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Weekend Reading for Financial Planners (Mar 23-24) – Practice Management Edition!

March 22, 2013 04:01 pm 2 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's issue is focuses on practice and career management issues, and starts off with some notable regulatory news, including a discussion of whether the landscape is shifting for potential adviser oversight as Congresswoman Maxine Waters may re-introduce SEC user fee legislation in the coming days that could put FINRA on the defensive, and some updated guidance from the SEC on the use of social media that should make it easier for advisors under an RIA to use social media.

From there, we have a long list of practice management articles, including a review of a recent Schwab survey that shows the primary desire of young advisors is to work with clients (sooner rather than later), a discussion by Angie Herbers about how to restructure your firm's org chart to facilitate associate advisors getting more face time with clients, some insights from Philip Palaveev about the importance of balancing both practice management research and good old trial-and-error to improve your firm, a look at some of the challenges to consider for brokers who wish to break away and transition to independence, and how to handle prospective situations where friends and family want a discount.

There are also two technology articles, including some guidance from Bill Winterberg about how to get a better return on investing in your website by going a step beyond just making it look prettier and being more mobile-friendly, and a discussion by consultant Craig Iskowitz about how client portals are changing and a look at the JunxureCRM ClientView platform in particular.

We wrap up with three articles: the first is from the Harvard Business Review blog, providing some guidance and advice about why you should not try too hard to fast-track your career; the second by Philip Palaveev suggesting that it's time to stop talking about "practice management" and start looking at "business management" instead; and the last is a nice list of productivity and anti-procrastination tips and techniques from Psychology Today - including a few common ideas, but also a few you may not have seen before.

Enjoy the reading!

Income Thresholds For Medicare Part B And Part D Premiums – An Indirect Marginal Tax?

March 20, 2013 11:04 am 54 Comments CATEGORY: Taxes

Since 2007, higher-income individuals and couples have been required to pay an additional income-related monthly adjustment amount (IRMAA) on their Medicare Part B premiums; a similar rule took effect in 2011 for Medicare Part D premiums. The ultimate impact can potentially be significant; although only a small number are affected, those at the highest income levels in 2015 (used to determine premiums in 2017) will see their Medicare Part B premiums rise from a base of $134.00/month up to $428.60/month. (Notably, though, those eligible for the "hold harmless" rules will have Part B premiums capped at $109.00/month for 2017.) In addition, Part D premiums will cost as much as an extra $72.90/month in addition to the base rate of the plan itself, under the IRMAA rules.

Although the higher premium amounts are a cost, because they're determined based on income and may change from year to year, they effectively equate to an "indirect tax" in the form of a higher burden on higher income levels. In turn, this means that the income thresholds for Medicare Part B and D premiums should itself be treated as a "tax bracket" that can be planned and managed around, as a form of proactive income tax planning. Strategies that might create income, or defer income resulting in a greater concentration down the road, must be evaluated for not only their outright tax consequences, but their indirect tax consequences in the form of higher Medicare premiums!

Behavior Change And Financial Planning – Whose Responsibility Is It When Clients Don’t Implement?

March 18, 2013 11:02 am 18 Comments CATEGORY: Client Trust & Communication

In financial planning, it's not just about having expert knowledge and wisdom to dispense to clients; after all, if clients don't ultimately implement the recommendations and change their behaviors, then their situations will not improve. In fact, many financial planners experience frustration when client's won't act, and view the failure of clients to implement recommendations as a sign that the people must be "bad" clients. The implication is that it may be more productive for planners to seek out "good" clients instead - those who act promptly and see the value in the planner and his/her advice.

Yet research from Dr. James Prochaska and his colleagues in the field of psychology suggests that in truth, the process of changing behavior - whether with respect to eating healthier and exercising more, ending a smoking habit, or making better financial decisions - is far more nuanced. Not only does it often take more than just one dose of good advice to bring about significant and lasting behavior change, but just because someone has a meeting with a professional does not necessarily mean that person is really even ready for change in the first place. Accordingly, an ideal process for working with clients may entail first understanding what stage of change the client is in, and then adapting the advice process to help the client move forward, from wherever he/she is at the time.

The most important implication, though, is that it may no longer be appropriate to simply view clients who don't implement as "bad" clients. Instead, a greater responsibility may rest upon the professional practitioner to help clients, regardless of where they happen to be in the process of change, to move forward. In turn, this means that it may be time for financial planning training to be improved, to develop the understanding and skillsets necessary so that planners can not only inform clients of what needs to be done to improve their financial situation, but also help motivate them to actually do it!

Weekend Reading for Financial Planners (Mar 16-17)

March 15, 2013 05:01 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's issue starts off with a recent survey from the Financial Planning Coalition that advocates for greater [fiduciary] regulation of advisers to protect consumers, and a review of the Senate confirmation hearing for prospective SEC chairwoman Mary Jo White, who pledged to act quickly on the proposed uniform fiduicary standard and increased oversight of investment advisers.

From there, we have a few practice management articles, including a look at how mega-RIA RegentAtlantic built a $2.4 billion AUM practice by creating a series of niche specialist planners under a single umbrella, an evaluation of all the ways advisors add value to clients in portfolios beyond just investment selection (e.g., helping clients stay the course, asset location, systematic rebalancing, etc.), an overview of the biggest tech trends coming out of the recent Technology Tools for Today conference, how to craft a good content marketing strategy, and a good list of ways in which advisors end out "wasting" their time on social media due to poor execution of the marketing strategy.

In additon, there are a couple of technical articles this week, including a look at how even index funds aren't really truly passive but that the essence of being passive can still be captured if the goal is to simply be the market and not beat the market, and an overview of some of the problems that arise when clients misunderstand what cash value life insurance is and how the cash value really works.

We wrap up with three articles: the first is by Bob Veres and looks at how financial planning may change in the coming decade; the second is a series of tips from Bill Bachrach about how to improve work habits in your practice to be more successful, and the last is an intriguing overview of some of the recent research about the link between money and happiness, which is much more nuanced than the traditional saying "money can't buy happiness" would imply. Enjoy the reading!

Will The New 3.8% Medicare Surtax Reinvigorate Non-Deductible IRA Contributions?

March 13, 2013 11:02 am 10 Comments CATEGORY: Taxes

The non-deductible IRA has long been a financial planning tool, albeit one that has become far less popular in recent years, given the tax preferences for both qualified dividends and long-term capital gains.

However, with the new 3.8% Medicare surtax on net investment income that took effect in 2013, a new incentive has emerged: even with ordinary income treatment, the non-deductible IRA provides a way to permanently avoid the surtax, which would otherwise apply to interest, dividends, and capital gains, as well as income from other tax-deferred vehicles like deferred annuities.

The strategy is especially appealing to those who are in the peak income years of their career, where a Roth conversion is unappealing due to the high current tax bracket (and other IRAs that will be aggregated), tax deferral is valuable, and a permanent avoidance of the 3.8% Medicare tax provides yet another added value... especially if the account will hold fixed income investments that were going to be taxed at ordinary income rates anyway.

Fortunately, the strategy is available regardless of how high income rises (and in fact, is best at high income levels), and while the value of the strategy is limited by the IRA contribution limit of $5,500 in ~~2013~~ 2015, several years of compounded efforts can still potentially produce a significant tax savings in the future!

Impressions From The FPA Business Solutions Conference – What Does Practice Management Mean To You?

March 11, 2013 11:07 am 2 Comments CATEGORY: Conferences

The FPA Business Solutions conference ran last week from March 7th to 9th in Chicago, Illinois. Located conveniently at the Westin O'Hare airport, the conference drew about 200 total attendees and just under 30 companies that provide financial planning or practice management-related products and services to advisors.

The practice management content followed a wide range, from how to view disruptive technology - or even become a disruptor! - to recognizing that for most firms, the real challenge is not the technology (whatever it happens to be) but how to really utilize it most effectively. No matter what type of practice, every advisor was able to find something of use in the lineup of sessions.

At the same time, though, the conference still is not as large as it could (and perhaps should) be. Attendance by exhibitors was spotty, with most key areas like financial planning and CRM software represented by a handful of providers, but only a handful. Some service providers, like custodians, were sparse, and other types - like broker-dealers - were not present at all. In addition, the turnout of consultants seemed light, despite the fact that practice management conferences are typically a great place to meet experts to help you solve the unique and particular problems of your own business.

Nonetheless, the reality is that FPA Business Solutions remains one of the only independent practice management conferences available for those who want to see something beyond whatever their custodian or broker-dealer serves up to them. From that perspective, the conference remains a stalwart of the financial planning space. Nonetheless, if the goal is to really see a wide range of products and services - and especially technology - dedicated to financial planners, FPA Business Solutions continues to face tough competition from the Technology Tools for Today event and the FPA Experience national conference.

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Weekend Reading for Financial Planners (Mar 23-24) – Practice Management Edition!

Income Thresholds For Medicare Part B And Part D Premiums – An Indirect Marginal Tax?

Behavior Change And Financial Planning – Whose Responsibility Is It When Clients Don’t Implement?

Weekend Reading for Financial Planners (Mar 16-17)

Will The New 3.8% Medicare Surtax Reinvigorate Non-Deductible IRA Contributions?

Impressions From The FPA Business Solutions Conference – What Does Practice Management Mean To You?

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Questions?