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Weekend Reading For Financial Planners (May 18-19)

May 17, 2024 02:00 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent study indicates that while overall social media engagement for financial services companies was down in 2023 compared to the previous year, firms boosted their engagement through posts that were entirely original content (rather than sharing third-party content), spoke to the firm's or advisor's principles (with posts responding to current news topics lagging), and were text-based (which was particularly effective for wealth management professionals posting on LinkedIn). Altogether, the study suggests that social media engagement is driven more by the quality (and originality) of the advisor's content, rather than the quantity of posts.

Also in industry news this week:

The SEC this week announced a proposed rule that would require RIAs to collect and verify their clients' personal information in an effort to prevent illicit activity, though many firms likely are taking many of these steps already
Why larger RIAs and those that have been acquired tend to have worse client and staff turnover than other firms

From there, we have several articles on retirement planning:

A recent study indicates that while the median retirement age for current retirees was 62, workers today expect to be employed well past this age, suggesting that some might not be financially prepared for a (perhaps involuntary) earlier-than-expected retirement
7 ways advisors can help their clients plan for an early retirement, from helping clients discover the true motivation behind their desire to presenting the full range of potential outcomes for a retirement that might last 40 years or longer
How incorporating information about a client's chronic health conditions can lead to more accurate life expectancy assumptions and retirement income planning

We also have a number of articles on investment planning:

How the popularity of model portfolios have taken off over the past few years, allowing advisors to spend more time with clients on planning topics beyond investment management
While model portfolios can boost the efficiency of an advisor's investment planning process and allow them to create tailored client portfolios without starting from scratch, they do require some hands-on work by advisors using them
How software can help advisors choose the best model portfolio options for their clients' needs and reduce the amount of time it takes to implement and manage them

We wrap up with 3 final articles, all about the planning profession:

What individual firms, and the financial planning industry as a whole, can do to stave off an impending shortage of qualified advisors
How the financial planning industry can serve as a role model, not only for other types of businesses, but also for how society as a whole views interpersonal relationships and the definition of success
How relatively smaller RIAs can stand out amidst a convergence in the practices of wealth management firms across the size spectrum

Enjoy the 'light' reading!

Kitces & Carl Ep 138: Crafting Your Own Stop-Doing List To Create Capacity For What Really Matters

May 16, 2024 07:03 am 0 Comments CATEGORY: Kitces & Carl Podcast

Kitces & Carl Ep Crafting Your Own Stop Doing List To Create Capacity For What Really Matters

In the initial stages of their careers, many financial advicers find that, with little revenue coming in and less than a full load of client-facing work to do, they spend the majority of their time on operations and marketing as they try to establish their practice. As a result, an advicer often has the capacity to say "yes" to any opportunity that comes along as they try to keep busy and (hopefully) improve their cash flow. However, as the advicer's practice grows and their calendars start filling up, they can find themselves at a point where they don't have enough time to start doing anything new until they stop-doing something else. Which begs the question: Is there a systematic way for a financial advicer to determine when it makes sense to say "no" so they can say "yes" to something else?

In our 138th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore the concept of a "Stop-Doing" list (as opposed to a "to-do" list), various ways to figure out what should go on that list, and how advicers can go about executing the list (so they can go on to doing the things that can move their practices and the profession forward).

From a conceptual perspective, saying "yes" to something also means saying "no" to something else. For instance, saying yes to taking on an operational duty might not leave time for going to more networking events. Yet, while saying "no" isn't always easy (especially for many advicers who were attracted to the profession in the first place specifically because they like to help others), one effective way to get more comfortable saying "no" to an item on a "stop-doing" list is to identify and stay focused on a much more meaningful "yes". By having a strong sense of what their ideal practice would look like, advicers may find that it gets easier to filter through those things that impede progress toward their goals. (Not coincidentally, this is also a useful way advicers can help clients stay on track with their financial plan when clients are tempted to overspend or make detrimental changes when markets get scary).

By gaining clarity on a deeper "yes", an advicer can start to identify the best things for them to stop doing. One approach is to determine the dollar value of an hour of their time, and from there, make a list of all the things that they do for their business and identify those tasks that they can outsource at a lower rate. Another method is to conduct a time audit by installing a time-tracking app. As while there might be a menu of small tasks that an advicer might love to take off their plates, the real power of a comprehensive time audit is in the ability to identify large chunks of time that an advicer may be spending on low-value activities (I'm looking at you, TikTok!).

As Parkinson's Law posits, work will expand to the point where it completely fills an advicer's calendar. Ultimately, by conducting a time audit and making a connection with a deeper "yes", advicers can gain a better understanding of how they're spending one of their most precious resources (i.e., their time) and figure out what they should stop doing so they can start doing things that will move their practices forward!

DoL’s Retirement Security Rule & PTE 2020-02 Amendment: What Advisers Need to Know Now About Giving Rollover Advice After Sept 23, 2024

May 15, 2024 07:01 am 0 Comments CATEGORY: Regulation & Compliance

On April 25, 2024, the Department of Labor (DoL) issued the final version of its Retirement Security Rule (the "Final Rule"), which imposes an ERISA fiduciary standard "that applies uniformly to all investments that retirement investors may make with respect to their retirement accounts". The new rule represents the latest attempt by regulators to define the types of individuals and advice that are subject to a fiduciary obligation, following on the heels of the SEC's Regulation Best Interest (Reg BI) and Commission Interpretation Regarding Standard of Conduct for Investment Advisers, as well as the DoL's own 2016 fiduciary rule (which was struck down by Federal courts in 2020) and Prohibited Transaction Exemption 2020-02.

Specifically, the DoL's new Retirement Security Rule defines an "investment advice fiduciary" as anyone who makes an investment recommendation to a retirement investor which is provided for a fee or other compensation (e.g., commissions), and who holds themselves out as a trusted adviser by either stating they are acting as a fiduciary or otherwise indicates that they are making individualized recommendations based on the investor's best interest. And although many advisors may have been already subject to a fiduciary standard under existing SEC or DoL regulations, the DoL's fiduciary standard is more stringent than others (e.g., requiring advisors not just to disclose but to eliminate certain conflicts of interest), meaning that even advisors who already considered themselves fiduciaries under previous rules may find themselves needing to update their processes to comply with the DoL's new standards.

In practice, the DoL's Final Rule means that financial advisers who advise clients about rolling over assets from an employee retirement account like a 401(k) plan into an IRA are now subject to ERISA fiduciary obligations. Most notably, the new DoL rule is meant to capture one-time recommendations by firms and their representatives made to retail retirement investors for almost any type of investment, meaning that the Final Rule covers not only RIAs and broker-dealers, but also insurance agents, bank employees, and others providing advice about how retirement investors should invest their 401(k) plan or IRA assets. It also covers many types of investments, including annuities, fixed-indexed annuities, CDs and other banking products, digital assets, commodities, and real estate, whereas previous rules like Reg BI and PTE 2020-02 applied only to securities like stocks, bonds, and funds.

In addition to issuing the Final Rule, the DoL modified existing Prohibited Transaction Exemptions (PTE 2020-02 and PTE 84-24) as part of its rollout of new rules around retirement advice. The amendments to the exemptions notably include revisions to PTE 2020-02's disclosure requirements to bring them more in line with SEC's Reg BI.

In sum, the Final Rule expands ERISA's stringent fiduciary obligations to cover almost any situation where advice is provided for a fee to a retirement investor where there is an expectation that the advice being given is in the investor's best interest. The Final Rule covers advisory firms and their representatives providing "fiduciary investment advice" to ERISA and non-ERISA plans, including IRAs. The Final Rule also covers broker-dealers and their representatives, insurance agents, bank branch employees selling bank products, and almost any other entity providing recommendations to retirement investors about investing their retirement assets. And with the new rules taking effect on September 23, 2024 (with a one-year transition period after the effective date for some of the conditions in the Prohibited Transaction Exemptions), the time is rapidly approaching for advisors to begin complying with DoL's expanded fiduciary standards!

#FA Success Ep 385: Unblocking Clients That Won’t Implement With A Journey Of Financial Health, With Danielle Howard

May 14, 2024 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Danielle Howard Podcast Featured Image FAS

Welcome everyone! Welcome to the 385th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Danielle Howard. Danielle is the owner of Wealth By Design, a hybrid advisory firm based in Glenwood Springs, Colorado, that oversees about $35 million in assets under advisement for 35 client households.

What's unique about Danielle, though, is how she has created a process she calls "Financial Fingerprints To Footprints", where she helps clients who are struggling to implement their financial planning recommendations by working with them to unlock their money memories and help them understand how the financial lessons of their past may be creating a financial identity that's preventing them from taking the actions necessary to achieve their goals of the future.

In this episode, we talk in-depth about how Danielle structures her financial planning engagements, which includes a 5-meeting sequence during their first year that explores both the client's financial situation and the "why" behind how they view money, how Danielle uses tools such as Money Quotient and George Kinder's 3 Life Planning questions to dig deeper into clients' money memories and money identities, and how Danielle positions these conversations to occur after she presents her initial financial planning recommendations, at a point where clients are engaged enough with and buy-in to the process that they're willing to explore these more sensitive topics that can lead to real breakthroughs.

We also discuss how Danielle's transition from having an insurance-focused practice to a planning-centric business was influenced by her and her husband working through Kinder's 3 Life Planning questions themselves, how Danielle has increased and reduced her client headcount to meet lifestyle goals during different stages of her life, and how building a financial planning business has fit Danielle's personality as a 'cook' who is able to make changes and 'season to taste' in the moment, rather than as a 'baker' who has to follow a certain fixed path to the letter.

And be certain to listen to the end, where Danielle shares why she thinks women can make important contributions in the financial planning industry, particularly when it comes to listening deeply to clients and bringing integrity and authenticity to the table, how Danielle's own definition of success over time has shifted from gathering clients and assets to feeling that she is helping her clients succeed, and why Danielle thinks the financial planning industry offers advisors a unique opportunity to blaze a career path for oneself that meets our own individual needs and interests while being aligned to helping clients achieve theirs.

So, whether you're interested in learning about Danielle's transition from an insurance-focused practice to a planning-centric business, how to strategically schedule deeper discussions about money identities, and why Danielle believes women have a unique role in deep listening and authenticity in financial planning, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Danielle Howard.

Your Feedback Requested – Reader Survey For Nerd’s Eye View (2024)

May 13, 2024 07:02 am 0 Comments CATEGORY: Nerd's Eye View

The traditional financial advisory firm is blessed with incredibly high client retention rates. Which doesn't change the fact that each and every client loss that occurs is still very painful. But mathematically, most financial advisors only have to add at most a handful of clients every year to maintain positive growth momentum. To the point that most advisory firms don't really need to worry "Am I providing enough value to my clients?" and instead can focus on delivering the value they already provide more efficiently and effectively.

Yet the reality is that client preferences can and do change over time. Sometimes services that were once valued highly (delivery of quarterly performance reports) are no longer so valid (I'll just check on my accounts from my smartphone when I feel like it). Other times the evolution of the client base makes new services more relevant (e.g., from accumulation planning to decumulation planning). You never really know… until and unless you ask!

Every year, we ask you – our readers – for feedback about what you want to make this website even better for you, to ensure we stay on the right track in adding value to the advicer community and making financial advisors better and more successful. And especially after the amount of change over the past few years, from the rollout of our Virtual Summits on Marketing and Advisor Value to our Kitces Courses on Tax Returns, Insurance, and Estate Document Reviews, and most recently, the launch of IAR CE in our Members Section… we're more eager than ever for your feedback about how we're doing, where we can improve, your thoughts about some new ideas we're considering, and your feedback about what else we could be doing to help the advicer community.

Because we really do take your feedback seriously. Over the years, Nerd's Eye View reader feedback has shaped everything from the visual design of the blog (from its original dense small font!), to the ongoing expansion of our Members section from offering CFP to now CPE credits for CPAs and IAR CE for RIAs that can be earned by reading Nerd's Eye View blog articles, the launch of the Financial Advisor Success podcast, our popular "Master List" of all the major Financial Advisor conferences and Best Books for Advisors, and turning our AdvisorTech Map into an entire AdvisorTech Directory that you can use to build your own tech stack.

So regardless of what kind of reader you are: an advisor or someone who works in an advisory firm home office, an individual consumer who reads this blog for your own benefit, a CPA, attorney, or another related professional that works with financial advisors, or you're associated with a vendor who serves advisors... I hope you'll participate in this year's survey. It's only 12 feedback questions, should take no more than a few minutes, and will remain open until the end of next week.

Thanks in advance for taking a few minutes to access our Reader Survey below, and share your feedback! 😊

Weekend Reading For Financial Planners (May 11-12)

May 10, 2024 02:00 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners"– this week's edition kicks off with the news that a recent analysis from Morningstar suggests that the Department of Labor's (DoL's) new Retirement Security Rule (aka Fiduciary Rule 2.0) could save retirement plan participants $55 billion over the next 10 years (due to an expectation of more low-cost fees being offered in plans) and those rolling over workplace plans into IRAs to purchase annuities another $32.5 billion (thanks to expected reductions in commissions and the embedded costs in these annuities). Nonetheless, for these potential benefits to come to pass, the rule will likely have to survive legal challenges, including a lawsuit filed led by an insurance industry lobbying group seeking to halt implementation of the rule (which is set to take effect in September), which argues that the rule violates the U.S. Congress' intent in passing ERISA and that the DoL overstepped its authority in adopting it.

Also in industry news this week:

The latest Social Security trustees report offered a slightly rosier picture for the health of the various Social Security trust funds thanks to improved economic conditions, though they warned that time is running out for legislators to take action to ensure the system will be able to pay out full benefits beyond the early 2030s
RIA custodian Altruist has raised $169 million in its latest funding round, giving it a $1.5 billion valuation and added capital to fund technology and staffing upgrades as it seeks to challenge Schwab and Fidelity in the RIA custodial space

From there, we have several articles on retirement planning:

Why considering a client's retirement time horizon and spending flexibility could lead to more accurate (and often higher) safe withdrawal rates than the simpler "4% rule"
While many financial advisors focus on preventing clients from depleting their portfolios in retirement, they might be overlooking the 'risk' that clients might underspend and not achieve their retirement lifestyle goals
How the creator of the "4% rule" is now incorporating inflation and equity valuations when calculating safe withdrawal rates

We also have a number of articles on advisor marketing:

A 4-step process that can help financial advisors craft better stories to use with clients
The best and worst times to use emotional storytelling to communicate an important message to clients
How effective storytelling can increase the likelihood that an advisor's message will resonate with clients amidst a sea of potential information sources

We wrap up with 3 final articles, all about vacations:

How taking a vacation can provide a sense of clarity that can lead to positive changes in one's 'normal' routine
How to decide how much to spend on a vacation, from planning out a year's worth of trips in advance to being aware of "luxury creep'"
Why money spent on vacations and other shared experiences could be considered an investment in an appreciating asset

Enjoy the 'light' reading!