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The Latest In Financial Advisor #FinTech (October 2017)

October 2, 2017 07:01 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the October 2017 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 Envestnet is acquiring FolioDynamix, in a “mega-deal” that will bring Envestnet’s total platform assets to a whopping $2 trillion, with substantial growth opportunities to convert FolioDynamix’s largely-commission-based broker-dealer users into the fee-based world.

And continuing the theme of large-enterprise industry consolidation, also in the news this month is the announcement that iPipeline – a form-filling software platform in the life insurance and annuity channels – is acquiring Laser App (which provides form-filling tools to RIAs and broker-dealers) to form a mega-provider of digital forms with supporting e-signature and e-delivery capabilities for financial advisors across the entire range of financial services products.

From there, the latest highlights also include a number of major new product and feature rollouts this month, including:

Fidelity launches its Automated Managed Platform (AMP) robo-advisor-for-advisors solution, which it is differentiating from other “robo” tools with its deep integrations to eMoney Advisor and a financial-planning-centric onboarding experience
eMoney Advisor launches its own Advisor Branded Marketing (ABM) solution, which is starting with a library of 2,000+ pre-written articles that advisors can share via email and social media (but at a higher price point that similar competing services)
YCharts launches a new YData service that will scour the internet for unique Corporate Events information which are distributed to YCharts users as a proprietary data feed
FinFolio launches its FinFolio 2.0 software, providing its own interface to the underlying portfolio management tools it is also making available as REST APIs via Wealthlab.io
Mineral Interactive launches the first “Prospect Portal” for financial advisors to use in the process of marketing to and onboarding prospects (unlike most portals that are built primarily for advisors to use with their existing clients).

You can view analysis of these announcements and more trends in advisor technology in this month's column, including the launch of United Income and its next generation of retirement planning software tools (which will only be available to its own advisors!), the news that compliance technology and consulting provider RIA In A Box won the Orion Fuse Hackathon “Best In Show” award for the 3^rd year in a row (a powerful reminder the advisor #RegTech still has substantial opportunities!), the announcement of a new Yodlee “FinCheck” app that may finally provide financial advisors a PFM solution that facilitates advice on spending and cash flow, and the pre-announcement of a new advisor integration hub from Advisor Innovation (AI) Labs that aims to finally solve the advisor woes of disparate software solutions with data that doesn’t flow effectively from one to the next!

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]!

Weekend Reading for Financial Planners (Sep 30 – Oct 1)

September 29, 2017 02:55 pm 5 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with a good recap of the Winners and Losers in President Trump's new Tax Reform proposal, which appears to be "good" news for those who don't itemize deductions, high-income individuals, and especially owners of pass-through businesses (including many financial advisors themselves!), but bad news for those who live in high-tax-rate states, those with large homes and mortgages, high-wage employees, and people with large medical (or more recently, natural disaster) deductions.

From there, we have several advisor technology articles, from this week's blockbuster deal announcement that Envestnet is acquiring FolioDynamix (to form a combined entity that will support nearly $2 trillion of advisory and nonadvisory TAMP assets), to new reviews of the wealth management technology platform AdvisorEngine and a new Medicare enrollment solution for financial advisors (and their clients) called i65, and a nice listing of software solution that financial advisors can use to help improve their digital marketing presence and connect with prospects online.

There are also several practice management and marketing articles this week, including: why offering a "free first appointment" is not necessarily a good way to approach prospects; how telling your personal story, including the tough times in your life, can help you connect with prospects; how to shift your business towards a niche and strategies to refine it further; and a look at some recent research that reveals a new factor driving which clients refer their advisors: the extent to which they feel knowledgeable about their own investments.

We wrap up with three interesting articles, all about changing our own habits and mindset as financial advisors: the first explores how, if you really want to change and improve your habits, it's not just about making a commitment to do so, but actually trying to change your own self-identity and especially your environment to make it more conducive to the new habit; the second takes a challenging look at what it really means to be "open-minded" and the ideals to strive for (though they're difficult for anyone/everyone to achieve!); and the last is a fascinating look at how, despite the increasingly popular discussion of pursuing "work/life balance", that most people actually find their greatest moments of happiness when they are most deeply engaged, suggesting that perhaps the better prescription is not to be more balanced, but to be deliberately unbalanced and more focused, but with the internal self-awareness to recognize when it's time to hit the "pause" button or make a change.

Enjoy the "light" reading!

Why Is it So Hard to Ask For Referrals As A Financial Advisor?

September 28, 2017 03:01 pm 8 Comments CATEGORY: Personal/Career Development

Growing a client base and acquiring more ideal clients is a challenge all advisors face, regardless of how successful they currently are. And although almost everyone in the industry has heard that asking for referrals is an important way to grow a business, many advisors struggle with this. Which raises the question, as recently posed by Ron Carson at a recent keynote presentation: "Why don't more advisors ask for referrals? Are advisors afraid to ask for referrals because they’re not proud of their own services?”

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we talk about why it is so hard to ask for referrals as a financial advisor, and how the many barriers – including our pride (or lack thereof) in the company or products we represent, our confidence in our own value, or even shame about the industry we are in – can make it hard to ask for referrals.

Of course, when financial advisors get started, it isn't feasible to ask for referrals, because you don't have any clients yet to refer you; instead, the only choice is cold calling, "cold knocking" (walking the streets and knocking on the doors of small businesses), or some other cold prospecting strategy. In fact, arguably for newer advisors, the whole appeal of being able to ask for referrals to generate new business is the opportunity to get away from cold calling and other types of prospecting!

Yet the caveat is that it's difficult to ask for referrals, if you're not actually proud of your company and its products. Because if you know, deep down, that your solutions aren't really the best for your clients, you'll likely self-sabotage your own behavior - as I experienced myself when starting out as a life insurance agent, struggling to prospect and ask for referrals because I was embarrassed about the sales tactics my company was using at the time!

Of course, ultimately becoming a real financial advisor is not about getting paid for your company's products, but getting paid for your own advice, knowledge, and wisdom. But that still means it's hard to ask for referrals until you're actually confident in yourself, and your own knowledge. And here, too, many struggle, because if we don't actually know anything about financial planning, and we know that we don't, then we can't confidently convey our value. Which is why professional designations like the CFP marks are so helpful... because often it's only after completing a designation that many will really start to feel confident that they can bring value to the table, and ask for referrals.

Although even once advisors have expertise and can truly add value as a financial advisor, it can still be hard to have confidence to ask for referrals, when telling people "I'm a financial advisor" risks making you a social pariah because so many consumers have had bad prior experiences with advisors! That's the challenge of trying to do business in a low trust industry. When metrics like the Edelman Trust Barometer finds that fewer than 50% of all consumers trust financial services companies, it’s literally an odds-on bet that if you say “I’m a financial advisor” and ask for referrals, that the person’s first and immediate impression of you will be negative!

The bottom line, though, is just to recognize that there really are a lot of barriers that make it hard for us to ask for referrals, all of which are built around our own fears and discomfort in what we do, the value we provide, or the company/industry we represent. Our fears hold us back. And often our fears are quite well-founded. It really is uncomfortable asking for referrals when you’re not proud of the company and products you represent. Or you're not confident in your own value. Or you're ashamed of the industry you're in. So, if you find yourself at one of these blocking points, figure what do you have to do to grow past it - whether it's leaving your company, reinvesting in yourself and your education, or differentiating yourself from the rest of the industry - or you won't have the confidence you need to ask for referrals!

Risk Composure: The Real Predictor Of Who Can Stick To Their Investment Plan

September 27, 2017 07:01 am 7 Comments CATEGORY: Investments

Regulators around the world require financial advisors to assess their clients’ risk tolerance to determine if an investment is suitable for them before recommending it. For the obvious reason that taking more risk than one can tolerate will potentially lead to untenable losses. And even if the investment bounces back, an investor who loses more money than he/she can tolerate in the near term may sell in a panic at the market bottom, and miss out on that subsequent recovery.

Yet the reality is that many investors end up owning portfolios that are inconsistent with their risk tolerance, and it’s only in bear markets that they seem to “realize” the problem (which unfortunately leads to problem-selling). Which raises the question: why is it that investors don’t mind owning mis-aligned and overly risky portfolios until the moment of market decline?

The key is to recognize that investors do not always properly perceive the risks of their own investments. And it’s not until the investor’s perceived risk exceeds his/her risk tolerance that there’s a compulsion to make a (potentially ill-timed) investment change.

Yet the fact that investors may dissociate their perceptions of risk from the portfolio’s actual risk also means there’s a danger than the investor will misperceive the portfolio risk and want to sell (or buy more) even if the portfolio is appropriately aligned to his/her risk tolerance. In other words, it’s not enough to just ensure that the investors have portfolios consistent with their risk tolerance (and risk capacity); it’s also necessary to determine whether they’re properly perceiving the amount of risk they’re taking.

And as any experienced advisor has likely noticed, not all investors are equally good at understanding and properly perceiving the risks they’re taking. Some are quite good at perceiving risk and maintaining their composure through market ups and downs. But others have poor “risk composure”, and are highly prone to misperceiving risks (and thus tend to make frequently-ill-timed portfolio changes!).

Which means in the end, it’s necessary to not only assess a client’s risk tolerance, but also to determine their risk composure. Unfortunately, at this point no tools exist to measure risk composure – beyond recognizing that clients whose risk perceptions vary wildly over time will likely experience challenges staying the course in the future. But perhaps it’s time to broaden our understanding – and assessment – of risk composure, as in the end it’s the investor’s ability to maintain their composure that really determines whether they are able to effectively stay the course!

#FASuccess Ep 039: Using Behavioral Assessment Tools To Really Understand A Client’s Wealth Building Potential with Sarah Fallaw

September 26, 2017 07:01 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the thirty-ninth episode of the Financial Advisor Success podcast!

My guest on today's podcast is Sarah Fallaw. Sarah is the founder and president of DataPoints, a technology company that is creating behavioral science and assessment tools for financial advisors to use to better assess, understand, and coach their clients' financial behaviors.

What's fascinating about Sarah's work with DataPoints, though, is the way that they have applied research rigor to the fundamental question of: what are the financial behavioral traits that lead people to actually turn their income into wealth. As advisors, many of us are already familiar with the concept of the mild-mannered "Millionaire Next Door" who, through steady frugal savings behaviors, has managed to accumulate substantial wealth, without being flashy about it. Well, as it turns out, that original research was done by Thomas Stanley - who was Sarah Fallaw's father - and it's his initial work that she has now extended even further, and turned into a series of assessment tools for advisors to use with our clients!

In this episode, we talk about Sarah's research on how people build wealth, the key financial behaviors and traits - including conscientiousness, financial literacy, frugality, planning, responsibility, confidence - that lead to building wealth, why and how they measure "social indifference" (how sensitive you actually are to trying to keep up with the Joneses) to understand someone's wealth building potential, and the way that they've turned all of this research into a series of assessment tools that we as advisors can use... whether it's giving the assessment to young accumulator prospects to really understand how likely they are to save and accumulate wealth, or to give it to new or even existing clients just to better understand where their strengths are, and where their potential financial challenges will be in the future. We even explore how these kinds of behavioral assessment tools could even become a way to show the true value of financial advice - where we provide the assessment to clients year by year, and actually show them not just how they're accumulating wealth over time, but how we're actually helping them to change their financial attitudes and behaviors for the better!

And be certain to listen to the end, where Sarah talks about the challenges in actually launching a technology company that provides solutions for advisors, how "perfection can definitely be the enemy of good" when it comes to getting a new company launched (true for both technology and advisory businesses!), and why - even when it comes to starting a technology company - it's still all about focusing in on a narrow niche of the particular type of target clientele (or target financial advisor) that you want to serve.

So whether you've been curious to learn more about the research on what actually leads to wealth-building behavior, are curious about a new technology solution you could use to identify clients (or even prospects) with good wealth-building potential, or simply want perspective on what it takes to build a successful business, I hope you enjoy this episode of the Financial Advisor Success podcast!

Launching An ESG Shareholder Engagement Initiative As An Advisory Firm Value-Add

September 25, 2017 07:01 am 0 Comments CATEGORY: Investments

Historically, socially responsible investing (SRI) has been about a fundamental decision: whether to hold a “traditional” diversified portfolio, or to screen out companies for various environmental, social, or governance (ESG) criteria in order to meet an SRI mandate. The end result has been an endless debate about whether a portfolio that used ESG screens will subsequently produce returns that are better, worse, or the same as the traditional portfolio.

Yet the reality is that an SRI approach doesn’t have to be a choice between traditional portfolio investing or using ESG screens. An alternative approach is to try to shape the stocks in a traditional portfolio to better adhere to an SRI mandate, by leveraging the proxy voting and shareholder engagement process to steer the company’s management itself in a more SRI-focused direction.

In this guest post, Justina Lai and Ria Boner of Wetherby Asset Management share how they implemented an ESG shareholder engagement initiative within their own advisory firm, leveraging the outside resources of an external non-profit called “As You Sow” that works with institutions (including advisors) to mobilize shareholder resolutions.

The end result of their ESG shareholder engagement initiative was a deeper engagement with clients themselves, for what was ultimately a fairly modest financial and logistical cost for the firm. However, because there are specific requirements that must be met for clients to vote proxies, including owning individual securities directly, affirming their ownership, and delegating proxy voting authority to a third party, advisory firms must be certain to implement a proper process to ensure their shareholder engagement efforts with clients are successful!