Nerd's Eye View blog

Outsourcing (Parts Of) The Financial Plan Preparation Process To Boost Solo Advisor Capacity

September 11, 2023 07:02 am 0 Comments CATEGORY: Practice Management

When a financial advisory firm owner first starts their business, much of their time is spent on finding clients that they can serve. But as they (hopefully) onboard more clients and get busier with servicing those clients, they will also find that they eventually start to run short on time. Because in addition to providing ongoing services (e.g., annual plan reviews) to their current clients, they will continue to prospect and onboard new clients as well. And at some point, they might find they hit a 'capacity wall' where they no longer have the resources to service new clients (often once they reach 30-40 clients) and where their wellbeing starts to suffer because of the time demands of a growing client base that they can no longer manage without recruiting additional help or outsourcing financial plan preparation.

One potential solution for advisors nearing such a capacity wall is to hire a full-time employee to take on some of the tasks that are eating up the advisor's time (e.g., a client service associate to handle various administrative and client communication tasks, or a paraplanner or associate advisor to work on more planning-centric issues such as building out drafts of financial plans). However, some advisors might not be ready to take on the burden of hiring an employee (from the time spent recruiting and managing the hire to the dollar cost of providing a salary and benefits). For these advisors, an alternative approach would be to outsource the tasks they want to remove from their plates.

Looking at the financial plan development process specifically, a variety of outsourcing providers are available that can perform the range of required tasks, from data entry to scenario modeling to the creation of plan deliverables. Given that most advisors probably won't want to outsource the entire plan development process, they can take a methodical approach to identify the tasks that they do not enjoy and/or that take up too much of their time (i.e., creating a "Stop Doing" list) and then review the range of outsourcing partners, assessing their core proficiencies, fee models, rates, and company structures, to find the best fit for their work needs and budget.

Ultimately, the key point is that because solo firm owners who approach their capacity walls can become overwhelmed with the wide range of responsibilities on their plate, finding ways to outsource certain financial planning tasks can help free up time and help them avoid hitting their capacity wall in the first place! And while some advisors might choose to make a full-time hire to handle items from their "Stop Doing" list, others who do not feel ready to do so (or simply prefer not to bring on full-time employees) can consider outsourced planning providers as an alternate solution. And while choosing this option does involve time and monetary costs, doing so could pay worthwhile dividends – not only for the firm's growth and profitability but also for the advisor's overall wellbeing!

Weekend Reading For Financial Planners (September 9-10)

September 8, 2023 01:01 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the SEC this week issued a risk alert outlining how it selects firms to examine, the areas it focuses on during exams, and how it chooses which firm documents to request, details that could ultimately help firms be better prepared for their next exam and make it a shorter, less painful process!

Also in industry news this week:

Changes to CFP Board’s procedural rules went into effect September 1 and are intended to make the disciplinary process more efficient for respondents as well as CFP Board staff, and to expand the CFP Board’s ability to pursue more complaints against CFP professionals
A NASAA model rule follows in the footsteps of FINRA and CFP Board in extending the amount of time advisors can leave their jobs without having to retake qualification exams

From there, we have several articles on advisor marketing:

3 behavioral science principles advisors can put into practice to attract more clients
How advisors can build understanding and trust with their clients to foster long-term relationships
How advisors can tactfully address the behavioral and emotional challenges prospects and clients face when it comes to money

We also have a number of articles on investment planning:

A survey indicates that many advisors currently using alternative investments with clients are looking to increase these allocations to further boost portfolio diversification
While clients might be tempted to move assets from equities to cash amidst the higher interest rate environment, doing so could limit their progress toward long-term financial goals
How the new interest rate environment presents an opportunity for advisors to reevaluate their clients’ fixed income allocations

We wrap up with three final articles, all about economic trends:

How suburbs have experienced a renaissance that started well before the pandemic
Why poverty persists in the United States and what might be done to fix the problem
How a pandemic-era tax break has led to a booming business of affiliate marketers targeting small businesses

Enjoy the ‘light’ reading!

Kitces & Carl Ep 120: Is It Really Harder To Scale A Small RIA Today Or Are Firms Just Navigating The Growth Treadmill

September 7, 2023 07:03 am 0 Comments CATEGORY: Kitces & Carl Podcast

A recent McKinsey report surveying growth in the wealth management industry predicted that the struggles of small RIA firms would increase as larger firms continue to grow and overshadow the industry... again. Although the messaging that smaller RIAs must scale to survive has been offered many times before over the past few decades, many smaller lifestyle firms and solo RIA practices have thrived in their preference to stay small. Yet, despite that many smaller firms have enjoyed success, scaling the business remain to be challenging prospects for those aiming to grow.

In our 120th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges that small to mid-size RIAs face when trying to scale and grow and how the pressures of competing with larger firms can affect those endeavors.

Even when smaller RIAs didn’t have access to many of the resources that help advisory firms operate and grow decades ago, they were still successful because many of them learned how to leverage their relevance by intimately and impactfully understanding and addressing their clients' unique financial challenges. And for many firms, this specificity and relevance has been amplified by homing in on a particular client niche, allowing them to focus on very specific types of problems that their clients face. Yet, while cultivating impactful relationships with clients has always been a powerful means of maintaining a firm's relevance and success, many business owners are challenged with growing their firm, even with the boon of abundant technology and platform solutions available today that make it easier than ever before for small firms and solo advisors to be successful.

As while a business grows, there are more employees, clients, and operational logistics that come with growth that the firm must manage. And as these elements of growing a firm increase, problems also increase, and more solutions are inevitably needed to solve for those problems. Some firm owners believe the solution to address these problems is to add resources and grow further until they reach some attainable point they imagine where all their problems will become manageable and their growth can be capped, allowing them finally to maintain their firm at a comfortable equilibrium level. The reality is, though, that as a firm continues to grow, new problems will always arise and it is very rare for a firm to address with growth, to the extent that at some point they no longer need to grow! Which suggests that identifying a firm's expectations for success is what's most critical, as a firm who wants to stay small needs to define what success means to them in terms other than growth – whether that means they earn more revenue per client, develop a more focused niche, or enjoy a shorter workweek.

Ultimately, the key point is that despite surveys that may foreshadow the demise of the small lifestyle practice, small (and mid-size) RIAs are not going away anytime soon. Small firms who want to stay small can increase their success by finding more impactful and/or efficient ways to remain relevant to their clientele and provide meaningful financial planning services. And smaller firms who truly want to grow have more options than ever before that will help them succeed – from choosing the right platform, merging their business, or acquiring other businesses to help them grow and scale more efficiently and effectively. In the end, understanding which path to success a firm owner wants to pursue can help them decide whether scaling for growth is really the solution that will give them the best options for solving the issues they face today, or whether they need to remove themselves from the constant cycle of growth objectives and identify the real objectives that represent a successful future for the firm!

How Advisors Can Help (Not-So HNW) Clients Maximize Asset Protection By Assessing Strategies, Tools, And Education

September 6, 2023 07:02 am 0 Comments CATEGORY: Estate Planning

Financial advisory clients are routinely concerned about lurking threats to their hard-earned wealth in the form of a large unforeseen judgment on a liability claim. While asset protection is a popular planning topic for High-Net-Worth (HNW) and ultra-high-net-worth clients, those who are not HNW are susceptible to the same threats to wealth. However, while some protection options come with a high cost (that might not be practical for non-HNW clients), asset protection can come in many forms, some of which do not involve excessive fees or complexity. Which means that by taking into account a client's net worth, realistic liability risks, and level of sophistication, advisors can help assess what types of strategies may be appropriate for the client to explore.

Notably, certain client assets have built-in creditor protection without the use of (often expensive) products or tools. For instance, qualified plan assets (e.g., 401(k) and 403(b) plans) offer purportedly unlimited creditor protection for plan participants, meaning that if an individual were to be sued or file for Federal bankruptcy protection, balances in these accounts would not be at risk. However, these benefits do not automatically extend to other types of retirement accounts (such as IRAs), the protection for which varies by state. Other sources of (often) built-in protection include homestead protection for a primary residence (some exemption is offered by most states, though not always automatically in place) and the benefits of joint account ownership (e.g., tenancy by the entireties and community property).

For other assets, insurance can represent the first line of defense against liability for a client, with other tools to fill in the remaining gaps, insulate assets from each other, and protect against any judgments that exceed coverage limits. For instance, an umbrella insurance policy can be an effective way to protect against significant personal liability claims in excess of any existing coverage the client possesses. Beyond insurance, advisors and their clients can also consider options such as the use of corporate entities such as Limited Liability Companies (LLCs) for business interests, and estate tax planning tools such as Spousal Lifetime Access Trusts (SLATs) that can offer both estate planning and asset protection benefits for married couples.

In addition to helping clients identify which assets might already have creditor protection and selecting the tools and products that could help protect other assets, advisors can play an important role in ensuring that asset protection plans do not run afoul of the law or are not subject to reversal. For instance, because most states have adopted the Uniform Fraudulent Transfers Act (UFTA), any transfers made less than 4 years prior to a creditor claim in those states may be reversed, which means that if a client gives something away (or transfers it for less than fair market value) with the intent to 'outsmart' creditors by transferring or hiding assets, then a judge can order the transfer undone and the asset returned to be used to cover the creditor claim (assuming the claim is made less than 4 years after the transfer).

Ultimately, the key point is that financial advisors can play an important role in helping their clients protect their assets, both in terms of educating clients on the protections they currently have and the options available to protect other assets, as well as in helping them avoid pitfalls that could put their asset protection plan at risk. Which means that knowing how to use the pantheon of strategies and understanding existing laws can help an advisor provide clients with the highest and best asset protection for the peace of mind their clients seek!

#FA Success Ep 349: Building The Marketing System Around Your Advisor Content To Get Real Marketing Results, With Olivia Luper

September 5, 2023 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 349th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Olivia Luper. Olivia is the Founder of Lexicon Advisor Marketing, a virtual outsourced digital marketing company that specializes in working with financial advisors to generate a steady flow of prospects.

What's unique about Olivia, though, is how she started out as a ghostwriter creating content for financial advisors and their blogs, but saw first-hand that great content alone doesn't generate prospects if there isn't more of a marketing system around it… so she expanded her firm to begin offering a full suite of outsourced marketing services to make the content actually generate results, from building lead magnets and mailing lists, to running social media ads to grow the list further, to writing the emails that get readers to actually schedule a first meeting.

In this episode, we talk in-depth about how Olivia has developed a 3-step process to building a marketing strategy for her advisor clients by focusing first and foremost on clarifying the advisor's message and vision for the firm, crafting an execution plan for top to bottom marketing funnel, and then if advisors don't want to do it themselves, providing ongoing implementation of the strategy, how Olivia has found success for her advisor clients using social media – even paid social media ads – not by trying to get clients directly but simply getting them to the advisor's website to collect an email address that will be used to turn them into a warmer lead over time, and how Olivia warms up those new email contacts with a welcome email sequence of 7 emails over the span of their first month that is structured to not only engage with prospects, but to help build trust and nurture the relationship with the advisor to increase the likelihood of the prospect becoming a client in the future.

We also talk about how, after having her son and just finishing her Master's degree in English, Olivia found herself between careers and was recommended by her mother-in-law (who also works in the financial advisor space) to try specializing in financial advisors because she saw the need for Olivia's content marketing expertise in the financial services industry, how Olivia experienced some frustration early in her advisor work because she was good at creating content for advisors and getting it out there but realized that advisors didn't know how to draw prospects to it to sustainably scale their growth, and why Olivia believes that most advisors are too timid about communicating the value of what they can provide to their prospects and that the key to better marketing success is about being more willing to simply share stories about how the advisor has helped other clients in similar situations.

And be certain to listen to the end, where Olivia shares how, while she was growing her business, she had a moment of reckoning for herself when she realized that she was employing marketing scripts that were too 'salesy' and focused on maximizing revenue and revamped her own marketing process to better align with how advisors aim to help their own clients in the first place, why Olivia believes that younger, newer advisors can find build more successful careers by being self-aware to find the types of clients they want to work with most and becoming increasingly well versed on the financial issues those specific people face, and why Olivia now feels fulfilled in her career as she can dive deep into her passion of helping advisors get unstuck and find the marketing messages that feel truly authentic to them so that they can continue to find more of their ideal clients and grow their firms, too.

So, whether you're interested in learning about why Olivia takes the time to learn about her advisor clients' vision and goals for their companies to make sure their marketing strategy is in alignment and can really help them grow, how Olivia structures each of the 7 emails in her welcome email sequence, or how Olivia develops marketing funnels to connect with warmer leads, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Olivia Luper.

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)!