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Weekend Reading For Financial Planners (March 23-24)

March 22, 2024 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 the SEC has recently been cracking down on firms for recordkeeping failures related to electronic communications, including their use of text messaging with prospects and clients. Which could serve as a warning to firms to heighten their supervision of their advisors' texting practices and whether they are being recorded properly (perhaps with the help of available archiving tools)!

Also in industry news this week:

A recent survey suggests that advisors who best understand their prospects' and clients' unique needs and communicate their value and fees clearly could be best positioned to win and retain clients
Why a dearth of advisor talent could spur additional M&A activity and 'poaching', and what firms can do to attract and retain team members

From there, we have several articles on retirement planning:

A survey indicates that financial and health planning in the pre-retirement years could lead individuals to have a more enjoyable retirement
Research suggests that individuals who want to (or have to) work after traditional retirement age will have opportunities to do so, though they might need to switch to a different field where their skills could be applicable
A growing number of individuals are working into their 80s and beyond, with many choosing this path for the challenge and sense of purpose continuing to work can provide

We also have a number of articles on the new "Spot" Bitcoin ETFs:

The factors investors can use to determine whether investing in a Spot Bitcoin ETF is right for them and, if so, how to choose among the available funds
How the creation and redemption process of Spot Bitcoin ETFs differ from more traditional ETFs and what this means for the potential costs issuers and investors might pay
Why potential regulatory scrutiny might contributing to many advisors' reluctance to recommend Bitcoin ETFs for client portfolios

We wrap up with 3 final articles, all about real estate:

How a recent settlement between the National Association of Realtors (NAR) and a class of homebuyers could upend how buyers and sellers pay for the services of real estate professionals
While both home buyers and sellers could benefit from lower commissions as a result of the recent NAR settlement, some buyers might face a cash crunch at closing
How the recent NAR settlement could impact home prices as well as the negotiation dynamics between home buyers and sellers

Enjoy the 'light' reading!

Kitces & Carl Ep 134: Helping Clients Who Can’t Ever Get To ‘Enough’ (And When They Don’t Really Want To)

March 21, 2024 07:03 am 0 Comments CATEGORY: Kitces & Carl Podcast

Kitces & Carl Ep Helping Clients Who Can't Ever Get To Enough

For many financial advicers, helping long-time clients identify and progress toward their goals eventually transitions into conversations around the best ways to enjoy the fruits of their labor once they reach them. Yet, for some clients, making the shift into retirement (or any other new stage of their lives) can often be a challenge for myriad reasons, which places the advisor in a unique position to help these clients understand the roadblocks they face and explore ways to overcome these obstacles.

In our 134th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the unique paradox faced by some clients who may not be ready (or willing) to step away from the work they've been doing to realize their financial goals… even after they've attained the goals they've committed to working for in the first place.

While this disconnect might seem to be a logical inconsistency, there are many reasons why clients may find it challenging to switch gears from their current work. One common reason is that they may be perfectly happy with where they're at and actually find the process of realizing their goals more meaningful than reaching the destination itself. As while many clients may look forward to retiring from their careers to spend time doing something else, others enjoy and experience meaningful satisfaction from the contribution and impact that their work may allow them to make.

Alternatively, some clients may be anxious or fearful about transitioning to a new stage due to concerns about their financial situation and whether they truly have the means to stop working. While reviewing the integrity of their financial plan can often help clients resolve their reservations, sometimes there are deeper reasons for a client's reticence to fulfill their goals. In these instances, it may be worthwhile to investigate these reasons, which may even necessitate professional counseling or therapy.

Ultimately, the key point is that while advisors often have implied permission to point out and challenge the apparent inconsistencies in their clients' behavior, keeping their own values separate from their clients' plans and focusing on what really motivates and concerns their clients will help advisors guide their clients past many of the roadblocks they face. And by ensuring that their clients are equipped with (and know how to follow!) well-designed financial plans created specifically with the client's goals and needs in mind, the advisor opens the path for clients to eventually make the transition to enjoy their realized goals, and to identify and obtain the help they may need to get there along the way!

How Communicating Guardrails Withdrawal Strategies Can Improve Client Experience And Decrease Stress

March 20, 2024 07:03 am 0 Comments CATEGORY: Retirement Planning

Monte Carlo simulations have become a central method of conducting financial planning analyses for clients and are a feature of most comprehensive financial planning software programs. By distilling hundreds of pieces of information into a single number that purports to show the percentage chance that a portfolio will not be depleted over the course of a client's life, advisors often place special emphasis on this data point when they present a financial plan. However, the results of these simulations generally don't account for potential adjustments that could be made along the way (e.g., decreasing withdrawals if market returns are weak and the probability of success falls, or vice versa), making them somewhat less useful for ongoing planning engagements where an advisor could recommend spending changes if they become necessary.

With this in mind, retirement income guardrails, which provide strategies that pre-determine when spending retirement adjustments would be made and the spending adjustments themselves – have become increasingly popular. Nonetheless, while these thresholds and the dollar amount of potential spending changes might be clear in the advisor's mind, they often go unspoken to the client. Which can lead to tremendous stress for clients, as they might see their Monte Carlo probability of success gradually decline but not know what level of downward spending adjustment would be necessary to bring the probability of success back to an acceptable level.

But by communicating the guardrails withdrawal strategy (and not necessarily the underlying Monte Carlo probability of success changes) to clients, advisors offer them both the portfolio value that would trigger spending changes and the magnitude that would be prescribed for such changes. Notably, while advisors have the power to determine these guardrails using traditional Monte Carlo software, doing so can be cumbersome and can involve calculating initial spending levels that are reasonable for a client's portfolio size, solving for the portfolio values that would hit the guardrail thresholds, and determining the spending changes corresponding to the desired adjustment once a guardrail is hit (though there are specialized retirement income software programs available that can make these calculations easier).

Even with the knowledge of potential short-run changes that a guardrails strategy might call for, a client may be concerned about additional income adjustments amidst an extended market downturn. One way advisors can give clients more confidence regarding this long-term outlook is to 'stress test' the plan with hypothetical scenario tests modeling some of the worst historical sequences of returns (e.g., the Great Depression or the Global Financial Crisis), showing clients when and to what degree spending cuts would have been necessary. This exercise can also give advisors and clients the opportunity to adjust the guardrail parameters depending on the client’s risk tolerance (e.g., a client who really wanted to guard against downward-spending-adjustment-risk might forgo income increases entirely).

Ultimately, the key point is that the probability-of-success results of Monte Carlo simulations can be highly stressful for clients, worrying them about the impact on their spending from a future market downturn. But by calculating guardrails and communicating the requisite spending adjustments that would protect the client's overall outlook, and how the approach would have fared in some of the worst historical market environments, advisors can help clients mentally prepare for potential adjustments while bolstering their confidence in their financial plan!

#FA Success Ep 377: Navigating A Major Health Event While Keeping Your Advisory Firm Going And Growing, With Meredith Moore

March 19, 2024 07:01 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Meredith Moore Podcast Featured Image FAS

Welcome back to the 377th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Meredith Moore. Meredith is the Founder & CEO of Artisan Financial Strategies, a hybrid advisory firm based in Alpharetta, Georgia, that oversees $77M in assets under management for 120 client households.

What's unique about Meredith, though, is how she was able to keep her firm open, navigating through and ultimately growing to more than $1M of annual revenue, despite a diagnosis in 2005 of a 7cm Glioblastoma tumor in her brain, resulting in several years of major surgeries, radiation treatments, and chemotherapies, all the while continuing to see and serve her clients. In this episode, we talk in-depth about how Meredith has met the multitude of challenges she has faced in the last 17 years head-on and found ways to navigate Artisan to ongoing growth despite those trying times, how Meredith decided to amplify her ability to grow the firm by hiring early (before she even had $200,000 in revenue) in the interest of staying ahead of the company's capacity (which, ultimately, jump-started a faster pace of revenue growth for her), and how, after a period of bad hires, Meredith pivoted Artisan's hiring process by leaning into LinkedIn Ads and more clearly articulating both what each role needed to succeed, and what a prospective candidate would really need to be able to do in order to move up and grow with the company in the future.

We also talk about how Meredith's realization that women who outearn their male partners are more apt to involve those partners in financial decisions than men would be, lead her to focus her advisory niche on women senior executives and entrepreneurs who are the household breadwinners, Meredith's whirlwind experience in being accepted as a speaker for TEDx Women in November, 2022, to talk about couples' dynamics with money (and the shock of having her talk cut down from 2,000 to 300 words to deliver for the event itself, and having to redo the entire talk on the day of the event), and how Meredith, inspired by Dorie Clark's "Becoming a Recognized Expert" course, has leveraged her TEDx talk as "social proof" of her expertise, and further leaned into expanding her network of potential clients through a luncheon series, each meeting connecting 6 women in high-level leadership roles who would meet and talk through a series of 3 simple questions that Meredith provided in order to connect with one another.

And be certain to listen to the end, where Meredith shares how she struggled in knowing how to really run an advisory practice like a business due to a lack of mentors around her (and is now much more mindful of the types of fellow advisor business owners she surrounds herself with), why Meredith still feels like her practice is in a "chasm of potential death" because of the unique challenges that arise in hiring and scaling up an advisory firm as it crosses $1M of revenue (and the staff infrastructure that has to be built to keep growing through that phase), and how, despite Meredith's surprise at how hard running and growing a business still is after 17 years, she's been able to keep growing by trying to constantly evolve, keep improving her process to find and put the right team members into the right roles that the business needs.

So, whether you're interested in learning about how hiring early and having the right recruitment and hiring process in place can mean the difference between the firm surviving despite a surprise brain cancer diagnosis and running out of cash due to years of bad hires, what it's REALLY like to apply, prepare for and give a TED Talk (twice), or how to grow your network and client base through intimate gatherings of influential and inspirational people within your firm's niche, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Meredith Moore.

Identifying Your Own “Soft Assets” To Turn COIs Into Powerful Referral Champions

March 18, 2024 07:01 am 0 Comments CATEGORY: Marketing

Soliciting prospect referrals can often be an effective way for financial advisors to grow their firms with clients who are ready to act and who will benefit from the firm since many referrals come from sources that are familiar not just with the advisor and the services they offer, but also with the prospect being referred and the needs they seek. This is particularly true when referrals come from Centers of Influence (COIs) – professionals who are trusted by their circles to influence ideal prospects to consider an advisor in the first place. Yet, many advisors might not prioritize networking with COIs or approaching them for client referrals and, as a result, may miss potential opportunities for valuable client referrals.

In this guest post, Michael Schein, founder of MicroFame Media and author of The Hype Handbook, helps advisors recognize how COIs can be powerful referral generators and shares his process of building connections with COIs using the power of their own "soft assets" that help them identify and leverage shared interests and skills not necessarily related to professional achievements.

Soft assets are talents, interests, and skills that are not directly related to one's professional field. They tend to come naturally, are plentiful, and are easy and pleasurable to share with others (such as an enthusiasm for cars, cooking, or closely held values). And the financial advisor who can find an overlap between their soft assets and the interests of a COI they'd like to connect with is much more likely to be successful in their outreach efforts. This is because they demonstrate that they are paying attention and want to 'deposit' something meaningful with the COI, rather than just seeking to 'withdraw' from whatever services the COI may have to offer.

In order to identify a match of soft assets, something as simple as following potential COIs on social media and noting the issues and interests that are shared at any given time can be a great starting point. From there, when the advisor is ready to reach out (whether via email, social media messaging, or something similar), leading with soft assets is key to building common ground. Often, sharing a connection through soft assets can be more valuable than the professional services of the COI – at least at first. Of course, the professional 'ask' can (and should) still be present, but "burying the lede" by placing this ask deeper in the email or message can help advisors establish connection-oriented alliances with these COIs – and from there, unlock the door to long-lasting professional relationships!

Ultimately, the key point is that building connections with COIs can sometimes take time and effort – but when advisors can align overlapping soft assets with a COI and identify shared, more personal common interests, they are far more likely to develop relationships that offer mutually beneficial outcomes. Which means that introspection and awareness of their own personal interests can take advisors a long way to connecting with COIs and new clients – and, in the end, leading to arrangements that benefit everyone!

Weekend Reading For Financial Planners (March 16-17)

March 15, 2024 01:03 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 final version of the Department of Labor’s (DoL) new “Retirement Security Rule” has been sent to the Office of Management for review, with the rule potentially going into effect in early 2025. While the final submitted text has not been released, some experts suggest that the DoL likely made few changes to its initial proposal, despite significant opposition from broker-dealers that could lead to the judicial system deciding the rule’s ultimate fate.

Also in industry news this week:

CFP Board this week announced changes to its Sanctions Guidelines and revisions to its Fitness Standards that clarify the factors that determine how potential sanctions are determined and revise the framework use to determine whether a candidate is eligible to become a CFP certificant
The Financial Services Institute joined other trade groups in filing a complaint against the DoL’s independent contractor rule, arguing that it creates confusion about the status of many financial professionals who prefer to operate as independent contractors

From there, we have several articles on tax planning:

The IRS has launched its free direct filing program, though it is currently limited to taxpayers in certain states and with relatively simple tax situations
Clients looking to rollover unused funds from 529 plans have the opportunity do so for both 2023 and 2024, with the deadline for 2023 fast approaching
President Biden’s budget proposal released this week includes a range of potential tax changes, from raising the top marginal rate to increasing the child tax credit

We also have a number of articles on practice management:

RIA M&A activity appears to have picked up in the first quarter of the year, with a steady flow of interested buyers and sellers
Why integrating tech stacks, service offerings, and team cultures is crucial to the success of an RIA acquisition
How the headline purchase price often does not reflect the final price an RIA buyer pays and the amount the seller receives, highlighting the importance of careful negotiation of deal terms by both sides

We wrap up with 3 final articles, all about Artificial Intelligence (AI) in the advisory industry:

How generative AI tools could transform the way knowledge workers, including financial advisors, operate, rather than replace them altogether
How lessons learned from the introduction of the digital spreadsheet can inform advisors’ future use of AI tools
How current advisor-facing software incorporates AI capabilities and why firm-specific tools might become more common in the future

Enjoy the ‘light’ reading!