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Weekend Reading For Financial Planners (November 25-26)

November 24, 2023 01:38 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 FINRA has issued a proposal to allow broker-dealers to advertise hypothetical performance data to institutional and high-net-worth investors, which would bring the rules for broker-dealers largely in line with those for investment advisers, but also raises questions about the comparative roles and regulations for the two groups.

Also in industry news this week:

A recent survey indicates that about 98% of clients are at least somewhat satisfied with their financial advisor and that an advisor’s ability to provide peace of mind when it comes to finances is a key driver of this satisfaction
A study indicates that advisors can potentially boost client referrals by using client portals and by implementing financial psychology practices

From there, we have several articles on insurance planning:

While many clients might be tempted to enroll in a Medicare Advantage plan, doing so can create potentially costly financial risks
How seniors in several of the largest states will experience greater-than-average increases to their Medicare Part D premiums in 2024
How advisors can help clients minimize IRMAA surcharges and appeal to have them reduced under certain circumstances

We also have a number of articles on client communication:

The 7 communication practices that clients dislike the most and how advisors can avoid them
Why avoiding technical jargon can facilitate better prospect and client communication and tactics to help advisors communicate more clearly
Why empathy often beats sympathy for advisors when it comes to working with clients dealing with stressful situations

We wrap up with three final articles, all about the history of common financial products:

How the current system of employer-provided health insurance benefits can be traced back to wage controls imposed during World War II
How the private long-term care insurance marketplace has evolved over time, and why some states are considering stepping in to provide coverage to their residents
How the 30-year fixed mortgage became dominant in the United States and how it is impacting housing affordability today

Enjoy the ‘light’ reading!

Anatomy Of An RIA Sale, Merger Or Acquisition: 5 Important Legal & Compliance Steps

November 22, 2023 07:01 am 0 Comments CATEGORY: Regulation & Compliance

For all of the myriad ways financial advisors can structure and run their practices, firm owners generally encounter similar stages in the development of their firms. At some point, solo advisors will need to decide whether to increase their headcount, and an ensemble practice may later evolve into a centralized brand with significant enterprise value. The journey will be unique for each advisory firm owner, but one thing they all have in common is that they will eventually have to divest themselves of their ownership stake, either through a voluntary (or involuntary) dissolution of the business or through the full or partial RIA sale, with the latter naturally being the most economically ideal outcome.

In this guest post, Chris Stanley, investment management attorney and Founding Principal of Beach Street Legal, discusses in depth the various stages of buying, selling, and merging an investment advisory and financial planning business.

The initial step towards the eventual sale of an advisory firm requires the seller to identify a well-suited counterparty, which can be challenging given the population of well-funded serial acquirers who have a material advantage over firm owners, many of whom have likely never bought or sold a business. Once the seller and potential buyer are ready to get serious about a deal, the next step will be to sign a mutual Confidentiality and Non-Disclosure Agreement (CNDA), which contractually obligates the parties to keep any information that is shared (as the name implies) confidential.

From there, both parties can begin their respective preliminary due diligence. Once they are comfortable with the information and documents that have been shared, they can sign a Letter Of Intent that, while still high-level, provides enough detail about the proposed transaction for the seller to make an informed decision about whether to proceed. At that point, the definitive transaction documents are drafted, providing details around items such as equity and/or asset purchase agreements, a possible promissory note, and a bill of sale. Notably, these documents will serve as evidence in any subsequent disputes, making it imperative for both seller and buyer to fully understand the terms.

Once all that work is completed and both parties are satisfied with the terms of the transaction, it’s time to seal the deal and legally bind themselves by signing the contract. This moves the deal into the closing period, where the transaction can be publicly announced and any closing conditions must be met (such as obtaining consent from the seller’s clients to transition to the new owner). Only then can the new owner begin the work of integrating processes and systems and serving their new clients.

Ultimately, the key point is that the process of transferring ownership of an advisory firm is an immense undertaking and is almost always far more intensive and involved than most parties can imagine. However, given that all advisory firm owners will inevitably face the transfer (or dissolution) of their ownership stake, it’s important to consider what a future sale or merger might look like, as it’s far better for potential sellers to understand the steps involved well in advance rather than trying to figure it out on the fly!

#FA Success Ep 360: Growing To 100+ Clients With $100M+ AUM With Intentionality To Leave Time For Family, With Suzanne Powell

November 21, 2023 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Suzanne Powell Podcast Featured Image FAS

Welcome back to the 360th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Suzanne Powell. Suzanne is a Senior Financial Advisor at Meridian Wealth Management, an RIA based in Lexington, Kentucky, where she oversees approximately $110 million in assets under management for nearly 150 client households.

What's unique about Suzanne, though, is how she grew to more than $100M of AUM by intentionally organizing her schedule from month to month throughout the year, clustering client and nearly all of her prospect meetings in the Fall and Spring, allowing her to spend the remaining 6 months away from the office and with her family, while still not needing to spend much time on prospecting by leveraging (and almost fully automating her responses to) a steady flow of SmartAsset leads.

In this episode, we talk in-depth about how Suzanne has been able to drive client growth through the lead-generation service SmartAsset and dials the lead flow up or down depending on how busy her month is, the way Suzanne has set up a series of email and especially text message automations that allow her to convert a very high percentage of her SmartAsset leads into clients without needing to be available to immediately to inquiries reply herself, and how Suzanne has customized the targeting of which leads she buys from SmartAsset to ultimately generate nearly $70M of new assets over the past 5 years for less than $100,000 in cumulative marketing spend.

We also talk about how Suzanne structures her weekly meeting schedule to balance the need to have 5 to 6 meetings a day during her busy seasons while still having time to prepare for each meeting and complete follow-up tasks, how Suzanne uses a standardized client meeting agenda to stay on track and ensure each meeting fits within the allotted 1-hour time block, and how Suzanne leverages technology – including a large, retractable television monitor located next to her desk – to present and adjust her clients' financial plans during the meetings instead of presenting them with a physical plan (which saves essential meeting prep time during her busy meeting season).

And be certain to listen to the end, where Suzanne shares how she entered the financial advisory industry without a Bachelor's degree and how she earned her degree 20 years later by taking college courses while working full-time as an advisor and will now officially be able to become a CFP certificant, how bringing her own consistent and authentic presence has allowed Suzanne to convert prospects into clients several years after their first contact with her (because as Suzanne notes, the fact that someone doesn't become a client today doesn't mean they aren't still watching and keeping up with you!), and why Suzanne has taken an approach of not trying to work and save for retirement as a time to enjoy when she gets there, but instead has structured her busy-season-light-season approach to client meetings to allow for more space to enjoy trips and time with her family now, instead.

So, whether you're interested in learning about how to use a compressed meeting schedule to free up time away from your business, how to structure those meetings to effectively provide value to clients, or the tools Suzanne uses to automate the process of converting SmartAsset leads to viable prospects, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Suzanne Powell.

Optimizing Your Advisory Firm Website’s Process Page For Prospect Conversion

November 20, 2023 07:05 am 0 Comments CATEGORY: Marketing

As marketing and prospecting processes become increasingly digital for financial advisors, many prospective clients learn about advisors and what they offer not from an introductory call, webinar, or speaking event but from the advisor's website itself. Talking about money is often highly personal and can leave individuals feeling vulnerable, so choosing who to serve in such a high-trust role as a financial advisor can have immense stakes. Which is why it's crucial for websites to give prospects the ability to see themselves as clients, and to understand what beginning and maintaining an advisor-client relationship might look like. These steps can make a measurable difference in 'demystifying' an otherwise obscure process for a first-time prospect and help them move into action.

In this guest post, Mikel Bruce, CEO of TinyFrog Technologies, discusses building a prospect-focused Process page into an advisory firm's website as a crucial part of the sales funnel to get calls from prospective clients by clarifying the process, demonstrating an advisor's unique value proposition, and providing an easy way for prospects to 'raise their hand' when they're ready to act.

As a starting point, a well-built Process page performs 4 critical functions. First, it establishes expectations for the prospect around the process of becoming a client (including the type of calls involved, the onboarding steps, and how long it takes) and the general communication style of the firm. Importantly, keeping this overview simple, high-level, and prospect-focused is crucial. Second, a Process page should use language that helps prospects identify with and envision themselves as ideal clients of the firm. Third, the Process page should describe the specific (and likely niched) issues the firm addresses with its clients. Fourth, the Process page clearly shows how interested prospects can move forward in scheduling a consultation (or however a firm would like to meet with them) by offering easily accessible call-to-action tools (e.g., calendar and scheduling software tools built directly into the Process page). Process pages can also include a simple FAQ section to address questions about fees, working style, or the frequency of meetings that ongoing clients can expect.

Once advisors have created their Process page, they have a few ways to start optimizing it. First, they can build funnels that direct traffic to the Process page from different places on the website, with multiple user paths depending on the type of prospect and their pain points. Advisors may also want to A/B test various aspects of their pages – calls to action, for example, or different language – to see if one feature or another influences how many prospecting calls they get in turn.

The key point is that finding a trustworthy advisor with whom prospective clients can build a relationship is not a quick or easy process – but an advisor with an effective Process page can help prospects envision the unique value they can derive from engaging with the advisor, making it easier for them to understand the benefits of a long-term planning relationship and, ultimately, to decide to become clients!

Weekend Reading For Financial Planners (November 18-19)

November 17, 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 legislative efforts to prevent the enforcement of the Department of Labor's newly proposed "retirement security rule" have a cloudy future, as both Democrats and President Biden are opposing such efforts. Which suggests that, if enacted, the ultimate fate of the proposed regulation, like its similar predecessors, will likely be decided in the courts.

Also in industry news this week:

CFP Board has expanded the details it provides regarding disciplinary actions, expanding transparency around the disciplinary process for both CFP professionals and the broader public
A recent study suggests that advisory firms that hire specialists are able to offer more planning services and increase the amount of time advisors spend with clients, though doing so comes at a cost

From there, we have several articles on retirement planning:

Why higher interest rates and lower inflation have led to an increased initial safe withdrawal rate for retirees, according to one analysis
A group of retirement 'supernerds' critiques a recent claim that retirees can confidently use an 8% safe withdrawal rate
Why retirees might consider gifting while they are alive rather than waiting until their deaths to leave money to loved ones and charities

We also have a number of articles on tax planning:

How financial advisors can add value for clients by helping them make Qualified Charitable Distributions (QCDs) correctly
The range of tax-savings opportunities advisors can uncover when reviewing a client's tax return
A year-end tax planning checklist advisors and clients can use to ensure there will be no surprises when it comes time to file their 2023 tax returns

We wrap up with 3 final articles, all about managing wealth:

Why having significant wealth does not immunize an individual from worrying about money
How advisors can support clients who are entering a relationship with unequal wealth
Budgeting and account management tools consumers (and their advisors) can consider using following the upcoming shutdown of Mint

Enjoy the 'light' reading!

Kitces & Carl Ep 125: Scale Your Business, Leverage Yourself, Or Just Grow

November 16, 2023 07:03 am 0 Comments CATEGORY: Kitces & Carl Podcast

Kitces & Carl Ep Scale Your Business Leverage Yourself Or Just Grow

For many financial advisory firms that start out as solo shops, a single advisor-owner is often responsible for managing all aspects of running their practice, from handling all aspects of client service to prospecting for new clients. But as a firm's client base grows, the owner might find that they need to bring on employees to help manage the expanding workload. However, while it might be easy for business owners in this position to recognize that their firms are growing in terms of client revenue or other metrics, it can be harder for them to determine whether they are truly 'scaling' their business, as scaling involves a greater investment in both time and money to manage the firm's growth and pay a rising number of employees.

In our 125th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss what it actually means to scale an advisory business, why doing so necessarily requires more staff support, and how scaling a firm is different than merely finding ways to best leverage a firm owner's time.

As a starting point, it's important to recognize the difference between "growth" and "scaling" for a financial advisory firm. Growth in a firm implies an increase in revenue and/or profits accompanied by a proportional rise in the number of employees and other costs. For example, a firm might quadruple its revenue while also quadrupling the number of advisors and support staff it hires (and still have a growth in profits!). By contrast, scaling indicates that the firm is increasing its revenue at a faster pace than it hires, often by generating efficiencies. For example, a scaling firm might quadruple its revenue while only tripling its headcount, potentially leading to even greater profitability.

Notably, though, the effectiveness of a firm's scaling efforts isn't just about whether it needs to hire staff, but rather about how many new hires are needed to serve a growing client base. Because, unlike software companies where each additional unit sold requires little additional labor, financial advisory firms inherently require advisors and staff to maintain a certain level of human-to-human interaction and to develop and implement financial plans for their clients.

Ultimately, the key point is that while many advisors have successfully scaled their businesses, doing so requires a firm owner to hire additional employees and does not merely involve finding ways to better leverage their own time. Which suggests that advisors looking to grow their revenue without working more hours themselves face a choice: remain as a solo practice or small team but try to move 'upmarket' to serve a similar number of clients who are willing and able to pay a higher fee, or scale by growing the firm's client base (and employee headcount) as efficiently as possible!