FP+Careers - Part 33

The Latest In Financial Advisor #FinTech (June 2017)

June 5, 2017 07:01 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the June 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 not-so-surprising news that “robo-advisors” are increasingly pivoting towards offering human advisors and pursuing a more affluent (i.e., not-necessarily-Millennial) clientele, and the somewhat-more-surprising news that one new robo platform – BrightPlan – has decided to enter the marketplace by raising $25M of capital and using it to buy an existing $3.6B life-planning-oriented (and human-advisor-based) independent RIA, raising the question of whether advisor tech companies could become an entirely new buyer category in the world of advisor M&A and whether existing RIAs may actually be a superior way to distribute new technology (rather than trying to compete with them!).

From there, the latest highlights also include:

Envestnet is beginning to reveal how it intends to leverage its Yodlee acquisition, by building out client-facing PFM (Personal Financial Management) solutions that help clients track not only their long-term financial plans, but their shorter-term cash flow and spending as well.
Apex Clearing appears to be making a move into the independent RIA community to compete against Schwab, Fidelity, and TD Ameritrade, leveraging “robo-advisor-for-advisor” software solutions like RobustWealth and AdvisorEngine to reach financial advisors, even as Wealthfront pivots away from building on Apex.
Morningstar appears to be working on its own financial planning software tools, though it’s not yet clear if they’ll be for financial advisors, or it “self-directed” consumer tools offered to retirement plan sponsors.
Following on the heels of popular Social Security software for advisors, a number of providers are now building Medicare planning software solutions for advisors who want to further differentiate their expertise with retirees and justify their value proposition beyond the portfolio alone.

You can view analysis of these announcements and more trends in advisor technology in this month's column, including a fascinating look at why, exactly, performance reporting software for advisors is so expensive (the answer: a lack of quality data and poor data standards in the data feeds from custodians), whether Amazon Alexa may become a new communication channel for financial advisors to reach their clients, and the news that XY Planning Network is running its second annual FinTech competition for advisor technology startups (deadline for those who wish to enter: June 15th).

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]!

#FASuccess Ep 022: Serving Gen X Professionals With A Net-Worth-Plus-Income Retainer Fee Model with Jude Boudreaux

May 30, 2017 07:01 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the twenty-second episode of the Financial Advisor Success podcast.

This week’s guest is Jude Boudreaux. Jude is the founder of Upperline Financial, a financial planning firm in New Orleans that works primarily with Gen X professionals in their 30s and 40s.

What’s fascinating about Jude’s practice is not only that he works with a much younger clientele than the typical financial advisor, but his unique pricing model – an annual retainer fee that’s calculated as 1% of the client’s income, plus half a percent of the client’s net worth. Which makes it feasible for him to work with that younger clientele, and deliver holistic financial planning, even if they don’t have any assets to manage. And thanks to his unique model, that's so well aligned to his target clientele, Jude has managed to grow his practice to capacity, at more than 150 clients and $400,000 of annual revenue, in only 6 years.

In this episode, Jude shares not only the details of his unique business model – including how he handles billing when there's no portfolio to bill from – but also his highly structured process for meeting with clients on a rotating basis three times per year, the kinds of financial planning issues he covers in those meetings to validate his fee structure, and what he did to fill in the income gaps while he was still growing to the point that he could replace his prior salary.

Jude also shares the exact marketing strategy he executed to get his 150 clients – by using blogging, Twitter, and media interviews to get him up to the #1 ranking Google result for "fee only financial planner in New Orleans". (Try the search yourself – you’ll see!) And now thanks to his successful local SEO strategy, all of his prospective local clients find their way to him. Even though, ironically, his own staff are all virtual and not in the New Orleans area!

And be certain to listen to the end, where Jude shares why it is that, even though he's successfully built a solo advisory practice to be very profitable, he's now looking to merge his firm into a larger advisory business, by taking a hard look at his personal strengths and where he wants to focus his energy in the future.

So whether you’ve been wondering how to structure a business model that lets you work with younger clients, or want to better systematize your own financial planning meeting process, or have been curious to hear how digital marketing is done by someone who dominated his local business opportunities, I hope you enjoy this latest episode of the Financial Advisor Success podcast!

Safe Savings Rates With Real-World Wage Increases Over Time

May 24, 2017 07:01 am 2 Comments CATEGORY: Retirement Planning

When financial planners run retirement projections for clients, the most common assumption is to assume some type of constant inflation adjusted earnings growth (i.e., annual cost-of-living adjustments [COLAs]). This may seem reasonable enough, as future earnings are highly variable, and many employers do try and offer cost-of-living adjustments to their employees. So why not just assume that will continue throughout one’s career, at least as a baseline?

However, as it turns out, income growth typically follows some predictable paths that don’t necessarily just align with steady (inflation-adjusted) earnings growth; instead, these paths vary significantly based on the general income profile of an individual. For most, income growth throughout their career will actually exceed mere cost-of-living adjustments, which can add up to a lot of additional income (and savings capabilities) over a multi-decade working career! Further, while real income growth is often experienced, real earnings typically peak at least a decade prior to retirement, which is then followed by a subsequent decline in real earnings for the last 10-20 years of one’s career. Which can actually have a substantial impact on the trajectory of retirement savings itself.

In this guest post, Derek Tharp – our new Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University – analyzes safe savings rates assuming more realistic earnings growth throughout one’s career, finding that traditional assumptions tend to overstate safe savings rates for low earners and understate safe savings rates for higher earners.

For instance, once we account for more realistic “earnings curves” of workers, it becomes clear that the decline in real earnings over the last 10-20 years of one’s career may actually reduce the retirement need – at least if we assume individuals prefer a smooth transition from pre-retirement to post-retirement spending. As a result, conventional assumptions may actually overstate the required savings rates for all but the top 20% of income earners, while understating the need for top earners (who advisors are most likely to be working with!). Additionally, given that most real earnings growth happens in the first decade or two of one’s career, conventional methods may overstate savings need even further for clients in their 40s or 50s (whose lifestyles aren’t likely actually rising at that point).

Another interesting finding is that once Social Security is incorporated with respect to different earnings curves, it’s possible that low savings rates for many Americans may not be as irrational as is often assumed. In fact, for individuals at the 20^th percentile and below (i.e., 1-in-5 Americans), historical safe savings rates may have been as low as 0.3%! And even the median earner would actually “only” need a savings rate of about 6.1%, and earners as high as the 80^th percentile would still have a safe savings rate below 10%! Highlighting not only the importance of Social Security to many Americans, but challenging the notion that low savings rates are an indicator of impending retirement doom for many Americans. In other words, this safe savings rate analysis suggests that, when real-world earnings growth is considered, most retirees really will be on track with relatively “modest” savings rates of 10% or less, when supplementing Social Security benefits.

The bottom line is that it’s crucial to recognize that for most workers, simply assuming steady inflation-adjusted earnings growth throughout the working years is not an accurate reflection of reality for most. And earnings curves do matter, because it impacts both the ability to save, when people can afford to save, and the likely level of their pre-retirement lifestyle costs (which in turn will likely impact the cost of the retirement lifestyle they wish to maintain) Of course, there are a lot of contingencies and unknowns when trying to predict earnings curves for any individual, but the fact remains that assuming constant real inflation-adjusted earnings is actually a very problematic default assumption for accumulators saving towards retirement!

Weekend Reading for Financial Planners (May 13-14)

May 12, 2017 02:57 pm 4 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the article generating the most "buzz" in the world of financial advisors this week: a takedown of the DALBAR behavior gap study by Morningstar's David Blanchett, who, similar to Wade Pfau in recent months, and this blog several years ago, finds that the DALBAR methodology does not accurately measure (amnd substantially overstates) the actual size of the investor behavior gap caused by bad-market-timing investment decisions. (Though Blanchett still affirms that the behavior gap exists, albeit at a far small magnitude than the nearly-600-basis-points that DALBAR suggests). Also in the news this week was a recent social media guidance update from FINRA, in Regulatory Notice 17-18, which should dramatically expand the adoption of social media for registered representatives working under broker-dealer firms.

From there, we have a number of articles about industry trends this week, from a major announcement that Merrill Lynch is stepping back from the "recruiting wars" amongst broker-dealers and instead is going to focus on hiring advisors with 3-8 years of experience and their CFP certification and pay them a stable salary for three years, to the latest M&A activity for RIAs (which hit an all-time high in the first quarter of 2017, but appears to be rotating to "smaller" firms with $100M to $1B being sold), a substantial increase from advisors and their clients in socially responsible investing (with a desire for SRI up from barely 20% to over 40% in just one year!), and a look at the accelerating growth of Vanguard and Schwab's tech-augmented-human advisor services, which at their current pace could siphon off as much as 2% of the aggregate growth of the entire RIA community in 2017.

Other articles on industry trends this week include: an in-depth Barron's profile on Morningstar, its new CEO Kunal Kapoor, and its controversial decision to begin offering nine mutual funds in its Managed Portfolios solution for advisors, despite its history as an independent rater of mutual funds; Bogle's "dire" forecast for the mutual fund industry, that funds shouldn't even bother trying to compete on price (because they won't win), and that at best they should just focus on their core competencies and try to win where they can, or simply enjoy the profits while they can get them until their funds wind down; the parallels between what Vanguard did to mutual funds, and what robo-advisors might do to human advisors, and where the silver lining may be; and a look at how, as more and more advisors become "fiduciaries", there will be a growing awareness that not all fiduciaries are the same, and some simply don't have the competency to execute as fiduciaries... which could even lead to a backlash against the term.

We wrap up with three interesting articles, all around the theme of consumer financial stress and financial advice behaviors: the first looks at how financial literacy programs are not only failing to make a lasting impact when actual outcomes are measured, but could actually cause harm by making people overconfident in their actual financial capabilities, and fail to recognize the impact their circumstances may have on their financial situation; the second looks at the growing base of research on how financial stress of employees impacts the workplace, which appears to be spurring a growing interest in employers to support financial planning and financial wellness programs; and the last is a fascinating look at the latest FINRA financial capability study to try to identify who is more likely to seek out financial advice (or not), and finds that one of the greatest inhibitors to hiring a financial advisor may be the consumer's fear about whether they're hiring a good one (or not)!

Enjoy the "light" reading!

#FASuccess Ep 015: Why Life Planning Is Simply Financial Planning Done Right With George Kinder

April 11, 2017 07:01 am 6 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the fifteenth episode of the Financial Advisor Success podcast!

This week’s guest is George Kinder, who is known to most as the “father” of the life planning – a way of holistically delivering financial planning that focuses on delving into clients’ real goals, beyond just their financial concerns, in an effort to help them use their money to deliver freedom into their lives.

What’s fascinating about George, though, is that he didn’t start out trying to create a movement towards life planning. George was actually a math major at Harvard, who then became a CPA (and earned the Bronze Medal for the third highest score in his entire state on the CPA exam!), and only began to explore the intersections between financial planning and psychology after forming a niche financial advisory practice delivering advanced tax strategies for self-employed psychologists and therapists!

In this episode, George talks about his early career and the inception of life planning itself, how he ultimately transitioned away from and sold his financial planning firm to teach life planning full time, his now-famous three questions that he asks of new clients to get to know them and begin the life planning process, and the five pursuits that most clients articulate in the life planning process… which rarely have anything to do with “traditional” financial planning goals like retirement! Though notably, George doesn’t view life planning as an alternative to financial planning, but simply as “financial planning done right”.

So whether you’ve been curious to learn more about life planning in particular, or are just looking for ideas about a whole new way to approach financial planning (and differentiate yourself in a crowded financial advisor marketplace!), I hope you enjoy this latest episode of the Financial Advisor Success podcast!

#FASuccess Ep 014: Validating Your Advisor Value Proposition And Overcoming Imposter Syndrome With Carl Richards

April 4, 2017 07:01 am 11 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back for the fourteenth episode of the Financial Advisor Success podcast!

This week’s guest is Carl Richards, a financial advisor who has successfully grown and sold his own advisory firm, but to most financial advisors is best known as the creator the famous “Behavior Gap” sketch (of the difference between investment and investor returns), and an industry writer and speaker on how to better communicate with clients about complex financial issues.

Carl has a career that many people would be envious of. He’s worked for top-notch financial planning firms, built his own RIA, written two books, publishes a column for The New York Times, and travels internationally to speak to financial advisors around the world about financial planning. Yet ultimately, like so many of us, Carl still faces his own self-doubts about whether the value he provides is really worth what he charges (despite all evidence to the contrary!), a phenomenon known as the “imposter syndrome” that can threaten anyone’s success.

In this episode, Carl shares his story, from accidentally falling into the securities industry, to building an advisory firm, starting his Behavior Gap platform and getting a regular column in the New York Times, how his speaking career built to the point that he’s now paid $10s of thousands of dollar to give a speech, and what he’s learned about the imposter syndrome, and why many great financial advisors constantly question whether or not they’re providing enough value for their clients given what they pay (despite the fact that our client retention rates suggests the overwhelming majority of clients are happy with what we deliver to them!).

And be certain to listen to the end, where Carl talks about how he sees the future of financial planning changing, to a world where technical competency is just the minimum tables stakes to be a financial advisor, why communication skills will be the real key to success going forward, and his number one tip on what any advisor can/should do to get better at this themselves.

So whether you’re struggling to achieve success because you doubt your own value to clients, or if you’re already successful but still nervous that you may not be providing enough value to keep your clients in the long run… or you’ve simply been curious to hear the story of Carl Richards himself, I hope you enjoy this latest episode of the Financial Advisor Success podcast!

How Do You Know It’s Time To Leave Your Advisory Firm?

March 16, 2017 08:26 am 1 Comment CATEGORY: Personal/Career Development

Finding your first good job as a financial planner can be tough. Not only because it's challenging just to find a job at all, but because it's not always clear up front which firms really do financial planning or not, and which jobs will be real financial planning jobs versus just a sales job. In many cases, the only way to find out is to take the job that's available, make the best of it, and hope it turns into a good long-term career path. Except when it turns out it's really not a good match at all... and then suddenly the challenge is figuring out whether it's time to leave, and whether having a short-term job stint on your resume will hurt your future career chances even more! So what should you do?

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, I discuss how to know it's time to leave your advisory firm to find another opportunity - based on whether the firm was a bit fit philosophically, or just not a good long-term growth opportunity - and best way to handle the situation if you find yourself in it.

First and foremost, though, remember that the best way to fix a problematic situation is not to make a change at all, but try to change the firm from within, rather than just running away from the problem. If you are worried about the investment or planning philosophy, or want to know if there's a better long-term career opportunity, then ask - broach the conversation with the firm owner. But it's important to be tactful in how you do this. If you are critical of your boss or the firm owner, they will likely just defend themselves, because that's human nature. Instead, come up with an actual solution, and offer it by having a "what if" conversation rather than a confrontational "why" conversation. If you come to the table with a proactive solution, most firm owners will actually be happy to work with you, adopt a solution, and get the firm in a better position than it was before!

Similarly, when it comes to career opportunities, if you want a career path, you may need to ask for it! I'm always amazed at how often people complain about having a lack of a career track, when they've never raised the conversation themselves! And realize that for most smaller advisory firms (which is most firms), this may be the first time they've taken someone through a career track, so the reality is they literally don't know what their career path is. Don't just sit back and expect that a perfect career track is going to be waiting for you, but instead, initiate the conversation ask about your opportunities with the firm as it continues to grow! The emphasis on continued growth is important, because both you and the owner want to be in a position of sharing a growing pie, rather than fighting over bigger pieces of a pie that isn't growing. If you find yourself in the latter position - in a firm that just isn't growing at all - the odds of a career track emerging are almost nil.

However, after having the tough conversations, the reality is you may decide that it really is time to leave. Perhaps something unethical is going on and you need to get out immediately. Or maybe the pie just isn't growing and that isn't going to change, so there's simply going to be nothing to share in the future. If that's the case, then what you should do next depends on the situation you are in. If you're really uncomfortable with how the firm operates and they truly aren't doing right by its clients, then get out right away. Life's too short for not doing right by your clients. But if it is "just" a lack of future growth, then realize that you can take your time and make a smart transition. Get your CFP experience (or finish the coursework if necessary!), save up some money for the transition, and take your time to truly do your due diligence on the next firm you work for. If you're checking the job boards and networking through industry associations, you may have a better chance of finding a good fit.

But in either case, understand that ultimately you don't have to worry about being labeled a "job-hopper" – or at least if it only happens one or two times. Just be straightforward about your prior situation, and take ownership for not doing your proper due diligence the first time around. Most advisors will understand that this happens, and will appreciate the attention you are paying this time. But whatever you do, don't make the transition without learning from it! If you go through too many entry-level positions without figuring this out, then ultimately, you may have good reason to worry about being labeled a job-hopper!

#FASuccess Ep 011: How Launching An Advisory Business Can Be Safer Than Working In One with Alan Moore

March 14, 2017 07:00 am 3 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the eleventh episode of the Financial Advisor Success podcast!

My guest this week is Alan Moore. Alan and I co-founded the XY Planning Network in 2014, but the reason I invited him to the podcast has little to do with XYPN itself, and everything to do with his own fascinating path as a financial advisor, business owner, and successful entrepreneur.

Because Alan started out his career as most of us are taught from the days we’re young – to go out and try to find a stable job with a steady income, and move up the ladder over time. Except Alan realized barely 6 months into his first job that it wasn’t going to be the right fit. Only to change to another job… from which he got fired in another 6 months. And so, realizing that perhaps being an employee just wasn’t the right fit, Alan decided to launch his own advisory firm. From scratch. At age 25.

These early experiences led Alan to the counter-intuitive conclusion that perhaps the traditional view of trying to find a job with a steady income is wrong, and that it can actually be more stable (at least in the long run) to build a business from scratch. Because as a business owner, even your best client firing you might only cost you a 2% to 5% of revenue… which is a lot “safer” than relying on a single boss who can take away 100% of your income in a heartbeat by firing you!

In this podcast episode, we talk about Alan’s journey from financial planning college student, to getting involved as a volunteer with NAPFA and its young-advisor group Genesis, to his path from employee to (young) entrepreneur of his own advisory firm, how he later launched a second business (XY Planning Network) as well, and how and why he ultimately made the decision that he couldn’t keep both a B2B and B2C business and would have to wind one down to fully focus on the other.

And be certain to listen to the end, where Alan talks about the rut he got into that almost led him to leave his rapidly-growing business entirely after a particularly bad month, and what it took to turn everything around and re-energize him in the business again.

So if you’re thinking about making the switch from employee to entrepreneur, or perhaps are an advisory firm business owner wondering how to better keep your young entrepreneurial employees, I hope you enjoy this latest episode of the Financial Advisor Success podcast!

Weekend Reading for Financial Planners (Mar 4-5)

March 3, 2017 02:49 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the details of the latest proposal to delay the DoL fiduciary rule by 60 days... which is shorter than the prior rumors that there would be a 180-day delay, and notably, is still only a proposal, that has to go through a public comment period and could take another month to be affirmed (which means a prospective delay in the April 10th applicability date may truly come down to the wire!).

Also in the news this week were a number of additional big announcements, including: a pricing war that erupted between Fidelity, Schwab, and TD Ameritrade, with each firm "voluntarily" imposing upon itself a 29%+ price cut in the cost to execute stock and ETF trades (down to $4.95 - $6.95 per trade); new guidance from the SEC on Standing Letters of Authorization (SLOA) and when they do and do not trigger custody or surprise audit requirements; an indication from the SEC that it may get more aggressive on trying to roll back the Accredited Investor requirements for private placements (kicking off a debate about whether limiting access to private placements is "unfair" to less affluent consumers who want to take some investment risks, or whether the bar to determine "financial sophistication" to invest in such opportunities should actually be higher); and a look at how the IRS is shifting its audit resources to increasingly focus on those with ultra-high incomes (e.g., $1,000,000+), in addition to doing far more correspondence-mail-based "lite audits" to ask for proof substantiating questionable line-item credits or deductions.

From there, we have a few more technical articles on financial planning topics, from a look at using Funded Ratios to evaluate retirement readiness, to how today's low-return environment can drastically increase the amount of savings prospective retirees need (or how much accumulators must save to get there), the important differences between arithmetic and geometric means (and how to calculate them), and new IRS guidance to 401(k) plans on hardship withdrawals that some fear will make it even easier for people to take advantage of the rules by simply being able to "self-attest" that they really had a hardship (and gamble that they won't be audited later to prove otherwise).

We wrap up with three interesting articles about supporting the success of younger financial advisors, including: ways to grow the financial planning talent pool, given that even with its recent growth, only about 6% of all four-year degree-granting institutions have a CFP Board registered program; career path advice for young financial planners trying to figure out how to put the right foot forward and get ahead (even while still a student); and a look at how just as financial success entails making investments for your future, advancing your financial planning career involves making investments into yourself, from advancing your formal and informal education (from CFP studies to post-CFP designations to reading books and industry news) to being certain that your own financial house is in order (both to ensure that you "practice what you preach" as a financial advisor, and because your personal financial stability is important if you want the flexibility to make job changes or someday launch your own advisory firm!).

Enjoy the "light" reading!

#FASuccess Ep 008: David Grau On Maximizing The Valuation Of A Financial Advisor’s Book, Practice, Or Business

February 21, 2017 07:00 am 3 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back for the eighth episode of the Financial Advisor Success podcast!

This week’s guest is David Grau Sr. David is not a financial advisor himself, but over the past 20 years his business, FP Transitions, has facilitated the sale of nearly 1,500 advisory firms, and valued almost 9,000 of them. Which means David brings an incredibly unique perspective to the evolution of buying and selling independent advisory firms, having had a front-row seat over the past two decades.

In this podcast episode, David shares the four different types of advisor ownership structures – books, practices, businesses, and firms – what characterizes each, how they’re typically valued, and what kinds of acquirers are interested in one type versus another. We also explore how to grow ownership from one stage to the next, and the classic pitfalls along the way – for instance, why the industry-standard revenue-based compensation is actually prohibitive of transforming a practice into a true business.

You’ll also hear about how advisory firm deals are typically structured today (and how it’s changed from 10 and 20 years ago), valuation trends with the looming seller wave of Baby Boomer advisors, the best way to find the right prospective buyer if you’re looking to sell now (or soon), and how the growing availability of bank financing is changing the way advisory firms are bought, sold, and valued.

And be certain to listen to the end, where David talks about why most advisors should be very wary of relying on their broker-dealer or custodian platforms to facilitate a sale, and how to spot the “predatory buyers” that are often lurking within those platforms.

So whether you’re a financial advisor getting ready to sell your advisory firm, just thinking about how to maximize the value for the future, or are a newer advisor who wants perspective on the dynamics of buying into an advisory firm, I hope you enjoy this latest episode of the Financial Advisor Success podcast!