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17 Steps To Successfully Transitioning Clients As A Breakaway Broker To An RIA

October 22, 2018 07:09 am 0 Comments CATEGORY: Practice Management

While a growing number of advisors who have built AUM practices at a broker-dealer have been making the switch to the RIA channel as a pathway to have better control over their businesses and how they serve their clients, the transition itself is still fraught with risk. At best, launching your own RIA – or even joining an existing one – entails an immense amount of paperwork to transition clients from the old firm to the new one, even as the prior firm may take steps to try and retain them. At worst, the onslaught of required paperwork causes mistakes to be made and transfers to slip through the cracks… undermining client confidence and leading them to decide not to make the switch with the breakaway broker after all.

In this guest post, Grier Rubeling of Advisor Transition Services details what it really takes to make a transition successfully – along with practical tools and templates she’s built – based on her real-world experience as part of a firm that made the transition and then founding an Advisor Transitions business to help many more advisors work through the transition process since then. Because the reality is that in a high-stakes competitive environment, where the breakaway broker is trying to persuade clients to come along as the prior firm fights to retain them… there is very little room for error.

The key to a successful transition process is to lay the proper foundation to begin with. Not just with respect to the formalities of creating the legal RIA entity and establishing a custodial relationship, but planning out each step of the transition process in advance, and putting the necessary tracking systems in place, so that when the time comes to hand in the resignation letter… the breakaway broker can hit the ground running immediately.

Unfortunately, even when done well, a breakaway transition can take many months of detailed tracking and client interaction to ensure that every account is opened and transferred and funded properly before the burden finally eases. Nonetheless, there are a lot of practical, time-saving tips that can be employed along the way to make the transition process at least a little easier to manage!

Weekend Reading for Financial Planners (Oct 20-21)

October 19, 2018 02:43 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 news that despite all the recent buzz, it appears that the SEC may be waiting nearly a year to release a final version of its Regulation Best Interest advice rule... but only because the Department of Labor may also be working in coordination with the SEC on its own version of an updated fiduciary rule as well. And also in the news this week is an announcement by the CFP Board that the organization is expanding its Mentor Match program, from what over the past two years was focused primarily on mentoring for young women entering financial planning (as part of its Women's INitiative or WIN program), to be available to any CFP certificant instead.

From there, we have a number of additional articles on retirement planning, from a look at the rise of "financial freedom" and "financial independence" as an alternative to the traditional label and approach of "retirement," to a fascinating look at the spectrum for total financial dependence to total financial independence (on a 17-step scale!), and the phenomenon of "microadventures" as a way to have more enjoyable vacation experiences even when you don't have the time for an extended vacation (whether during your working years, or in "busy" retirement itself!).

We also have several practice management articles this week, including: an articulation of the key difference between being a manager and a leader; a different way to think about who your most "valuable" clients are (based not just on their revenue or referrals, but how much they value what you do as a financial planner in the first place, which makes them more likely to become your long-term advocates); why it may be better to ditch the Annual Review for As-Needed Reviews instead; and a look at ideas about how to name (or re-name) your advisory firm if you don't want to simply name it after yourself as the lead advisor/owner.

We wrap up with three interesting articles, all around the theme of how to make better decisions: the first explores the so-called "distinction bias," and how we tend to overweight and overvalue small differences (and misjudge how much we'll really care about them in the future) when we compare objects side by side; the second looks at how delaying decisions tends to increase their stakes, so often the best way to make "easier" decisions is simply to proactively make more/faster small decisions instead; and the last looks at the growing base of research around decision-making itself, and how to better frame decisions for yourself with techniques like creating a "premortem" analysis or doing proactive scenario planning... or if you want to use the traditional "Pros and Cons" list, at least be certain to assign values or weights to them so that you give each factor its proper consideration!

Enjoy the "light" reading!

Why All Financial Planners Need To Create A Sample Financial Plan

October 18, 2018 02:15 pm 0 Comments CATEGORY: Client Trust & Communication

One of the biggest challenges we consistently face as financial advisors when creating a financial plan for clients is simply getting the data we need to actually do the plan in the first place. Because, without any information to enter into the financial planning software to begin with, it’s impossible to assess a client’s financial situation, show them the consequences of various trade-offs, and ultimately make our recommendations. Yet while for at least some clients, the problem with getting data is that they literally don’t know their own financial details in the first place – thus their need to hire a financial planner! – more often, the real issue is that the client doesn’t actually understand why they need to provide the data in the first place, and what they’re going to get out of the process.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why it’s not enough to just make the data gathering process mechanically easier for clients (e.g., with online data gathering forms instead of manually entering data into a printed data sheet), and why creating a Sample Financial Plan for prospective and new clients is an essential step in building enough trust with clients that they’re willing to gather and comfortable in sharing their financial information with you in the first place.

Historically, getting clients to complete data gathering forms has been a challenge simply because it’s tedious and time-consuming to fill out a paper form. And the situation is even worse for those who most need financial planning – because their financial lives are currently so disorganized – as the disorganization that makes them want financial planning is also the disorganization that means they don’t even know (and potentially don’t even know where to find) their own data to enter into a form in the first place!

Fortunately, as we move towards a more integrated digital age, the difficulty in obtaining financial planning data in the first place will be mitigated by account aggregation tools. Instead of manually entering information into a form, in the future all clients will have to do is link their accounts to their advisor’s portal, which will then automatically download the pertinent data into the planning software!

Still, even though some of these automations are starting to come online, a client’s hesitation to share their personal financial data often has less to do with the time involved, and more to do with the trust that clients need to feel – in the advisor themselves, and the value of the advisor’s process – before they allow an outsider to have a peek into their personal financial lives.

Because in a world where one of the biggest challenges financial advisors face – besides actually finding prospective clients in the first place – is demonstrating the real value of an intangible financial planning service, one of the most effective ways to get buy-in from new clients is to actually show them a Sample Financial Plan of exactly what they’ll get, and tangibly prove why it’s worthwhile. As even though the real value of what financial planners deliver is the actual process of defining goals, getting clients organized, and delivering advice, that sample financial plan is often the one and only tangible deliverable that clients can see to judge the value of the process.

The bottom line, though, is simply that if you are struggling as an advisor to get clients to share their financial information with you (whether via a data gathering form, or account aggregation), or are having trouble even getting prospective clients to sign on with you in the first place, it implicitly suggests that clients are just not seeing the value that you say you bring to the table. Because, even though we know that the financial planning process is worth it, ultimately, the onus is on us to show our clients that investing their dollars, time, and trust in your services is justified. For which the starting point is to create a Sample Financial Plan to really show clients the relevant value you can bring to them!

Getting Real About (Annual) Health Care Costs In Retirement

October 17, 2018 07:03 am 0 Comments CATEGORY: Retirement Planning

In its latest update, Fidelity recently estimated that the average 65-year-old couple will need a whopping $280,000 just to cover their health care costs in retirement, between Medicare Part B and Part D premiums, and additional out-of-pocket costs (or the Medigap supplemental insurance plan to mitigate them). Not including the potential cost of long-term care needs as well. As a result, one recent study of prospective retirees found that more Baby Boomers are actually less afraid of running out of money in retirement than they are specifically fearful of handling health care costs in retirement.

Yet the reality is that health care costs in retirement aren’t needed as a “lump sum” on the day of retirement, and the Medicare system actually makes health care costs a remarkably stable annual cost that can be planned for. And in fact, looking at health care expense in retirement as a lump sum masks a number of more direct and substantive planning issues, from the fact that unhealthy retirees may face fewer years of costs but much higher annual costs, to the challenges (and additional costs) of navigating health insurance as an early retiree via state health insurance exchanges.

Accordingly, a recent joint study by Vanguard and Mercer Health and Benefits analyzed the typical (and potentially unexpected) costs of health care in retirement, and showed that the "scary" lump sum cost of retiree health care is actually little more than spending a few hundred dollars per month, per person… for the better part of 2-3 decades in retirement, with the average female spending just $5,200/year throughout her retired years including all health care-related costs (albeit excluding long-term care needs).

Of course, individual health care costs may still vary… but it turns out they vary in rather predictable and plannable ways, from the increase in health care costs for those entering retirement with one or several chronic health conditions, to those who must plan for the additional costs of health insurance via state marketplaces for early retirement, and the additional layer of costs for high-income individuals due to the Medicare income-related surcharges.

Which means in the end, while health care costs may cumulatively add up to a lot over a multi-decade time horizon, they do so in ways that can be largely planned for in advance, saved for with both retirement savings itself or using Health Savings Accounts (HSAs) as a supplemental retirement savings vehicle, managed by making good Medicare enrollment choices, and adjusted for (typically-known-by-retirement) chronic health conditions. Or simply funded by Social Security payments, which for a married 65-year-old couple earning merely “average” benefits, amounts to a lump sum equivalent of more than $600,000 anyway (for those who prefer to convert ongoing retirement cash flows to lump sum equivalents)!

#FASuccess Ep 094: Crafting Your Optimal Solo Practice By Simply Charging What You’re Worth With James Osborne

October 16, 2018 07:03 am 2 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 94th episode of the Financial Advisor Success podcast!

This week's guest is James Osborne. James is the founder of Bason Asset Management, a solo advisory firm based in the Denver suburbs that oversees more than $225 million of assets under management.

What's unique about James, though, is the unusual way that he structured his advisory business, with a simple flat fee of $4,800 per client regardless of their assets, which has allowed him to build a high-margin solo practice with just 80 clients generating nearly $400,000 of revenue for the firm at the age of just 35 years old.

In this episode, we talk in depth about why James decided to structure his firm using this flat fee approach in lieu of the AUM model. How the design of his business model makes it possible for him to generate a target of his exact income potential as he reaches client capacity, the way he handles situations where his flat fee would be substantially lower than what another advisor's AUM fee might be for prospective clients with a lot of assets and net worth, and the reason that he chose to deliberately build a business model that fits his personal lifestyle and family goals.

We also talk about what it really means to reach personal capacity as a financial advisor. The challenging trade-offs that start to emerge as advisory firms try to grow beyond the individual capacity of the founder, why it is that beyond a certain point, doubling the number of clients and revenue at the practice has almost no impact on the take-home compensation of an advisor, and the reason that so many solo advisory firms will actually generate far more value for their founders by staying small even if the practice is never sold.

And be certain to listen to the end, where James talks about how he's adjusting the way he meets with and takes on prospective clients as he approaches his personal capacity, and what he plans to do to maintain his high-income lifestyle practice once he reaches that threshold.

So, whether you're interested in learning about some of the benefits of a flat-fee structure, how James approaches investment management, or why most advisors are scaling their practices all wrong, then we hope you enjoy this episode of Financial Advisor Success Podcast.

The 16 Best Conferences For Financial Advisors To Choose From In 2019

October 15, 2018 07:05 am 1 Comment CATEGORY: Conferences

Best Conferences for Financial Advisors 2019

The need to engage in continuous learning is a simple reality for anyone in professional services. As a profession’s body of knowledge grows and evolves with ongoing research and discoveries, new products and solutions, and emerging best practices, even the best practitioners have to update their knowledge and skills from time to time. You want your surgeon to be up to speed on the latest surgical techniques that speed recovery time and reduce scarring. You want your lawyer to know the latest laws and regulations that might adversely impact your business to reduce the risk of regulatory or legal hassles. And consumers want their professional financial advisors to be up to date as well.

And the reality is that while you can get a lot of this continuing professional education directly from the comfort of your own office, in a technology-driven world with an ever-growing number of webinars and reading opportunities – including in the Members Section of this blog! – it’s still important at least once a year to take a break from the office and get away from it all. Both to give yourself the opportunity to really immerse in your education without the inevitable drumbeat of distractions in the office. And because mentally, you really can better focus on your education and thinking about steps to improve your business when you get away from it for a few days.

The caveat, however, is that these days, there is an overwhelming number of financial advisor conferences to choose from. Because while the good news is that for most successful advisory firms, it just takes one good takeaway from a conference that can be implemented in the business to make the whole trip worthwhile… the bad news is if you don’t find a conference that’s the right fit for your needs and business, you aren’t likely to find even that one good takeaway. Which makes both the expense of the conference, and the lost time out of the office, very costly indeed.

As someone that has been speaking at nearly 70 conferences a year for almost a decade myself, I’ve seen the good and bad of our various industry events, which are spread across membership associations, broker-dealers and insurance companies and RIA custodians, product manufacturers, trade publications, private events, and more. And as a result, am often asked for my own suggestions of what, really, are the industry’s “Best” conferences to attend.

Yet the reality is that what conference is “best” really depends on what you, personally, are looking for. Some advisors are focused more on broad-based technical educational content, while others want to go deep into a niche. Some advisors want practice management advice as business owners, while others need help with their personal career development as employee advisors instead. Some want to talk about innovating technology, while others want to innovate new business models.

Accordingly, back in 2012 I started to craft my own annual list of “best-in-class” top conferences for financial advisors in various categories (to allow advisors to match the available conference specialties to their own needs), and have updated it every year since in what has become one of our most popular annual articles.

And so now, I’m excited to present my newest list of “Top Financial Advisor Conferences” for the upcoming 2019 year, from practice management to technology to career development and deep-dive educational content, and a special focus on the rise of “niche” financial advisor conferences aiming to serve the growing number of financial advisors who themselves are focusing more and more into niches to differentiate themselves in today’s competitive environment.

So, I hope you find this year’s 2019 conferences list to be helpful as a guide in planning your own conference budget and schedule for next year, and be certain to take advantage of the special discount codes that several conferences have offered to all of you as Nerd’s Eye View readers!