Nerd's Eye View blog

Wealth.com Raises $30M To Provide Estate Documents To Advisors’ Clients (And More Of The Latest In Financial #AdvisorTech – October 2024)

October 7, 2024 07:02 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the October 2024 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 digital estate planning platform Wealth.com has raised a whopping $30 million in Series A funding, following on the heels of Vanilla's follow-on $20M capital round just a few months ago – which on the one hand reflects the anticipated enthusiasm for solutions that can help advisors efficiently solve their clients' needs for estate document preparation (beyond 'just' estate planning software), but on the other hand raises questions about how big the market opportunity really is for advisor-driven estate document preparation, given that unlike tax planning tools (which have an annual cadence for filing tax returns with the IRS) most clients may only update their estate documents only 10–15 years (often amounting to no more than 2–4 clients per advisor per year).

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

VRGL has announced a new venture capital funding round to continue building out its capabilities to extract data from prospects' investment statements and automatically generate investment proposals – but while VRGL has proven popular among some advisors for its ability to save time spent poring over paper statements, it remains to be seen how many will want to use (and pay for) it as a standalone investment analytics and proposal tool versus 'just' as a tool for extracting investment data (to send to the advisor's preferred analytics platform)
Cashmere, an AI-driven prospecting tool aiming to help advisors "identify, enrich and engage" with prospective clients, has announced a $3.6 million seed capital funding round – although, as multiple new solutions have cropped up in recent years that also seek to help advisors catch money-in-movement events, fill in gaps in data on prospects, and match advisors with their best-fitting prospects, the question remains how many different solutions the market for prospecting tools can support (especially given that most firms tend to move away from prospecting as soon as it's feasible to generate most of their new growth from referrals)
Fidelity has announced that it plans to effectively cut off access to 401(k) plans on its platform by Pontera and other technology that uses client credentials to view and trade in held-away accounts – which while putatively being about protecting client data and privacy, also serves to highlight Fidelity's conflicts as both a 401(k) provider and custodian (since now in order to manage within Fidelity-held 401(k) accounts, advisors will need to have custody assets on Fidelity as well), and raises questions about how Pontera can resolve its disputes with both state regulators and now plan recordkeepers to continue allowing advisors to manage clients' 401(k) assets on its platform

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

Charles Schwab has announced that it plans to shut down its Institutional Intelligent Portfolios "robo-advisor for advisors" in the coming year, further accentuating the decline of the B2B robo-advisor space in recent years as the costs of attracting next-generation clients to sign up have continued to outpace the growth of new assets, to the extent that only a small handful of the original crop of B2B robo-advisors from the mid-2010s still exist today

Retirement planning platform Income Lab has announced the launch of a new Annuity Planning tool aiming to model the impact of a wide range of different types of annuities on a client's overall retirement picture – which is arguably the first tool capable of subjecting many annuities to a robust and objective analysis (rather than the optimistic projections included in annuity sales literature), and may help to settle some debates over how certain annuities might perform in a range of different scenarios

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 (October 5–6)

October 4, 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 from Charles Schwab indicates that advisors see technology as the biggest driver of change in the RIA industry, with the growing number of AdvisorTech solutions as the most frequently cited tech-related driver of change. Further, Artificial Intelligence (AI) was the most cited factor driving industry growth during the next 3 years, with client data integration as a primary area for improvement, suggesting an opportunity for AI tools to help advisors make the most of the significant amount of client data they possess (possibly saving time in the process) and potentially offer a deeper planning experience for their clients!

Also in industry news this week:

A recent survey found that while 1/3 of advisory firms are currently using AI tools, another 1/3 are fearful of doing so, indicating that while some firms are eager to be early adopters of this technology, others are taking a wait-and-see approach, perhaps as regulation surrounding this technology evolves over time
National RIA Creative Planning recently received an eye-popping 23X earnings valuation in its sale of a minority stake to a Private Equity (PE) firm, indicating that some acquirers are prioritizing a firm's depth of integration and consistency (and the growth prospects it supports), and not just its size, when making investments and setting a value for advisory firms

From there, we have several articles on retirement planning:

Why now could be a good time for clients nearing and in retirement to trim their equity allocations (perhaps as part of a regular rebalancing strategy), despite the potential temptation to be overweight stocks in the current hot stock market
Why contingent deferred annuities could serve as a middle ground for advisors and their clients who want additional protection from longevity risk without giving up control over their assets
How a "bond tent" approach can help advisors and their clients reduce sequence of return risk without increasing longevity risk in the process

We also have a number of articles on client communication:

How advisors can craft effective stories that can help clients and prospects better understand technical planning topics and the value the advisor provides
Why individuals and companies that have the 'best' story sometimes prevail over those that might have better ideas or products
5 types of stories for advisors to have in their back pocket to deal with a variety of client circumstances

We wrap up with 3 final articles, all about spending on children:

Why some parents are cutting back on financial support for their adult children, and the strategies they are using to do so
How providing "helicopter money" can unintentionally stunt a child's path to financial independence from their parents
Why buying kids the highest-quality goods could give them a skewed perspective on what 'normal' purchases look like and the need to balance financial limitations with their 'wants'

Enjoy the 'light' reading!

Kitces & Carl Ep 148: Making It Easier To Get Started By NOT Building In Public And Focusing On Version 0 Instead

October 3, 2024 07:02 am 0 Comments CATEGORY: Kitces & Carl Podcast

"Building in public" is a common piece of advice for tackling new challenges – whether launching content, starting a business, or setting personal or professional goals – as public commitment fosters accountability and motivation, tapping into the human desire to avoid embarrassment. While this approach can be effective, it ultimately poses its own difficulties; for example, when stakes are public, advisors may feel pressured to endlessly perfect their offerings and over-commit their time and resources before knowing what really works. Alternatively, they may avoid public commitment altogether to sidestep this pressure.

In the 148th episode of Kitces and Carl, Michael Kitces and Carl Richards discuss how advisors looking to try something new can overcome mental roadblocks and take action… without feeling the pressure to publicly announce their plans first.

As a starting point, it may be helpful to remember that, for better or worse… few people pay attention to someone's early public efforts. For example, firm owners often spend an immense amount of time on marketing before referrals or prospects begin to flow in. Most new offerings don't come with a built-in audience. The reality is that, more often than not, recognition for one's 'new' offering tends to come long after the offering was launched, which is why we often hear the phrase about taking 10 years to become an overnight success. On the one hand, it may feel defeating ("What's the point if no one cares?"); on the other, it can feel liberating ("I can build anything I want, and few will notice if I fail.").

The benefit of this slow recognition is that it gives advisors time to refine their product… as long as they start. The desire to create a polished product that matches what clients want is important (and a part of how an advisor has gotten so far) but can also inhibit advisors from getting started in the first place. From that end, it may be helpful for advisors who struggle to start to create a "Version 0" – a version built with release in mind, but not a commitment to a finalized, perfected end product. For example, an advisor creating new video content may record "Version 0" videos, where rather than focusing on perfecting sound, light, and other design elements, they ‘just' turn on their camera and follow a brief script. After recording, they may find that Version 0 is actually good enough to release! And once "Version 0" is out, observing who shows up and engages can inform the advisor about what their audience truly cares about.

The key point is that if advisors can ‘just' begin by iterating new offerings, the process of releasing them gives the advisor space to refine what truly resonates with clients – ultimately leading to a great, relevant product!

Helping Nervous Clients Understand The (True) State Of The Social Security System And What It Means For Their Retirement

October 2, 2024 10:15 am 0 Comments CATEGORY: Retirement Planning

Given the frequent news headlines on the (un)sustainability of the Social Security system, many working-age financial advisory clients might harbor doubts about receiving their full estimated Social Security benefits (and many current Social Security recipients might be concerned that they will not continue to receive their full benefits throughout the remainder of their lives). In this environment, financial advisors have the opportunity to add value for their clients not only by giving a clear explanation about the current status of Social Security and the potential legislative changes that could improve its solvency, but also by modeling what (realistic) changes would mean for their clients' financial plans.

To start, while the state of Social Security's trust fund reserves often receives significant media attention, in reality, the bulk of funding for paying out Social Security benefits comes from Federal Insurance Contributions Act (FICA) taxes, more commonly known as payroll taxes (with workers and their employers each paying 6.2% on up to $168,600 of income in 2024 for the Social Security portion of FICA). Which means that even if the trust fund reserves were to become depleted (currently estimated to occur in 2035), the system would continue to pay the majority of benefits that are simply covered by the ongoing receipt of significant payroll tax revenue. In fact, according to the latest annual report of the board of trustees of the Social Security trust funds, Social Security would still be able to pay 83% of scheduled benefits in 2035 when it is expected to be depleted, though this figure would decline to 73% of scheduled benefits by 2098. Which might come as a surprise to clients who assume that the exhaustion of trust fund reserves would mean that no (or very little) benefits would be paid!

Nonetheless, given the disruption that a reduction of benefits would cause recipients of Social Security retirement benefits (particularly those who rely on such benefits for a significant percentage of their retirement income), policymakers have an incentive to enact measures that would allow the system to continue paying out full benefits for decades to come. Such options include single-policy solutions that would wipe out the entire 75-year shortfall (e.g., the board of trustees report estimates that a 3.33 percentage point increase in the payroll tax or a 20.8% reduction in benefits would cover the gap) or a (perhaps more politically feasible) combination of policies that address system revenues and/or costs (e.g., raising the payroll tax wage cap or increasing the Full Retirement Age) that would close the funding gap.

Ultimately, the key point is that financial advisors have the opportunity to add value for their clients by providing context on the state of Social Security (e.g., even if the trust funds are exhausted, the system would still be able to pay out the majority of scheduled benefits) and potential legislative fixes (which, depending on the legislation passed, might not be as severe as some clients assume), as well as leveraging financial planning tools to show the impact of the possible trust fund exhaustion and/or potential policy actions on each client's financial plan (both in dollar terms and how it changes the probability of success of their plan). Which, together, could provide clients with a more realistic picture of what changes to Social Security could mean for their unique situation!

#FASuccess Ep 405: When Being ‘Youthful’ Turns From A Liability To An Asset In Building Your (Long-Term) Advisory Business, With Gaetano Sacco

October 1, 2024 07:04 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome everyone! Welcome to the 405th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Gaetano Sacco. Gaetano is a partner and senior financial advisor at Fountainhead Advisors, an RIA based in Warren, New Jersey, that oversees approximately $900 million in assets under management for 1,000 client households.

What's unique about Gaetano, though, is how after breaking away from an insurance broker-dealer with barely $5M in assets under management, he has been able to quickly build his practice to $75 million in AUM in just 5 years in part by turning what was originally a liability for him in his 20s – being a 'young' advisor who prospective clients didn't always think was credible – into an asset, where Gaetano is now quickly growing his client base of retirees by highlighting how his 'youthfulness' as a 30-something means he's been around long enough to show that he's going to be a financial advisor for the long run, and still young enough that he can do this for another 30 years and actually be their financial advisor for their entire retirement (or basically, the last advisor they'll have to worry about picking in their lifetime).

In this episode, we talk in-depth about Gaetano's experience working in insurance sales starting soon after he graduated from college, including why the need to cold-call for business as a relative newcomer was both a challenge and a confidence-builder as he started to gain traction selling insurance products and some standalone financial plans, the factors that ultimately led Gaetano to decide to make the switch from insurance to the RIA channel and leave friends and mentors he had made in the insurance world despite the success he was having there after winning "Financial Planner of the Year" in his region of the company, and how Gaetano, now in his late 30s, has found his age to be an asset, as getting married and having kids has given him new perspectives in life to be able to better related to his clients and prospects, his years of experience shows that he has credible success, and his relatively young age helps him reassure his older clients that he can really be there for them in the long run.

We also talk about how Gaetano has built his current practice up to $75 million in just 5 years in part through client referrals that came after he got really proactive in addressing client concerns (from phone calls to webinars to additional written commentary and even crafting an expertise on PPP loans while they were available) during the COVID-induced market downturn, how Gaetano has since used in-person client appreciation events, including restaurant crawls and entertaining clients at a popular horse race, to both build loyalty among his current clients and to generate warm introductions to the friends that his existing clients bring to these events, and how Gaetano expanded his capable to be able to serve his 150 clients in part by empowering a newer advisor to take on plan-building and client-facing tasks while building his own book of business.

And be certain to listen to the end, where Gaetano shares how joining an advisor study group, and its structured cadence of 2 multi-day meetings every year, has guided him through multiple changes that allowed him to level up his own practice, why Gaetano turned down his first potentially lucrative job offer with an RIA because of the bad vibes he got from the firm and its leadership, and how Gaetano's realization that he wanted to work in the financial advice business for the long run influenced his decision to pursue a more planning-centric career path… that gives him the opportunity to wake up every day excited to meet with his clients (while still being able to maintain a strong work-life balance).

So, whether you're interested in learning about gaining credibility as a 'young' advisor, driving client referrals through a proactive service experience, or the professional benefits of participating in an advisor study group, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Gaetano Sacco.

CEO Peer Groups: A Strategy For Financial Advisors To Build Trust With And Attract Business Owner Clients

September 30, 2024 07:04 am 0 Comments CATEGORY: Personal/Career Development

When it comes to focusing on a niche for financial advisors, business owner clients can be an appealing target as they can have complex financial planning problems ranging from cash flow management to tax planning to acquisition strategies. However, while business owners can be compelling clients, they can also be difficult to find and prospect in the first place. One component that feeds this dynamic is that business owners have many people vying for their attention; another is that business owners have limited time and resources. So, the dilemma for advisors looking to find business owners and convince them to become clients often comes down to finding business owners who can benefit from (and want) financial planning services and demonstrating expertise in a way that can build trust.

An effective strategy for attracting business-owner clients is to engage with a CEO Peer Group. These support groups, typically comprising 10–12 business owners, generally meet monthly and allow members to discuss issues, brainstorm solutions, and share resources. Most importantly, CEO Peer Groups provide space for business owners to work 'on' their businesses – rather than 'in' their businesses – with highly trusted peers.

Advisors have a few options for getting involved in a CEO Peer Group. One is to become a Strategic Partner (SP) and create a new group, serving as both sponsor and host. This option allows advisors to establish themselves as experts and resources for other Peer Group members, where they can also better understand what business owners want and need from the complex situations they discuss with their Peer Group. Additionally, when the advisor shows up and facilitates fruitful discussions every month, providing relevant resources as the group's SP, business owners begin to see the real value the advisor can offer. Group members get to know and trust the advisor in a non-sales environment, making them more likely to become prospects (and then clients) of the advisor.

Instead of engaging with a CEO Peer Group by serving as a Strategic Partner (which can be relatively time intensive), a second way for advisors who are firm owners to engage with peer groups is to become members themselves. This lets them reap the benefits of having both the support and guidance of a Peer Group and access to a level of prospective outreach through networking within the group as a group member. A third way for advisors to engage with a CEO Peer Group is to partner with a peer group moderator to serve as a Center of Influence for the group, allowing the advisor to connect their own network of resources with group members to help solve their various problems, or even providing members with resources through their own planning services to answer questions on issues such as taxes, insurance, and scaling.

Ultimately, the key point is that for advisors who work with (or would like to work with!) business owners, CEO Peer Groups can provide an organic way to connect with, market to, and ultimately onboard new clients. Whether serving as a Strategic Partner, a group member, or a Center of Influence, CEO Peer Groups can provide advisors with a valuable opportunity to learn from like-minded business owners to help them expand their own network of trusted peers!

Weekend Reading For Financial Planners (September 28–September 29)

September 27, 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 study by Cerulli has shown a sharp increase in the number of affluent investors willing to pay for advice, which on the one hand reflects the increasing financial complexity in peoples' lives (while they've also gotten busier than ever at work and at home) to the extent that they're more willing to work with someone to navigate those financial challenges; while also highlighting the progress advisors have made in providing more value beyond 'just' portfolio management – and in demonstrate that value to the public.

Also in industry news this week:

As brokerage firms have faced a wave of lawsuits regarding the low interest rates paid on cash sweep accounts, some legal experts believe that RIAs could also be targeted for legal action if they allow clients' uninvested cash to sit in a cash sweep account rather than investing it or moving it to a higher-yielding cash account
In a recent SEC panel discussion, the CFP Board pushed back against claims by the broker-dealer and insurance industries that a uniform fiduciary duty would impose a heavy cost burden on commission-based advisors (and therefore restrict access to financial products and advice for lower- and middle-income consumers) with data showing that CFP certificants, who are held to a fiduciary standard, actually earn more income on average while still serving lower-income clients

From there, we have several articles on investing in the wake of the Federal Reserve's recent decision to cut interest rates:

How the Fed's rate cuts will translate into lower interest rates on cash products like savings accounts, CDs, and money market funds (meaning cash may no longer be a 'free' source of 5%+ returns)
How markets have historically tended to fare surprisingly well following rate cuts, providing some comfort for long-term investors even in the midst of short-term economic uncertainty
Why there's little that investors can do today to take advantage of the recent rate cut (since it was already largely priced into markets) – but it may not ultimately matter much to investors with a longer time horizon, for whom a rate cycle is just a blip in the long-term picture

We also have a number of articles on Mergers & Acquisitions:

Why firms seeking to pursue growth inorganically via M&A will be more successful if they can first figure out how to achieve sustainable organic growth
What business owners (including RIA owners themselves, as well as business owners whom advisors serve) can consider when planning a business exit strategy, and why it's best to start planning several years before the date of the expected sale
How the headline "multiple" of an M&A deal can be misleading, since it may contain caveats like unrealistic performance-based incentives that make the true economics of the deal less attractive for the seller

We wrap up with 3 final articles, all about advisor dress and office decor:

Why the once-ubiquitous necktie has fallen out of fashion, even amid formal attire (although in the end it's not so much about what's in fashion as about what the advisor can wear to feel their best in front of clients)
How advisors use their office décor to project their unique attributes and spark conversations with clients, from personal mementos to an outdoor natural environment
Why even though advisors may feel most 'authentic' in casual attire, they may still find it easier to land clients (particularly if they have less experience or professional accomplishment) if they dress similarly to what clients may expect an advisor to wear

Enjoy the 'light' reading!

Why Pre-Tax Retirement Contributions Are Better Than Roth In Peak Earning Years (Even If Tax Rates Increase)

September 25, 2024 07:03 am 0 Comments CATEGORY: Taxes

Over the last 60 years, the top Federal marginal tax bracket has steadily decreased from over 90% in the 1950s and 60s to 'just' 37% today. However, with the national debt expanding rapidly, observers of U.S. tax policy are predicting that Congress will inevitably be forced to again increase tax rates in order to raise revenue and balance the national budget – and that the current regime of relatively low tax rates will prove to be a temporary phenomenon.

From a financial planning perspective, the seeming implication of a likely rise in future tax rates would be that, given a choice between being taxed on income today or deferring that tax to the future, it makes more sense to be taxed today when taxes are lower than they'll be in the future. For example, if taxes were expected to rise in the future, it would be better to contribute to a Roth retirement account (which is taxed on the contribution, but not upon withdrawal) than to a traditional pre-tax account (which is tax-deductible today but is taxable on withdrawal). As a result, there's a common line of thinking that people saving for retirement should avoid pre-tax retirement accounts entirely and contribute (or convert existing pre-tax assets) to Roth instead – regardless of which tax bracket they're in today.

While it's true that the top marginal tax rate has decreased dramatically since the mid-20th century, the difference in the actual tax paid by most Americans has been far more modest. Because not only were very few households actually subject to the 1950s-era top tax rates (which were triggered at the equivalent of over $2 million of income in today's dollars), but the long decline in nominal tax rates has also come with the elimination of many loopholes and deductions that have resulted in more income being subject to tax. Which means that it seems less likely that Congress will simply raise the marginal tax brackets in the future than that they will further reduce the benefits of current tax planning strategies – possibly including those of Roth accounts themselves!

Furthermore, focusing only on tax rates at a national level ignores the fact that an individual's own tax rate is likely to change much more during their lifetime based on their own income and life circumstances. In particular, those nearing retirement may see a large swing from the upper tax brackets as they reach their peak earning years, to the lowest brackets upon retirement, and eventually stabilizing somewhere in the middle once they start receiving income from Social Security and Required Minimum Distributions (RMDs). Which creates a tax planning opportunity to make pre-tax contributions while in the peak earning years, and then to convert funds to Roth after retirement – and as long as those funds can be converted at a lower tax rate than they were contributed, it still makes sense to contribute them to a pre-tax account.

Ultimately, while the idea that we currently live in an anomalously low-tax environment that will inevitably reverse course has its appeal, basing one's tax planning decisions around that assumption is still risky. Because even if taxes do creep up nationally, individuals who are already in the highest tax brackets today are still likely to be in a lower bracket upon retirement – which makes it better to contribute to a pre-tax account today and then withdraw (or convert) the funds at a lower rate later on!

#FASuccess Ep 404: The Evolution Of Specializing In College Planning To Work With Mid-Career Professionals Who Save, With Ann Garcia

September 24, 2024 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome everyone! Welcome to the 404th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Ann Garcia. Ann is a partner of Independent Progressive Advisors, an RIA based in Portland, Oregon, that oversees approximately $115 million in assets under management for 120 client households.

What's unique about Ann, though, is how she crafted a nationally recognized expertise in college financial planning, and the ways that specialization has evolved as Ann’s advisory business itself has evolved its focus on serving mid-career professionals balancing the competing priorities of saving for college and their own retirements.

In this episode, we talk in-depth about Ann’s path to becoming a recognized college planning expert, which started by becoming the in-house expert within her firm by researching answers to common client questions about funding college for their children, how Ann leveraged the emails she had already been sending to clients to answer their college funding questions to compose the initial articles of a blog on college planning (and how the blog’s singular focus on its college planning specialization allowed Ann to relatively quickly earn acknowledgement and hyperlink traffic back from national publications like the The New York Times), and how Ann has further leveraged this expertise and media exposure to publish a book and build an online course on college planning, allowing her to serve families that she knows need her help but aren’t necessarily a fit for her advisory firm’s core wealth management services.

We also talk about how Ann’s media appearances and college planning expertise have helped her attract clients and grow her firm by serving mid-career professionals balancing college planning with other financial goals (to the point where Ann and her business partner are navigating capacity constraints as they reach 120 client households), how Ann started out on her own as an advisor by buying the practice of a retiring advisor (retaining all but one of her clients in the process) and using that as the foundation to build the practice Ann ultimately wanted it to become, and how Ann’s decision early on in her career to take as many prospect meetings as possible, even if she knew they wouldn’t likely become clients, helped her get in the repetitions necessary to refine her communication and sales process to the point where now prospects who are a good fit almost always become clients after meeting with her.

And be certain to listen to the end, where Ann shares her advice for families going through the college planning process, including the importance of starting these conversations with kids early in their high school years to set expectations for how much the family can afford to pay for college in the first place, how Ann’s volunteer service as a NAPFA study group leader not only helped her connect with advisors with a wide range of experiences, but also enabled her to build a valuable network of COIs in her local community to support her clients, and why Ann decided to leave a firm that did offer her career growth and prestige opportunities to start out on her own instead… so that she could work exclusively with clients that she wanted to work with, who shared her own values.

So, whether you’re interested in learning about how to build nationally recognized expertise in a client niche, helping client families plan for college, or how acquiring a retiring advisor’s firm can jump-start an advisor’s own practice, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Ann Garcia.

7 New Lessons Learned Building A Fee-Only RIA From Scratch: Years 3–5

September 23, 2024 07:01 am 0 Comments CATEGORY: Practice Management

Starting a new firm can be a nerve-wracking time for an entrepreneurially minded financial advisor, as making the jump involves a significant amount of professional and financial risk. Nonetheless, after a year or 2 in business, some firm owners will find that their plate is becoming full and their available time is shrinking as they balance servicing current clients with marketing for new ones and also possibly managing staff. Which presents an opportunity for the firm owner to step back and assess whether they want to change any of the practices that they've established in their first years in business to make the next several years both professionally and personally rewarding.

In this guest post, Jake Northrup, founder of Experience Your Wealth, LLC, discusses 7 lessons he learned in years 3–5 of building his RIA and the changes he subsequently made to his service model, client base, and daily schedule, offering guidance to firm owners who may need to navigate some of the same challenges that come with scaling their advisory business.

When an advisor opens a firm, they might have little to no revenue but a good deal of time to manage their practice. Which means that when their first clients come on board, they might be tempted to overservice them to demonstrate the value that they can provide. Nevertheless, as a client base grows, maintaining such a level of service can take up more time that the advisor may have available, particularly given the added responsibilities of running their growing business. In Jake's case, after deciding that he was overservicing clients during the earlier years of his practice, he started scheduling fewer standard meetings and limited the number of after-meeting action items, freeing up his time and mental bandwidth for other activities to grow and run his firm.

In addition, he also found that he preferred working with certain types of planning clients over others, leading him to refine his niche and ideal client persona over time. While Jake had originally worked with equity compensation clients, current or aspiring business owners, and young professionals with student loans of $100,000 or more, he realized that he didn't care as much for student loan planning, which led him to make the difficult decision to transition 20% of his client base who primarily needed student loan planning.

Jake also learned key lessons on managing daily schedules. For instance, because he disliked the traditional 9–5 work schedule, he offered his team significant flexibility in deciding when they worked. However, this lack of structure actually put more pressure on team members because it didn't allow for sufficient collaboration time, leading him to implement a more standard work schedule that still offered some flexibility during the day and virtual coworking sessions for the team. For himself, Jake time blocked his schedule to ensure that he prioritized his personal life and wellbeing (e.g., taking vacations) and organized his workday to leverage the times of day when he has the most energy. He also conducted a "time audit" based on Dan Martell's 2-dimensional DRIP Matrix system to help him identify tasks based not just on their revenue potential but also their ability to energize and light him up.

Ultimately, the key point is that a new financial advisory firm owner's original vision for their practice is likely to change over time, which can create challenging decision points (e.g., when to hire new staff and whether to adjust the firm's ideal client persona). Nevertheless, as Jake has found, there are strategies to help firm owners mold their business to meet personal and professional needs, which can help them support greater wellbeing for themselves and a more sustainable business in the long run!