Nerd's Eye View blog

Advice Engagement Tools For A More Dynamic VIP (Visualization, Interaction, and Process) Planning Experience

November 29, 2023 07:01 am 0 Comments CATEGORY: Technology & Advisor FinTech

The traditional way that most financial planning has been offered was for an advisor to create "The Plan": a comprehensive document outlining a client's financial strategy that was delivered either on a one-time basis or updated annually. However, as the industry has shifted towards an ongoing relationship model, advisors have felt compelled to demonstrate consistent value to their clients throughout the year. The problem, however, is that a typical client's big-picture financial situation doesn't tend to change much from year to year, and the process of updating "The Plan" entails intensive document review and time-consuming data entry. Which means that updating a client's financial plan more frequently would offer little additional value to the client and would be very inefficient for the advisor.

As a result, tools have emerged that are designed to keep clients engaged in the financial planning process throughout the year, addressing the inefficiency and time burden of frequently updating the full financial plan itself. Recent Kitces Research on Advisor Technology indicates that while these newer Advice Engagement tools are not yet widely adopted among advisors (likely due at least in part to the newness of the category overall), most advisors who do use advice engagement software tend to like it – which in turn suggests that as more advisors become familiar with advice engagement tools, the rate of adoption will increase as advisors see the potential for a more dynamic ongoing financial planning process.

Broadly, advice engagement tools incorporate 3 key elements that enhance the process of financial planning: First, they use visualization tools to simplify complex and abstract financial planning concepts for clients. Second, they facilitate clear and organized communication between the advisor and client to ensure that important information is effectively conveyed. And third, advice engagement tools help clients understand where they stand in the financial planning process itself – and, most importantly, what comes next – to provide a clear roadmap and prepare the client for what lies ahead. The current tools in the Advice Engagement category vary in their use of Visualization, Interaction, and Process (VIP) elements, offering advisors the option to tailor the technology to the client experience that they desire.

Which means that for advisors considering adopting advice engagement technology, the process starts with deciding which engagement elements can do the most to enhance the advisor's existing financial planning. For many advisors, tools that help to define and navigate the planning process for clients can be the most valuable starting point, with interaction fostering more dynamic communication and visualization delivering information in an impactful, meaningful way.

Ultimately, as financial advice continues to steer away from static plans and towards a more dynamic planning relationship with clients, advisors will increasingly benefit from tools that can help them not only analyze and project financial data, but also deliver information to clients more effectively. Because as the increasing adoption and high satisfaction of advice engagement tools show, giving clients a "VIP" experience really does increase their engagement not only with the advisor, creating a deeper client-advisor relationship, but also with the financial planning process itself, making both client and advisor more successful in the long run!

#FA Success Ep 361: Scaling A $2.4B Advisory Enterprise With Debt-Financed Acquisitions Into High-Productivity Pods, With Peter Tiboris

November 28, 2023 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 361st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Peter Tiboris. Peter is a Partner of Park Avenue Capital, an advisory firm affiliated with Northwestern Mutual based in New York City, that oversees $2.4 billion in assets under management for 1,377 client households.

What's unique about Peter, though, is how he and his business partner have built up their firm through a combination of organic growth, and a series of mergers and acquisitions all conducted within the Northwestern Mutual ecosystem, where Park Avenue Capital's size as one of the largest Northwestern Mutual offices in the country, and their ability to access debt-financing, provides a unique acquisition differentiator that is just further accelerating their growth.

In this episode, we talk in-depth about how Park Avenue Capital has grown to $20 million in revenue through a combination of organic growth and M&A activity, their approach to evaluating and valuing potential acquisitions, and the unique bank financing arrangements they made to be able to fund serial acquisitions over time, the way Peter and his firm build out 3-person advisor pods – including the lead advisor, an associate advisor, and a client service associate – and structures team support around the pods so allow them to increase their client capacity and productivity with a target of 50% gross profit margins, and how Peter and his business partner built a service-oriented culture at Park Avenue Capital, including hiring the former general manager of the St. Regis hotel in New York to bring a new mindset to the firm about what it really means to provide a personalized client experience (and bind the client to the firm's brand, rather than to their specific advisor).

We also talk about how Peter started in the industry in New York city in the aftermath of 9/11 as an insurance salesperson charged with cold-calling potential customers (and how he took inspiration from the work of author Nick Murray to overcome the challenge of hearing "no" from prospective clients on a regular basis and push through to grow his book of business), how Peter still thinks of his firm as being in the early stages of a startup despite all the growth and acquisitions because the business challenges that arise continue to be new and different as the firm grows, and why and how Peter created a business decision approach for himself by consciously considering what his older self would think of a potential choice, rather than just what his current self would prefer.

And be certain to listen to the end, where Peter discusses how he and his business partner came to the decision to hire a full-time CEO of their advisor enterprise so that they can focus on their strengths of generating new business and looking at the big picture of their business (rather than needing to manage the day-to-day operations of the firm), Peter's advice for advisors starting out as they try to generate prospects and build their initial book of business, and why Peter remains so upbeat about the advisory business, as one of the few high-income careers in America that can be achieved with very little in business startup costs (especially since large firms will often 'front' you a desk, a computer, and a phone), where success is determined primarily by your ability to control and manage through your own visceral reaction to hearing the word "no" from prospects until you get to the next "yes".

So, whether you're interested in learning about building a firm through M&A, using a pod structure to maximize the number of clients an advisor can serve, or how to create a service experience that ties clients to the firm's brand rather than to their individual advisor, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Peter Tiboris.

How Financial Advicers Can Write, Publish, And Distribute Their Own Book To Create A More Effective Impression On Prospective Clients

November 27, 2023 07:07 am 0 Comments CATEGORY: Personal/Career Development

One of the main goals of financial advisors who market themselves is to build a foundation of trust with their prospective clients so that they feel comfortable in discussing often-sensitive financial topics and ultimately acting on the advisor's recommendations. The challenge, though, is that advisors usually have only a short amount of time to build this trust, and while advisors can use different channels (e.g., their websites, newsletters, and social media) to demonstrate their expertise, these channels often don't give advisors enough time or space to convey what makes them ultimately worth hiring. This is because telling the full story of an advisor's background, philosophy, and expertise could easily fill up a book; in fact, many advisors have written books to share their knowledge and experience, which can establish them as trustworthy and desirable professionals for prospects to seek out.

In this guest post, Michael Levin, a New York Times bestselling author and ghostwriter, writes about how financial advisors can make a more effective impression on prospective clients by writing, publishing, and distributing a book that establishes their authority, confidence, and, above all, trust.

When writing a book, the first goal is to make the reader feel like the author understands them, which draws them in and makes them want to know more about the author. Establishing that the author understands the reader's problems (e.g., through examples of how the author has solved those problems for others) early on in the book creates a connection with the reader. And because of this rapport, the reader will want to listen to the advisor's story. Put differently, since people care (and want to read) about their own problems, then by extension, they care about the people who understand and can solve those problems, too.

After creating the initial connection, the next goal for the author is to establish expertise in a captivating way. One way to do this is to create value on every page by giving readers clear and authoritative information that they can actually use. Some advisors may be wary of giving away too much information and providing the tools that readers could use to do everything themselves (rather than hiring the advisor). However, in reality, there's almost always more that could be said when a current or prospective client is in the room with the advisor. So, while advisors may want to avoid providing so much information as to be overwhelming to nonexpert readers, being otherwise as generous as possible (for instance, by outlining a detailed process to solve a specific problem) can develop a sense of gratitude in the reader, while giving them a glimpse of what could await them if they became a client.

Finally, as with many other forms of marketing, ending the book with a call to action makes it clear to the reader what they can do next. A brief, clear description of the types of clients the advisor works with, the services provided, and what to expect after the client's initial outreach helps the reader understand whether they might be a good fit as a client and how they can become one (which, if they've made it to the end of the book, they hopefully want to!).

The key point is that while an advisor's book can showcase the advisor's expertise and empathy, the story's real hero is the reader, not the advisor. By keeping the reader and their challenges front and center, the author demonstrates relevant expertise and encourages the reader to trust them with their problems. And when the reader can see themselves reflected in the pages of the book, they'll want to know more about how that advisor can be a part of their journey!

Weekend Reading For Financial Planners (November 25-26)

November 24, 2023 01:38 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 FINRA has issued a proposal to allow broker-dealers to advertise hypothetical performance data to institutional and high-net-worth investors, which would bring the rules for broker-dealers largely in line with those for investment advisers, but also raises questions about the comparative roles and regulations for the two groups.

Also in industry news this week:

A recent survey indicates that about 98% of clients are at least somewhat satisfied with their financial advisor and that an advisor’s ability to provide peace of mind when it comes to finances is a key driver of this satisfaction
A study indicates that advisors can potentially boost client referrals by using client portals and by implementing financial psychology practices

From there, we have several articles on insurance planning:

While many clients might be tempted to enroll in a Medicare Advantage plan, doing so can create potentially costly financial risks
How seniors in several of the largest states will experience greater-than-average increases to their Medicare Part D premiums in 2024
How advisors can help clients minimize IRMAA surcharges and appeal to have them reduced under certain circumstances

We also have a number of articles on client communication:

The 7 communication practices that clients dislike the most and how advisors can avoid them
Why avoiding technical jargon can facilitate better prospect and client communication and tactics to help advisors communicate more clearly
Why empathy often beats sympathy for advisors when it comes to working with clients dealing with stressful situations

We wrap up with three final articles, all about the history of common financial products:

How the current system of employer-provided health insurance benefits can be traced back to wage controls imposed during World War II
How the private long-term care insurance marketplace has evolved over time, and why some states are considering stepping in to provide coverage to their residents
How the 30-year fixed mortgage became dominant in the United States and how it is impacting housing affordability today

Enjoy the ‘light’ reading!

Anatomy Of An RIA Sale, Merger Or Acquisition: 5 Important Legal & Compliance Steps

November 22, 2023 07:01 am 0 Comments CATEGORY: Regulation & Compliance

For all of the myriad ways financial advisors can structure and run their practices, firm owners generally encounter similar stages in the development of their firms. At some point, solo advisors will need to decide whether to increase their headcount, and an ensemble practice may later evolve into a centralized brand with significant enterprise value. The journey will be unique for each advisory firm owner, but one thing they all have in common is that they will eventually have to divest themselves of their ownership stake, either through a voluntary (or involuntary) dissolution of the business or through the full or partial RIA sale, with the latter naturally being the most economically ideal outcome.

In this guest post, Chris Stanley, investment management attorney and Founding Principal of Beach Street Legal, discusses in depth the various stages of buying, selling, and merging an investment advisory and financial planning business.

The initial step towards the eventual sale of an advisory firm requires the seller to identify a well-suited counterparty, which can be challenging given the population of well-funded serial acquirers who have a material advantage over firm owners, many of whom have likely never bought or sold a business. Once the seller and potential buyer are ready to get serious about a deal, the next step will be to sign a mutual Confidentiality and Non-Disclosure Agreement (CNDA), which contractually obligates the parties to keep any information that is shared (as the name implies) confidential.

From there, both parties can begin their respective preliminary due diligence. Once they are comfortable with the information and documents that have been shared, they can sign a Letter Of Intent that, while still high-level, provides enough detail about the proposed transaction for the seller to make an informed decision about whether to proceed. At that point, the definitive transaction documents are drafted, providing details around items such as equity and/or asset purchase agreements, a possible promissory note, and a bill of sale. Notably, these documents will serve as evidence in any subsequent disputes, making it imperative for both seller and buyer to fully understand the terms.

Once all that work is completed and both parties are satisfied with the terms of the transaction, it’s time to seal the deal and legally bind themselves by signing the contract. This moves the deal into the closing period, where the transaction can be publicly announced and any closing conditions must be met (such as obtaining consent from the seller’s clients to transition to the new owner). Only then can the new owner begin the work of integrating processes and systems and serving their new clients.

Ultimately, the key point is that the process of transferring ownership of an advisory firm is an immense undertaking and is almost always far more intensive and involved than most parties can imagine. However, given that all advisory firm owners will inevitably face the transfer (or dissolution) of their ownership stake, it’s important to consider what a future sale or merger might look like, as it’s far better for potential sellers to understand the steps involved well in advance rather than trying to figure it out on the fly!

#FA Success Ep 360: Growing To 100+ Clients With $100M+ AUM With Intentionality To Leave Time For Family, With Suzanne Powell

November 21, 2023 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 360th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Suzanne Powell. Suzanne is a Senior Financial Advisor at Meridian Wealth Management, an RIA based in Lexington, Kentucky, where she oversees approximately $110 million in assets under management for nearly 150 client households.

What's unique about Suzanne, though, is how she grew to more than $100M of AUM by intentionally organizing her schedule from month to month throughout the year, clustering client and nearly all of her prospect meetings in the Fall and Spring, allowing her to spend the remaining 6 months away from the office and with her family, while still not needing to spend much time on prospecting by leveraging (and almost fully automating her responses to) a steady flow of SmartAsset leads.

In this episode, we talk in-depth about how Suzanne has been able to drive client growth through the lead-generation service SmartAsset and dials the lead flow up or down depending on how busy her month is, the way Suzanne has set up a series of email and especially text message automations that allow her to convert a very high percentage of her SmartAsset leads into clients without needing to be available to immediately to inquiries reply herself, and how Suzanne has customized the targeting of which leads she buys from SmartAsset to ultimately generate nearly $70M of new assets over the past 5 years for less than $100,000 in cumulative marketing spend.

We also talk about how Suzanne structures her weekly meeting schedule to balance the need to have 5 to 6 meetings a day during her busy seasons while still having time to prepare for each meeting and complete follow-up tasks, how Suzanne uses a standardized client meeting agenda to stay on track and ensure each meeting fits within the allotted 1-hour time block, and how Suzanne leverages technology – including a large, retractable television monitor located next to her desk – to present and adjust her clients' financial plans during the meetings instead of presenting them with a physical plan (which saves essential meeting prep time during her busy meeting season).

And be certain to listen to the end, where Suzanne shares how she entered the financial advisory industry without a Bachelor's degree and how she earned her degree 20 years later by taking college courses while working full-time as an advisor and will now officially be able to become a CFP certificant, how bringing her own consistent and authentic presence has allowed Suzanne to convert prospects into clients several years after their first contact with her (because as Suzanne notes, the fact that someone doesn't become a client today doesn't mean they aren't still watching and keeping up with you!), and why Suzanne has taken an approach of not trying to work and save for retirement as a time to enjoy when she gets there, but instead has structured her busy-season-light-season approach to client meetings to allow for more space to enjoy trips and time with her family now, instead.

So, whether you're interested in learning about how to use a compressed meeting schedule to free up time away from your business, how to structure those meetings to effectively provide value to clients, or the tools Suzanne uses to automate the process of converting SmartAsset leads to viable prospects, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Suzanne Powell.

Optimizing Your Advisory Firm Website’s Process Page For Prospect Conversion

November 20, 2023 07:05 am 0 Comments CATEGORY: Marketing

As marketing and prospecting processes become increasingly digital for financial advisors, many prospective clients learn about advisors and what they offer not from an introductory call, webinar, or speaking event but from the advisor's website itself. Talking about money is often highly personal and can leave individuals feeling vulnerable, so choosing who to serve in such a high-trust role as a financial advisor can have immense stakes. Which is why it's crucial for websites to give prospects the ability to see themselves as clients, and to understand what beginning and maintaining an advisor-client relationship might look like. These steps can make a measurable difference in 'demystifying' an otherwise obscure process for a first-time prospect and help them move into action.

In this guest post, Mikel Bruce, CEO of TinyFrog Technologies, discusses building a prospect-focused Process page into an advisory firm's website as a crucial part of the sales funnel to get calls from prospective clients by clarifying the process, demonstrating an advisor's unique value proposition, and providing an easy way for prospects to 'raise their hand' when they're ready to act.

As a starting point, a well-built Process page performs 4 critical functions. First, it establishes expectations for the prospect around the process of becoming a client (including the type of calls involved, the onboarding steps, and how long it takes) and the general communication style of the firm. Importantly, keeping this overview simple, high-level, and prospect-focused is crucial. Second, a Process page should use language that helps prospects identify with and envision themselves as ideal clients of the firm. Third, the Process page should describe the specific (and likely niched) issues the firm addresses with its clients. Fourth, the Process page clearly shows how interested prospects can move forward in scheduling a consultation (or however a firm would like to meet with them) by offering easily accessible call-to-action tools (e.g., calendar and scheduling software tools built directly into the Process page). Process pages can also include a simple FAQ section to address questions about fees, working style, or the frequency of meetings that ongoing clients can expect.

Once advisors have created their Process page, they have a few ways to start optimizing it. First, they can build funnels that direct traffic to the Process page from different places on the website, with multiple user paths depending on the type of prospect and their pain points. Advisors may also want to A/B test various aspects of their pages – calls to action, for example, or different language – to see if one feature or another influences how many prospecting calls they get in turn.

The key point is that finding a trustworthy advisor with whom prospective clients can build a relationship is not a quick or easy process – but an advisor with an effective Process page can help prospects envision the unique value they can derive from engaging with the advisor, making it easier for them to understand the benefits of a long-term planning relationship and, ultimately, to decide to become clients!

Weekend Reading For Financial Planners (November 18-19)

November 17, 2023 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 legislative efforts to prevent the enforcement of the Department of Labor's newly proposed "retirement security rule" have a cloudy future, as both Democrats and President Biden are opposing such efforts. Which suggests that, if enacted, the ultimate fate of the proposed regulation, like its similar predecessors, will likely be decided in the courts.

Also in industry news this week:

CFP Board has expanded the details it provides regarding disciplinary actions, expanding transparency around the disciplinary process for both CFP professionals and the broader public
A recent study suggests that advisory firms that hire specialists are able to offer more planning services and increase the amount of time advisors spend with clients, though doing so comes at a cost

From there, we have several articles on retirement planning:

Why higher interest rates and lower inflation have led to an increased initial safe withdrawal rate for retirees, according to one analysis
A group of retirement 'supernerds' critiques a recent claim that retirees can confidently use an 8% safe withdrawal rate
Why retirees might consider gifting while they are alive rather than waiting until their deaths to leave money to loved ones and charities

We also have a number of articles on tax planning:

How financial advisors can add value for clients by helping them make Qualified Charitable Distributions (QCDs) correctly
The range of tax-savings opportunities advisors can uncover when reviewing a client's tax return
A year-end tax planning checklist advisors and clients can use to ensure there will be no surprises when it comes time to file their 2023 tax returns

We wrap up with 3 final articles, all about managing wealth:

Why having significant wealth does not immunize an individual from worrying about money
How advisors can support clients who are entering a relationship with unequal wealth
Budgeting and account management tools consumers (and their advisors) can consider using following the upcoming shutdown of Mint

Enjoy the 'light' reading!

Kitces & Carl Ep 125: Scale Your Business, Leverage Yourself, Or Just Grow

November 16, 2023 07:03 am 0 Comments CATEGORY: Kitces & Carl Podcast

For many financial advisory firms that start out as solo shops, a single advisor-owner is often responsible for managing all aspects of running their practice, from handling all aspects of client service to prospecting for new clients. But as a firm's client base grows, the owner might find that they need to bring on employees to help manage the expanding workload. However, while it might be easy for business owners in this position to recognize that their firms are growing in terms of client revenue or other metrics, it can be harder for them to determine whether they are truly 'scaling' their business, as scaling involves a greater investment in both time and money to manage the firm's growth and pay a rising number of employees.

In our 125th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss what it actually means to scale an advisory business, why doing so necessarily requires more staff support, and how scaling a firm is different than merely finding ways to best leverage a firm owner's time.

As a starting point, it's important to recognize the difference between "growth" and "scaling" for a financial advisory firm. Growth in a firm implies an increase in revenue and/or profits accompanied by a proportional rise in the number of employees and other costs. For example, a firm might quadruple its revenue while also quadrupling the number of advisors and support staff it hires (and still have a growth in profits!). By contrast, scaling indicates that the firm is increasing its revenue at a faster pace than it hires, often by generating efficiencies. For example, a scaling firm might quadruple its revenue while only tripling its headcount, potentially leading to even greater profitability.

Notably, though, the effectiveness of a firm's scaling efforts isn't just about whether it needs to hire staff, but rather about how many new hires are needed to serve a growing client base. Because, unlike software companies where each additional unit sold requires little additional labor, financial advisory firms inherently require advisors and staff to maintain a certain level of human-to-human interaction and to develop and implement financial plans for their clients.

Ultimately, the key point is that while many advisors have successfully scaled their businesses, doing so requires a firm owner to hire additional employees and does not merely involve finding ways to better leverage their own time. Which suggests that advisors looking to grow their revenue without working more hours themselves face a choice: remain as a solo practice or small team but try to move 'upmarket' to serve a similar number of clients who are willing and able to pay a higher fee, or scale by growing the firm's client base (and employee headcount) as efficiently as possible!

Employee Retention Credit: Helping Clients By Assessing Rules And Eligibility In 4 Phases

November 15, 2023 07:02 am 0 Comments CATEGORY: Taxes

In the depths of the COVID-19 pandemic, many small businesses such as restaurants, entertainment venues, and retail stores experienced cratering revenues, either due to government lockdown orders that forced many non-essential businesses to temporarily shut their doors, or simply due to lack of demand since many of their customers decided to stay at home out of an abundance of caution. To stave off a wave of business closures and a subsequent surge in unemployment, the U.S. government designed a number of small business relief packages to incentivize companies to keep workers on their payrolls. One of these was the Employee Retention Credit (ERC), a tax credit that eligible small businesses could take against their employment taxes.

Although it was initially overshadowed by other relief measures such as the Paycheck Protection Program (PPP), more recently, the ERC – which technically ended after 2021, but which businesses have until as late as April 15, 2025, to claim – has attracted attention due to a pop-up industry of ERC vendors who purport to help small businesses claim the credit. The caveat is that many of these vendors encouraged businesses to apply for the ERC even when they weren't eligible, and the resulting wave of questionable ERC applications has caused the IRS to scrutinize businesses' claims of eligibility for the credit. As a result of this attention, advisors are seeing an uptick in questions from their clients – and may have questions about their own businesses – regarding whether or not the ERC is really legitimate, who can actually claim it, and whether it's worth pursuing either way.

While the ERC is indeed legitimate, determining eligibility is complex largely due to its phased implementation across 4 separate 'phases' spanning most of 2020 and all of 2021. Each phase has slightly different rules about who can claim the ERC and how the credit is calculated. Businesses need to determine their eligibility for the ERC and the amount that they can claim on a quarterly basis, adhering to the specific rules of the 'phase' in which each quarter falls since these rules can shift from one quarter to the next!

In general, businesses can apply for the ERC if they were forced to partially or fully suspend their operations due to a government order, or if they experienced a "significant decline in gross receipts" between March 13, 2020, and September 30, 2021. A business could also qualify as a "recovery startup business" (as long as the business started after February 15, 2020, had annual gross receipts of under $1 million, and didn't otherwise qualify under the other criteria), which would allow it to claim the credit for the last 2 quarters of 2021. The credit itself is calculated as a percentage of the "qualified wages" paid to employees. Notably, many of the criteria used to determine the credit – including what constitutes a "significant decline in gross receipts", what is included in "qualified wages", and what percentage of qualified wages is used to calculate the credit – vary for different time periods, as well as for different sized businesses.

The key point is that, unlike the claims of many ERC vendors, determining a business's eligibility for the ERC is by no means a simple process and generally requires the expertise of a tax professional. And yet, many ERC vendors are not tax professionals themselves, often shifting the liability of complying with the complex eligibility requirements onto the business (even while the ERC vendor collects a substantial portion of the business's ERC as fees for itself). Financial advisors, then, can help by serving as an advocate for business owner clients, helping them preliminarily determine whether they may or may not qualify for the ERC and directing them to an expert tax professional to help them make the final decision of whether or not to claim it. Which has value even if the client isn't ultimately eligible, since the headache of applying for the ERC and being later found ineligible by the IRS could be far worse than not applying for the ERC in the first place!