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Highlights From The 2024 T3 Advisor Conference

February 19, 2024 07:03 am 0 Comments CATEGORY: Conferences

The 2024 Technology Tools for Today (T3) Advisor Conference, held last month in Las Vegas, Nevada, featured a large gathering of financial advisors and representatives from across the fintech industry. Hosted by Joel Bruckenstein and his team from T3 Consulting, the conference focused heavily on the relationship between financial advice and its accompanying fintech, covering everything from how AI and other tech developments are changing the advisor landscape in unprecedented ways to the importance of stringent cybersecurity measures, tech-stack integrations that actually work together cohesively and seamlessly, and the value of retaining the human essence in a wealth management landscape that is constantly moving forward.

In this guest post, Craig Iskowitz – CEO and founder of Ezra Group, a financial technology consulting firm – highlights this year's conference with his signature Twitter-driven recap, featuring presentations on the compelling paradox of AI; as while AI has become increasingly associated with overcoming human limitations with its efficiency, accuracy, and convenience, its weakness actually lies in its lack of humanity and inability to establish human connections. For example, Snappy Kraken emphasized how delegating tasks to AI tools can increase efficiency beyond what advisors can do on their own, and TradePMR shared their own (surprising) experience that their highly skilled personal concierges were actually AI bots; however, both companies conceded that technology can only go so far without a human relationship acting as the 'engine' for all of these (automated) pieces.

A continual thread through the conference was the ongoing effort to build a truly cohesive tech stack. In the wake of an AdvisorTech boom over the last decade, many advisors have all the tools they need to build truly comprehensive solutions for their clients. However, as Pershing Wove's Ainslie Simmonds points out, 65% of affluent investors are willing to leave their advisors if they do not offer an integrated tech experience – and in fact, having interoperable tech was a key component to growth.

Other major highlights from the T3 Advisor Technology Conference included:

Several speakers, such as Craig Ramsey and Rich Cancro of Advisor Engine, emphasized how processes are quickly changing in the new face of technology, and FP Alpha emphasized that right now presents a better opportunity than ever to reexamine old practices to see what can be simplified, automated, or altered.
At the same time, Morningstar's CEO Kunal Kapoor highlighted that efficiency comes with a greater demand towards personalization, and Orion's new CEO Nataline Wolfsen also spoke of the importance of aligning technology with the human elements of trust, shared values, and personal understanding.
Apex Fintech Solutions noted that the average advisor rings in at a cool 97% retention rate for acquired clients, suggesting that net new assets may provide a clearer lens for growth than the more traditional AUM metric. In the same vein, they also highlighted that hybrid firms (i.e., those that offer both digital robo-advice and human touch) are growing faster than almost everyone else, with 24% of net new cashflows despite the low aggregate number of firms with this business model.
Of course, with digitalization, integration, and automation comes cybersecurity risks. Digital hygiene, encryption security, and good staff training can all be enormous factors in the overall safety of the company, as explained by Patrick Hennessy, Schwab's Director of Business Consulting.

Finally, the annual T3/Inside Information Software Survey, which assesses the software programs used by financial advisors, found that tax planning tools are on the rise – with adoption rates jumping from 30% to 43%. Likewise, while CRM usage has slipped by about 5%, the overall number of advisors who use a CRM still remains at a dominant 92%. And lastly, as data becomes more comprehensive in today's digital landscape, cybersecurity rises in importance – and cybersecurity tool adoption remains on a slow, but steady, rise.

Ultimately, the 2024 T3 Advisor Conference brought together advisors, leaders, vendors, and students from all across the financial advice industry to share insights on threats, changes, observations – and, of course, to examine new opportunities in a constantly shifting fintech landscape. As software providers grow in number and their offerings expand in complexity, automation and cybersecurity will be central themes as client preferences continue to change. Which means that there is plenty of space – and demand – for technology to evolve, continually helping more advisors to be better, and more successful, and also allowing for the definitions of 'better' and 'successful' to grow as our technology options do as well!

Weekend Reading For Financial Planners (February 17-18)

February 16, 2024 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 study from Cerulli Associates indicates a lack of fee transparency represents a significant hurdle for many investors when considering working with a financial advisor. Which suggests that while advisors might be hesitant to publish their fees on their website before being able to meet face-to-face with prospects, doing so (and linking the fees to the value proposition they offer their ideal clients) could help certain consumers overcome their reluctance and start the process to becoming clients!

Also in industry news this week:

While AUM fees remain ubiquitous among fee-only advisors, recent data show that an increasing number leverage multiple fee models to meet different client needs and preferences
While CFP Board has come out firmly in favor of the Department of Labor's proposed Retirement Security Rule, FPA has taken a more cautious approach, expressing concern about the potential compliance costs of the proposal for advisory firms

From there, we have several articles on advisor marketing:

A 5-step process advisors can use to build relationships with Centers Of Influence (COIs) and generate more prospect leads
Why the effective use of lead-generation services typically requires advisors to have plenty of free time to follow up with the leads they receive
Best practices for how advisors can use webinars to generate client leads, from leveraging effective email campaigns to creating near-term follow-up opportunities

We also have a number of articles on spending:

Why the relationship between spending and happiness is not linear, and what this phenomenon means for client spending and life satisfaction
How the differences between being "frugal" and "independent" can call for different advisor recommendations when it seems that clients are spending less than their income and assets allow
Why "Coast FIRE" might be an attractive strategy for clients who want more flexibility during their working years but don't want to stop work completely

We wrap up with 3 final articles, all about reading and writing:

How a daily writing practice can bring a range of personal and business benefits, from greater clarity of thought to building a professional brand
How experimental data suggests that taking notes by hand, rather than typing them out, could lead to more effective learning
The challenge of reading (and finishing) books amid a growing number of distractions and potential solutions to enable greater focus

Enjoy the 'light' reading!

A Proposed Salesperson’s Exemption To The DoL’s Retirement Security Rule?

February 14, 2024 07:01 am 0 Comments CATEGORY: Regulation & Compliance

When an investor is seeking to work with a financial professional, there's a substantial difference in expectations about the nature of the relationship when the professional being consulted is an advisor versus when they're a salesperson. In hiring an advisor, the investor is presumably seeking to put their trust and confidence in someone with their best interests in mind who can advise them on a course of action. Whereas in a sales transaction, the investor is most likely aware that a salesperson's job is simply to sell a product, which puts the onus on the investor (rather than the professional) to evaluate the salesperson's pitch and decide whether or not to act on it.

The difference between an advice and sales relationship isn't necessarily problematic on its own, since some people truly do just want to buy a product from a salesperson, rather than go through the time and cost it takes to be thoroughly advised on the best strategy. However, if an investor is unable to recognize whether they're engaged with an advisor (where they would expect the advice is truly in their best interest) and when they're engaged with a salesperson (specifically intended to sell products), they may be persuaded to take actions that are not truly in their best interests.

As a result of this dynamic, there is a long regulatory history of separating sales and advice, going all the way back to the Investment Advisers Act of 1940, which strictly limited the use of the then-popular "investment counsel" title to be used only by those who were actually in the business of giving investment advice, and forbidding its use by those primarily providing brokerage services. However, by the 1970s, the "investment counsel" term had largely fallen out of use in favor of the more generic (and less regulated) "financial advisor", which grew in popularity as insurance and mutual fund salespeople began to co-opt the title and position themselves as "advisors" while still being both compensated and regulated as salespeople. To this day, slews of professionals from the investment, brokerage, and insurance industries still use the "financial advisor" title without being registered as being in the business of giving investment advice – leaving many investors who hire them confused about how their "advisor" might not actually be an advisor expected to give them advice in their best interests.

Against this backdrop, the U.S. Department of Labor (DoL) has released a new proposed Retirement Security Rule that aims to apply new fiduciary standards to professionals who give investment advice to retirement investors when a relationship of trust and confidence exists between the advisor and the client, which would encompass both registered investment advisers, and insurance agents and brokerage representatives offering advice recommendations as well. But while DoL's proposed rule applies to professionals based on the functions they engage in (e.g., the level of personalization/customization of the advice recommendations), it has also expressed interest (via a Request for Comment on its proposed rule) in how a retirement advice provider's title may or may not create an expectation of trust and confidence. For example, if a professional holds themselves out as a "financial advisor", a prospective retiree who hires them may presume that the professional will provide advice – recommendations that are in their best interest – even if that professional isn't actually obligated to do so.

Arguably, though, the DoL still misses the true significance of the role that advisor titles play. As ultimately, there may be no actual functional difference between the type of questions and the specificity of recommendations made by advisors versus salespeople; instead, the difference between sales and advice is driven by the consumer's expectation of whether they're working with someone in an advice or sales capacity in the first place. Which is first and foremost defined by the way the financial professional titles themselves and markets their services.

As a result, one of the most straightforward ways to re-assert a clearer line for consumers between advice and sales is simply for the DoL to permit insurance agents and brokerage representatives to continue to be salespeople… so long as the professional does not hold themselves out as being a financial advisor or market that they offer financial planning.

Such a "Salesperson's Exemption", which would allow insurance and brokerage salespeople to avoid the DoL's fiduciary obligation in the Retirement Security Rule, would apply to salespersons who (1) avoided holding themselves out as financial advisors or financial planners, (2) avoided marketing that they offer any financial advice or financial planning services, (3) and provided disclosures on all sales presentations or illustrations to the effect that the engagement does not constitute advice and that the consumer should consult an actual financial advisor about the appropriateness of the sales recommendation.

The benefit of such an approach is that it would allow insurance companies and brokerage firms to continue acting in a purely sales function, without meeting the additional regulatory burdens of being a fiduciary advisor. Which would also help the DoL defend against the court challenges it faced with its last fiduciary rule – struck down when the courts agreed that the fiduciary standard should only apply to advisors, and not to salespeople who are not in a "relationship of trust and confidence" with their clients. All of which helps to preserve the regulatory distinction between sales and advice, and also continues to allow retirement investors the opportunity to choose between sales and advice (according to their own needs).

The key point is that even though regulatory bodies have recognized the distinct nature of advice relationships of trust and confidence and applied higher standards of care for such advice relationships in the past, the line between sales and advice has blurred in more recent years. The DoL could help clarify the distinction with a more "truth-in-advertising" approach, by requiring those who market themselves as advisors acting in a position of trust and confidence to retirement investors to be accountable to the fiduciary standards that go along with it, while also providing a path for those who wish to avoid the burdens of fiduciary status to avoid it… by being clear that they really are not advisors, and are simply acting in a sales capacity, so the consumer is clear about the true scope of the relationship.

#FA Success Ep 372: Quadrupling Revenue By Restructuring Your Business Model To Reflect Your Entire Value To Clients, With Melody Townsend

February 13, 2024 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Melody Townsend Podcast Featured Image FAS

Welcome back to the 372nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Melody Townsend. Melody is the president of Townsend Financial Planning, an RIA based in Lexington, KY, that oversees $112 million in assets under management for 160 client households.

What's unique about Melody, though, is how after her first decade in practice, she quadrupled her revenue in the subsequent 2 years by restructuring her business model from standalone hourly engagements and project planning fees to a more holistic wealth management offering that combined investment management and financial planning for a single AUM fee… which both better reflected the full value she was providing clients, and enabled her to truly scale her firm and hire up so it was no longer solely dependent on her alone.

In this episode, we talk in-depth about how although Melody initially built an hourly, fee-only firm for its ability to serve the middle market in Kentucky where she was based, she found that while it provided a lot of flexibility, there were limitations to the growth and scalability the model offered when you're also responsible for all of the back-office tasks in addition to trying to generate enough billable hours, how Melody also realized that the hourly model had led her to undercharge by not billing for all the time she was spending servicing clients and decided to take a big leap to right-size her prices by wrapping them into an AUM fee for those clients she was helping with implementation, and how Melody found despite her fears about losing clients in the face of a fee change that would on average double her client fees, in practice even her clients knew that she was undercharging, to the point that almost every single one stayed and many even consolidated more assets with Melody once she was actually able to manage (and bill on) them.

We also talk about how Melody invested early, at least relative to her revenue and profits, in business coaches and her own employees in order to sustain the service model that would meet her own standards, why Melody decided to hire with a focus on character over technical skills, reasoning that while she could teach paraplanning work, she couldn't teach integrity and work ethic, and now has several house-trained CFPs working in her firm, and how Melody leveraged the lack of Certified Financial Planner professionals available in Kentucky as a method of her own branding and let organizations like NAPFA and FeeOnlyNetwork send prospective clients to her door, rather than spending time in sales that she didn't enjoy anyway.

And be certain to listen to the end, where Melody shares how she struggled initially with delegating because it was hard for her to articulate in words what he just 'knew' in her own brain about how clients should be served, how as Melody has grown her revenue and hired more people, the book "Lead From Any Seat" which advocates that teams treat the boss as a 'customer' of the employees both transformed how she shaped her communication with her team for the better, and empowered her employees to take full accountability for their work, and how Melody's career and business decisions came not as a steady path of growth but a series of epiphanies about her own worth and value led her down new avenues that she had never envisioned when first embarking on entrepreneurship as a 20-something advisor nearly two decades ago.

So whether you're interested in hearing about how Melody calculated her project-based work to make it 1 size fits all (and shortened her onboarding process in the meantime), how Melody remained relentlessly centered on finding her ideal clients, even in the early years, and how Melody uses her firm's core values to filter through both her strategic business and team-building decisions, then we hope you enjoy this episode of the Financial Advisor Success Podcast.

The Importance Of Employee Appreciation (Going Beyond Just Recognition) For Advisory Team Satisfaction And Retention

February 12, 2024 07:02 am 0 Comments CATEGORY: Practice Management

While there is a plethora of ways that financial advisory firm owners can build and run their practices (from service models to specialties to fee structures and beyond), one of the most complex activities shared by many growing firms are those that involve hiring, training, managing, and retaining employees. And with the increasing shift to remote and hybrid work in recent years, these skills have become even more important. The reality is that advisory firms that help their employees thrive in these shifting work models will more likely be the ones to attract and retain top talent. In a world where less than a quarter of all employees are estimated to be actively engaged in their work, there is one simple yet highly effective strategy that can dramatically improve both employee satisfaction and business results.

In this guest post, Paul White, co-author of "The 5 Languages of Appreciation in the Workplace", shares how firm owners can reap tangible benefits by fostering a culture of authentic appreciation, because having employees who feel they are genuinely valued and appreciated will inevitably lead to higher productivity, lower turnover, and higher client (and employee!) satisfaction ratings.

To set the stage, it's essential to understand what workplace appreciation is and how it's materially different from employee recognition. As while recognition programs typically aim to incentivize desired employee behavior (e.g., by public acknowledgment of positive employee actions), they are often 'one-size-fits-all' efforts that may seem impersonal and contrived. In contrast, genuine appreciation is expressed in a way that is personally meaningful to each recipient and focuses on the contributions that individuals make within the organization... even when they aren't top performers. Moreover, unlike recognition programs, appreciation doesn't necessarily take a top-down approach driven by the firm's hierarchical' org chart' but can instead originate (oftentimes preferably) from colleagues as well as superiors.

Genuine appreciation is inherently personal, and not everyone values appreciation in the same way. Accordingly, advisory firms can use a framework to show appreciation based on 5 different 'languages' as discussed in "The 5 Languages of Appreciation In The Workplace" by Gary Chapman and Paul White (based on Gary Chapman's earlier book, "The 5 Love Languages"). For instance, while Words of Affirmation, the most commonly preferred form of appreciation in the workplace, are characterized by positive and encouraging words, Quality Time generally involves meaningful one-on-one time spent with a valued colleague or leader or just simply spending time together in a non-work setting. Acts of Service can involve lending a hand or even dropping off a snack when a colleague is swamped, and Tangible Gifts are personalized offerings that make the receiver feel special. As the 5th language, Appropriate Physical Touch (e.g., a high five, fist bump, or even a literal pat on the back) doesn't often have a foundational role in most work-based relationships, yet using it to communicate encouragement and appreciation can be valued by some employees. It is crucial to emphasize, though, that the acceptability of interactions involving physical touch is always contingent upon the comfort and consent of the person being touched.

Ultimately, the key point is that advisory firms with team members who feel that they are genuinely valued and appreciated are in a much better position to be successful and to provide outstanding service to their clients. Learning how to express authentic appreciation intentionally, in ways that are meaningful to each individual, is not only the right thing to do in and of itself, but will also help create a healthy workplace and improve a wide array of key performance metrics throughout the business!

Weekend Reading For Financial Planners (February 10-11)

February 9, 2024 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 survey sponsored by CFP Board demonstrates the upsides of a career in financial planning, from a median salary of nearly $200,000 to flexible work schedules and a strong sense of purpose among advisors. In addition, related research suggests further opportunities for firms looking to acquire and retain talent, from providing a greater sense of autonomy to building effective service teams.

Also in industry news this week:

A recent study finds that having a defined marketing strategy is a linchpin of marketing success, as advisors with a defined strategy were more likely to have seen an increase in inbound leads during the past 12 months and have more confidence in meeting their practice goals during the coming year than those without one
The number of RIA-focused annuity marketplaces and their sales volume continues to grow as many brokers turn to the RIA channel and commission-free annuity offerings make annuities more attractive to fee-only advisors

From there, we have several articles on advisor marketing:

How creating content that answers the questions of a firm's ideal target client can help it build trust with prospective clients even before meeting with them
How advisors can best leverage client testimonials and reviews, including why video is often the most effective medium to deliver them
How advisors can effectively ask for client referrals without coming off as too 'salesy'

We also have a number of articles on cash flow and spending:

How advisors can help clients better understand the "why" of their spending habits
Why a significant number of younger Americans are suffering from "money dysmorphia" and how advisors can help them see the reality of their finances
An exploration of research-backed methods for generating the most happiness when it comes to spending money, from 'buying' time to delaying consumption

We wrap up with 3 final articles, all about saying "no":

How curating a shorter to-do list can help individuals overcome "planning bias" and get more done on time
Why saying "no" to invitations and opportunities can free up time for one's highest priorities
Experimental findings suggest that people tend to overestimate how upset those offering an invitation will be if the invitee decides to decline it, suggesting that individuals can keep more free time in their schedule without burning bridges with friends and family

Enjoy the 'light' reading!