Kitces.com - Advancing Knowledge in Financial Planning

#FASuccess Ep 136: Leveraging Risk Tolerance And Financial Planning Software Upfront To Deepen Conversations With Prospects, with Nina O’Neal

August 6, 2019 07:07 am 2 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 136th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Nina O’Neal. Nina is a partner with Archer Investment Management, a hybrid advisory firm based in Raleigh, NC that oversees nearly $90 million of assets under management for 165 clients.

What’s unique about Nina, though, is the authentic way that she juggles the realities of being an advisor, a firm owner, and a parent, going so far as to pioneer the advisor video series “The Juggle is Real” about the challenges of work-life balance as a financial advisor raising a family.

In this episode we talk in-depth about Nina’s own advisory firm, the unique way they use Riskalyze for risk tolerance assessments not just with existing clients, but as part of the prospecting process, how she also integrates the eMoney Advisor portal as a way to paint the picture with prospects of how their firm works with clients on an ongoing basis, and the unique client service commitment postcard that all clients receive after being on board for three months.

We also talk about how Nina’s advisory firm is structured, the way the firm decides to handle its mixture of fee-based advisory and commission-based brokerage business, how the firm structured its AUM fee to be an “all-in” AUM fee that captures the underlying costs of both trading and any separate account managers, why Nina’s firm doesn’t view the hybrid model as a waypoint to the independent RIA model and plans to remain a hybrid firm, and how, despite the number of naysayers about broker-dealers and their sometimes overbearing compliance culture, Nina actually chooses to stay with her broker-dealer, Triad, precisely because she actually appreciates the quality of their compliance support.

And be certain to listen to the end, where Nina talks about the real-world challenges of balancing the burdens of being a parent with the challenges of growing an advisory firm, why she decided to create her own advisor video series “The Juggle is Real”, and her latest endeavor in launching the new Female Advisor Network specifically as a community to help empower fellow female advisors in their own path of building an advisory business and balancing the rest of their lives in the process.

So whether you're interested in learning about how Nina uses Riskalyze to deepen her relationships with her clients, why she has no interest in letting go of her broker-dealer, or the advice that she has for young, female advisors, then we hope you enjoy this episode of the Financial Advisor Success podcast.

The Latest In Financial Advisor #FinTech (August 2019)

August 5, 2019 07:19 am 3 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the August 2019 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 announcement that Orion Advisor Services is acquiring newcomer financial planning software maker Advizr for a whopping $50M (on a revenue base of only $3M), and will almost immediately begin offering it for free to Orion users as a way to make the Orion client experience more financial planning centric… but in the process, creating potential client experience and workflow conflicts for actually-planning-centric advisory firms already using other third-party financial planning software tools.

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

Independent software goes wirehouse as Morgan Stanley selects Box to power its new Client Vault and Merrill Lynch cuts a deal with Envestnet Tamarac to replace its own proprietary portfolio performance reporting solution.
AdvicePay launches a new Fee Calculator tool for advisory firms to show and explain their pricing to clients, as Schwab’s Intelligent Portfolio Premium service quickly garners $1B in 3 months with its own financial-planning-for-a-monthly-subscription-fee offering.
Northern Trust Asset Management acquires robo-advisor-for-advisors Emotomy as standalone digital onboarding tools continue to struggle to find traction.
Salesforce rolls out a new “downmarket” version of Financial Services Cloud in an attempt to compete in the small-to-mid-sized RIA market

Read the analysis about these announcements in this month's column and a discussion of more trends in advisor technology, including Betterment rolling out an “Everyday” high-yield cash savings option for its investors but finding that it’s the Betterment For Advisors RIAs quickly becoming its biggest cash referrers, Ritholtz Wealth re-launches its LiftOff “robo” service for small clients and chooses to pay Betterment For Advisors 0.25%/year just to not use existing RIA custodians’ digital onboarding tools, “Techno-TAMPs” are on the rise as Ethic Investing raises a $13M Series A to provide advisor-customized centrally-managed SRI strategies, Plaid rolls out new student loan account aggregation capabilities that may finally bring more student loan planning tools to advisors, and Envestnet MoneyGuide partners with Jackson National to leverage its wholesalers to provide training on MoneyGuideElite’s new “Secure Income Modeling” tool designed to make it easier for RIAs to begin using annuities with their clients.

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 new 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 (August 3-4)

August 2, 2019 02:59 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the big investigative journalism report from the Wall Street Journal this week that the CFP Board's "Let's Make A Plan" website was including thousands of CFP brokers who had a history of disciplinary misconduct and/or other material disclosures on the FINRA website that were not communicated on the CFP Board's website... leading the CFP Board to immediately make changes to its site to link to BrokerCheck and IAPD, to increase its reviews of CFP professionals' disciplinary records during the renewal process, and to appoint a new Task Force chaired by former Texas Securities Commissioner Denise Voigt Crawford to "strengthen and modernize" CFP Board's enforcement.

Also in the news this week are several articles about the increasingly controversial 12b-1 fee, from a lawsuit from the SEC against Commonwealth Financial alleging that the firm received more than $100M in not-properly-disclosed 12b-1 fees as part of a revenue-sharing agreement with NFS (that may have directed investors towards higher-cost share classes that paid such 12b-1 fees to NFS and Commonwealth), and a look at how Vanguard itself competes by not paying 12b-1 fees to other platforms even as Vanguard's own brokerage and Personal Advisor Services solution may be collecting 12b-1 fees from other mutual funds in order to fund their own platform costs.

From there, we have a few articles on cash flow and budgeting issues, from a look at the recent Equifax settlement for $125 cash or up to 10 years of credit monitoring (and how to claim them, and why the credit monitoring may be a far better deal than the cash), to a takedown of why consumers should ignore Suze Orman's recent admonition that "wast[ing] money on coffee is like peeing $1M down the drain", and an interesting framework to help figure out when it is a good idea to "go cheap" and when it's better to still spend up for quality.

We also have a few articles on mergers and acquisitions in the advisor space, including the latest "Deal Book" report from M&A consultant David DeVoe that finds record highs in both the volume of RIAs selling and the valuations that advisory firm sellers are commanding in the marketplace, a breakdown of the common components of an advisory firm deal (from Deal Structure to Financing to Tax Treatment), and some "must-know" items to be mindful of when you receive an unsolicited inquiry to sell your advisory firm and now must suddenly decide whether to consider the buyer's offer.

We wrap up with three interesting articles, all around the theme of maintaining a productive office workspace: the first looks at the increasingly popular rise of "phone booths" (but without the phones) as a form of 'privacy pod' in open floor office plans; the second explores the research on how having multiple monitors really does make us more productive at work; and the last looks at how the physical layout of an office space matters not only for its visual and aesthetic appeal, but because it can impact the sound of the space, which in turn can impact everything from our productivity to even our mood in the office.

Enjoy the "light" reading!

Kitces & Carl Ep 13: The Better Way To Send Market (And Other) Commentary Emails To Clients

August 1, 2019 07:01 am 2 Comments CATEGORY: Client Trust & Communication Kitces & Carl Podcast

In our last episode, Kitces & Carl opened a proverbial can of worms by asking if financial advisors still, in this day and age, send out market commentary to their clients. And if so, what do they send? The general conclusion was that, yes, advisors still need to touch base with their clients, outside of their regular service cycle, using some sort of bulk communication tool or personalized report. Because doing so accomplishes several goals, including and especially that it demonstrates to clients that the person they trusted to manage their life savings is “paying attention.”

Regular communication, meanwhile, is especially important for those clients who are in the “Cone of Trust” (e.g., that stage of the relationship where a client has been with an advisor long enough to meet much less frequently and understands that the advisor will reach out if there’s a problem, and vice versa) because it helps ensure that the client actually stays in the Cone of Trust. Unfortunately, though, while our intrepid hosts were able to conclude that sending something is better than sending nothing (and especially better than anything that features a couple holding hands against a backdrop of a lighthouse on the beach), they ran out of time before they could answer the question: What should advisors be sending their clients?

So, in our (lucky) 13th episode, Michael Kitces and financial advisor communication expert Carl Richards sit down to discuss why it’s important to send regular commentary, provide a specific example of an easy and effective way to let clients know that you are thinking about them and their challenges, and why it matters so much that it ultimately comes from you (versus any number of white-labeled, off-the-shelf offerings).

In general, what advisors send out for regular communication generally fell into three buckets. Some use third-party commentary and other materials from a reputable source (some of which can be “white-labeled”), others question the value of even sending anything out at all (since the objective is for clients to not focus on and become concerned about short-term market gyrations), while still others insist no one should be sending content unless it was produced in-house (since the goal is for the advisor to establish their own expertise and authority).

For advisors who fall somewhere between the second and third camps, but whose skill set doesn’t include content creation, one effective strategy is to send out a collection of interesting articles (which may or may not have anything to do with money or “the market”), along with a short comment on why you found it useful. It provides a means of still connecting with clients (since ultimately, whether you connect frequently can be just as important as what you send to connect). And this way, when something noteworthy in the market does come along, your clients (or even prospects) are already accustomed to your cadence.

Ultimately, the key point is simply that it does matter that advisors send something to their clients and that they do so on a fairly predictable basis. Because if you are consistently communicating with clients, you can dictate the tone and focus of whatever it is you’re sending. Which means at the end of the day, what matters is that you do take some time, on a regular basis, to send something (preferably in your own words… even if it’s just a sentence or two about why you find a particular article useful). And when you do, you send a clear signal to your audience that you’re thinking about them… and about the responsibility you have as a steward of their life savings!

The 6 Types Of Itemized Deductions That Can Still Be Claimed After TCJA

July 31, 2019 07:03 am 1 Comment CATEGORY: Taxes

Touted as the most significant update to the Internal Revenue Code in decades, the Tax Cuts and Jobs Act of 2017 (TCJA) did indeed introduce several noteworthy changes, including the new 20% qualified business income owners of (some) pass-through entities, a (much) lower corporate tax rate, a (much) higher estate tax exemption, lower individual tax rates for the vast majority of taxpayers, and a slightly higher total standard deduction (which combined both the existing individual standard deduction and the per household personal exemption). Ironically, though, while the TCJA legislation largely accomplished its objective of simplifying the process of filing taxes, it did so largely by making it a lot harder for households to itemize deductions at all going forward!

As while the new standard deduction isn’t that much higher than the combined prior standard deduction and personal exemption, the threshold for itemizing deductions in the first place is significantly higher than it was before, simply because the personal exemption wasn’t part of the equation when calculating the prior deduction threshold. Moreover, the TCJA also either eliminated completely or curtailed many of the most popular itemized deductions that got people over the hurdle to itemize in the first place, including moving expenses, many miscellaneous itemized deductions, and unreimbursed employee expenses (to name just a few). The end result: the number of households eligible to itemize deductions at all is anticipated to fall from approximately 30% of US households to “only” 10%.

Regardless, despite the upheaval, itemizing deductions is still a viable strategy to reduce overall tax obligations, and there are still six core deductions available to taxpayers, including: medical expenses (to the extent that they exceed 10% of Adjusted Gross Income – up from 7.5% in 2018); taxes paid to other governmental entities (both state or local municipality taxes as well as foreign governments, but with a $10,000 maximum deduction limit… regardless of filing status!); at least some types of interest paid (for not only mortgage interest – up to a $750,000 principal limit – but for investment purposes as well); charitable giving (but with limits); casualty and theft losses (but, for individuals, only if they were attributable to a Federally declared disaster); and other (miscellaneous-but-not-subject-to-the-2%-of-AGI-floor) deductions (such as gambling losses and Ponzi scheme losses, among others).

It’s important, meanwhile, to note that most of the still-available itemized deductions simply don’t occur regularly, and there are even fewer large enough to get taxpayers close enough to the new standard deduction threshold to make itemizing “worth it” on a recurring basis. Those items include big mortgages (particularly when mortgage rates are still at historically low levels), large ongoing charitable deductions (even though the deduction amount will necessarily be much less than the amount given), big state and local tax deductions (at least for individuals, where the $10,000 SALT cap gets them close to a standard deduction that is “only” $12,000), high margin investing (since interest paid on investments is deductible… as long as the returns on the investments are taxable in the first place), big long-term care events (which, while undesirable, can require large ongoing medical expenses), and significant stretch-IRAs that are eligible for the Income in Respect of a Decedent (IRD) deduction (to the extent that the IRA was inherited from someone who actually had to pay Federal estate taxes).

While few households will be able to meet the standard deduction threshold every year using just those big-ticket items, though, it is feasible (and perhaps even much more likely) that taxpayers will be able to itemize on an intermittent basis, by combining a few (or several) additional deductions on top of other (lower-but-recurring) deductions. For instance, a taxpayer might combine ongoing mortgage interest, property taxes, and state income taxes with a large charitable contribution to push past the standard deduction threshold in order to take advantage of additional tax benefits.

Ultimately, the key point to realize is that the combination of a higher Standard Deduction threshold and the curtailment of itemized deductions, makes it much harder to itemize than it once was (if only because the new standard deduction provided a more substantive and generous tax benefit in the first place). Yet while fewer households are able to itemize each and every year, some may still be able to do so, either on an ongoing basis, or at least intermittently by stacking infrequent clusters of additional deductions on top of recurring items that typically aren’t large enough to matter from a tax planning perspective. Which is important, because at the margin it’s still valuable to identify and plan for the (few) years where itemized deductions will still be available, as those are the years when there’s the most tax benefit to stacking any other possible “add-on” deductions on top for more tax savings!

#FASuccess Ep 135: Developing The Systematized Business Development Playbooks To 10X Your Advisory Business, with Kathryn Brown

July 30, 2019 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 135th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Kathryn Brown. Kathryn is the co-founder of Morton Brown Family Wealth, an independent RIA in Allentown, Pennsylvania that oversees nearly 110 million of assets under her management for 85 affluent households. What's unique about Katie, though, is the way they position their firm for the potential for 10X growth in the coming years, systematizing everything from their business development to their financial planning processes and even hiring a Data Geek Chief of Staff as just their third hire to ensure the firm stays focused on the metrics that matter the most.

In this episode, we talk in-depth about the playbooks that Katie and her partner have developed for the firm, from a business development playbook that articulates exactly what the firm does to nurture a potential new clients in each stage from being a source name to a lead to a prospect and eventually onboarding as a client, to their client experience playbook that tracks a financial planning heat map where clients are between the planning and process phase, implementation phase, maintenance phase, update phase, and no plan phase. And the way the partners of the firm have surrender control of their own calendars to a team member whose job is to ensure that they keep their own time focused on where they need to spend the time to positively impact the business the most with each day of the week set with specific tasks to focus on that day.

We also talked about Katie's own path through the planning business from starting out in an administrative roles straight out of school, then moving into an operations role and then into a client-facing financial planning role before eventually forcing herself to learn business development and then eventually deciding that it was time to launch her own firm with a partner after nearly 15 years in the business, building on the foundation of skills and confidence that she had developed in each step along the way.

And be certain to listen to the end where Katie talks about the way she made the successful transition to breaking away from her prior firm. How keeping the split amicable made for an exponentially easier process of being able to use the negative consent letters instead of fully repaid to bring all her clients, the challenges she faced along the way with certain outsourcers that didn't always deliver, and how she persevered through the leap to independence despite learning that she had breast cancer and going through three surgeries while preparing for the transition to break away.

So whether you're interested in learning about why Kathryn hired a "data geek", the process she went through when learning how to build a business with intent, or how she's developed systematic processes for business development and the financial planning process, then we hope you enjoy this episode of the Financial Advisor Success podcast.