Nerd's Eye View blog

Changes To Student Loan Planning With The New SAVE Income-Driven Repayment (IDR) Plan

July 12, 2023 07:03 am 0 Comments CATEGORY: Debt & Liabilities

Last year, the Biden Administration announced a sweeping package of student loan relief programs intended to ease the pressure on borrowers affected by the skyrocketing student debt of recent years. The two key pillars of the administration's package were a proposed one-time cancellation of up to $10,000 of Federal student debt per borrower, and a new Income-Driven Repayment (IDR) plan featuring much more borrower-friendly terms than previously existing IDR plans. Fast forward to this summer, and the U.S. Supreme Court has struck down the loan forgiveness portion of the administration's plan. However, the new IDR plan (named the Saving on A Valuable Education, or SAVE Plan) is still moving forward, and in response to the Supreme Court's decision, the Biden administration has released its final regulations regarding the new repayment plan.

In this post, Kitces Senior Financial Planning Nerd Ben Henry-Moreland explains the new SAVE Plan's features, how it changes the student loan planning landscape for new and existing borrowers, and what financial advisors can do to help clients with student loans prepare in light of the upcoming end of the current student loan payment pause – which has been in effect since March of 2020 – on August 31, 2023.

The main feature of the new SAVE Plan (which will replace the existing REPAYE plan in the IDR plan lineup) is that it will reduce the monthly student loan payments for many borrowers by decreasing the required payment for loans taken out for undergraduate education from 10% of a borrower's discretionary income (for those on IBR, PAYE, or REPAYE repayment plans) to 5%, while also adjusting the calculation for discretionary income to lower it for most borrowers. As a result, undergraduate loan borrowers will see their payments slashed by more than half of what they would have been under other plans, while graduate loan borrowers will also have a smaller but still significant reduction in their payments.

Additionally, the SAVE Plan fixes several issues that existed in other repayment plan options by allowing married couples who file as Married Filing Separately to exclude their spouse's income from their monthly loan payment calculation (which can significantly reduce the payment amount for borrowers whose spouses earn higher incomes) and fully subsidizing any loan interest that isn't covered by a borrower's monthly payment (ensuring that loans won't negatively amortize for borrowers on the SAVE Plan).

Borrowers on the SAVE Plan will also have expanded options for loan forgiveness under the new rules, where those whose loans originally totaled no more than $12,000 will now be eligible for forgiveness after 10 years of monthly payments (compared to 20–25 years under other IDR options). Additionally, they will be able to get credit for forgiveness during months where they didn't make payments due to a range of deferment or forbearance periods, as well as for payments made on loans that were consolidated (which previously reset the clock on forgiveness and required the borrower to make another 20 –25 years of payments to be eligible for forgiveness).

One other effect of the SAVE Plan and other new repayment plan regulations announced by the Department of Education will be to reduce the number of IDR plans that a borrower can choose from since, after the new rules' implementation on July 1, 2024, several of the other plans will be either limited or closed off entirely to new enrollees. However, there are still plenty of planning opportunities around student loans – including which of the remaining IDR options to choose from, when to recertify income, and whether to file as Married Filing Separately in order to exclude spousal income.

Ultimately, with student loan planning being effectively a new part of many clients' financial planning situations (since the 3 1/2-year pause in required payments made it easy to forget what life with student loan payments was like), now is an opportunity for advisors to help clients re-navigate the thicket of potential IDR options and provide some clarity on a path forward. Because while it was always certain that payments would resume again someday, it was never certain until now just when and how that would take shape – but with the resumption of payments coming in October, now is the time to make sure the transition goes as smoothly as possible!

#FA Success Ep 341: Bolstering The Quality Of Advice By Deliberately Rotating Advisors For Each Client, With Thor McIlrath

July 11, 2023 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 341st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Thor McIlrath. Thor is the Owner of McIlrath & Eck, an independent RIA based in Arlington, Washington, that oversees more than $610 million in assets under management for 970 client households.

What's unique about Thor, though, is how he has structured his firm so that clients rotate through different advisors at the firm each time they come in for a meeting, eschewing the traditional industry approach of trying to help clients form a deep relationship with one individual advisor and instead intentionally creating an environment where clients get advice from multiple different advisors about their situation over time.

In this episode, we talk in-depth about why Thor was inspired to create a rotating advisor structure because he found that in other professional services like medical teams that implement a similar structure, advisors shared details and in-depth knowledge of each of the firm’s clients, which creates a team environment where the client benefits from differing expert perspectives and increased oversight (and it also decreases the likelihood that clients will follow if an advisor should leave the firm), how Thor first rolled out his rotating-advisor approach (which wasn’t the way the firm operated originally) and despite his trepidation a clear explanation of the benefits of the approach meant that only about 20% of McIlrath & Eck’s clients have been adamant about continue to work with a singular advisor at the firm, and the meeting notes template that Thor implemented for his advisors to centralize their notes and client information to keep everyone up to date as clients rotate.

We also talk about why and how Thor built a 6-hour adult education class on retirement at a local community college as a way to both give back to the community but also drive a steady growth of dozens of new clients every year, how Thor tracks the success of his adult education classes and finds that about 70% of the students from his classes on average will schedule a meeting with the firm (and 70% of those would ultimately become an actual client), and how while Thor initially worked from a third-party template of a presentation he bought he has over time customized his classes by simply taking the key parts of the CFP curriculum that he believes pre-retirees need to hear the most and teaching it to them in a way that fits how Thor likes to explain the concepts.

And be certain to listen to the end, where Thor shares how he is happy to be the rainmaker so that his advisors can focus solely on providing the best service for their clients and then when hiring advisors focuses on qualities like compassion, empathy, and other traits that go beyond how many clients they can produce for the firm, why Thor believes that it is important to be wary of accepting just anyone as a client because not everyone will be a good fit and he found that he could cultivate more loyalty from his advisors by showing that he was willing to let go of bad clients to maintain a positive work environment, and why Thor feels that younger, newer advisors should strive to achieve their CFP designation and then can make a choice to either go get their own clients, or simply look to find another advisor who is good at getting clients and work closely with them instead.

So, whether you’re interested in learning about how Thor didn’t have intentions to teach classes but quickly fell in love with teaching after seeing how eager his students were to learn, how, through his passion for flying airplanes, Thor has found the systematic process of using checklists as a helpful tool and was inspired to utilize checklists in his own firm to ensure the needs of all his clients are met, or how Thor believes in a “work hard, play hard” philosophy and structures more frequent meeting cadences in the winter so that his employees can enjoy more time off and half-days on Fridays in the summer, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Thor McIlrath.

From Unprofitable To $115M AUM: Reinventing A 2nd Generation Advisory Business By Finding The Right Niche

July 10, 2023 07:01 am 0 Comments CATEGORY: Practice Management

As owners of financial planning firms approach retirement, some may decide to sell to an external buyer, while others may plan for an internal succession. Sometimes, this succession plan can include the owner's child, providing an opportunity to keep the business in the family. At the same time, the business strategies that worked for the original owner might not be suitable or as successful for their successor, which can force the 2nd-generation owner to take a different path to ensure the firm thrives into the future.

In this guest post, Jason Siperstein, President and Wealth Advisor at Eliot Rose Wealth Management, outlines the range of (often unsuccessful) marketing tactics he tried in an effort to boost business after taking over his father's investment management firm, and the pivot he made to provide comprehensive financial planning services to a niche clientele that has ultimately turned around the fortunes of his business for the better.

Gary Siperstein, Jason's father, had built a successful investment management firm exclusively focused on managing portfolios of small-cap value stocks. But as market trends changed (with the performance of this asset class falling behind large-cap stocks during the 2010s) and clients entered retirement (often consolidating their investment management with 1 advisor), Eliot Rose started losing clients, eventually becoming unprofitable in 2016, the year Jason became president of the firm. To stem the outflow of clients, the firm tried a number of marketing strategies – from creating an off-brand Facebook page, to using print advertisements, and to buying paid referral services – most of which were unsuccessful. With revenue in a bad place, Jason found ways to cut costs liberally in order to stay afloat, saving the company approximately $200,000 annually by streamlining expenses from technology to salaries (including his own and that of his firm's 2 long-time employees).

Jason's next move was to shift the firm away from pure investment management by incorporating comprehensive financial planning for his clients. The firm first implemented an $85/month program for young professionals; this brought in new clients but did not generate revenue commensurate with the time required to service them. Jason then pivoted to offering financial planning services for those nearing or entering retirement, which required the firm to retrain its staff on the ins and outs of retirement planning. This move was more successful, and as prospects started to come in, the firm refined their ideal target client further to individuals within 12 months of retirement, who wanted planning and investment management, and had investible assets greater than $1 million.

Like other firms, the onset of the pandemic led the Rhode Island-based firm to shift to virtual operations, which opened the door to clients from other parts of the country, finding their way through client referrals and internet searches, and even from national publications featuring Jason's content. With more confidence, the firm increased its planning fee incrementally over a 3-year period from $1,500 to $5,400. The firm is now getting more clients that fit their niche (with 1-2 'ideal' prospects each month) and has increased its AUM from $55 million in 2016 to $115 million today.

Ultimately, the key point is that it is sometimes necessary to reinvent a business in order to thrive as time goes by. In Jason's case, this meant being open to experimenting and making changes, staying tenacious and holding on to his sense of humor throughout challenging times, finding the right niche, and focusing on serving his firm's ideal target client, which has turned a once-struggling practice into a thriving business!

Weekend Reading For Financial Planners (July 8-9)

July 7, 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 recent survey data indicate that advisors are more satisfied and productive when they have more time to spend with their clients and when those clients fit within their ideal client profile, in terms of needs, specialties, or engagement levels. Which suggests that advisor wellbeing could potentially be improved not only by automating or outsourcing administrative tasks, but also by adjusting their client rosters to better match their ideal client type.

Also in industry news this week:

A recent survey indicates that a strong majority of financial advisory clients have maintained their trust in their advisors despite the investment market setbacks experienced last year
A report from the SEC shows that a majority RIAs have mandatory arbitration clauses in their client agreements, a practice that has come under fire from some consumer groups

From there, we have several articles on RIA mergers and acquisitions:

A study has found that while RIA M&A activity has been hot during the past 3 years, many firms have walked away from deals, often due to misaligned valuation expectations between buyers and sellers
What RIAs contemplating an acquisition can do to make sure they get their first deal ‘right’
The options for firms considering whether and how to adjust fees for clients acquired through an acquisition

We also have a number of articles on tax planning:

How IRMAA surcharges, while a nuisance, tend to represent a relatively small percentage of a retiree’s income
The IRS is warning wealthy taxpayers about scams involving CRATs and monetized installment sales
How advisors can help clients take advantage of the 0% long-term capital gains tax bracket

We wrap up with 3 final articles, all about overcoming mental obstacles:

The psychological phenomena that help explain why individuals tend to think that the world is worse off today than it was in the past
Why self-judgment can contribute to burnout and how to overcome this tendency
Why it can be easy to fall into a funk when pursuing a goal and how to get out of it

Enjoy the ‘light’ reading!

Why International Diversification Is Still The Prudent Strategy (While Keeping Behavioral Biases, Risks, And Results In A Healthy Perspective)

July 5, 2023 07:03 am 0 Comments CATEGORY: Investments

As the U.S. stock market has, on average, outperformed international equities over the last 15 years since emerging from the Great Recession of 2008, many investors argue that international diversification is a poor allocation of dollars that would otherwise be earning more in the U.S. market. The outperformance of U.S. stocks has led to the favoritism of ‘local’ investments over international ones through behavioral biases (e.g., recency bias and the tendency to confuse the familiar with the safe) that have swayed investors (and some advisors) away from international diversification entirely. However, despite recent market trends, there is a legitimate case to be made for international diversification – starting with the basic tenet of investing that past performance does not promise future returns.

In this guest post, Larry Swedroe, head of financial and economic research at Buckingham Strategic Wealth, discusses why many investors tend to fall prey to recency bias, and explains why global diversification – and keeping short- and long-term results in the right perspective – remains a prudent strategy.

One common argument made by investors who refrain from global diversification is that, during systemic financial crises, everything does poorly, leading them to question the protection that international diversification offers during large market declines. While research may support this argument – that worst-case real returns for individual countries do tend to correspond with severe declines across all countries globally – the trend generally holds true only for the short term and the similarities in market behavior for countries around the globe tend to deteriorate over the long-term, as different countries naturally recover at different rates. But because no one can be sure of when and where these recoveries will happen, investors who are willing to spread the risk of slightly lower returns from globally diversified portfolios stand to yield the rewards of having an edge in the natural cycle of global markets in the aggregate.

Contrary to the view that global diversification may offer little protection from market declines, it is especially salient in cases of a worldwide recession – while the average individual country’s returns after such an event tend to stay depressed, global portfolios go on to eventually recover. In other words, while global diversification may not necessarily provide protection from the initial crash, it does create the potential for a significantly faster recovery. And this behavior tends to be more pronounced with longer time horizons – which are ultimately more relevant for investors with long-term wealth goals.

In addition to overlooking global long-term recovery patterns, investors often fail to consider the important role that valuation changes play in investment returns. Despite the caveat that “past performance is no guarantee of future results”, the patterns of historic past earnings data can offer insight into how a company is valued, which can influence the performance of its shareholders’ equity. For example, a strong case has been made for the predictive value of the CAPE 10, a price-to-earnings metric designed to assess relative market valuation, which is especially insightful when it comes to long-term returns. As while investment returns can be driven by underlying economic performance, such as through growth in earnings, they can also be driven by changes in valuations. And even though timing markets based on valuations in the short-term has not proven to be a successful strategy, the CAPE 10 has been positioned as a useful predictor of long-term future returns. Given the current (as of March 2023) economic positions for the U.S. CAPE (at 3.4%) and the EAFE CAPE 10 (5.6%), unless these values change, investors can reasonably estimate EAFE markets to outperform the S&P 500 by 2.2% annually.

Ultimately, the key point is that when evaluating for diversification, many investors can be prone to behavioral biases that preclude them from maintaining a well-diversified risk-appropriate portfolio that relies on a mix of U.S. and global investments. But by helping clients develop a clear understanding of the actual risks of diversification and a healthy perspective of historical market performance, advisors can prepare their clients to stay disciplined and focused on long-term results, ending out as both more informed and more insulated against inevitable market dips!

#FA Success Ep 340: Operating Agreement As Pre-Nup: Splitting Away From Ensemble Partnership To Launch Your Own Firm, With Melissa Joy

July 4, 2023 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 340th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Melissa Joy. Melissa is the Founder of Pearl Planning, an independent RIA based in Dexter, Michigan, that oversees more than $175 million in assets under management for 251 client households.

What's unique about Melissa, though, is how she originally built her career following a path of becoming a partner in a large ensemble firm, but when she finally got the opportunity to make partner she still had an external lawyer review the partnership documents and the company’s operating agreement like a prenup – hoping for the best and that it would be a relationship for life, but ensuring there was clear documentation of what would happen if the relationship didn’t work out in the long run – which proved to be important as ultimately she and the business did grow apart in their vision for the future, and the legal work Melissa did upfront allowed her a pathway to be able to start over again when it became clear that she and the firm needed to part ways.

In this episode, we talk in-depth about how, while Melissa was being considered for partnership at her former firm, she decided to have outside counsel review the firm’s operating agreement (with its provisions and limitations about what happens if the partnership were to be dissolved) so she could be clear on what that would mean for her if she ever had to leave the practice, why even though Melissa began her career in operations and didn’t intend on changing roles, she was inspired to acquire her CFP marks because of advice that her mentor gave her that she could advance her career even further and bring value to the firm if she also brought in assets and had her own clients, and how despite having a 30% share of her former firm as a partner, Melissa decided to leave and launch her own business because she recognized that she enjoyed working on the development and growth of a business but her current firm was reaching a mature stage where major growth and rapid expansion was no longer the main focus.

We also talk about how Melissa set up her firm as a DBA under the firm of her close advisor friend so that she could have support and the time to focus on business development instead of working on achieving her Series 24 to operate as her own branch before launching, why Melissa is a big proponent of business operating systems and implements a combination of EOS and Small Giants in her own firm so that she can focus on company goals, create career opportunities for her employees, and streamline processes, and how Melissa grew her firm by developing hundreds of marketing touches through social media, networking meetings, sponsoring local events, webinars, and newsletters… and then rebuilding her firm’s website so that prospective clients could more easily schedule meetings when they were ultimately ready to reach out.

And be certain to listen to the end, where Melissa shares why she intentionally went through the ZingTrain management training so that she could become a better leader and boss, why Melissa feels her next natural step in her business is to take the role of CEO as she recognizes that she is a visionary and has become more confident in her leadership qualities which can help take the business to the next level, and how Melissa struggled early in her career with imposter syndrome but ultimately found that she had more success when she figured out how to speak up and started trying to get noticed instead.

So, whether you’re interested in learning about how Melissa handled transitioning into a role as a business owner, why Melissa purposefully chose to find a mentor outside of her former firm so that she could gain unbiased advice, or why Melissa engages in self-development training and continues to seek ways to improve in her career and personal life, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Melissa Joy.

The Latest In Financial #AdvisorTech (July 2023)

July 3, 2023 07:02 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the July 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 Pershing X has announced the launch of its long-awaited (and newly renamed) “Wove” advisor technology platform – which despite purporting to be an open-architecture, multi-custodian solution allowing advisors to smoothly integrate all the technology they choose to bring onto it, in reality seems truly geared towards advisors who want to use Pershing’s custodial and outsourced investment management solutions, along with Wove’s suite of native or partnered software tools… which may be especially appealing as an ‘out-of-the-box’ solution for breakaway brokers that Pershing is likely looking to attract, but raises questions about why Pershing would bother to promote Wove’s open-architecture capabilities in the first place given that they don’t appear to be what the platform will actually do best?

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

All-in-one software platform Blueleaf has launched a new “aggregation-as-a-service” solution, promising better client data aggregation capabilities than existing solutions by automating the process of weaving multiple sources together to ensure cleaner data – although it remains to be seen, given that it is still reliant on third-party aggregation providers that are prone to inaccuracy and account breakages, whether Blueleaf’s solution will finally be the avenue for client data aggregation to live up to its long-unfulfilled potential
Sales enablement and client success platform Nitrogen has unveiled a new set of firmwide data analytics capabilities allowing firm leaders to compare the growth success and portfolio management of multiple advisors, as well as a new pricing tier for midsize advisory firms, further leaning into its recent rebrand as a growth platform by providing more insights for firms to track and manage their (multi-advisor) growth
Estate planning technology provider Vanilla has pivoted from providing technology-supported document preparation services to being a standalone software solution for ‘estate advisors’, providing estate visualization and projection tools for complex estates – although with fewer and fewer clients being subject to estate tax, it remains to be seen just how big of a market there is of advisors who are willing to pay for not just standalone estate planning but an ongoing ‘estate advisory’ solution

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

RIA firm Ritholtz Wealth Management is launching a new robo-advisor offering to provide a blend of automated investment management and personalized financial planning (which could signal an intent to consolidate with its existing Liftoff robo-advisor solution and move away from the Betterment for Advisors platform that powers that solution), highlighting how successful Ritholtz has been at leveraging its media-driven marketing strategy into paying clients (though it’s not clear if any other RIAs will ever be able to replicate the success when implementing their own robo-advisor solutions?)
Of all the tools that have arisen this year incorporating artificial intelligence, the ones that appear to be getting the most traction aren’t advice recommendation engines or chatbot interfaces, but simply ‘word calculators’ that can generate text on a blank page – reflecting the fact that AI can’t yet be trusted to reliably answer questions, but can save meaningful time for advisors who simply struggle and want help with writing emails, social media posts, and other written materials that they can simply edit (and use their own expertise to fact-check as appropriate)

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 (July 1-2)

June 30, 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 NAPFA has announced that it will no longer exclude advisors who receive up to $2,500 in annual trailing commissions from previous product sales, if they agree to donate that money to a non-profit organization and are otherwise fully dedicated to fee-only principles with their clients going forward. The change has led to strong pushback from some of the organization’s own members, who argue that allowing any level of commissions is a step away from NAPFA’s “fee-ONLY” roots, and will dilute the organization’s brand as being the home of fee-only advisors when they’re not purely fee-only anymore… while others suggest that the policy simply recognizes the practical challenges that previously commission-based advisors face when making the transition to fee-only models (including that sometimes it’s virtually impossible to get insurance companies to stop paying trails on old policies!).

Also in industry news this week:

Concerned about the (insufficient) frequency of its examinations of RIAs, an SEC committee has recommended that the regulator allow third parties to conduct these examinations and to request Congressional authorization to charge investment advisers under its purview a ‘user fee’ that would provide steady funding to the SEC’s examinations division
A recent report has found that 72% of new advisors drop out of the industry, creating an incentive for firms to invest in their recruiting, onboarding, and training practices to be able to grow their headcount amidst a wave of expected advisor retirements in the coming years

From there, we have several articles on cash flow and spending:

How individuals can balance the desire to spend on small luxuries today with the need to save for the future
How advisors can help younger clients get on a sustainable spending and savings path
While research has found that, broadly, greater income can lead to increased happiness, a variety of mediators, from an individual’s baseline happiness level to the amount of free time they have, can affect this relationship

We also have a number of articles on retirement planning:

Why advisors and their clients entering or in retirement might consider income annuities as a replacement for the bond portion of the client’s portfolio
How advisors can support workplace retirement plan sponsors in deciding whether to include annuity options and, if so, which to choose
While a proposed hybrid annuity/long-term care insurance product could help consumers and insurance companies mitigate their risk, it has yet to get traction

We wrap up with 3 final articles, all about the relationship between hard work and success:

While those who have reached the top of their fields might appear to perform effortlessly, getting to that point likely took thousands of hours of practice
Why finding meaning in one’s career could be superior to seeking wealth for its own sake
How luck (both good and bad) shaped the course of 1 advisor’s career path

Enjoy the ‘light’ reading!

Kitces & Carl Ep 115: Setting The Right Minimum Fee Per Client And The Revenue Model Generator

June 29, 2023 07:03 am 0 Comments CATEGORY: Kitces & Carl Podcast

For most financial advisory firm owners, ensuring that their business or practice is remunerative and that it can remain viable is often a key priority. And while there are many factors that help owners determine whether their firm is making enough money to profitably sustain itself, one common variable that can help them adjust their net revenue is the fee they charge to clients for financial planning services. By adjusting their clients’ minimum fees, advisors have a way to ensure they are being fairly compensated for the time they spend with each client, and that the revenue generated collectively by all clients will be enough to cover overhead, employee salaries, and other costs to run and grow the firm. However, as every firm’s structure, priorities, and growth goals are different, determining the appropriate minimum fees for clients can be challenging.

In our 115th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisory firm owners can determine appropriate fees for clients by taking a close look at their current business metrics, their desired business metrics, and their desired lifestyle as an advisor.

Balancing the amount of personal income that advisory firm owners want to earn with how many clients they want to serve can help them decide how to adjust their fees to maintain a satisfying and sustainable business model. As while serving more clients can mean more compensation, setting realistic boundaries can keep solo advisors (who want to stay solo advisors) from exceeding their limits and relying on support staff (which can compromise profit margins) to ensure that all clients receive exceptional service. Once advisors determine their desired income and client-base size, the minimum fee can be calculated by dividing the target revenue that would cover all business expenses (including the advisor’s desired income) by with the number of desired clients.

For advisory firm owners who want to grow their business, deciding how to scale their operations is important to assess how they will need to adjust their minimum fees to accommodate growing costs and expanding services while also growing profit margins for further growth. As while a growing practice will have evolving objectives, its advisory firm priorities will need to be reassessed periodically to ensure a sustainable revenue model for the changing needs of the firm. And having a clear strategy to decide how client fees can be adjusted to provide sufficient revenue can facilitate the growth process more seamlessly.

Ultimately, the key point is that having a systematic approach to determine minimum fees per client will help firm owners ensure they target an appropriate revenue level to earn a fair and satisfying income, maintain the health of their practice or business, and support a healthy work-life balance. Most importantly, finding the appropriate minimum fee per client can help the advisor create a sustainable business and increase the chances of the business lasting for the foreseeable future – helping even more clients in the long run!

Flip ‘Plan Presentation’ Into ‘Plan Engagement’ Meetings To Generate More Focus And Reflective Questions From Clients

June 28, 2023 07:02 am 0 Comments CATEGORY: Financial Psychology

One of the key steps in the financial planning process is presenting the plan to the client, which has traditionally been done as part of a single 'plan presentation' meeting that takes place once the advisor has gathered and analyzed all of the client's data. While this approach may have made sense in a time when the 'plan' itself was mostly limited to investment recommendations (which the advisor would be able to go on and implement themselves since they were managing the client's assets), financial planning has come to cover more and more areas of clients' lives, with a widening breadth of financial planning recommendations in kind – to the extent that trying to cover the entire plan in 1 session can result in an exhausting and overwhelming ordeal for both the client and the advisor.

In this article, Kitces Senior Research Nerd Meghaan Lurtz writes about what the most recent Kitces Research study on Advisor Productivity reveals about how advisors deal with the challenge of delivering more and more information to clients, and how it's possible to keep clients engaged in the process of presenting financial plans… without resorting to longer planning meetings.

As the latest Kitces Research reveals, advisors are increasingly turning to collaborative financial planning software, which – at least in theory – can help to keep clients engaged by turning the planning meeting into a back-and-forth discussion versus a 1-sided lecture. However, the danger of relying on software to facilitate collaborative financial planning is that if either the advisor or the client isn't familiar enough with the software to leverage its features, the software can instead be a blocking point for the advisor in delivering the information (making it less likely for the client to implement the advice, since they may not fully understand it in the first place) while eating up valuable meeting time focused on the technology… and not the client or their plan.

One approach that can help create a more engaging and productive plan presentation is to 'flip' the meeting so that some (or most) of the information is presented in advance rather than during the meeting itself. By sending meeting materials (including recommendations) in advance up front, clients can absorb and reflect on the information on their own time, freeing up meeting time to focus on questions the client has (which will presumably be more thoughtful and relevant after spending some time to think about them, versus 'on-the-spot' questions that arise immediately after the advisor presents the information). Not only can sending user-friendly materials (such as short video clips recorded in apps such as Loom) help clients better engage with the financial planning recommendations, but they can also help clients establish a baseline knowledge of the technology required for key analyses (e.g., Monte Carlo analysis) that might otherwise be difficult to understand when first encountered in a plan presentation meeting. This allows the advisor to focus on the client's plan and recommendations instead of on how the tech is used.

Ultimately, sending planning and educational materials to clients in advance helps advisors transform the plan 'presentation' meeting into a plan 'engagement' meeting. And because materials sent in advance only need to cover the basics, they don't necessarily need to be personalized – meaning that the advisor can create a handful of broadly applicable videos to use over and over again to educate clients before diving into the details in the meeting itself. The net outcome, then, can be not only to reduce the amount of time needed for meetings themselves, but also to make the time spent in the meeting more engaging and valuable for the client!