing his work. Even without any formal training in art, Carl has evolved his sketching into a central part of his work by sticking to simple tools and persevering with continuous practice.

Ultimately, the key point is that giving yourself permission to pursue unplanned adventures might just lead to rich and rewarding experiences well worth the risk. And even though the business of planning and preparing clients for the future is often largely an objective, data-driven process, creativity and the flexibility to say “yes” to unplanned opportunities can be powerfully valuable tools used to tackle unique and unexpected situations and to help clients attain their unconventional, off-the-beaten-path goals.

Assisted Reproductive Technology (ART) Tax And Insurance Planning For Individuals With Fertility Challenges

December 18, 2019 11:27 am 8 Comments CATEGORY: Insurance

The Code of Laws of the United States defines Assisted Reproductive Technology (ART) as “all treatments or procedures which include the handling of human oocytes [eggs] or embryos”. For many individuals and couples with fertility struggles, ART has made biological parenthood possible. According to data from the Centers for Disease Control and Prevention, fertility treatments are on the rise with 284,385 ART cycles performed in the U.S. in 2017, and approximately 1.7% of all live births in the U.S. involve ART. The most common ART procedure is IVF; other procedures include Gamete Intrafallopian Transfer (GIFT), Zygote Intrafallopian Transfer (ZIFT), Intracytoplasmic Sperm Injection (ICSI), and Artificial Insemination.

As ART enables exciting new family opportunities, though, it also presents a number of financial and legal issues. For many, the extremely high costs and limited coverage by insurance companies create a high barrier to access ART procedures, forcing many to pay for treatments out of pocket, which have given rise to the proposal of several pieces of legislation in an effort to help make ART more accessible through insurance coverage. However, despite legislative efforts to expand insurance coverage for ART procedures, there is still no Federal requirement for insurers to provide ART coverage to policyholders. In turn, though, the lack of Federal laws requiring insurers to provide ART coverage has led thirteen states to pass their own “mandate-to-cover” laws (AK, CT, DE, HI, IL, MD, MA, MT, NJ, NY, OH, RI, and WV), and three have passed “mandate-to-offer” laws (CA, TX, LA) for residents and workers in those states. “Mandate-to-cover” laws require that some or all insurance plans have to cover certain fertility treatments, and “Mandate-to-offer” laws require that insurance providers offer certain testing and treatment services (although employers can decide which of those benefits, if any, to offer those covered by their plans). Some of these “mandate” states also carry certain exemptions for costs related to surrogacy, religious employers, and restrictions for same-sex couples.

Financial advisors can offer great value to their clients by reviewing their current health insurance policies and helping them understand whether their coverage includes fertility treatments, especially for individuals and couples living in non-mandate states. Some individuals may have access to coverage for ART procedures through employer-based group coverage, benefits available to government workers or military servicemembers, or public benefits like Medicare. Some employees who reside in non-mandate states, but who have employers with main offices in mandate states, may be able to benefit from the mandate-state policies as well.

A growing number of technology companies like Google, Facebook, and Spotify are also adding ART processes, such as egg freezing and IVF cycles, to their employee benefits packages. Advisors may want to encourage their clients to explore risk-sharing programs, scholarships and grants, and even traveling abroad where fertility treatments are offered at significantly lower cost (at least relative to the pricing of such services in the US).

The costs of ART procedures may also be mitigated by leveraging the tax code. The IRS considers “fertility enhancements” that help the taxpayer “overcome an inability to have children” as deductible medical expenses that can be claimed as itemized deductions (if the usual key thresholds for itemizing medical expense deductions are met). These deduction-eligible fertility enhancements include “procedures such as in vitro fertilization” and “surgery, including an operation to reverse prior surgery that prevented the person operated on from having children.”

Access to employer-provided tax-preferenced savings accounts, such as Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs), may provide additional tax-saving opportunities. A one-time IRA rollover to an HSA, called a Qualified HSA Funding Distribution (QHFD), can also be used to help fund expenses if income or liquidity is low.

Ultimately, the key point is that the cost of ART procedures can be unpredictable and potentially very expensive. While managing the costs of ART may take some creativity, advisors can help their clients successfully navigate the legal and financial complexities to minimize the emotional and financial burdens often experienced by those pursuing fertility treatments.

#FASuccess Ep 155: Eschewing A Bricks-And-Mortar Office For Reduced Overhead And (Virtual) Flexibility, With Derek Notman

December 17, 2019 07:09 am 3 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 155th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Derek Notman. Derek is the founder of Intrepid Wealth Partners, operates as an agent for New York Life and an IAR for Eagle Strategies, and oversees nearly $50 million of assets under management for almost 200 clients.

What's unique about Derek, though, is the way that he's evolved his advisory firm from a traditional bricks-and-mortar office space into an entirely virtual practice, born out of sheer necessity when he moved halfway across the country for an advisory firm merger that fell through and then had to figure out how to operate from two office locations, and evolved into a firm that has no office space at all.

In this episode, we talk in-depth about Derek's journey from a high-volume bricks-and-mortar office-based practice to an entirely virtual one. From starting out as an insurance agent where the pressure was on generating a high volume of clients that ultimately culminated in a practice of more than 1,000 clients in his first 10 years, how a move from where Derek started in Vermont out to Wisconsin forced him to start meeting with his team and then eventually clients using video chat, the way Derek eventually built out the entire virtual team he operates with today, and the way Derek has been able to grow his income and his freedom by transitioning nearly 80% of his clients away to other advisors while working with his clients sometimes as far as a continent away.

We also talk about how Derek's efforts on growth and business development have changed over the years. From the way he aggressively sought out networking opportunities and referrals in person to expand his client base in the early years, to a shift of generating 100% of his new clients online and virtually today through the use of a blog and social media, his decision to create a narrower niche focus on small business owners and CEOs, and how declaring that he works virtually with clients right on his homepage as their "virtual wealth partner" has actually helped him to attract new clients by promising not to meet with them in person.

And be certain to listen to the end, where Derek talks about why he regrets having tried to build a big practice in a bricks-and-mortar office, the pain points he's worked through in trying to get a large insurance company on board with his virtual model, where the greater challenge was not running his firm virtually and digitally, but simply trying to market for clients online, and how Derek is now trying to teach other advisors the virtual tools and systems that he had to figure out the hard way.

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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 156: Establishing Next Generation Career Tracks And Business Development Training For Long-Term Sustainability, with DeLynn Zell

Want CE Credit for reading articles like this?

SECURE Act And Tax Extenders Creates Retirement Planning Opportunities And Challenges

Weekend Reading for Financial Planners (Dec 21-22)

Kitces & Carl Ep 23: Following Through On Your Business Creativity By Saying ‘Yes’ And Figuring It Out Later

Want CE Credit for reading articles like this?

Assisted Reproductive Technology (ART) Tax And Insurance Planning For Individuals With Fertility Challenges

#FASuccess Ep 155: Eschewing A Bricks-And-Mortar Office For Reduced Overhead And (Virtual) Flexibility, With Derek Notman

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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

Want CE Credit for reading articles like this?

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  