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11 Action Steps To Design An Extraordinary Client Experience

May 14, 2018 07:01 am 1 Comment CATEGORY: Practice Management

Examples of Services Provided To Different Client Segments

As financial advisors - like any business owner - we want our clients to have a "great experience" when they do business with us, providing a high level of service and proactive communication. Yet the challenge is that what constitutes the "right" level of communication and engagement with clients will itself vary by the client, making it difficult to standardize "good service" across the entire firm. And ultimately, it's hard to differentiate on good service anyway, as virtually all advisory firms like to pride themselves on providing "good service" to their clients. Which means if we truly want to provide an extraordinary service to our clients, we must go beyond just great service and think much deeper about what an extraordinary "client experience" truly is.

In this guest post, Julie Littlechild of Absolute Engagement (a firm that helps advisors craft a client experience that makes them attractive to the right clients) shares her 11 action steps that advisory firms can take to design their own extraordinary client experience, recognizing that the key to a create experience starts with clearly understanding who the firm is trying to serve (and not trying to serve) in the first place, and then crafting a plan to execute the plan profitably. Though ideally, it's not just about segmenting clients, creating a service matrix for the firm to follow, and assessing capacity and profitability, but also better defining what your target clientele or niche is in the first place, and then working with them to co-create the client experience and map out the client journey, along with the supporting client communications plan and necessary business infrastructure.

Ultimately, though, the key point is simply to acknowledge that what we tend to think of as delivering great service in an advisory business is simply too narrow when it comes to really defining experiences, and great service alone isn't the differentiator it once was. A broader and more holistic client experience really can differentiate a firm, but only if the firm clearly understands who it wants to serve, so it can create an extraordinary client experience for that particular target clientele. Because in the end, it's not about finding the one particular tactic that is going make the difference, but instead, the building of a strong foundation that supports a specific target clientele and is consistent with the client's journey that truly makes a client's experience extraordinary!

Weekend Reading for Financial Planners (May 12-13)

May 11, 2018 02:54 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the interesting announcement that SEC Commissioner Piwowar will be retiring in early July, a month before the public comment period closes for the new SEC advice rule, and raising the question of whether the SEC may end up deadlocked by the time the comments are in and it's actually time to deliberate on a final version of the proposed rule!

Also in the news this week was the announcement that Connecticut has passed a law that would allow its municipalities to create charitable entities to fund public services as a way to work around the new cap on the State And Local Tax deduction (and raising the question of when/whether the IRS and Treasury will challenge the strategy, and if it will ultimately end up in front of the Supreme Court), and the news that a new requirement for bond markup and markdown disclosures will take effect next week, in a move that could put new pressure on size of those trading commissions (or not, since the new disclosures only have to be communicated view printed transaction confirmations that not all investors read anyway!).

From there, we have several articles on industry shifts in advisory fees, including a fascinating overview of the various new advisory fee models that are emerging beyond (just) AUM, to the fact that a segment of financial advisors not only aren't experiencing fee compression but are actually raising their fees, and advice for firms that are struggling with fee pressures about what to do next (hint: it's all about giving deeper advice and differentiating beyond increasingly commoditized portfolio solutions alone).

We also have a few practice management articles, from tips about how smaller and solo advisory firms can (legitimately) make themselves look more credible in the eyes of prospects, to the benefits of trying to write a book as a financial advisor, and the value of engaging in PR strategies by doing media interviews to expand the visibility and presence of the advisory firm.

We wrap up with three interesting articles, all around the theme of advisor introspection and overcoming challenges: the first is a look back by an advisor who launched her own solo advisory firm 2 years ago, about what it really took to succeed (hint: it's more about the ability to adapt to challenges than to predict them in advance, and don't underestimate the importance and value of having a supportive community around you!); the second provides some tips to pass the CFP exam from someone who unfortunately failed her first attempt (in part by possibly over-focusing on her weak areas, and unwittingly scoring low in an area she thought was her natural strength!); and the last is a good reminder that if we as financial advisors really believe the primary value of advice is not just the information and expertise, but the benefit of having an objective third-party advisor who can view the situation with emotional detachment... that arguably most of us as financial advisors should have our own advisors too (because it's not just about the informational expertise we already have!), with the added benefit that if you really want perspective on how to improve your financial planning process with clients, you should try going through the process yourself, too!

And be certain to check out the video at the end – a fascinating look at how Will Smith's journey into becoming the "Fresh Prince of Bel Air" was driven by the failure to hire a financial advisor and make responsible financial and tax planning decisions after his first album went triple platinum, leading him to seek out new job opportunities because he was broke!

Enjoy the "light" reading!

The Advisory Firm Jobs That Robots Really Do Threaten

May 10, 2018 02:42 pm 0 Comments CATEGORY: Planning Profession

The early fear around "robo-advisors" was that technology could replace what human financial advisors do, at a fraction of the cost, and that their low-cost solution would attract consumers in a competitive marketplace. Yet in practice, robo-advisors have failed to capture even 0.1% market share of consumer investable assets, in what appears to be more of a niche solution for a subset of tech-savvy self-directed investors, than a mainstream competitor. Nonetheless, the failure of robo-advisors to disrupt human advisors doesn't mean that the broader the rise of technology won’t reshape the nature of our advisory firms. Because while our jobs as financial advisors aren’t necessarily threatened by technology, there are other jobs in advisory firms that are increasingly being threatened by technology.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we explore the changing nature of advisory industry jobs due to technology, and specifically why it is the back office (i.e., non-client facing) jobs that really are threatened by emerging "robo" and other advisor technology!

The key distinction is that there are really multiple types of jobs in advisory firms, which broader fall into two categories: “front office” jobs, and “back office” jobs. Front office jobs in advisory firms are the client-facing jobs (e.g., advisors themselves, as well as front-of-office staff like a receptionist). Back office jobs, by contrast, are… the ones that are not front office (i.e., not client facing) - the operations and administrative jobs in the firm (e.g., portfolio trading, account opening, transfers, insurance and annuity applications, etc.). Some people will add in a third category as well, called the “middle office”, which are the jobs that hold the firm together as a business (e.g., executives, managers, researchers, compliance & oversight). The fundamental point, though, remains simply that there’s a range of “advisory firm jobs”, from the front office client-facing stuff, to the back-office administrative and operations jobs, and the middle office jobs that hold it all together.

The reason this matters is that the real threat of robo-advisors (or technology more generally), is not to front-office advisor jobs, but towards the back office and more administrative jobs. Because while back office jobs are absolutely crucial – they’re the actual “doing” jobs that get key tasks done, repeatedly, day after day and week after week, client by client… it’s the very fact that they’re often repetitive tasks that make them prone to being replaced by technology. Consider the process of actually implementing a portfolio... At one point in time, this was a highly manual process (manually type holdings into a spreadsheet, pull up fund reports, do some research on alternatives, calculate tax implications, manually type in all trades, etc.), but with modern rebalancing software, one trader can handle this process for a thousand clients simultaneously in just an hour or two. Which means, for a sizable advisory firm, the clients of a dozen advisors might have historically required a dozen staff members just to do the trading... and now it's just one person with some software to get it done. And as technology continues to march on (in ever-new categories like robo-onboarding, online scheduling, etc.), back office jobs will increasingly be at risk. Ultimately, this is good for advisory firms, are it allows the firm and its advisors to focus more on working with clients and less on administrative tasks. But it is a threat to those back office jobs.

Which means it's important for people currently working in back office roles in advisory firms to think about what this means for them in the long run, and which of two paths they want to pursue next. The first option is to try and move up on the administrative side of the organization, shifting from more a back office oriented position to a middle office position. The caveat to this approach is that not everyone in an organization will ultimately be able to make this transition, as there are more admin jobs than manager jobs (e.g., 6 staff reporting to 1 manager means only one can move up!). The second option is to try and move into a front office role (i.e., go down the road of becoming an advisor), starting by enrolling in a program like the College for Financial Planning's old "Registered Paraplanner" program (now rebranded as the "Financial Paraplanner Qualified Professional" (FPFQ) program), with the ultimate plan of pursuing CFP marks as well.

The bottom line, though, is to recognize that the rise of technology isn’t a threat to financial advisors, because the technology doesn’t do what financial advisors do. But the operational efficiencies technology can create will begin to threaten the back office administrative jobs that complete those tasks today... which may ultimately make the firm more efficient, but means it's important for those currently in such jobs to reinvest into themselves to thrive in the future!

Proactive Section 199A Deduction Strategies For Small Business Owners

May 9, 2018 07:01 am 0 Comments CATEGORY: Taxes

The Tax Cuts and Jobs Act brought the biggest changes to both individual and corporate taxes that we've seen in the past 30 years. Included in those changes was IRC Section 199A, which is a new section of the tax code that introduces a 20% deduction on qualified business income (QBI) for the owners of various pass-through business entities (which include S corporations, limited liability companies, partnerships, and sole proprietorships). Fortunately, the QBI deduction will provide big tax breaks for many business-owning clients, but unfortunately, the new deduction is highly complicated, and it may take some time before the IRS can even provide more meaningful guidance on how it will be applied. However, the reality is that the planning opportunities created by IRC Section 199A are tremendous, and practitioners are already eagerly exploring how they can help clients reduce their tax burden through creative strategies around the QBI deduction.

In this guest post, Jeffrey Levine of BluePrint Wealth Alliance shares some of his own QBI deduction strategies and considerations after the TCJA. Broadly speaking, most strategies QBI deduction strategies can be broken into the three buckets, including income reduction strategies to stay below the income threshold where the specified service business or wage-and-property tests kick in, "income alchemy" strategies for transforming income from a specified service business into non-specified service business income, and other business strategies – such as hiring more W-2 employees – which are focused on favorably characterizing business income.

Notably, within each bucket are a wide range of tactics. Business owners who could benefit from income reduction strategies can consider ideas such as planning around retirement contributions, transferring portions of ownership to various non-grantor trusts, and revisiting filing separately as a married couple. Business owners who could benefit from "income alchemy" strategies can consider spinning-off certain assets and leasing them back, creating employee leasing companies, and even avoiding marketing language that makes strong claims about a business owner's skill. And business owners who could benefit from favorably characterizing business income may want to reduce or eliminate guaranteed payments to partners, change profit-eligible-only S corporations to partnerships, or switch from a salaried employee to an independent contractor.

Ultimately, the key point is to acknowledge that IRC Section 199A creates a tremendous number of planning opportunities after the TCJA. New strategies with QBI deduction implications will certainly continue to be developed with time and further guidance from the IRS, but even in the present, financial planners already have enough reason to reach out to business-owning clients and help them reduce their tax liabilities!

#FASuccess Ep 071: Appointing A Chief Planning Officer To Ensure Firm-Wide Consistency In Financial Planning Advice with Peggy Ruhlin

May 8, 2018 07:01 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome, everyone! Welcome to the 71st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Peggy Ruhlin. Peggy is a partner and the CEO of Budros, Ruhlin, and Roe, a wealth management firm in Columbus, Ohio that oversees nearly $2.5 billion of assets under management for nearly 700 affluent clients.

What's unique about Peggy and her firm, though, is the way that they have focused on systematizing the financial planning recommendations they make within the firm, to ensure that every client in the firm truly receives consistent advice and a consistent planning experience across the firm's five planning teams.

In this episode, we discuss in depth the firm's approach to making their financial planning more consistent, including regular "collaborative studies" meetings one Monday a month, peer-to-peer presentations on a quarterly basis to review unique planning cases, a bi-weekly financial planning committee meeting to discuss what the firm's standard recommendations will be on various planning issues, creating a "Wealth Management Resource" library to catalog them, and appointing a "Chief Planning Officer" to be responsible for it all, just as the firm has a Chief Investment Officer to do the same in standardizing the firm's investment process!

We also talk about the evolution of how Budros, Ruhlin, and Roe has done business with clients over the past 30 years that Peggy has been there, from starting out as a financial-planning-only firm back in the 1980s (when it was not very common to do so!), the combination of net worth and income fees they used in their early years, why the firm ultimately shifted to add in investment management services and adopt the AUM model, and how they currently offer clients a choice between investment management only for a percentage of assets under management, or a comprehensive wealth management relationship for a percentage of their total net worth under advisement.

And be certain to listen to the end, where Peggy shares her own career path, from starting out as a CPA who decided to earn her CFP marks to make a shift from historically-focused accounting and tax compliance to forward-looking financial planning, why she's been an active volunteer over the years with organizations from the IAFP to the Foundation for Financial Planning and now the CFP Board's Board of Directors, and why she says that volunteering in professional organizations in her early years was more instrumental than anything else she did to advance her own career!

So whether you are interested in learning how a Chief Planning Officer can help ensure firm-wide consistency in financial planning, why a firm which set out to be financial planning only added in investment management services as well, or how volunteering in professional organizations can advance your career, I hope you enjoy this episode of the Financial Advisor Success podcast!

The Latest In Financial Advisor #FinTech (May 2018)

May 7, 2018 07:01 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the May 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 private equity firm Hellman & Friedman is purchasing Financial Engines for a whopping $3 billion in cash, and intends to pair what many call the “original robo-advisor” together with (also-Hellman-owned) Edelman Financial, in an effort to expand Financial Engines’ services to 401(k) plan participants to include human comprehensive financial planners. Which is notable both that major investors now see the upside of “robo” platforms as expanding them back into human advisors, and also because if it works it could dramatically alter the landscape for 401(k) rollovers by making those assets “advised” by a comprehensive financial planner before they ever become a rollover opportunity in the first place!

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

Personal Capital pairs up with Alight to distribute its PFM solution into the large firm employee channel as a means of getting financial advice prospects.
Goldman Sachs buys the Clarity Money PFM solution as a way to cross-sell its Marcus bank products to nearly 1 million Clarity users.
“Free” robo-advisor WiseBanyan raises $6.6M of venture capital to cross-sell more a-la-carte “premium” services to its existing 32,000 clients.
Australian Salesforce CRM overlay PractiFI partners with Black Diamond to bring its “business management” advisor CRM solution to the U.S.
Chalice Wealth Partners launches a new “technology network” that aims to charge advisors $249/month to integrate their technology (overlaid onto Chalice’s B/D-RIA platform).

Read the analysis about these announcements, and a discussion of more trends in advisor technology, in this month's column, including United Capital’s shift into providing a standalone FinLife Partners option (dubbed FinLife CX) for firms that want to continue using their existing CRM software, the launch of a “RoboWholesaler” that aims not to fully replace human wholesalers but make it easier for financial advisors to control the process by identifying the funds they’re interested in and then contacting the wholesalers they want to talk to, the rollout of a straight-thru insurance application process by Cetera that is integrated directly into MoneyGuidePro financial planning software, a look at whether the new ScratchWorks competition could be a new model for Advisor FinTech startups aiming to raise capital, and the opening of the application period for the third annual XYPN FinTech Competition for advisor fintech startups specifically aiming to support financial advisors serving next generation (i.e., Gen X and Gen Y) clientele.

And be certain to read to the end, where we have provided an update to our popular new “Financial Advisor FinTech Solutions Map”, including a number of new companies and categories!

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]!