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The Latest In Financial #AdvisorTech (September 2023)

September 4, 2023 07:02 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the September 2023 issue of the Latest News in Financial #AdvisorTech – 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!

This month's edition kicks off with the news that WiserAdvisor, one of the longest-running lead generation services in the industry, has acquired IndyFin, a startup advisor rating platform that had aspired to be the 'Yelp for Advisors' – which on the one hand provides WiserAdvisor with an opportunity to jump into the business of client reviews and ratings (which has garnered significant interest from multiple AdvisorTech startups hoping to promote such services in the wake of the SEC's new Marketing Rule allowing client testimonials), but on the other hand, raises questions about how much demand there really is for a standalone advisor rating tool, since few advisors are likely to accumulate enough ratings from current or former clients to actually draw in new clients (and advisors with enough clients to get a critical mass of reviews likely have enough clients that they can just rely on client referrals… or don't even need to add new clients anymore?).

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

Former United Capital Partners founder/CEO Joe Duran is reportedly exploring the launch of a new RIA 4 years after selling his firm to Goldman Sachs, with a reported emphasis on providing lead generation opportunities for advisors on its platform – which if successful, could provide a new model for boosting organic growth without the high cost of outsourcing to a third-party lead generation service or relying on inorganic growth via mergers & acquisitions.
Onramp Invest, the platform that aimed to solve the challenges of cryptocurrency investing for financial advisors, was acquired by Securitize, a platform specializing in blockchain-based tokenization of private market investments, suggesting that advisors' interest in recommending digital assets for their clients – already limited during previous rallies in the price of Bitcoin and other cryptocurrencies – has declined further amid the price crash and ensuing scandals that have happened in the year-plus since
Wealthtender, a lead generation and advisor rating service, has announced a partnership with custodial account provider UNest to bring its find-an-advisor technology to UNest's customer base of parents opening investment accounts for their children – which, while expanding Wealthtender's footprint in the competitive lead generation market, raises questions about how large of a potential customer base UNest can provide (and whether Wealthtender will be able to secure any larger enterprise partnerships that can help it secure a spot as the "One and only" advisor rating service)

Read the analysis about these announcements in this month's column, and a discussion of more trends in advisor technology, including:

With AI technology proliferating in the financial services industry, regulators are increasingly concerned about possible conflicts of interest if the technology can be manipulated to recommend a company's products and solutions over others (despite being under a technological veneer of 'objectivity'), as highlighted most recently by the SEC issuing proposed regulations for RIAs for evaluating and eliminating conflicts of interest in their technology, and Massachusetts Secretary of State William Galvin sending a request for six companies from different areas of the industry to detail their use of AI in their business practices
Over the last 10–15 years, a number of AdvisorTech providers have gained the majority of market share in certain core categories like financial planning and CRM; but as the most recent Kitces Research on AdvisorTech has found, a new crop of tools has arisen in more recent years that has garnered higher satisfaction ratings than the incumbents, and have been steadily gaining market share – suggesting that the traditional advisor tech stack might eventually be upended and replaced by a new 'next-generation' tech stack that reflects the growing shift of advisors into deeper financial planning and non-AUM fee models

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*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 (September 2-3)

September 1, 2023 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 Massachusetts Supreme Judicial Court ruled that the state's fiduciary rule for broker-dealers can stand, potentially opening the door for other states to impose similar standards that exceed the requirements of the Securities and Exchange Commission's Regulation Best Interest rule.

Also in industry news this week:

A legal challenge to FINRA's operations as a self-regulatory organization has the potential to upend the current regulatory system for broker-dealers and their registered representatives
A recent study indicates that while many consumers appear confident handling their finances on a 'DIY' basis during their careers, the percentage seeking professional financial advice increases as they approach retirement

From there, we have several articles on retirement planning:

Why some individuals believe they need to save more money than they really do in order to have a sustainable retirement and how advisors can support them
A recent study suggests that average inflation-adjusted spending among retirees decreases by 3% annually, a sharper decline than previous estimates
The value in deciding how much is 'enough', and how advisors can support their clients in doing so

We also have a number of articles on practice management:

Best practices for giving praise and constructive criticism to motivate employees and help them grow
How developing and communicating a clear strategic plan can not only set the long-term direction for a firm, but also help employees better understand the value of their work
Why advisor happiness leads to better client service, and how firms (and clients) can assess whether their advisors are happy

We wrap up with 3 final articles, all about wealth:

Why those in the upper class are taking a more understated approach to displaying their wealth compared to previous generations
The services and skills that can help advisors move 'upmarket' and attract wealthier clients
How "social debt" can serve as a psychological and financial challenge for wealthy individuals and what they can do to avoid this burden

Enjoy the 'light' reading!

Crafting More Equitable Advisor Non-Solicit Agreements With The ACRES Agreement

August 30, 2023 07:04 am 0 Comments CATEGORY: Regulation & Compliance

Non-compete agreements (where a company prohibits an employee from working for competitors, at least for a certain period of time) are often used to help companies protect their investment in the employee (e.g., the time and money spent training the employee) as well as preventing the employee from taking the company's best practices to a new job at a competitor. But in the financial advisory business, firms are typically less concerned about employees taking intellectual property (e.g., financial planning processes and other 'trade secrets') with them to a competitor and are more concerned about clients (and the revenue they bring in) following their (departing) advisor to their new firm. Because of this, non-solicit agreements (where the departing advisor is restricted in whether and how they can communicate with their clients, and "solicit" them to come with the advisor when they leave for another firm) are much more common in the financial advisory industry.

As non-solicit agreements have become more prevalent among independent advisory firms, the terms of these agreements come into focus, such as whether a non-solicit agreement covers all of an employee advisor's clients or only certain ones. For instance, while it might be clear that the firm 'owns' the relationship with a client that the firm brought on itself and passed on to the advisor (thereby perhaps warranting a stricter non-solicit agreement), it would seem inappropriate to restrict an advisor from soliciting certain other clients (e.g., a personal friend or relative/family member) to their new firm.

In addition, there is also a fuzzy middle where it is less clear who owns the goodwill equity of the relationship (e.g., if a firm brings in a prospect through its marketing, but the advisor closes the deal and brings the individual on as a client, or the advisor brings in the prospect but does so using some of the firm's marketing resources or by leveraging its known brand in the local community). In these cases where the client is effectively a 'joint' client of both the firm and the advisor, it might be appropriate for the firm and the advisor to negotiate the specifics of how these client relationships will be handled under the firm's non-solicit agreement. For instance, the firm and the advisor might specify the client relationships that would be acceptable for the advisor to solicit, or perhaps negotiate a price at which the advisor would have to pay to take and service clients at their new firm.

Since many advisors and firms lack the legal expertise or resources to hire a lawyer to craft a custom agreement for each advisor, we are introducing the Advisor/Client Relationship Equitable Split (ACRES) Agreement to the advisor community as a foundational template advisory firms can use and/or modify to their specifications. At its core, the ACRES Agreement formalizes the recognition of the "yours, mine, and ours" split of client relationships, and allows firms and advisors to set the terms for how those different types of client relationships will be handled in the event that there is ever a split (from which clients can be solicited or not, what client information can be taken or not, and whether compensatory payments are due back to the firm or not).

Ultimately, the key point is that non-solicit agreements that represent the investment that firms and their advisors make into attracting and serving clients can leave each side feeling confident that their interests will be respected if the advisor and firm ever decide to separate in the future. Our hope is that by providing the ACRES Agreement as a template, advisory firms and their advisors can set better, clearer, and fairer terms for both parties!

#FA Success Ep 348: Building Your Own Planning Spreadsheets To Show Clients What They Need To See, With Jeff Jones

August 29, 2023 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 348th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Jeff Jones. Jeff is the Owner and Founder of Cypress Financial Planning, an independent RIA based in Haddon Heights, New Jersey, that oversees $275 million in assets under management for 380 client households.

What's unique about Jeff, though, is how he built his own financial planning spreadsheets in Excel, and has developed coding and integrations that automatically populate into a PowerPoint presentation, that he then shows clients to help build a story for their financial plans and give them the motivation they need to achieve their financial goals… while also still being able to know and audit where every single number in the projection came from.

In this episode, we talk in-depth about how Jeff leveraged his early years as an engineer for Lockheed Martin to develop the macros and Visual Basic code for his Excel spreadsheets to create more customizable and in-depth financial plans than he could with traditional off-the-shelf financial planning software, why Jeff felt compelled to build his own spreadsheets because he felt it would give him more confidence to answer client questions about the underlying assumptions and the details being presented to them (because he deeply understood the innerworkings, and the limitations, of the planning spreadsheets he built), and how Jeff has spent time over the years iterating on his spreadsheets so that his expanding base of advisors could easily add data and get the information they needed themselves for their clients… which worked so well that his business partner Ben branched off and teamed up with TIFIN to start his own FinTech company that further built out Jeff's financial planning spreadsheets into an actual piece of software that they now sell to other financial planning firms.

We also talk about how despite building the planning spreadsheets, Jeff was not as interested as his partner to starting up a FinTech company and instead gave Ben permission to develop the spreadsheets into standalone software with an agreement that Jeff would receive an equity share and would be able to use and develop his master copy of his spreadsheets for his firm, how, even though Jeff is only 39 years old, he has already begun sharing equity of his advisory firm with his advisors with the intention that he can possibly move on to other endeavors in the next 10-15 years while his G2 advisors can continue the firm's legacy, and how Jeff worked with FP Transitions to value his firm and to help build equity agreements where partners can buy in with a modest down payment and pay back a seller-financed note that accumulates equity through multiple tranches over time.

And be certain to listen to the end, where Jeff shares how he chose his equity agreement with his advisors because even though they would be essentially paying him back with the profit distributions of the firm he owned in the first place (such that he would be sacrificing his own profits and shares), he felt that this was the best way to help incentivize his partners to stay and give them better opportunities to become successful and help grow and scale the firm further, how Jeff found his first advisor mentor while he was still working for Lockheed Martin by cold calling advisors in his area and simply offering his time to help in any capacity he could and asking if he could just pick their brains about the industry so that he could start his own career in financial planning, and how, even though he has some time before he retires, Jeff already has plans to work more in the pro bono financial planning space once he has the time, energy, and his own financial freedom to be able to give back and create greater impact in the lives of others (with his passion that financial planning should be accessible to all no matter how much money a client has to invest).

So, whether you're interested in learning about how Jeff likens creating his Excel spreadsheets to that of an artist with a blank canvas where the end product is only limited by his imagination, how Jeff built macros into his spreadsheets so that when he makes updates to the data that supports assumptions in the master file, the sheets created from that file also update, or how, after working for Lockheed Martin, Jeff intentionally took a job at Goldman Sachs as a financial analyst so that he could get the industry experience and knowledge he needed to launch his own firm, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Jeff Jones.

TD Ameritrade To Schwab Conversion Tips For Financial Advisors

August 28, 2023 07:01 am 0 Comments CATEGORY: Practice Management

The announcement of the merger between Charles Schwab and TD Ameritrade in November 2019 kicked off a marathon of preparation for advisory firms to transition their clients on the TD Ameritrade custodial platform to Schwab. And with the final conversion of clients scheduled to take place over the upcoming Labor Day weekend of 2023, the marathon is approaching its final sprint toward the finish line. While many RIAs have already tackled some of the bigger issues around the conversion such as informing clients of the changes and updating regulatory documents, there are still some operational intricacies in the TD Ameritrade to Schwab transition process for advisors to address that could cause headaches if they're missed.

In this Guest Post, Grier Rubeling, a transition consultant for RIAs and founder of Advisor Transition Services, offers a series of actionable tips to help advisors (and their clients) get through the 'Schwabitrade' transition smoothly.

At a high level, some of the operational challenges of the transition amount to adjusting to Schwab's way of doing things for advisors who are used to TD Ameritrade. For instance, TD Ameritrade rep codes that are used to organize client accounts will be converted to an 8-digit Schwab "master number", which is used for account grouping, billing, account service, and more. Advisors will also need to familiarize themselves with Schwab's treatment of sundry accounts for fee billing and tax withholding elections for distribution, both of which differ in some key ways from TD Ameritrade.

Additionally, although Schwab states that most advisors' tax-lot settings for cost basis purposes will carry over after the conversion, some advisors with specific personalized settings (such as having multiple default lot-selection methods for different security classes) will likely need to research Schwab's Transition Planning Guide for information on whether and how those settings may change post-conversion. And any changes made between now and the conversion date of Labor Day weekend likely won't carry over, meaning they would need to be re-implemented once the transition is complete.

Finally, there is a category of tasks that involves tying up some loose ends that may remain after the conversion. For example, any checks or third-party direct deposits addressed to TD Ameritrade will be accepted for around 90 days after the conversion, but may encounter delays, so it's important to ensure that clients' deposit instructions are updated quickly. Additionally, any open trade orders (e.g., Good-Til-Canceled or Good-Til-Date orders) for non-mutual-fund securities will be canceled and will need to be re-ordered after the conversion. And for clients with IRAs, all contribution and distribution reported by Schwab will reflect only post-conversion transactions – meaning that advisors will need to keep careful records for any clients who contributed or withdrew prior to the conversion.

Ultimately, while this is by no means a fully comprehensive list of potential issues for advisors to consider about the TD-to-Schwab conversion, they may be some of the most common and important to address to ensure a smooth transition. Because with Schwab's customer service resources likely to be stretched thin in the days and weeks following the conversion, the more potential issues that advisors can identify and address before they become a problem, the less of the advisor's own resources need to be tied up in operational headaches (allowing them to keep the focus on their client-facing work)!

Weekend Reading For Financial Planners (August 26-27)

August 25, 2023 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 a recent CFP Board survey indicates that consumers do not expect AI tools to replace human financial advisors, but rather supplement advisors' work. Further, 87% of respondents said they would trust advice from human advisors, more than any other source of advice surveyed, and well above the 37% who said they trust generative AI tools.

Also in industry news this week:

The SEC settled its first charges related to its new marketing rule with a firm that advertised 2,700% annual returns
A survey suggests that older Americans prefer the term "longevity" to "aging", perhaps informing the way advisors discuss related issues with their clients

From there, we have several articles on retirement planning:

How advisors can help clients explore what they really want out of retirement rather than relying on 'scripts' for what retirement looks like
9 traits that determine whether an individual will be happy in retirement, and how advisors can help clients achieve them
Why retirement wealth extends beyond dollars and cents to time, relationships, health, and skills

We also have a number of articles on investment planning:

A recent study found that investors lagged the performance of the funds in which they invested by 1.7% per year over the past decade, suggesting a potential role for advisors in helping them overcome this "behavior gap"
While there are many potential ways to get rich in the markets, they can vary significantly by their degree of difficulty, likelihood of success, and time required to be successful
How to approach designing a portfolio built to last for hundreds or thousands of years

We wrap up with 3 final articles, all about remote and hybrid work:

How opinions of remote and hybrid work differ based on geography
How some recent research has poured cold water on the idea that remote workers are more productive, at least in certain professions
Why a hybrid work approach where employees come into the office on specified days could boost productivity and employee satisfaction

Enjoy the 'light' reading!

Kitces & Carl Ep 119: Navigating Succession Plans When Founders Are Having Second Thoughts On Retirement

August 24, 2023 07:05 am 0 Comments CATEGORY: Kitces & Carl Podcast

For many next-gen financial advisors who start with or move their careers to an established firm, eventually earning an equity stake in that firm can be an exciting prospect and is often a major career goal that many advisors aspire to achieve. However, when these aspirations are delayed or blocked by senior advisory firm partners who choose to delay their retirement plans, it can leave younger advisors frustrated and in a place of uncertainty about their futures with their firm.

In our 119th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how frank conversations between younger advisors and firm owners about succession plans and career-track expectations can mitigate the repercussions of retiring advisors who may reconsider their original plans to retire or scale back from firm activities.

As a starting point, it's important for younger advisors to acknowledge that for many long-time financial advisors, their professional success and lifelong career experiences have become an integral part of their personal identity. Whereas many senior advisors can spend decades developing client relationships and honing their craft, it can be challenging for them to transition to a lifestyle where their main focus is no longer on working with their clients. At the same time, it is also important for firm owners to understand the frustration a rising financial advisor may experience when their own goals and career aspirations are sidetracked by unexpected delays in the retirement plans of senior advisors and partners.

However, having candid discussions about the firm's succession plans and how they mesh with newer advisors' career goals can be the best way for owners, retiring advisors, and successors to understand each other's perspectives. Such discussions can help ensure that the firm's succession plans best support all interested parties, whether that means adhering to the current plan or amending the plan with compromises, which could entail offers of partial equity or decision-making control to succeeding advisors or gradually scaling back the engagement level in firm activities by senior advisors. And if a mutually acceptable plan is not agreed upon, having direct, upfront conversations about the process will better position the succeeding advisor to determine whether to part ways and pursue a new path on their own or with a different firm.

Ultimately, while firm owners and next-gen advisors may have very different opinions on what succession means to them and the timelines that succession plans may follow, allowing all interested parties to clearly communicate their priorities and expectations can help the firm customize a plan that can support everyone's goals, or at least maintain clear communication to ensure that potential successors will be able to decide if the firm's goals align with their own or, if they don't, whether it would make more sense for them to part ways. Because when a workable succession plan is created, it not only helps the firm owner ease into retirement when they are ready to do so, but it also gives the succeeding advisor the opportunity to set realistic expectations around fulfilling their own career goals – potentially furthering the firm's legacy for years to come!

“Legacy IRA” Rollover To A Charitable Gift Annuity: Using This New Tax-Advantaged Opportunity To Help Clients Achieve Charitable And Retirement Goals

August 23, 2023 07:03 am 0 Comments CATEGORY: Taxes

Charitable Gift Annuities (CGAs) have long been a popular way for individuals with charitable intentions to plan their legacies. By contributing a lump sum to a charity in exchange for fixed recurring payments for life (with any leftover funds after the donor's death going to the charity), the individual can ensure that their funds are directed towards a purpose that aligns with their values, while also retaining a steady source of income for the rest of their life. However, the caveat with current CGAs has been that they could only be funded with after-tax dollars before the donor’s death, meaning that if an individual only had tax-deferred funds (e.g., in an IRA or 401(k) plan) to contribute to the Charitable Gift Annuity, they would need to withdraw – and be taxed on – those funds first. Testamentary CGAs, on the other hand, can be established after a donor’s death, funded with IRA or other assets to provide income for another person. But the SECURE 2.0 Act, passed in December 2022, created the ability for individuals over age 70 1/2 to make a one-time Qualified Charitable Distribution (QCD) of up to $50,000 of IRA funds into a CGA, with the amount distributed to the CGA being excludable from the donor's taxable income.

In this guest post, Kathleen Rehl, a semi-retired financial advisor and educator now focusing on her own estate planning considerations, shares her experience with creating her "Legacy IRA" rollover to a Charitable Gift Annuity to support her chosen nonprofits after Congress passed the SECURE 2.0 legislation at the end of 2022.

The potential benefits of the new Legacy IRA rules are threefold. First, they allow donors to enhance their charitable giving legacy and ensure their future charitable intentions are fulfilled. Second, they reduce the donor's tax bill in the year the CGA is created by excluding the amount contributed to the CGA from taxable income. And third, they create a stable lifetime income stream that can be paid to the donor and/or their spouse.

All of which is important during a time when members of the Baby Boomer generation, who have accumulated unprecedented levels of wealth compared to previous generations, are preparing to make decisions on how to balance their intentions for transferring that wealth – whether that be passing it on to the next generation of family members or friends, or providing for causes that are meaningful to them – with their own needs for sustainable retirement income. And while a Legacy IRA may only be one piece of the puzzle (since the $50,000-per-person lifetime limit may only represent a small portion of the assets of many high-net-worth families), it can still serve as a unique and valuable legacy and tax planning tool – and given the minimal expense and hassle of setting up and maintaining the CGA (since the charitable organization typically handles all of the administrative aspects of doing so), there may be no reason for any individual with charitable intentions and lifetime income needs not to use it to the extent that the one-time $50,000 limit allows!

Ultimately, for financial advisors, the Legacy IRA can be one part of a broader toolkit for helping retired clients with values-based, purposeful legacy planning. By understanding the eligibility requirements and rules around the new law and gift annuities in general, and having a 'recipe' that clients can follow for establishing their own Legacy IRAs, advisors can help plant the seeds with their clients around strategic giving (while also differentiating themselves to potential new clients as a go-to resource for estate planning and charitable giving)!

#FA Success Ep 347: When The Firm You Sell To Gets Sold And You Have To Reinvent Yourself, With Cary Carbonaro

August 22, 2023 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 347th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Cary Carbonaro. Cary is the Senior Vice President & Director of Women and Wealth Services for Advisor Capital Management, an independent RIA with offices around the country and headquartered in Ridgewood, New Jersey, that oversees more than $6 billion in assets under management for 1,700 client families.

What's unique about Cary, though, is how she navigated selling her practice to United Capital and after several years of establishing herself in a leadership role, she then had to navigate the sale of United Capital itself to Goldman Sachs, and the complexities and challenges that followed as she found herself in a very different kind of culture that wasn’t aligned to her media-driven approach to advisor marketing.

In this episode, we talk in-depth about how, in 2001, Cary left her Director of Marketing role at Lord Abbett selling mutual funds and in the face of the tech crash realized that mutual fund companies were so cutting their marketing budgets that she may as well just launch her own advisory practice instead, how after years of growing successfully on her own, Cary realized her gift was bringing clients in and that she needed help with scaling her back-office and consequently decided to sell her practice and tuck into United Capital and their support systems, and how Cary dealt with the sudden sale of United Capital to Goldman Sachs that virtually overnight forced her to change the way she’d been marketing herself as an advisor for nearly 20 years because of the new corporate policies of the buyer.

We also talk about how Cary tried to navigate the 2-year non-compete clause in her contract and even offered to buy back her practice and undo the non-compete, how Cary ultimately reached a compromised path with a 6-month non-compete and decided that was good enough to be able to make a transition and not have to totally start over, and how, after the 6-month non-compete period was over, Cary was ultimately able to retain nearly 90% of her and her lead advisor’s clients and decided to move her practice to a new RIA where she could go back to serving her clients as she wished and continue her work in the media that she enjoyed.

And be certain to listen to the end, where Cary shares how she faced a messy divorce while also navigating the 2008 financial crisis and had to move her practice to smaller firm so that she could prevent her husband from seeking retribution and give herself time, how, in the early years of launching her practice, Cary dealt with feelings of inadequacy because she felt she needed to have all the answers to her clients’ questions but over time and by teaching CFP courses herself was able to overcome her confidence issues, and how Cary’s definition of success is evolving as her career grows from ‘just’ increasing the size of the practice to now finding the freedom and time to pursue her passion of speaking, writing, and appearing in the media… with the focus on influencing and changing the financial services industry to create better opportunities for other women to succeed in their careers.

So, whether you’re interested in learning about how, prior to the United Capital sale, Cary’s practice was a diamond tier practice and ranked as one of the best performing practices of the firm, how Cary walked away from 2 $500,000 a year jobs so that she could manage her practice the way she saw fit, or how Cary is working on her second book detailing her challenges with the sale of her firm and her vision for making the industry more female-friendly, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Cary Carbonaro.

How Niches Improve Advisor Marketing Satisfaction And Efficiency

August 21, 2023 07:09 am 0 Comments CATEGORY: Marketing

Many financial advisors start their own firm because of an entrepreneurial itch, a desire to work with a specific type of client, or perhaps because they want to have more control over their work life. But typically, the opportunity to create and implement a marketing strategy is not one of these reasons. In fact, data from the latest Kitces Research study, How Financial Planners Actually Market Their Services, shows that many advisors find marketing to be difficult and not very effective. For instance, out of the 25 marketing tactics reviewed, only 6 of them had a success rate (defined by the acquisition of at least one new client during the past year as a result of the tactic) of at least 70%. In addition, advisors surveyed were largely dissatisfied with the results of their marketing efforts in terms of generating leads, as well as the quality of those prospects. Finally, the study found that in general, advisor marketing tactics are relatively inefficient overall, failing to recoup the costs of the tactic from the first year of revenue generated by new clients.

Nonetheless, one group of advisors reported more marketing success than others: those serving client niches. For instance, niche firms have greater satisfaction with the number of leads received, the ‘fit’ of the prospects with the firm, and the effectiveness of their lead generation strategies when compared to non-niche firms. Further, niche firms reported greater marketing efficiency levels than non-niche firms with respect to most marketing tactics used. In particular, niche firms had significantly higher efficiency scores than non-niche firms when using search engine optimization and drip marketing, two tactics that require relatively little of an advisor’s time to implement. These advantages likely contributed to niche firms’ higher average client growth rate (58%) compared to non-niche firms (26%).

While choosing a niche can seem challenging for firm owners, using a methodical process can help an advisor choose a niche they can serve effectively. First, an advisor can consider the many niche options from which to choose, including professional (e.g., doctors or employees of a certain company), technical (e.g., equity compensation), values-based (e.g., shared religious or political views), and affinity (e.g., frequent travelers) niches. To help narrow down the possibilities, an advisor can consider the types of problems they solve well, any special skill sets they might have (e.g., tax planning or working with blended families), as well as the type of clients they like working with the most. Next, the advisor can decide on the specific services they would want to provide to clients in that niche based on the advisor’s skills and interests, as well as the needs of those in the niche group. Finally, the advisor can create a marketing plan to target that niche, which, as research has shown, is likely to be more successful than marketing to a broader audience.

Ultimately, the key point is that while marketing is a challenge for many advisors, choosing a client niche can make a firm’s marketing efforts more effective and efficient. And while selecting and implementing a niche takes work, research shows that it can pay off not only in better marketing, but also in greater growth for the firm as well!Read More...