Kitces.com - Advancing Knowledge in Financial Planning

#FASuccess Ep 085: Boosting Firm Productivity With A Financial Planning Resident Program With Elissa Buie

August 14, 2018 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 85th episode of the Financial Advisor Success podcast!

This week's guest is Elissa Buie. Elissa is the CEO of Yeske Buie, an independent RIA with offices in San Francisco and Washington, D.C. that manages nearly $750 million of assets under management for 240 clients with a team of 13.

What's unique about Elissa, though, is the way that she and her firm have figured out how to leverage next-generation talent through a financial planning resident program that trains and develops advisors, with the expectation that they will graduate and leave the firm after three years to be replaced by another financial planning resident.

In this episode, we talk in depth about YeBu's Financial Planning Resident Program. How the firm developed an intensive boot camp process to train new advisors in just eight weeks in how to produce the core deliverables the firm provides to clients, the way their financial planning residents gain experience in client meetings while boosting the firm's productivity, and why the firm prefers hiring financial planning residents to a more traditional approach of hiring and developing paraplanners instead.

We also talk about the evolution of how advisors are trained and educate as professionals. The rise of master's degree programs to increase the technical competency of today's advisors, the importance of programs like the FPA Residency program to teach the so-called soft skills of effective client communication, and why Elissa believes that all advisors should at least know how to create a comprehensive plan for clients with only a yellow pad and a financial calculator to ensure that today's financial planning software will then be used as a tool instead of a crutch with clients.

And be certain to listen to the end, where Elissa shares why the financial crisis of 2008 and 2009 was the hardest moment for the firm, not simply because revenues turned down with the market decline, though, why the firm has decided to remain on the AUM model despite being a financial planning-centric business, and Elissa's advice to new advisors in how best to find clients you will actually enjoy working with in the long run.

So whether you are interested in hearing about Yeske Buie's unique structured financial planning residency program, about the ongoing financial planning work Elissa's firm does for its clients, or why every financial advisor should know how to create a comprehensive plan by hand, then I hope you enjoy this episode of the Financial Advisor Success Podcast!

From Planning Analyst To Financial Planner: It’s Not How You Start That Matters, It’s How You Improve

August 13, 2018 07:03 am 0 Comments CATEGORY: Personal/Career Development

As the average age of a financial advisor remains 50-something and rising, along with it is a rising need to not only attract and develop the next generation of financial advisors, but actually begin to transition clients to them. However, while it’s difficult enough for advisory firms to simply recruit next-generation talent at the early stages of their careers, it can seem even more challenging to transition existing clients to them. Nonetheless, advisory firms are going to have to tackle these transitions if they want to continue to grow and, ultimately, to retain clients as their founders and experienced advisors retire.

Yet while there’s been a lot of discussion from the senior advisor’s perspective about how best to manage this process of transitioning clients, remarkably little has been written from the viewpoint of the up-and-coming advisor about how best to prepare and position themselves for a successful transition. Accordingly, in this guest post, Jack Rabuck from West Coast Financial recounts his career path so far, from starting out as an entry-level analyst fresh out of college, to becoming the de facto point of contact for newer clients, and then gradually growing into a lead advisor role with 65 existing clients and $165M of AUM in just five years by the age of 27… and the steps he took to ensure the transition would be successful.

Because the reality is that there is a lot that paraplanners and associate advisors can do to better prepare themselves for success, by trying to gain more of their own knowledge, exposure, and experience. From actively seeking out opportunities to sit in on meetings with as many different advisors as possible, to paying close attention to how they actually manage meetings themselves, becoming an expert in highly specific topic (effectively creating a micro-specialization for themselves), focusing on learning as much as possible, and being brutally honest with oneself about areas for needed improvement… the more the new advisor positions themselves for success, the more duties and responsibilities that can be taken on in a relatively short period of time.

Of course, there will often still be challenges, and Jack shares some of his own challenges experienced and the key lessons learned along the way, that any advisor can seek to apply to advance their own career!

Weekend Reading for Financial Planners (August 11-12)

August 10, 2018 02:51 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 the IRS has issued new regulations to provide additional guidance on the Section 199A "pass-through business deduction", with a particular focus on cracking down on professional services firms (which includes financial advisory firms) to prevent them from abusing potential "loopholes", like cracking up their businesses into pieces that might have been eligible for the deduction.

Also in the news this week is a discussion that RIA custodians are considering whether to adopt a new pricing model of offering custody services for a basis point charge, rather than just trying to make money on the underlying products that clients implement... in what would be a very positive realignment of the costs that advisors and their clients pay with the value that custodians provide, but could be challenging to transition to the currently-less-transparent "free" model of custody for advisors.

From there, we have several retirement-related articles this week, including research on the kinds of words and images that consumers use to describe retirement (which importantly but not surprisingly varies depending on their own demographics and background), tips to prevent loneliness in retirement for new retirees who often unwittingly become very socially isolated, why more and more retirees are looking for "phased retirement" approaches that blend part-time work with retirement, and the real-world difficulties that many older workers are facing in actually finding meaningful part-time work in retirement.

We also have a few practice management articles, from a fascinating study about what next generation advisors really want in a financial planning job (with 78% wanting to do comprehensive financial planning, but only 2% showing interest in sales and marketing!), how to speed up training for next generation advisors by becoming a more effective mentor, and the rising demand of next generation advisors for family leave policies given that more and more are launching their financial planning careers while also starting a family.

We wrap up with three interesting articles, all around the value of reading itself to advance our knowledge and skills: the first explores the physiology of the brain and how reading literally helps the brain form new connections that can improve our fluid intelligence and ability to spot important patterns; the second looks at the important balance between both book knowledge and real-world knowledge (as book knowledge alone misses real-world applications, but real-world knowledge alone misses important patterns and opportunities that aren't necessarily intuitive); and the last is a series of four "summer reading" book suggestions on the leading industry books that are most relevant to financial advisors today.

Enjoy the "light" reading!

Why CPAs Are A Growing Competitive Threat to Financial Advisors

August 9, 2018 02:40 pm 0 Comments CATEGORY: Planning Profession

Over the past few years, advisors have worried mightily about the threat posed by the rise of the so-called robo-advisors. However, as we’ve seen in recent months, several robo-advisors have shut down, while many of the more prominent ones have seen their growth rates decline dramatically. Still there is a threat out there that financial advisors need to be aware of: and it’s not from robo-advisors, but from Certified Public Accountants (and what robo-tax-preparation has done to them!).

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope and guest hosted this week by Jeff Levine, we discuss why CPAs represent the biggest competitive threat to financial advisors today, why the demise of the DoL fiduciary rule has opened the door for CPAs to expand their practices by offering financial planning services, and the steps financial advisors can take right now to help stave off that threat.

It’s not news that financial advisors have been dealing with compressed margins for years, but CPAs have been under that same pressure for far longer, as “robo” tax preparation software has dramatically reduced tax preparation costs for consumers. By expanding into financial planning services, CPAs have the opportunity to add value for their clients by capitalizing on the fact that, not only do they already have a deep knowledge of their clients’ financial situations, but they also enjoy a very high level of public trust.

All of this, including the fact that consumers prefer one-stop shopping, makes financial planning a great fit for CPAs. The American Institute of Certified Public Accountants (AICPA) knows this as well and has been busy promoting their Personal Financial Services (PFS) designation, which (by the way) is only available to CPAs. And now, with the Department of Labor's fiduciary rule now officially out of the picture, a major regulatory hurdle is out of the way, opening the door for larger accounting firms to take a closer look at entering the wealth management arena.

All is not lost, however. To combat this threat, financial advisors can focus on developing their tax planning expertise, and work on making themselves indispensable to tax professionals by proactively sharing and providing client information and collaborating with as early as possible every tax season. Because CPAs who already work productively with financial advisors are less likely to decide to go into competition with them… especially if the CPA is counting on you as their referral source!

The bottom line, though, is simply that CPAs represent a threat to financial advisors, as they are driven increasingly towards the advice business because of the pressure on their own accounting firms… but there’s still an opportunity for advisors to create stronger professional relationships with accountants and even grow their practices in the process.

RUFADAA And The Importance of Digital Estate Planning

August 8, 2018 11:57 am 2 Comments CATEGORY: Estate Planning

Digital Estate Planning Rules And The Three Tiers Of RUFADAA

Over the past several years, the rise of the Federal estate tax exemption has dramatically reduced the scope of “traditional” estate planning, which is less about estate tax planning now and more about simply ensuring that the right legal documents are in place to specify how various assets should be disposed of, and who is responsible for doing so.

Yet at the same time, the rise of the digital world has created a new wrinkle for estate planning: how to transition “digital” assets. Which is important not only for those digital assets that can carry a monetary value (such as cryptocurrencies, domains, websites, etc.), or login credentials to such sites (e.g., usernames and passwords to bank and investment accounts), but also social media profiles and actual media files (e.g., digital photos). As once the account owner passes away (or is merely incapacitated), the heirs may have difficulty finding and accessing those digital assets after the fact.

While it might seem simple enough to solve the problem by just keeping a list of account credentials “in a safe place” for someone to use “just in case”, the fact that they might have the information to access to the accounts doesn’t necessarily mean that they have the legal authority to do so, especially when a website’s Terms of Service do not permit a transfer of ownership. In fact, heirs could potentially be found guilty of “hacking” by trying to access a loved one’s online accounts after he/she is gone… even if it was the individual’s dying (but not legally binding) wish!

To address the situation, various legal measures have been proposed in recent years, including the Uniform Fiduciary Access to Digital Assets Act (UFADAA), and the Privacy Expectation Afterlife and Choices (PEAC) Act. But after various implementation struggles, the Uniform Law Commission ultimately created the Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) in 2015, which received widespread support and in just a few years has been adopted by more than 40 states.

RUFADAA gives a clear hierarchy of instructions for how a person’s digital assets are to be treated should a fiduciary seek access, which may include not only executors after death, but trustees, court-appointed guardians, and attorneys-in-fact. The starting point is that online service providers can create an “online tool” that functions as a form of “digital power of attorney” to specify who has control and access for that specific site. In addition, RUFADAA provides a clear legal framework for digital asset rights to be specified in traditional legal documents (e.g., Wills and powers of attorney). And clarifies that it’s only in the absence of an online tool, or any legal documents, that finally the service provider’s own Terms of Service will control.

Ultimately, the importance of estate planning has always been about ensuring that assets are distributed in the desired manner after death, and identifying the individual(s) responsible for doing so. But the complications of digital estate planning are unique, not only because of the complexities of bequeathing “digital” assets, but also because most individuals accumulate so many online accounts it may be difficult to even know where all the digital assets are! Fortunately, though, that means there’s a valuable role for the financial advisor to play in helping clients to ensure their digital estate plan is in order. Starting with helping clients at the next meeting understand the value of using a secure password manager, not only for the benefits of cybersecurity, but because it can form the core of the digital asset inventory they’ll want to begin the digital estate planning process!

#FASuccess Ep 084: Re-Energizing After A Mid-Career Crisis With A Focus On Next-Generation Talent Development With Diane Compardo

August 7, 2018 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 84th episode of the Financial Advisor Success podcast!

This week's guest is Diane Compardo. Diane is a partner and team leader at the Moneta Group, an independent RIA with nearly $20 billion of assets under advisement and 40 partners, in which Diane leads a 16-person team with 4 partners and $1.4 billion of AUA, and has served as the chair of their Governance Committee as well.

What's unique about Diane, though, is that after nearly 20 years of building an incredibly successful advisory practice working with corporate executives at Moneta, she decided to substantially increase the size of her team and shift her own focus towards building and developing new advisors and partners at the firm... not just to grow the business, but as a way to reenergize herself after a proverbial mid-career crisis.

In this episode, we talk in depth about the unique Moneta Group structure that provides shared centralized administrative compliance and support services for more than 20 independent teams of advisors affiliated with the firm, how the firm structures its compensation and revenue-sharing agreements with teams, the unique partnership structure of the firm based on their relative contribution of profits to the firm, and how Moneta evolved into creating a governance board that sets strategy for the firm but is separate from the management team that runs the day-to-day business.

We also talk about how Diane's own niche in working for corporate executives evolved. How she first created a specialization in working with them during her early days as a CPA at Price Waterhouse, working long hours and cramming 10 years of experience into just 5 years, why she ultimately left PwC to join Moneta and forge her own pathway to partnership, and how Diane structures her team meetings today with clients both as a way to improve client service and also to develop new advisors themselves.

And be certain to listen to the end, where Diane talks about how she uses checklists in her calendar to balance her time between work and personal life, the support system she's created for herself by getting involved in local networking groups like the Women Presidents' Organization, and how she reenergized herself from the low point of her career with the strategic and deliberate shift in how she was spending her own time in the business.

So whether you are interested in hearing about Moneta Group's unique partnership structure, how a mid-career crisis re-energized Diane and helped her to focus on developing next-gen talent, or the strategies she's used to build a strong network, then I hope you enjoy this episode of the Financial Advisor Success podcast!