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New IRMAA Surcharges On Medicare Part B and Part D Taking Effect In 2018

November 29, 2017 07:01 am 13 Comments CATEGORY: Retirement Planning

Since 2007, the Medicare Modernization Act of 2003 has required high-income Medicare enrollees to pay an “Income-Related Monthly Adjustment Amount” (IRMAA) surcharge on their Medicare Part B premiums, which lifts the Medicare Part B premium from covering “just” 25% of costs up to as high as 80% of results, increasing Medicare Part B premiums by as much as 219% in 2017. And since 2011, a similar IRMAA surcharge has applied to Part D premiums, applying a flat dollar surcharge of as much as $914/year in 2017.

Beginning in 2018, though, the IRMAA surcharges on Medicare premiums will apply even more quickly, as changes under the Medicare Access and CHIP Reauthorization Act of 2015 will reduce the top Modified-AGI threshold from $214,000/year down to “just” $160,000 (for individuals, or $320,000 for married couples). And individuals with MAGI as low as $133,500 (or married couples at MAGI of $267,000/year) will be forced into a higher IRMAA tier, resulting in a nearly $1,000/year increase in IRMAA surcharges.

Which means going forward, it will be even more important to engage in proactive income tax planning for affluent retirees, to manage their exposure to IRMAA, especially in a low-inflation environment where being impacted by IRMAA also renders the household ineligible for the so-called “Hold Harmless” rules that limit annual inflation increases to Medicare Part B premiums. Especially since even “one-time” income events, like a sizable Roth conversion, or liquidating substantial capital gains, can be IRMAA triggers (at least for that one year the income event occurs).

On the other hand, it’s important to recognize that IRMAA surcharges still only amount to a roughly 1% to 2% cost increase, relative to the income the household must have to be subject to IRMAA in the first place. Which means that while managing taxable income (or really, MAGI) is important, it’s equally crucial not to let the tax tail (or the IRMAA tail) entirely wag the dog.

Nonetheless, the new 2018 IRMAA rules will just make Medicare-related tax planning more popular than ever. Although notably, for new retirees, the best IRMAA planning strategy is simply recognizing the opportunity to file Form SSA-44 to receive an exception to the IRMAA surcharge, as the act of retirement itself is a valid “life-changing event” that can allow new Medicare enrollees to avoid IRMAA premium surcharges on Part B and Part D in their initial Medicare years!

#FASuccess Ep 048: Creating Tangible Advisor Marketing Messages For Intangible Financial Planning Services With Gail Graham

November 28, 2017 07:01 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome, everyone! Welcome to the 48th episode of the Financial Advisor Success Podcast!

My guest today is Gail Graham. Gail runs an eponymous marketing consulting firm called Graham Strategy, that works with both advisory firms and B2B vendors serving financial advisors, on how to more effectively craft relevant marketing messages to reach their target clientele.

What's fascinating about Gail, though, is that she's had a similar marketing role in a wide range of advisory industry businesses, from the private wealth division of PNC bank, to Fidelity's private client group, and later as Chief Marketing Officer for the mega-RIA United Capital. And through the journey, Gail has gained some incredible insights about what it really takes to effectively market an intangible like financial planning services.

In this episode, we talk in depth about how to more effectively communicate financial planning and its value, from the importance of using plain language that people understand (instead of saying "I'm a fiduciary" simply say "Here's how it works – I'm personally liable if I give bad advice"), to the benefits of converting your value proposition into a physical proposal sheet and bringing a Sample Financial Plan to every prospect meeting (because it literally makes the advice value proposition more physically tangible), to the benefits of including "proof points" that actually validate your value proposition with prospective clients (such as "we've helped 300 families do this in the past 8 years").

We also talk about why getting better at financial advisor marketing is all about getting clear for yourself on who your ideal client really is, why it's absolutely essential to focus in order to find the right marketing messages that really resonate, and Gail's process to finding and refining your own value proposition.

And be certain to listen to the end, where Gail shares her perspective on the benefits and challenges of the RIA custody model, and why she's decided to collaborate as a marketing strategist with Apex Clearing to try and help disrupt the status quo, for the betterment of advisors and their clients.

So whether you have been contemplating to how to make your own marketing of intangible financial advisory services more tangible, have been reconsidering who your ideal client truly is, or are simply interested in hearing some new perspectives on marketing topics, I hope you enjoy this episode of the Financial Advisor Success podcast!

How Mindset Trumps Best Practices For Financial Advisor Success

November 27, 2017 07:01 am 0 Comments CATEGORY: Practice Management

Financial advisors looking to improve their businesses have a wide range of “Best Practices” research to tap for new ideas, from industry benchmarking studies to specialized white papers. And of course, this Nerd’s Eye View blog. For those seeking methods to run their advisory business more efficiently and profitably, there are a lot of relatively simple tactics to try.

In fact, as highlighted in this guest post from Stephanie Bogan and Matthew Jarvis, arguably the greatest challenge in improving a financial advisor’s business is not actually figuring out the Best Practices methods at all… and instead is almost entirely about changing the mindset of the advisory firm owner. Because most business improvements to an advisory firm are fairly straightforward – from standardizing service offerings, to eliminating fee schedule exceptions. The blocking point is in our heads. Literally.

Because as Bogan and Jarvis discuss, the real reason that most advisors struggle to take their businesses to the next level is the limiting beliefs that we impose on ourselves as financial advisors and business owners. The idea that certain aspects of the business “must” be done a certain way, or the business will fail. When in reality, it’s simply that we don’t want to go through the awkwardness of change and the discomfort of feeling threatened and worried that a client might push back… even though at worst, making changes will probably just threaten to cause a few clients to leave (and usually it’s those clients who weren’t even the best fit in the first place!).

In other words, the key to financial advisor success isn’t really about implementing the right methods – the business tactics and best practices – but more about having the right mindset that makes it easier to implement those methods in the first place. Because once as advisors we have clarity and focus in the business, a confidence in our own worth and the value we provide, a focus on leveraging our time and relationships, and an abundance mentality that the money and business success will come by doing the right things… it becomes remarkably easy to make the changes necessary for that success to actually happen!

Weekend Reading for Financial Planners (November 25-26)

November 24, 2017 01:01 pm 7 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with a look at the latest part of the Senate Republican tax plan generating buzz amongst advisors… that all investment sales may be required to use FIFO treatment in the future, eliminating the specific lot identification method, which would substantially curtail tax loss harvesting strategies.

Also in the recent news is the announcement that the military is overhauling its traditional 20-or-nothing pension system to a slightly scaled down version of the pension combined with government involuntary plus matching contributions to the Thrift Savings Plan (and a choice for enlisted military with less than 12 years of experience about whether they want to stay in the old system or switch to the new one). And there’s also a timely article on providing ideas for client holiday gifts, just in time for Black Friday sales!

From there, we have several articles about pricing and marketing advisory services, from a look at how to properly set and then communicate your fees, to an outsider’s perspective on how financial planners should be pricing their services (or rather, offering a menu of variously-priced services), and a good reminder about how it’s impossible to effectively market the value of your services until you get a clear understanding of your internal business strategy on how you plan to create (and differentiate) your value to your intended target market.

We also have a few practice management articles, including: how a growing number of advisory firms are shifting from lifestyle practices to enduring businesses (which provides more upside value potential to sell the business, but introduces substantial complexity along the way); a good primer on how a valuation expert looks at the real issues involved in trying to determine an advisory firm’s value; and a look at what today’s RIAs may be missing in how the DoL fiduciary rule will apply to them (including during the current “transition BICE” period until the full rule takes effect in July of 2019).

We wrap up with three interesting articles, all around the theme of how the advice industry, and the needs to be successful in the industry, are changing: the first looks at the challenges in attracting women into the financial planning profession, noting that the real challenge may not be the concern about whether there’s “too much math” or not, but that too many financial planning jobs are still overly sales-oriented, too inflexible, and too unwilling to given upwardly mobile Millennials the autonomy they crave; the second explores the emerging field of financial therapy, and how just as financial planners have been blurring the line between advice and product sales, so too is financial therapy blurring the line between advice and making (and treating) mental health diagnoses; and the last notes that as more advisors master the technical skills in financial planning, it’s the communication skills that are increasingly important, especially in a world where money remains such a taboo subject, which means perhaps it’s time to rename the “soft skills” to something more commensurate with the gravitas they are taking on in the path to being a successful financial planner!

Enjoy the "light" reading!

The Wealth-Limiting Risks Of Diversifying Too Soon – Redwoods, Bushes, and Pear Trees

November 22, 2017 07:01 am 30 Comments CATEGORY: Investments

Good diversification is a staple of financial planning advice, though the principle long pre-dates financial planners. From the aphorism “don’t put all your eggs in one basket”, to Talmudic texts from 3,000 years ago directing people to split their wealth evenly between cash, real estate, and business, the virtue of limiting exposure to risk from diversification is an “accepted truth”.

Except the reality is that, when you look to those who achieve the greatest wealth or have the greatest impact, virtually none of them ever diversify… or at least, not throughout most of their years. After all, if Bill Gates had “just” diversified into the S&P 500 after Microsoft IPO’ed, he’d have barely 1/40^th of the wealth he does today. In fact, most of those on the list of the richest billionaires are people in their 60s, 70s, or 80s, who have held a concentrated interest in their businesses for nearly their entire lives. Like the redwood tree, they waited a very, very long time before branching out… and as a result, were able to grow the tallest.

Of course, that doesn’t mean that diversification is always bad. Most “trees” are actually short bushes and shrubs, that grow just a few feet tall, but are still able to broaden their shoots and leaves enough to grow healthy. In the investing context, it’s the equivalent of a person who diligently saves and invests in a portfolio for decades, and retires with “comfortable wealth”.

Still, it’s important to recognize that diversification isn’t literally always the winning strategy, and for those who are young and have a long time horizon, arguably not even a necessary one. In fact, the weakest tree is the Bradford Pear – known for growing a V-shaped trunk, effectively diversifying itself from the start… in a manner that virtually ensures the tree will eventually either collapse under its own weight, or succumb to external forces.

For those who have decided they have “enough”, the satisficing strategy of the bush may be just fine. But for those who decidedly want to generate more wealth or have more impact, perhaps the redwood strategy is underrated after all? In fact, the highest-risk losing strategy may actually be the pear tree strategy of trying to have it both ways at once!

#FASuccess Ep 047: Pursuing An Operations Career Path In An Advisory Firm With HIFON Study Group Support With Shaun Kapusinski

November 21, 2017 07:01 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome everyone! Welcome to the 47th episode of the Financial Advisor Success Podcast!

My guest today is Shaun Kapusinski. Shaun is the Director of Operations for Sequoia Financial Group, a hybrid RIA based in Akron, Ohio, that manages more than $3.7 billion across private client and institutional divisions spanning four office locations.

What's unique about Shaun, though, is that while he started out in the industry over 15 years ago like many advisors of the time – as a "financial advisor" selling life insurance for a career agent life insurance company – he made a shift early in his career to the operations side of the business, and has since been able to grow his career by following an Operations career track inside of an advisory firm, rather than the more traditional paraplanner, then associate advisor, then lead advisor career track.

In this episode, we talk in depth about the organizational structure of this mega advisory firm, how they split apart a division of "Shared Services" including centralized paraplanners, a centralized investment team, and centralized operations (all supporting advisors with local client service associates in multiple locations), the core technology stack of Tamarac, eMoney, and Microsoft Dynamics that Sequoia uses to run the business, and why the firm is looking to make a shift from Dynamics to Salesforce Financial Services Cloud for the next stage of growth.

We also talk about Shaun's own fascinating career track, from starting out as a life insurance agent, transitioning to an operations role early in his career, why he believes that getting an MBA is even more valuable for those in an Operations role at an advisory firm than getting the degree as a financial advisor, and Shaun's perspective on why "growth" is such an imperative for advisory firms – because it's the growth that creates the career track opportunities in operations in the first place!

And be certain to listen to the end, where Shaun talks about the study group he created, called HIFON – short for High Impact Financial Operations Network – which gathers together operations team members from advisory firms across the country. And in recent years, HIFON has grown to the point that it's no longer just a study group, but an emerging membership group for the operations staff of advisory firms, with not only study group opportunities, but also private discussion forums, private vendor webinars, and even shared data about what technology various advisory firms are using!

So whether you are trying to figure out how to grow the operations side of your business, interested in making a transition to operations yourself, or simply interested in learning about the resources such as HIFON that are available for operations team members, I hope you enjoy this episode of the Financial Advisor Success podcast!