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#FASuccess Ep 133: Joining As Sibling Partners To Launch A Joint Advisory And Accounting Firm, With Danna Jacobs

July 16, 2019 07:06 am 2 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 133rd episode of Financial Advisor Success Podcast!

My guest on today's podcast is Danna Jacobs. Danna is the co-founder of Legacy Care Wealth and Inspired Vision Accounting, a combination of financial planning and small business accounting firms that serve nearly 80 high-income, next-generation clients. What's unique about Danna though is that she launched her advisory firm and accounting practice jointly with her brother, where she focuses on the financial planning and he focuses on the accounting and tax planning as they grow the businesses together.

In this episode, we talk in-depth about how Danna's firm works with next-generation clients, their blended fee model of charging $150 to $250 a month for ongoing planning advice that shifts into an AUM fee as their client's savings and portfolio grows, the four-meeting financial planning process that all clients go through, the unique ongoing monthly report tracking client cash flows and growth and net worth that they use to show their client's progress and help justify their ongoing monthly fee and the way they divide up their rotation of quarterly planning meetings for clients between tax planning, debt repayment, insurance matters, and an overall annual review. With the structured agenda that Danna uses for every client meeting covering their accomplishments since the last meeting, current discussion topics, and key client takeaways that become the client's homework for the next meeting.

We also talk about how Danna and her brother grew the business in the early years, the way they leverage their differentiation as being some of the only fee-only CFP professionals in their area willing to work with young clients with no minimums as a way to get clients through local SEO and the CFP Board's Find a CFP Professional site, the way they've been able to bring in small business owner clients by starting with their bookkeeping needs first, and why Danna doesn't regret walking away from her prior salary working at a major firm and taking the leap to go out on her own even though it took nearly five years to get back to her prior income.

And be certain to listen to the end where Danna shares why she decided to go out on her own and start an advisory business with her brother and then start her own family and have two children, the way that she balanced early motherhood and the early stages of the business, and how early on she hid the fact that she started a firm with her sibling but now embraces the story as a way to further differentiate the firm.

So whether you interested in learning about the pros and cons of starting a business with a sibling (and how it helps her balance being a mom and a business owner), the services that Danna provides for her clients (and how she charges for them), or the most valuable deliverable that she provides for her younger clients, then we hope you enjoy this episode of the Financial Advisor Success podcast.

The Great Convergence And The Death Of Fiduciary Differentiation (For RIAs)

July 15, 2019 07:03 am 4 Comments CATEGORY: Planning Profession

For the past several decades, RIAs have increasingly differentiated themselves and their advice from competing broker-dealers by the “best interests” fiduciary standard that RIAs owe to their clients, from outright marketing themselves as fiduciaries, to signing “Fiduciary Oaths” for clients (that other broker-dealers wouldn’t and couldn’t sign).

The fiduciary distinction for RIAs wasn’t originally intended to be a marketing differentiator for advice, though. Its roots lie in the fact that RIAs were created from the start to be providers of investment advice, while broker-dealers originally were created to play a vital role in the capital formation and capital markets process (which included selling investments, in the form of stocks and bonds to prospective investors, often underwritten by the broker-dealer’s investment banking division). For which RIAs were subject to a fiduciary standard – as the providers of advice – while broker-dealers were subject to a lower suitability standard consistent with the sales-centric role they were created to fulfill.

But over the past several decades, as technology has increasingly commoditized the core functionality of broker-dealers, from “discount” brokerage reducing the price to execute trades (without a stockbroker to facilitate them), to online platforms making no-load funds available to consumers directly (without a broker-dealer to sell them), the RIA and broker-dealer channels have gone through a Great Convergence. To the point that today, a consumer may pay 1%/year for ongoing financial advice in the form of a fee-based wrap account, a C-share mutual fund trail, or an advisory fee, and not even make a distinction between the choices. Except from a regulatory perspective, these remain substantively different choices, given the (originally) different roles that broker-dealers and RIAs play.

In recent years, the Great Convergence has led to a flurry of proposals on new standards, as regulators have recognized that as the gap between broker-dealers and RIAs has been reduced over the years, so too did the gap in the standards of conduct between them need to be narrowed as well. Resulting in the release earlier this summer of the SEC’s new Regulation Best Interest, lifting the standard of conduct for broker-dealers to a “Best Interest” standard when making a recommendation to their customers.

Notably, in practice, the new Best Interest standard under Reg BI is not a full-scale fiduciary duty and only applies at the time of the broker’s recommendation itself (and not to the overall relationship). Nonetheless, Reg BI will grant – and in fact, require – that broker-dealers now explain their standard of conduct as being an obligation to act “in the best interests of the customer when making a recommendation.”

Which leaves little room for RIAs to market their fiduciary obligation to act “in the best interests of the client” as a differentiator when broker-dealers will be able to use substantively identical words. Raising the question: how will RIAs differentiate themselves in the future?

On the one hand, some RIAs may point out that there’s still a difference between being a “fiduciary at all times,” versus "just" being held to a Best Interest standard at the time of recommendation alone. Others may pursue and highlight voluntary designations like CFP certification, which itself has its own “fiduciary at all times” obligation (applicable to not only RIAs but those at broker-dealers as well). Some may even choose to pursue new terms of distinction, like “stewardship” as a higher standard above merely being a legally-obligated fiduciary.

In the long run, though, arguably the best path forward for most advisors will simply be to actually differentiate on their services and what they actually do for clients, rather than their standard of conduct in the first place. As the irony is that, the more fiduciary advocates push for higher standards across the industry… the less likely it is that being a fiduciary with higher standards will ever be an effective differentiator again in the future.

Weekend Reading for Financial Planners (July 13-14)

July 12, 2019 02:59 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the big Advisor #FinTech news that Orion is acquiring financial planning software Advizr for a whopping $50M in an effort to expand its platform towards more holistic wealth management and provide advisory firms a more planning-centric portal for clients to engage with.

Also in the news this week is the announcement that just 3 months after its launch, Schwab's monthly subscription service has raked in a whopping $1B of AUM, and AdvicePay crossed 20,000 advisors under enterprise contract facilitating financial planning fee payments, as consumer interest in the monthly subscription model of financial planning continues to heat up.

From there, we have several industry-related articles, including a surprising call from the FPA that the CFP Board should delay enforcement of its new fiduciary Standard of Conduct (but just until next June, to take effect alongside the new Regulation Best Interest), the announcement from the FPA that its OneFPA Network Plan has been finalized by the Board and will be proceeding forward with a 10-chapter beta test (despite generating positive Public Comment letters from less than 0.02% of its membership), an Op-Ed from former CFP Board chair Ray Ferrara disputing at least some of fiduciary advocate Don Trone's allegations that the CFP Board needs to improve its own fiduciary governance processes, and the news that Fi360 has become (only) the 10th financial advisor designation to earn (ANSI) accreditation for its AIF (Accredited Investment Fiduciary) designation.

We also have a few marketing-related articles this week, from tips on how advisory firms can differentiate themselves on their websites once Reg BI eliminates "fiduciary" as a differentiator, how to improve your Advisor Bio page so it doesn't "suck," and basic tips on how to improve the SEO (Search Engine Optimization) of the articles you do publish to your website.

We wrap up with three interesting articles, all around the theme of figuring out what is really fulfilling and "enough" to make us happy: the first looks at how more and more research shows what really makes us happy in our jobs, yet in practice people are less and less happy at work; the second explores the ways that we tend to pursue money, but when faced with difficult time-vs-money trade-offs (e.g., would you take all of Warren Buffet's money if you also had to take on his current age of 87?) we virtually always choose the time over the money; and the last examines how often the biggest returns we can get on the path to financial success aren't actually about earning money at all, but about getting comfortable that what we have is "enough" (and then saving all the rest).

Enjoy the "light" reading!

Choosing The Right 529A Plan For A Special Needs Beneficiary

July 10, 2019 07:02 am 2 Comments CATEGORY: Investments

Leveraging the success (and the systems and infrastructure) of tax-preferenced 529 college savings plans, in 2014 Congress passed the “Achieving a Better Life Experience” (ABLE) Act, which created a new “529A” version of the accounts, designed specifically to allow families to accumulate assets on a tax-preferenced basis for special needs beneficiaries. Which for some families may be a more cost-effective (and tax-favored) alternative to a special needs trust, and for others may at least supplement a special needs trust for a portion of the assets the family sets aside.

The caveat, however, is that similar to 529 college savings plans, the new ABLE accounts are established on a state-by-state basis, with everything from the costs to the state tax deductions varying from one state to the next. And because 529A plans are more likely to be used transactionally on an ongoing basis for their special needs beneficiaries… they’ll less likely to grow to a significant size. Which has resulted in some states deciding not to even offer the accounts. Making the process of selecting a 529A plan far more of a state-by-state evaluation effort than even traditional 529 college savings plans.

In this guest post, Andrew Komarow and Craig Breitsprecher of Tenpath Financial Group, an advisory firm with a specialization in working with families that have special needs beneficiaries, explores the current landscape of 529A plans, the key criteria to compare one ABLE account to the next, and what advisors should be mindful of in helping clients to select a plan. Including the fact that very few 529A plans are even designed to work with financial advisors directly in the first place, with only one broker-sold plan and no fee-based options. But with at least some potential workarounds for RIAs through their own custodial platforms.

And with potential legislation under consideration in Washington that might further increase contribution limits, expand age limits, and overall make 529A plans more appealing, ABLE accounts may increasingly need to become part of the financial advisor’s "quiver" of tools to use with clients. At a minimum, though, it’s important to be aware of the options that exist today, and what it takes to ensure that clients who do have a special needs beneficiary pick the plan that’s best for them.

#FASuccess Ep 132: Finding The Confidence To Avoid Discounting And Charge The Fee You’re Really Worth, with Linda Leitz

July 9, 2019 07:01 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 132nd episode of Financial Advisor Success Podcast!

My guest on today's podcast is Linda Leitz. Linda is the president of Peace of Mind Financial Planning, an independent RIA based in Colorado Springs providing comprehensive financial planning services on a retainer fee basis to nearly 100 clients with a team of 4.

What's unique about Linda, though, is the depth of her experience in pricing her financial planning services and working with clients for an ongoing retainer fee, and what she's figured out over the span of 20 years about how to successfully position retainer fees for clients who may not be used to seeing the exact dollar amount they'll be paying for financial planning advice.

In this episode, we talk in depth about how Linda has structured her financial planning fees tied to a client's income, net worth, and complexity, the way she presents this information to clients using a fee calculator to validate the price, the way she positions her retainer fee increases during biannual renewals, showing clients how their fees compare to what another advisor's AUM fee might be, how the biggest problem when quoting financial planning fees is not that clients try to haggle the price down, but that as advisors, we often haggle our own fees down due to our own self-doubt, and what it took for Linda to finally stop the temptation to give clients a discount the moment they flinched or gasped at the cost of her services.

We also talk about Linda's decision after nearly 20 years to shift from being a siloed solo advisor under a cost-sharing partnership to building her own multi-advisor team. Why she decided to make the shift not to position herself for retirement, but simply to ensure continuity of service for her clients in the event that something happened to her, what surprised her most by shifting to a team structure after being a solo for so long, and how having a team around her changed her own mentality about how to price her services with clients.

And be certain to listen to the end, where Linda shares why she decided to go back to school for a PhD in financial planning as an experienced practitioner to help build better connections between practitioners and academics. The differences she found about being a practitioner versus doing academic research, and the somewhat humbling experience she had doing a dissertation that showed how some of her own traditional financial planning advice might not actually be fully validated in research.

So, whether you're interested in learning how to gain confidence around the fees you charge, ways to communicate fee increases to clients, and ways in which flat-fee advisors can differentiate themselves from advisors with other fee models, then we hope you enjoy this episode of the Financial Advisor Success podcast.

6 Types Of Niches For Financial Advisors To Differentiate Themselves

July 8, 2019 07:05 am 2 Comments CATEGORY: Marketing

As more and more financial advisors deliver comprehensive financial planning and wealth management services to clients, it’s becoming harder and harder for any particular advisor to differentiate themselves from all the other advisors offering substantively similar services. The good news is that as long as clients are well served, they tend to remain as clients (maintaining good retention for the advisory firm). The bad news, though, is that firms who are unable to differentiate will struggle to grow further, even if they’re serving their clients well and providing good value… because the prospective client’s perception is that every other advisor does, too.

Which means the key to growth as a financial advisor is not merely to be better, but to be different as well… crafting a unique value proposition that is relevant for the particular target market (or a subset thereof) that the advisor wants to serve. Which, in turn, requires the advisor to identify the specific niche solution they can provide to attract some or all of that target market. Except for most advisors, the struggle then becomes: how do you pick the “right” niche in the first place?

In this Guest Post, financial advisor marketing consultant Stephen Wershing shares his perspective on how advisors can better understand the range of niche choices in order to pick the one that best suits them. Because the reality is that not all types of niches are the same in the first place.

For instance, an “Affinity” niche is about developing relationships based on a common social circle (e.g., business development at the yacht club or the local chamber of commerce), while a Values niche builds relationships based on shared Values (e.g., shared religious beliefs, or a Values system like the Boy Scouts). An Educational niche focuses on prospective clients who are looking to get more educated about a particular problem or issue, while a Psychosocial niche focuses on prospects who need to address more emotional needs (e.g., recent divorcees or widows), and an Experiential niche tries to differentiate by crafting a unique experience that will resonate with a particular type of clientele. And some advisors will differentiate with a Technical niche, where they bring to the table a unique and specialized expertise that is relevant for a particular niche clientele.

Ultimately, advisors can differentiate themselves with any of the 6 different types of niches, and which will be most appealing depends on the advisor’s own interests, style, existing relationships, and natural market. The key point, though, is simply to recognize that differentiation isn’t just about being better, but about being different… and the best way to be different is to focus on a particular type of clientele who have unique needs, and develop a niche solution that is especially relevant (and differentiated) for that particular clientele!