FP+Careers - Part 35

Weekend Reading for Financial Planners (July 30-31)

July 29, 2016 02:45 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with news on the Department of Labor's proposal that would clear the way for state-based automatic enrollment into IRAs for employees of small business, which has been sent as a final proposal to the Office of Budget and Management (OMB) and is expected to be approved within a month or two, ushering in a new era of accessibility for automatic-enrollment retirement savings.

From there, we have several additional articles on the ever-shifting regulatory landscape for advisors, including a look at what RIAs will have to do to comply with the Department of Labor's fiduciary rule (which will have less impact on RIAs than broker-dealers, but still introduces new compliance obligations), how the DoL's "grandfathering" rule allowing existing commission trails to continue may have the unintended consequence of limiting the ability for registered reps to change broker-dealers next year, and a discussion of the SEC's looming push for an initiative that would start using third-party examiners to increase oversight of RIAs or whether the agency should wait and study current RIA practices to understand which ones really do (or do not) need greater oversight in the first place given the modern role of independent custodians that RIAs work with.

We also have a few practice management articles this week, including: how advisors can improve their marketing by being more transparent about their services and pricing; tips for dealing with introverted vs extroverted prospective clients, and how to frame questions differently to better engage them; and how connecting with and providing even basic advice services for clients' children is associated with a higher likelihood of getting referrals (though it's not clear if that's because helping the children drives referrals, or if clients who refer are more likely to push their advisor to work with their children, too).

There are a couple of investment-related articles as well, from a look at how FinaMetrica (known for its academically rigorous risk tolerance questionnaire) is pairing with both RiXtrema and Macro Risk Analytics to provide more robust tools to analyze a client's current portfolio and compare it to their risk tolerance, a discussion of whether near-zero or negative yields could actually be a sign of prosperity and not looming global deflation, and a look at how asset managers are still struggling to gain traction with actively managed ETFs.

We wrap up with three interesting articles: the first is a discussion of how the media's focus on "newsworthy" events, combined with ever-improving access to information about what's happening in the world, may be causing us to mistakenly believe the world is getting worse, when in reality it's never been better (we're just more aware of a smaller number of bad events than we were in the past); the second is an interesting study from the Journal of Financial Planning finding that advice on savings/investments and tax planning really do lead to higher financial satisfaction, but advice regarding debt, mortgages, and insurance does not (unless it's all paired together holistically); and the last is a fascinating look at how those who enjoy their work the most tend to have the best career progress, the most retirement readiness, yet are the least interested in retiring (because they enjoy their work!), while those who are most miserable in their jobs are the ones who most want to retire but may struggle with earning enough to achieve that retirement, suggesting that the real key is not in doing better "retirement planning" but in helping to guide clients to more fulfilling careers in the first place.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, which this week includes a flurry of "robo-advisor" news (from the launch of Fidelity Go to announcements that TD Ameritrade and Wells Fargo are working on "robo" tools), along with news from Envestnet/Tamarac on the roll-out of its "Client Portal 2.0", and MoneyGuidePro releasing a new DoL fiduciary software tool called "Best Interest Scout".

Enjoy the "light" reading!

What’s The Best Personality Type To Succeed As A Financial Advisor?

July 21, 2016 11:50 am 7 Comments CATEGORY: Personal/Career Development

According to most industry benchmarking studies, average income of an experienced financial advisor is roughly 2x to 3x the average household income in the U.S., which makes being a financial planner an incredibly appealing career, both to college graduates looking for a career, and those who may feel they have "topped out" in their current industry and wish to make a career change into financial planning. The caveat, however, is that financial advisors also have an incredibly high attrition and failure rate in the early years, which means the decision to try is not without significant risks. For many, their greatest fear in getting started is simply that they don't have the "right" personality type to succeed in the first place.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at what kind of personality type it does take to succeed as a financial advisor, and how despite the conventional view that being a financial advisor is a quintessential career for extroverts (where you meet lots of people to work with and do business with), in reality many introverts are also very successful at being a financial advisor. Because while being an introvert might be a little more challenging when "prospecting" for potential clients, the fact that introverts more commonly form deeper relationships to fewer people is actually a great fit for establishing a great and loyal client base!

In fact, for many who start out as a financial advisor, the biggest roadblock is not about being an introvert versus extrovert, but simply about having the "grit" necessary to handle the emotional rollercoaster that is being an entrepreneur and building your own business. That includes both the sheer financial ups and downs of starting a business from scratch with no income, and the amount of rejection that occurs when prospecting for clients, where "just" being rejected 2-out-of-3 times is actually a fairly solid 33% close rate!

Fortunately, there is an alternative career path for financial advisors beginning to emerge as well - the employee advisor path, which starts out as an entry level "paraplanner" and climbs from there to an associate advisor, lead/senior advisors, and perhaps even to becoming a partner someday. Unfortunately, though, the relatively slow progression down that career path - which may take as long as 7-10 years to reach a senior advisor position - is for many career changers "too long" to wait to reach the income levels of their former careers.

Nonetheless, the bottom line is that the "right" personality type for being a financial advisor is not about being an introvert or extrovert - because either can create meaningful relationships with clients (and both will struggle if they are too extreme in either the introversion or extroversion direction) - but about having the patience and focus to build your career as an employee, or the sheer grit (and financial capabilities) to handle the entrepreneurial rollercoaster of starting your own advisory firm from scratch!

Weekend Reading for Financial Planners (Jun 11-12)

June 10, 2016 02:01 pm 2 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with a deeper look at the SIFMA lawsuit against the Department of Labor's fiduciary rule, which is looking more and more like an Alamo-style futile last stand, as the details of their legal complaint appear to be little more than rehashing the same arguments they have already presented and lost at each prior step of the rulemaking process.

We also have a few technical planning articles this week, from strategies to plan around maximizing step-up in basis (and especially avoiding a step-down in basis) at death and the new Form 8971 cost basis reporting rules, to tactics that advisors should consider when helping younger clients make good student loan decisions, and a review of a newer company called Vest Financial that is providing an outsourced options overlay service to help design risk management strategies for client portfolios.

From there, we also have several practice management articles, including: looming anti-money-laundering (AML) rules that could hit later this year and put significant new compliance burdens on SEC-registered investment advisers; a list of 13 "true" differentiators that advisors can use to think about what really differentiates their own client services; how to reframe your value proposition to clients by shifting from just talking about your job title and what you do to helping clients understand how you'll actually improve their situation; a review of "startup friendly" RIA custodians TradePMR and Scottrade Advisor Services, which have actually been cracking down a bit on the smallest "hobbyist" RIA firms; and a look at how you can improve your engagement with clients over the next 2 months by taking a one-week-at-a-time fresh look at key aspects of your advisory firm and how your clients experience it.

We wrap up with three interesting articles: the first raises the question of whether our current 'obsession' with the philosophy of "always be your authentic self" may be going too far, because in the end people may care more than we're sincere and do what we say, than whether we authentically share every last thought in our heads; the second is a great reminder that while we're often told to "follow our passion", most of us aren't actually sure what our "passion" really is, and in most cases really understanding that takes years or even decades of a career to find, so the better approach is to try to "foster your passion" and just keep moving in the direction of the work that most inspires you; and the last is an interesting look at how the media views financial advisors and recommends that consumers find an advisor, where consumers are recommended to look at everything from how the advisor is compensated, to whether the advisor has "humility in large doses" when it comes to describing their own abilities.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, which this week includes interviews from the recent Envestnet Advisor Summit on the latest Envestnet Advisor Portal technology developments with Tamarac and Yodlee, along with the new Open ENV initiative!

Enjoy the "light" reading!

Why It’s Crucial To Attend At Least One Financial Advisor Conference Every Year

June 2, 2016 12:31 pm 1 Comment CATEGORY: Practice Management

Periscope Office Hours Cover Image May 31 Why Its Crucial To Attend At Least One Financial Advisor Conference Each Year 1

Human beings are creatures of habit. The good news is that habits make it easier for us to get through the day and do everything we need to do. The bad news is that it can get us stuck in a rut and reinforce bad behaviors.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at the virtue of going to financial advisor conferences, as a way to get a fresh perspective and get out of a potential rut in your business and career.

Because ultimately, while there's certainly value to going out for a conference to get a lot of CE credits all in one place, it's the potential for business ideas and connections with other advisors that is really the most valuable. Because often it takes an outsider's perspective about the struggles you face to figure out how to move forward.

To really maximize the value of attending a conference, though, it's crucial to take the steps to prepare yourself for success. Which means scoping out the agenda in advance to plan on what sessions you will (and won't) attend, bringing ample business cards to share, sending a follow-up email to the people you meet, and visiting the exhibit hall, which increasing is filled with providers that can help make your business more successful!

Weekend Reading for Financial Planners (May 7-8)

May 6, 2016 02:44 pm 5 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with an interesting new Fidelity study, finding that female and Millennial advisors are becoming more and more likely to change firms as they gain experience... and that it's the most successful advisors who are the most likely to switch, raising serious questions about the ability of advisory firms and platforms to retain the best next generation talent. Also in the news this week is a notable lawsuit filed against T. Rowe Price for "excessive fees", claiming that the otherwise-moderately-priced mutual fund company was taking advantage of its retail investors by not doing more to drop the price of its mutual fund expense ratios to match its institutional pricing as its funds grew their AUM.

From there, we have a number of technical financial planning articles this week, including a look at the shifting buying habits of LTC insurance policyowners when it comes to inflation riders (as the use of 5% compound inflation riders has crashed, replaced by 3% compound inflation, guaranteed purchase options, and rising-premium structures), a discussion of whether it's better to "de-risk" a portfolio by owning less in equities or just owning less volatile equities, and a fascinating analysis of whether the shift towards passive investing really risks making the market less efficient or whether it could actually make the economy as a whole more efficient instead.

There are also several practice management articles this week, including: a Pershing Advisor Solutions announcement that it will be launching an open API initiative similar to TD Ameritrade Veo, and is bringing on 3 new "robo" tools to help advisors (SigFig, Vanare, and Jemstep); how Fidelity is building in the exact opposite direction with its coming new Wealthscape platform, designed to make the process simpler for advisors by constructing a single fully integrated solution (while maintaining some open architecture for those who still want to mix and match); tips for why you should hire an intern for your advisory firm and how to do it; and a look at how the ability to connect with people virtually, thanks to the internet and social media, is leading to a rise of "virtual mentors" as well.

We wrap up with three interesting articles: the first is a look at how consumer spending is rising more quickly amongst the top 5% of earners than the other 95%, which is driving rapid growth is a wide range of ultra-elite services to cater to the affluent (even as companies get better than ever at identifying top customers, and figuring out how to better cater to them); the second is a fascinating discussion of "authoritarianism" in American politics, which helps to both explain the sudden rise of Donald Trump's candidacy for President, and suggests that even if Trump loses, the authoritarian voting block may divide the GOP for years to come; and the last is a fantastic reminder than we often remember history as being more modest than it actually is, and that even though the remember with nostalgia the days that the government didn't overspend, markets were less volatile, and everyone had a pension plan, the truth is that the government has run a deficit for most of the past 100 years (except for what turned out to be bubble years in the 1920s and 1990s), monthly market volatility is actually less this decade than any decade for the past century, and even at its peak only 38% of private sector workers were ever covered by a pension (in 1979), compared to a much-larger 64% of people who actively participate in a 401(k) plan today! In other words, even as we lament that times have never been worse, the truth is that they've never been better.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, which this week includes coverage of Wealthbox CRM's five new integration partners (from TD Ameritrade to Office365 and Zapier), a new Orion Advisor Services feature that sends portfolio information to clients via text message, and the launch of a new client portal from Morningstar's ByAllAccounts!

Enjoy the "light" reading!

The 4 Skill Domains For Financial Advisor Mastery

April 25, 2016 07:01 am 8 Comments CATEGORY: Personal/Career Development

In the early years of financial planning, the reality was that most advisors only needed one skill to be “successful”: the ability to sell, and get clients. After all, when advisors are solely compensated by commissions, if you can’t keep finding new prospective clients to sell to – and actually sell something to them – your income will quickly go to zero.

As financial advisors have shifted to the AUM model though, and the recurring revenue it supports, the requisite entry level skillset has shifted. Now for many advisors, the key abilities are technical competency to give the right advice, and empathy skills to form and deepen the client relationship. Sales and business development comes later, if at all.

And as advisory firms have grown, for many the emerging skills gap is in the area of management, from training and developing other staff members, to the overall execution of the business.

From the career track perspective, what this means is that for financial advisors to progress in their own careers, it becomes necessary to expand their expertise across more and more of the domains – generally at least three of the four. And for advisory firms themselves, the four skill domains may provide a helpful roadmap to consider where the firm should invest resources to improve the team for the future!

Weekend Reading for Financial Planners (Jan 2-3)

January 1, 2016 02:01 pm 5 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with a scathing investigative report from Ann Marsh at Financial Planning magazine, highlighting how brokers guilty of consumer harm are obtaining settlements in FINRA arbitration and then getting their records expunged on the basis of not being found guilty (due to pre-empting a guilty finding with the settlement!). Also in the news this week was an SEC report reviewing the ETF "flash crash" from August 24th, which disturbingly finds the problem was so widespread that it's still not clear why it happened, nor is it clear what needs be done to prevent it from occurring again in the future.

From there, we have a few practice management articles this week, including: a Bob Veres discussion of whether the typical advisory firm's efforts to impress prospective clients are actually just intimidating them; the first of what will likely be many stories looking at how the Department of Labor fiduciary rule may change the industry; a controversial suggestion from practice management guru Mark Tibergien that perhaps the industry's "talent shortage" problem is actually a shortage of skilled advisory firm management capable of attracting, developing, and retaining Millennial talent; and a profile of Live Oak Bank, which has burst onto the scene in recent years to become one of the primary lenders financing advisory firm succession plans, with more than $250M of loans funded since 2013.

We also have a couple of technical articles this week, from a look at how the recent spending legislation's extension of the solar investment tax credit may spur an explosive boom in solar energy, a discussion of how traditional portfolio metrics fail to capture the benefits of downside portfolio protection (and an alternative way to better measure the impact), and an analysis of why most people should actually consider funding an HSA first for retirement (in some cases even before a 401(k) plan with a match) given that virtually all retirees will have at least some medical expenses in retirement which can be funded tax-free from the HSA.

We wrap up with three interesting articles: the first is an interview with John Thiel, the head of wealth management at Merrill Lynch, who discusses how the firm is preparing itself for the looming Department of Labor fiduciary rule (and that it would rather comply with a fiduciary obligation to clients than walk away from $2 trillion of AUM); the second is a nice turn-of-the-new-year reminder that it's a good time to de-clutter (whether it's your desk, your business, or your clients); and the last is a Wall Street Journal highlighting recent research into consumer spending behaviors, and why the traditional advice to just budget and monitor spending is so often ineffective in practice.

Enjoy the reading, and Happy New Year!

Weekend Reading for Financial Planners (Nov 21-22)

November 20, 2015 02:30 pm 13 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the launch of the CFP Board's new Center for Financial Planning, which will pursue the laudable goals of attracting more young financial planners to the profession, improving advisor diversity, and lanuching a new academic journal for financial planning research, but in the process is increasingly putting the CFP Board into conflict with the FPA with overlapping membership initiatives. At the same time, the CFP Board also announced this week that for the first time in a long time, the average age of CFP certificants has begun to decline, and dipped below age 50 this year, as the organization's ongoing efforts to attract young new talent is beginning to show signs of progress.

From there, we have a few technical financial planning articles this week, including: the final announcement that Medicare Part B premiums will rise "only" 16% next year for those not eligible for Hold Harmless (albeit with a $3/year surcharge to last the next decade or so); a look from retirement researcher Wade Pfau at how Social Security compares to investment alternatives (particularly if you want to spend down your portfolio while delaying Social Security benefits); an announcement from the Department of Labor to expand state-run IRAs and employer retirement plans (including the potential for automatic enrollment with payroll deduction); the news that next February the NYSE will stop allowing Stop orders and Good-Til-Canceled orders (in acknowledgement that investors are improperly using them as risk management tools when they're not); and a look at the new Actuarial Guideline 49 that rolled out this fall to limit the "over"projections of indexed universal life policies (and whether the AG49 rules still don't go far enough to limit overly optimistic policy illustrations).

We also have a couple of practice management articles this week, from the importance of hiring an Operations Manager or Chief Operating Officer for your advisory firm if you're finding yourself at/past capacity (and especially if client service and/or business growth are starting to suffer!), to a discussion of the pros and cons of trying to hire a "permanent" financial planning associate who is not seeking a career track of personal advancement, and a look at how a typical advisor "Mastermind" or group operates (and how to take the steps of forming your own).

We wrap up with three interesting articles: the first explores the research of how we typically judge people (including ourselves) based on how hard the person works and how much time they put in, even though the reality is that the most creative and productive people usually limit how much time they put in (otherwise the brain just gets too tired!); the second is a look at the new Gino Wickman book "Rocket Fuel" which highlights how the most successful businesses are the ones that pair together a visionary and an "integrator" who is capable to putting the visionary's ideas into practice; and the last is a great reminder that just as fitness tracking devices like the Fitbit are successful because they take long-term health goals and break them down into daily bites, so too must advisors break their long-term goals down into daily bite-sized activities that can be tracked and measured to help reinforce success (and it's not a bad idea to try with clients, too!).

Enjoy the reading!

Weekend Reading for Financial Planners (Oct 17-18)

October 16, 2015 02:01 pm 17 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the big news that a majority stake in mega-RIA Edelman Financial has been purchased by private equity firm Hellman & Friedman at a whopping $800M valuation, a market valuation that may have been upwards of 3X the $15B RIA's revenue, suggesting that the big money still sees a bright future for RIAs charging AUM fees. Also in the news this week was a final rule from FINRA that will require brokerage firms to include a link to FINRA's BrokerCheck system so consumers can more easily investigate the regulatory history of their brokers... though, sadly, the rule will not require brokers to provide consumers with a link directly to their actual BrokerCheck profile!

From there, we have a few technical planning articles this week, including: a discussion of the new DFA-based ETFs being offered by John Hancock and how they differ from DFA's traditional mutual funds; a new study raising the question of whether high-deductible health plans paired with health savings accounts are just leading consumers to skip out on important health care services (rather than becoming more savvy health care shoppers); guidance on why advisors might want to work with clients to reconstruct the total amount of non-deductible contributions into their IRAs if they haven't already been tracking it on Form 8606; and a recent Supreme Court ruling that opens the door for clients with income taxed by cities and counties across multiple states to file amended tax returns and claim a refund for the past 3 years.

We also have a couple of practice management articles, from a discussion of how the proposed DOL fiduciary rule could introduce significant paperwork and compliance obligations for RIAs as well as broker-dealer firms (for any RIA whose AUM fee is higher than the prospective client's former 401(k) plan), to a look at why it's so crucial to establish clear and consistent messaging about the services an advisory firm provides to its clients, and a reminder that if advisors are going to claim to be the "quarterback" of the client's financial team that they really need to step up and actually be the quarterback that proactively reaches out to and engages with a client's other advisors!

We wrap up with three interesting articles: the first raises the question of whether female-focused advisory firms, like Sallie Krawcheck's recent Ellevest initiative, are really likely to succeed, especially given that several prior high-profile initiatives in the past decade have all quietly folded (or whether the reality is that focused on "women" is still far to broad to be a relevant 'niche' solution); the second is a critique of the recent Elite Daily article that Millennials should just enjoy themselves in their 20s and not worry about savings, pointing out that our 20s are often the best time to work hard and set our careers on a path to success; and the last is a touching offering of financial advice from personal finance writer Morgan Housel to his newborn son, that provides good relevance reminders for anyone and everyone (regardless of age)!

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including why Winterberg is upbeat on the Morningstar acquisition of Total Rebalance Expert (tRx), the announcement that LogMeIn has acquired LastPass, and coverage of the recent LaserApp "AdvisorCon" conference.

Enjoy the reading!

Are The Licensing And Other Requirements To Become A Financial Advisor Too Easy?

August 24, 2015 07:01 am 53 Comments CATEGORY: Planning Profession

Virtually all financial advisors today follow one of three paths in becoming a financial advisor – either as a registered representative of a broker-dealer, an insurance agent with an insurance company, or an investment adviser representative of an RIA. And each path has its own licensing and exam requirements.

Yet the sad commonality of all paths to becoming a financial advisor is that the actual exam and educational requirements to be an advisor are remarkably low. In fact, the licensing exams for financial advisors do little more than test basic product knowledge and awareness of the applicable state and Federal laws, and none require any substantive education in financial planning itself before holding out to the public as a comprehensive financial advisor who will guide consumers about how to manage their life savings!

Given the roots of financial advising in the world of insurance and investment product sales, this isn’t entirely surprising. The licensing requirements to become a financial advisor, along with the suitability standard to which most advisors are subject, are built around the concept that “advisors” are really just product salespeople. And the bar to determine if someone is "capable" of selling a product isn't very high.

Ultimately, though, if financial advisors hope to actually be recognized as bona fide professionals, the requirements to become a financial advisor must become harder, and require actual education and experience to demonstrate competency as a financial advisor (not just compliance with the laws that apply to salespeople!). Otherwise, the reality is that even if a uniform fiduciary standard is implemented that requires all brokers and investment advisers to act in the best interests of their clients, consumers may still be harmed by advisor ignorance and the sheer lack of competency that would result from raising the fiduciary duty of loyalty but ignoring the equally important fiduciary duty of care – to only give advice in areas in which the professional is actually educated and trained to give advice in the first place!