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#FASuccess Ep 055: Separating Management From Ownership On The Path To $10B of AUM with Tim Kochis

January 16, 2018 07:01 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome, everyone! Welcome to the 55th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Tim Kochis. Tim is the co-founder of Aspiriant, one of the first independent RIAs to have reached $1 billion in assets under management in the early 2000s, that today is one of the advisory industry's few independent RIAs focused on comprehensive wealth management to have reached a whopping $10 billion of AUM.

What's fascinating about Tim is the way that he was able to attract and retain great talent as his firm grew, by distributing ownership equity of the firm early on... a philosophy that Aspiriant has retained by now having over 50 partners that participate in the firm's equity ownership.

In this episode, Tim shares how he was able to grow so quickly to become one of the leading RIAs (with a niche focus on working with corporate executives), the way he differentiated his firm and gained credibility even without having a big corporate name on his business card, how he deepened his reach in his niche by co-authoring multiple books on tax strategies for managing executive compensation and concentrated stock positions, the reason why Aspiriant chose from early on to charge separately for investment management and financial planning, and how the firm structured its lengthy and comprehensive financial plans with a shorter Executive Summary up front and a deep Appendix of Technical Memoranda in the back... with all the technical information.

In addition, we talk in depth about how Aspiriant separated ownership from management of the firm, the management infrastructure it used to operate, why Tim and his partners ultimately decided to merge the firm with another large RIA after already reaching $2.5 billion of AUM, and how he navigated his own exit as the firm's CEO (even though he still retains an ongoing ownership stake).

And be certain to listen to the end, where Tim discusses some of the insights he's gleaned over the years in how to successfully execute a succession plan, and the work he's now doing with leading industry consultants Philip Palaveev and David DeVoe on succession planning and developing the next generation for advisory firm leaders.

So whether you have been curious about ways you can establish credibility through a niche without a big corporate brand name, how to best structure a succession plan within your own firm, or are simply curious to learn more about the growth path of a multibillion dollar RIA, I hope you enjoy this episode of the Financial Advisor Success podcast!

Comparing The Best Digital Advice “Robo-Advisor” Platforms For RIAs

January 15, 2018 07:01 am 6 Comments CATEGORY: Technology & Advisor FinTech

Previewing The Best Digital Advice Robo-Advisor Platforms For Financial Advisors

As robo-advisor platforms have increasingly pivoted from direct-to-consumer offerings to business-to-business offerings instead, financial advisors have had many new "robo-advisor-for-advisors" platforms to choose from. The appeal of these "digital advice" support platforms is the potential to expedite the onboarding process for clients - especially less affluent clients where the advisor can't necessarily afford to take as much time to work with the client directly - where the technology helps with everything from risk profiling to efficiently handle the administrative tasks of account opening. And increasingly, these advisor FinTech companies are actually trying to expand into full-scale end-to-end wealth management offerings. Yet ironically, as more and more digital advice platforms build out their capabilities, it's increasingly difficult to simply keep track of the varying list of feature and integrations.

In this guest post, Craig Iskowitz, CEO and founder of Ezra Group (a management consulting firm providing advice to the financial services industry on marketing and technology strategy) shares his thoughts on the best "robo-advisor-for-advisors" platforms for RIAs available, reviewing popular players like AdvisorEngine, Oranj, RobustWealth, Jemstep, and Riskalyze regarding everything from features and integrations, to the client experience, pricing, and more!

Notably, as these modern digital advice solutions become more and more capable, they're also beginning to shift from technology tools to assist with "just" an advisor's smaller clients, to platforms that are capable of supporting the full range of an advisor's clientele. After all, even "traditional" financial planning clients continue to have increasingly higher expectations with respect to the online experience their financial advisor provides... which in turn is expanding beyond just having a seamless digital experience for opening and managing accounts, and into areas such as proactive communication and tracking of financial planning progress.

So whether you have been wanting to look into your options for utilizing a robo-advisor-for-advisors platform, are currently using a solution and want to ensure that it's still the right platform for your firm, or are simply interested in staying on top of this rapidly expanding area of advisor FinTech... I hope that you find this guest post from Craig to be helpful!

Weekend Reading for Financial Planners (January 13-14)

January 12, 2018 02:52 pm 2 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the news that during the lull of the delayed Department of Labor fiduciary rule, the SEC is proactively working on its own version, and a first proposal could be released as soon as the second quarter of 2018. In fact, in anticipation of the coming rule, the CFA Institute has submitted a somewhat controversial comment letter suggesting that as the SEC proceeds, the best solution may not be to just harmonize with a uniform fiduciary rule for all broker-dealers and RIAs, but instead to focus more on the titles that advisors use and simply require those who hold out as such to be registered as investment advisers (and be subject to a fiduciary rule under current law!).

At the same time, this week's news also included newly proposed legislation in New Jersey, that would require brokers who are not fiduciaries to clearly and explicitly disclosure that they are not and have no obligation to act in their clients' best interests, as delays in a national fiduciary rule are leading to a growing momentum for states to take up the fiduciary slack in their stead. And the Wall Street Journal also published an investigative report about how even at discount brokerage firms like Schwab, Fidelity, and TD Ameritrade, which are known for not using commission-based brokers, that their Financial Consultants are still receiving bonus incentives on top of their salaries that introduce problematic conflicts of interest in their recommendations (further supporting the need for a fiduciary rule).

From there, we have a slew of advisor technology articles this week, including: a new cybersecurity platform initiative in the advisory industry called cleverDome; why financial advisors should be concerned about the recent news of computer chip vulnerabilities Meltdown and Spectre (and another reason/reminder of why it's so important to promptly patch your computer with software updates!); how "robo" tools are coming to life insurance now, both streamlining the process of applying for insurance, and even the time it takes to underwrite the coverage (as algorithms and data feeds begin to replace requests for paper medical records and human underwriters); a favorable review of Advyzon (which provides a combined CRM and portfolio accounting/reporting tool for investment advisers); and a look at some of the financial data startups that are trying to compete with Bloomberg in the independent financial advisor community (including YCharts and Sentieo).

We wrap up with three interesting articles, all around the theme of time management and personal productivity: the first looks at what the research tells us about the most (and least) productive times of day for decision-making or creative work; the second provides a fascinating look at how our struggles with time management may simply be a modern-world iteration of the age-old philosophical question about how to find better focus and meaning in our lives; and the last is a simple but effective technique to help avoid distracting "opportunities" that may come along in your business... just provide a quote that is drastically higher than your usual prices, and let the prospective client either say no (but then it was their decision, not yours), or perhaps even yes (and properly pay you for the off-focus work, giving you dollars you can then re-deploy more productively in the business!).

Enjoy the "light" reading!

The Unhappiest Successful Advisors: Accidental Business Owners

January 11, 2018 01:32 pm 2 Comments CATEGORY: Practice Management

As we enter the new year, many advisors will be thinking about ways they can improve their business in 2018. Yet one of the more interesting trends that I have been seeing lately is the rise of advisory firms where the biggest challenge is not the success and growth of the business... but that the advisory firm owners themselves are unhappy, or downright miserable. This seems to particularly occur within the RIA community, and especially amongst those firms managing between approximately $100 million and $300 million of AUM... a subcategory of firms I call "accidental business owners". Because the source of their stress is that they may have built successful and profitable businesses - and now find themselves responsible for managing it - despite the fact that they never actually intended to build a firm that they would have to spend so much time managing in the first place!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss what is causing so many advisory firms to become accidental business owners, why they occur in the first place, the problem with being an accidental business owner, and what financial advisors can do if they find themselves in this situation to become happier (and regain control of their lives).

To understand the phenomenon of the accidental business owner, it’s important to first point out that the word “business owner” is being used in a very specific way. We often talk about advisory firms as being “businesses”, but there's a distinction between true "businesses", and advisory firm practices. The difference is that a practice is built around an individual advisor. The practice is you, and while you may have a staff member or two, it's primarily about the services you provide to clients. By contrast, an advisory firm business – a true business – goes beyond just you as the founder advisor. There are other advisors, who manage clients, and who are responsible for helping to bring in new revenue. Historically, almost all financial advisors were salespeople, and most salespeople simply have practices - as evidenced by the fact that if the advisor-salesperson did not go out and selling new insurance or investment products, income dropped precipitously and the business would die. But with the rise of the AUM model, and phenomenally high retention rates amongst advisory firms, advisors began being able to accrue clients over time and actually build large and scalable businesses – businesses that truly needed to hire other advisors to come in and manage relationships – often even without trying to do so. The clients just accrued until the point that it was a business. Thus, they became "accidental" business owners.

But the fundamental problem that crops up for those financial advisors who become accidental business owners is that the job of running an advisory business is different than the job of being a successful advisory practice. A successful practice as a financial advisor is all about your ability to effectively service your own clients. By contrast, running a successful advisory business requires you to be in the role of teaching and training other financial advisors to be good at business development, financial planning, servicing clients, and managing relationships (in addition to managing the firm, hiring staff, making technology decisions, and actually being a leader of the firm). Which means if the primary reason you started your firm in the first place was because you like to be a financial advisor, and give people advice, and help them, and have those client relationships… then being an advisory firm business owner is going to be pretty miserable, because you don't get to do any of that stuff anymore. Which ultimately tends to occur as firms grow to around $100 to $300 million in AUM, because this is the point at which an advisor (or a small team of 2-3 advisors) truly crosses the threshold where they are at capacity and have to add more advisors and other employees and start to scale their practice up to a business.

So with all this being said, if you do find yourself in the position of being one of those unhappy accidental business owners, what should you do about it? The key is to acknowledge that is that there is effectively a fork in the road. The path on the left is to embrace your new role as a business owner. You may not have set out to do it, but here you are, and this is your opportunity to grow, to learn something new, and to do this well. You may recognize that you need help, but that's OK. If you’re a more visionary type, and you can see what needs to be built, but you’re really not the good manager to build and integrate it all together, then make the reinvestment to hire a Chief Operating Officer to be your right hand for implementation.

On the other hand, the path to the right is to go back to being a successful solo advisory practice again. This is by far the more painful path for most of us. Because it basically means downsizing the firm and the number of clients you serve, which to many can feel like "failure". Except it turns out that it may be the single fastest step to actually make you happy again in your business. Because, due to the 80/20 rule, many or even most advisors can maintain their current take-home pay by scaling back to (just) their top 20% of clients while freeing up additional expenses and a lot of time and effort.

But the bottom line is that as you get started here in the new year, take a good long look at what you’ve built. Is it a practice, or a business? And more importantly, what do you want it to be. Do you really want to build a business, and make the reinvestments – financial, time, effort, and learning new skills – that it takes to lead the business? Or do you really just want to run a successful practice, make good money, and regain control of your time? Either path is truly okay, but you have to decide what you want to build towards. And if you’ve found yourself accidentally going down the “wrong” path – you’re an accidental business owner that doesn’t really want to be anymore – recognize that going back to a lifestyle practice is an acceptable answer, and it may be the path that truly leads to greater happiness!

Managing The “Theater” Of A Financial Planning Meeting

January 10, 2018 07:01 am 5 Comments CATEGORY: Client Trust & Communication

Managing The Theater Of Financial Planning

For financial advisors who pride ourselves on the quality of the advice we provide to clients, it can sometimes be easy to lose sight of the importance of the more physical elements of our business that seem qualitatively irrelevant to the value of the guidance and recommendations we give to clients. However, as a tremendous amount of psychological research suggests, we should be careful not to overlook the more "theatrical" elements of a financial planning meeting – from the clothes we wear and the way we present information to clients, to the design and set up of our office – as the "theater" of financial planning actually does influence our clients, and their ability to implement our advice in a meaningful manner.

In this guest post, Dr. Derek Tharp – a Kitces.com Researcher, and a recent Ph.D. graduate from the financial planning program at Kansas State University – examines why it is important to both acknowledge and manage the theater of financial planning, particularly given the ways in which clients and prospective clients utilize the signals we as advisors send (both consciously and unconsciously) to decide everything from whom to hire, to what financial recommendations they should implement (or not!).

It is widely acknowledged that effective communication is an important aspect of what financial advisors do. However, something that is less commonly appreciated is the role that our environment plays in facilitating that communication. In his book, Suggestible You, Erik Vance examines the ways in which our suggestible minds are influenced by the stories we hear and the environments we hear those stories in. In particular, Vance examines the "theater of medicine", and its surprisingly powerful role in shaping the perceptions and beliefs of patients, which can, in turn, influence their physical health and well-being as well!

Additionally, the physical spaces we occupy (such as our office) can actually say a lot about us. Though laboratory research in financial planning is still very young, and scholars are only beginning to delve into how the offices of financial advisors can optimally be designed, some research from other fields has found that our physical environments can actually say even more about our personalities than some commonly used tools and assessments. At the heart of this are ways in which our personality manifests in certain behaviors which leave physical evidence within our environments that is really hard to fake – from mementos we collect and things intentionally place out for others to see, to more subtle clues such as the way we dress and organize things on our desk.

Ultimately, financial advisors have many options for trying to better manage the theater of financial planning... from sending signals of our conscientiousness through our clothing (e.g., formal dress) and communication style (e.g., controlled posture and calm speech), to signals of our competence through education and professional designations (e.g., CFP certification), and even signaling our knowledge of and solidarity with niche communities that we service... there are many ways in which we can seek to manage the "theater" of our financial planning to help our clients adopt and implement wise financial planning practices!

#FASuccess Ep 054: Lessons Of An Advisory Firm Merger And Launching Your Own Advisor FinTech Company with Greg Friedman

January 9, 2018 07:01 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome, everyone! Welcome to the 54th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Greg Friedman. Greg is the co-founder of Private Ocean, an independent RIA in northern California that manages nearly $1.2B of assets under management for 450 households, with a combination of both investment management and financial planning services.

What's unique about Greg, though, is that in addition to leading a billion-dollar advisory firm that he founded over 25 years ago, he also developed his own CRM system to better manage all the workflows for his financial planning clients... which he eventually made available to other advisory firms as well, in the form of the software we now know as Junxure CRM.

In this episode, Greg talks about how Private Ocean got its initial traction with a niche Center of Influence in the California Tire Dealers Association – just to emphasize that any niche can work when you build connections to the key Centers of Influence! – how the firm is structured today with lead and associate advisors, how compensation is set for the firm's lead advisors to keep them from focusing too much on investments alone, and why Private Ocean has decided to charge only AUM fees despite having such a deep focus on its financial planning work with clients.

In addition, we talk in depth about the real-world challenges that cropped up when Greg decided to merge his successful advisory firm with a larger one 7 years ago, to become the successor CEO of the combined organization when the other firm's founder retired, how Greg is able to manage his software company along with his advisory firm and how he handles his time, the guiding philosophy that he uses to stay focused across all of his businesses, and why Greg thinks it's so crucial to have an Executive Coach.

And be certain to listen to the end, where we include a small additional "bonus" interview – because ironically, in the short time between when we originally recorded this podcast, and when it went live, Greg actually sold Junxure to AdvisorEngine. So we gather some of his thoughts about what makes you want to sell a company you built. Especially when you're not ready to retire yet.

So whether you have been curious about how to build your business by leveraging a niche, the unique opportunities for advisory firms that develop and eventually sell their own software, or curious about the real world challenges that come with merging a successful advisory firm into a larger one, I hope you enjoy this episode of the Financial Advisor Success podcast!