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Weekend Reading for Financial Planners (Dec 8-9)

December 7, 2018 02:57 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the latest edition of Financial Planning magazine's annual Advisor Technology survey, showing the most widely adopted advisor software tools in various categories... and highlighting that, with the proliferation of advisor technology, the problem now is not the threat of robo-advisors but simply the burden of choosing which of the ever-growing number of solutions human advisors want to use to deliver their own tech-enabled services!

Also in the news this week was the stunning news that wirehouse Wells Fargo will be rolling out a pilot program for "independent" RIA offices (albeit still operating under the Wells Fargo brand) in an effort to stem the tide of brokers breaking away to the RIA channel, and the news that the SEC is going to take a hard look at its own custody rule in 2019 and whether it's time to update the requirements for the modern technology-driven world (where custody is far more complex than just having physical possession of a client's printed stock certificate!).

From there, we have several articles on industry trends, including a look at the initial success of recent Financial Planning Re-Entry Initiative from the CFP Board's Center for Financial Planning to increase the number of women in financial services, an updated discussion from Bob Veres on the recent OneFPA Network proposal (and the FPA National Board's response to his earlier criticisms), and the news that the FPA NexGen community is transitioning itself away from being an independent community for younger advisors and instead will adopt the vision and mission of FPA National and serve as its community for any advisors who are new to the profession (whether entering as young students or more experienced career-changers instead).

We also have several practice management articles this week, including a reminder of the importance of focusing not just on reducing employee turnover but "regrettable" turnover, the impact of culture and how it is naturally set from the top by a firm's founder/leader (but can be consciously changed/improved), and tips for advisors who want to negotiate a better deal for themselves when changing broker-dealers (and understanding what can potentially be negotiated in the first place).

We wrap up with three interesting articles, all around the theme of finding our own purpose and success in life: the first looks at how, despite the popularity of the saying "do what you love and the money will follow," a better approach is probably the Japanese concept of "ikigai" which considers both whether what you're doing is something you love, something you're good at, something the world needs, and something you can actually get paid for (and that it takes the intersection of all 4 to really succeed financially at what you love); the second takes a fascinating look at how luck may play a far greater role in success than we realize (but talent does matter, and you can choose to put yourself in positions where good luck can happen to you); and the last explores how the key to getting what you desire (and aspire to) is being willing to change when necessary in order to achieve it.

Enjoy the "light" reading!

Year-End Tax Planning Opportunities For Cash-Basis Small Business Owners

December 5, 2018 07:03 am 2 Comments CATEGORY: Taxes

Generally speaking, business owners have at their disposal two common accounting methods allowed by the IRS. The first, and more complex, is the accrual method, in which businesses recognize income when the business has performed its service or delivered its goods, and expenses after everything has occurred that would require an expense to be paid. Neither of which require the buyer to actually pay the seller.

Conversely, the other, and far more common method for small business owners, of accounting is the cash basis method, generally does require the exchange of funds, and typically is not dependent upon the preceding (or subsequent) delivery of good or rendering of service.

While historically business transactions were relatively straightforward and direct, the advent of debit cards, credit cards, and other means of electronic payment means that buyers and sellers now affect their transactions in some form of payment other than cash.

Fortunately, though, the cash basis method allows for more than just the transfer of actual cash. For instance, a payor’s expense recognition for paper checks that are mailed depends not on the date written on the check itself, but on the date of the postmark… which can be meaningful if that occurs at the end of the year. Conversely, payees don’t wait until the funds hit their checking account to record income, but rather, can recognize income once the check is received.

Meanwhile, credit card payments have their own subtle differences from cash or checks, in that payee’s must wait until the money from the payment is actually credited by the payment processor to their account, whereas the payor recognizes the expense as soon as the charge is made, rather than when they (eventually) pay the credit card bill.

All of this raises some potentially useful strategies to affect positive tax outcomes (recognizing, of course, the oxymoron inherent in that phrase). For instance, business owners can reduce taxable income in a given year by waiting to send out invoiced for goods delivered or services rendered, thus pushing out income into the following year. Alternately, businesses looking to increase current-year deductions could prepay certain expenses, like insurance, and using something called the “12-Month Rule,” a substantial amount of those (and other) expenses can be pulled into the current year in order to stack deductions.

Other useful strategies include taking advantage of Bonus Depreciation – which allows for accelerated depreciation of certain assets, and (after the passage of the Tax Cuts and Jobs Act) gives businesses the ability to deduct 100% (!) of the purchase price of used property that is “new” to the business – and the Section 179 expensing election, which is also a way to accelerate depreciation and was enhanced by the TCJA.

The key point, simply, is to recognize that there are several strategies that advisors can help business owners take advantage of, and create, some real hard-dollar savings. And, while some of these strategies may be relatively straightforward, they can still have a significant impact on a business owner’s tax liability.

#FASuccess Ep 101: Financial Advisors As Adherence Partners To Deliver Advice That Actually Sticks with Moira Somers

December 4, 2018 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 101st episode of Financial Advisor Success Podcast!

This week's guest is Dr. Moira Somers. Moira is a clinical neuropsychologist who studies the complexities of how hard it is for people to change their behaviors, especially when it comes to money.

What's unique about Moira, though, is the way that she's applied her financial psychology expertise not just to consumers themselves, but to how advisors can more effectively help their clients. Specifically by teaching advisors how to better deliver advice itself in a way that actually sticks so their clients really do change their behaviors for the better.

In this episode, we talk about the growing base of research from the medical field about what doctors need to do to make their patients better comply with the drugs and other therapies they're prescribed. How that patient compliance research is being applied to financial advice to help clients better adhere to their advice, the role of a financial advisor as an adherence partner to help clients follow through on advice, and why it's unrealistic to expect even well-intentioned clients to always follow through on good advice they may be given.

We also talked about specific steps that financial advisors can take to improve their advice delivery in a way that increases adherence from clients. From better assessing client readiness to actually take and implement the advice, to giving better follow-through support on the implementation of advice, why it can be a good and valuable service to occasionally nag clients, and why Moira starts out every meeting with the simple question, "What would make this meeting the best use of your time today?" to ensure that the conversation is always focused on what really matters most to the client in the moment.

And be certain to listen to the end, where Moira talks about the importance of actually measuring client adherence. Why advisors should consider tracking how quickly and consistently their clients implement their advice or not, and why better delivery of advice that sticks can actually help to both justify and even reduce the cost of financial advice itself.

So whether you're interested in learning the bests ways to help clients stick to the advice that we, as advisors, give them, how to give clients better follow-through support, and why it's important to track how consistently clients implement the advice they're give, the we hope you enjoy this episode of Financial Advisor Success.

The Latest In Financial Advisor #FinTech (December 2018)

December 3, 2018 06:55 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the December 2018 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 big news that Blackrock is taking a whopping $123M stake in Envestnet as the company doubles down on the strategy of using technology as a distribution channel after its $150M acquisition of FutureAdvisor just 3 years ago… and raising the question of both what other asset managers may acquire FinTech companies for distribution in the coming years, and what Envestnet itself may invest into and acquire with its newfound cash.

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

E*Trade ramps up its competitive push into the (large) RIA custodial space with new account aggregation tools and an advisor referral program,
RightCapital becomes a real financial planning software contender with enterprises as a Commonwealth deal takes the company beyond its independent RIA roots,
Stonecastle launches an FDIC-insured cash management solution for RIAs to compete with MaxMyInterest as cash yields start to matter again, and
United Capital partners with Medicare BackOffice as “real” retirement planning increasingly expands beyond just retirement portfolio management.

Read the analysis about these announcements in this month's column, and a discussion of more trends in advisor technology, including a signal that Investopedia’s Advisor Insights may be shutting down, a Vestorly pivot away from content marketing into trying to license its content curation engine instead, Smartasset ramping up its financial advisor directory for consumers (but without learning the lessons of BrightScope from years ago), Morningstar fighting back against Riskalyze and Blackrock’s Aladdin, and TD Ameritrade announcing the finalists for its first “Innovation Quest” FinTech competition.

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 (Dec 1-2)

November 30, 2018 02:55 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with a new proposal from the CFP Board to allow CFP certificants with a public disciplinary event (that culminated in a public letter of admonition or one-year suspension of their CFP marks) to potentially scrub their records clean after 5-10 years... raising the question of where the financial planning profession should balance forgiveness and the recognition that people can and do change against the need for consumers to be aware of a potentially problematic history that could indicate a higher risk of recidivism.

From there, we have a number of practice management articles, including a look at when/why an advisory firm should consider hiring a Chief Operating Officer (COO), the questions to ask when interviewing an advisory firm CEO, a fascinating research look from the Harvard Business Review at how real CEOs manage their time, and a good reminder about how, if advisory firm owners want their employees to "act more like owners," they need to be given opportunities and pathways to actually become owners (and see that their behavior can be rewarded).

We also have several financial advisor marketing articles this week, from a look at how most advisory firms don't effectively allocate their marketing budgets, to the best (and worst) kinds of content to buy/use when marketing online, how to handle your social media presence during the holiday season (hint: clients and prospects tend to be on social media sites more during the holidays, so don't take a holiday from your own social media accounts!), and some helpful tips and considerations when buying holiday gifts for clients (or referral sources, or centers of influence).

We wrap up with three interesting articles, all around the theme of the internet and how we interact with it: the first is a fascinating look at how internet technology is so lowering the costs to deliver goods and services, that startups are now finding ways to leverage the internet to serve the poorest 2 billion people of the world cost-effectively and even profitably (and without requiring them to have smartphones that most of the world's poor still do not); the second provides a fascinating look at how the first era of the internet was all about decentralized protocols (on which platforms like Yahoo and Google and Facebook were built), how the pendulum has swung to more centralized platforms as those companies built their own proprietary layers on top (potentially limiting innovation), and how decentralized networks like blockchain may bring about a third (more open and more innovative) era of the internet; and the last explores how our behavioral biases not only adversely impact our investing behavior, but can cause us to misperceive the current state of the world, especially in a social media environment where platforms have an incentive to hold our attention (even if it means stoking our biases instead of helping us to overcome them), and how in the process we may be missing out on how incredibly positive world progress has actually been in recent decades!

Enjoy the "light" reading!

How Do I Tell My Client’s CPA Or Attorney That They’re Wrong?

November 29, 2018 01:13 pm 0 Comments CATEGORY: Client Trust & Communication

One of the most interesting aspects of being a financial advisor is the ability to gain insight into all sorts of different areas of clients’ lives. Far from the domains of “just” insurance and/or investments in the early stages of the industry, today, a true advisor helps define goals and aspirations, identify challenges, take advantage of opportunities, and optimize the accumulation and distribution of assets.

In fact, a favorite industry analogy is that a financial advisor acts as a sort of “quarterback” for their clients, giving impartial and helpful advice and acting as a trusted intermediary for a wide variety of relationships and interactions. And in order to provide the best advice and service to clients, advisors often gain, at the minimum, a working knowledge of a number of areas that fall outside the realm of traditional finance, including tax and legal issues.

Unfortunately, however, that disciplinary overlap has the potential to create interprofessional conflict, particularly when a client’s accountant or attorney might not be giving them the best advice possible, or worse, is simply wrong. Which in turn, raises the question: How do you, as a financial advisor, tell your client that their CPA or attorney is wrong?

In this week’s #OfficeHours with @MichaelKitces, my weekly broadcast via Periscope and guest hosted this week by Jeff Levine, we discuss potential pitfalls when addressing the issue of a client getting incorrect advice from another professional, specific steps to take in such a situation, and ways to ensure a positive outcome for everyone involved.

Because, even though you’re not trying to make anyone look bad, there are all sorts of problems that might arise if you don’t handle the situation properly, including: running into compliance issues by providing “legal or tax advice”; offending the accountant or attorney, because, after all, they’re the licensed experts in their respective field, not you; and, upsetting your client, since they might feel you’re calling into question the trust they’ve placed in their CPA or lawyer.

The question then is: How do you handle such a situation? Often it’s best to follow a three-step process, where the first step is to reach out to the professional in private and, while deferring to their expertise, indicate that there may be a misunderstanding or some miscommunication regarding the issue at hand. Next, refer to an outside source, preferably a thought leader, or notable expert in their field (i.e. a well-known attorney if you’re talking to an attorney, or a well-known CPA if you’re reaching out to a CPA – people tend to respond better from “advice” from their own profession) as the catalyst reaching out, and finally (and this is key), asking them for their thoughts, because (again) it’s important to defer to their expertise.

Because, ultimately, doing what’s best for the client sometimes require Solomonic tact, and ensuring that everyone involved saves face is the easiest way to do that. And, as an added bonus, you then might even have an opportunity to develop a new relationship with a center of influence after helping them navigate a potentially problematic situation.