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#FA Success Ep 345: Differentiating With Institutions And Ultra-High-Net-Worth Investors As A Serious Investment Firm, With Lori Van Dusen

August 8, 2023 07:04 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Lori Van Dusen Podcast Featured Image FAS

Welcome back to the 345th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Lori Van Dusen. Lori is the CEO of LVW Advisors, an independent RIA based in Pittsford, New York, that oversees more than $2 billion in assets under management for over 450 small-to-mid-sized institutions and ultra-high-net-worth families.

What's unique about Lori, though, is how through her multi-decade career, she has built a deep expertise in the investment intricacies and complex issues faced by small-to-mid-sized institutions and ultra-high-net-worth-families with $10s of millions of dollars each, and has built an RIA that focuses on that serious investing expertise as a differentiator.

In this episode, we talk in-depth about how Lori built her in-depth investment knowledge while working with large institutions and endowments at wirehouse firms like Shearson Lehman Brothers and Citigroup Smith Barney, how Lori approaches portfolio management with an approach of "don't fix what isn't broken" and assumes most large portfolios she manages will only need incremental changes from what they've already got (which she identifies by stress testing every portfolio in Hidden Levers to identify where they need to be shored up further), and why Lori and her firm developed a governance calendar to systematize and scale their quarterly deliverables and check-ins with ongoing clients.

We also talk about how Lori dealt with being sued by Citigroup and the lengthy legal battle that ensued after she decided to break away and go independent (and how she ultimately won because she was diligent in following the Broker Protocols when leaving), how Lori learned the hard way about conducting her own due diligence on advisor platform after the RIA she decided to join upon leaving Citigroup didn't have the level of technology she thought they did to support her business which ultimately led to her deciding to leave them too, and how Lori dealt with the aftermath of deciding to leave the RIA she partnered with and launch her own RIA only to discover that choosing to transition twice made many of her institutional clients lose confidence and issue RFPs which ultimately led to billions of AUM leaving that Lori had to rebuild.

And be certain to listen to the end, where Lori shares why, even though she has experienced turmoil in her business, she tries to maintain a positive outlook because without these experiences, she would not have developed the specific expertise or become the advisory firm owner she is today, why, after dealing with a personal tragedy and not coming back to work for a year, Lori realized that she had finally built the team support she always wanted and decided to reward her loyal employees (and not just advisors) by offering a deferred compensation plan and defining a clearer pathway to equity ownership, and why Lori believes that younger, newer advisors would benefit from finding a mentor that can help them grow and being objective about their strengths and passions so that they can focus their career on what they are good at and love to do to build their own successful career.

So, whether you're interested in learning about how Lori spent a year right out of college learning SPIN sales techniques from Xerox's sales training which has shaped how she digs deeper into her clients' issues, how Lori dealt with her legal issues and moving her clients to a new RIA all while the economic crisis in 2008, or how Lori learned that when making big decisions, it is important to listen to your gut and to always make sure your values and culture are in alignment with what you want to achieve, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Lori Van Dusen.

The Latest In Financial #AdvisorTech (August 2023)

August 7, 2023 07:02 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the August 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, 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 estate planning platform Wealth.com has launched Ester, an AI-driven 'legal assistant' that uses machine learning to help advisors quickly review and extract the key information from clients' estate planning documents, as it joins FP Alpha in the competition to become 'Holistiplan for estate planning documents' – although given Wealth.com's core business as a document preparation service, Ester's success may be better measured by how many new clients it brings in to create new estate planning documents, than its overall market share as a standalone estate planning software tool for advisors?

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

Wealth Management GPT has launched as one of the first standalone AI writing tools for financial advisors, distinguishing itself from other tools that are integrated within already-existing AdvisorTech tools (which raises questions about how Wealth Management GPT will fit within an advisor's tech stack, and whether its integration capabilities will make it attractive as a standalone tool that can fill in the gaps of advisors' non-AI-enabled tools)
The new Kitces Research AdvisorTech study is out, which along with giving an overview of the current trends in the AdvisorTech marketplace, highlights the depth and breadth of advisors' challenges around integrating the components of their tech stack (which, as the research data suggests, may not just be a problem with the integration capabilities themselves, but with the usability of the software – an issue that could be addressed by better understanding of how and what advisors use integration for)
A new crop of 'digitally native' RIA startups are promising to disrupt the industry by building advisory firms on top of custom-built, all-in-one proprietary technology platforms – which raises questions about whether, like robo-advisors who made similar avowals in the past, they may find that a seamless technology experience isn't enough to persuade advisors to pay a significant portion of their revenue for access to it (or even to attract any more clients than they would have by using standard third-party technology instead of building their own platforms)

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

With advisors often facing a choice between recommending clients use a trust administrator from a bank who will try to compete for their investment management business, or an accountant or attorney who will likely cost the client more in fees, 2 new technology-enabled trust administration solutions have emerged in Valur and Luminary that promise to keep the advisor at the center of the relationship while offering tech-enabled trust administration at a reduced cost (though it remains to be seen how much advisors really want to be at the center, rather than focusing on just focusing on their traditional role of managing trust assets)
With Twitter faltering and other competitors waiting in the wings to replace it, it's natural to wonder whether we may see a reshaping of the 'Big 3' of social media networks popular among financial advisors – however, for reasons ranging from a lack of options to archive content on newer platforms for compliance to the fact that the other 2 major networks already fulfill most of the functions that advisors need from social media, it seems more likely that the Big 3 will ultimately just turn into the Big 2.

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 (August 5-6)

August 4, 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 credit ratings agency Fitch on Tuesday downgraded its assessment of the U.S. government's creditworthiness from an AAA rating to AA+. While the downgrade has made headlines and might be startling to advisory clients (particularly those with significant portfolio allocations to U.S. Treasury securities), some observers suggest that the factors cited by Fitch for the downgrade (from the growing national debt to the recent debt ceiling standoff in Congress) do not necessarily portend a default, at least in the near term.

Also in industry news this week:

RIA M&A activity fell in the second quarter compared to the same period last year amid rising financing costs, though continued private equity interest in the RIA space could help buoy deal volume going forward
According to a recent survey, RIAs appear to be taking a defensive approach toward the SEC's new marketing rule, with many firms changing their marketing materials to be in compliance with its provisions and few firms expanding their use of client testimonials and other opportunities offered by the rule

From there, we have several articles on advisory firm hiring practices:

A recent study explores what new advisors are looking for from their firms and how training and mentorship programs could play an important role in boosting advisor retention rates
Why crafting an applicant-centric job posting and casting a wide net across hiring platforms can help firms boost the number of qualified candidates they attract when looking to add talent
Tactics firms can use to attract a more diverse pool of job applicants and the potential business benefits of doing so

We also have a number of articles on retirement planning:

Why common advisor concerns about Monte Carlo analysis are more about the software tools they use rather than the technique itself
How advisors might be underestimating the longevity of their clients, particularly those who are healthy and have already reached retirement age
A research study suggests that "psychological ownership" and loss aversion could be driving many individuals to claim Social Security benefits early despite the potential financial downsides of doing so

We wrap up with 3 final articles, all about workplace culture:

How individuals tend to underestimate how much their colleagues, friends, and partners want their feedback
Why understanding and leveraging employee work style preferences can create more effective teams
How being intentional and flexible when designing workspaces can promote productivity and wellbeing

Enjoy the 'light' reading!

Planning For Adoption: Understanding Different Pathways And Their Costs, Tax Breaks, And Financial Assistance Available

August 2, 2023 07:03 am 0 Comments CATEGORY: General Planning

Adoption, the social and legal process in which an adult is formally made the parent of another individual (typically a child), helps fill a critical need in society: to unite children who need loving families with those who want to raise children. At the same time, adoption can be expensive, with costs that can add up to $70,000 or more. Which means that financial advisors can play an important role in adoption planning – helping clients strategically plan for the costs involved in the process, including accessing tax credits that can significantly defray these expenses.

The costs of adopting a child can vary significantly depending on the method of adoption. For example, one of the least expensive options (with an average cost of $2,744) is to care for a child in the foster care system with adoption as an ultimate goal (though sometimes the children being fostered end up being reunited with their biological family). Another relatively less-expensive option (at around $10,000 or more) is an independent adoption, where the birth and adoptive parents typically forgo the services of an adoption agency and instead work with a trusted attorney to complete the process (this option is commonly used when the birth and adoptive parents already know each other and have a good relationship). At the higher end of expenses are agency adoptions (with costs of $20,000–$70,000 or more), where parents looking to adopt work through an agency that provides matching and screening services, as well as international adoptions (estimated at $22,000–$32,000 or more), where parents adopt a child from another country.

The Federal government and some state governments provide tax breaks to help defray "reasonable and necessary" adoption costs. For instance, the Federal Adoption Credit provides a nonrefundable credit of up to $15,950 per child for adoptions in 2023 (claimed on tax returns filed in 2024), with no limit on the number of adopted children to whom this credit can apply. However, because the credit has MAGI phaseouts (generously ranging from $239,230–$279,230 for 2023), financial advisors can assist clients with income and expense planning to take full advantage of the credit. For example, if the adoptive parent's income is too high to claim the credit in the current year due to income phaseouts, the advisor may suggest deferring the payment of eligible adoption expenses to the next year after the adoption is finalized. Alternatively, shifting taxable income to a later year is another way to help clients avoid the loss of adoption tax benefits due to phaseouts for high-income earners.

In addition to taking advantage of available tax breaks, advisors and their clients can also consider other methods to defray the adoption costs. These include tapping employer-provided resources for adoption support, seeking out grants from charitable organizations, or, if funds are very tight, taking out loans or taking distributions from retirement plans (as the SECURE Act created a new opportunity for parents to withdraw up to $5,000 from their IRAs or employer-sponsored plans without the 10% early distribution excise tax following the birth or adoption of a minor child, though this must now be repaid within 3 years).

Ultimately, the key point is that because adopting a child is an expensive process, financial advisors can play an important role in helping adoptive parents plan for the costs involved and providing them with an understanding of the various tax breaks and other options that are available to defray these expenses, helping make adoption a reality for clients eager to grow their families!

#FA Success Ep 344: Scaling To $5B By Going Narrow And Deep Across Multiple Business Segments At Once, With Brad Barrett

August 1, 2023 07:04 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 344th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Brad Barrett. Brad is the Managing Director and Partner of One Capital Management, an independent RIA based in Westlake Village, California, with locations across the country, that oversees $5.3 billion in assets under management for more than 2,000 client households.

What's unique about Brad, though, is how he helped his large multi-billion-dollar firm develop what they call business segments… which are essentially multiple niche specializations, each with their own advisor leader and team, all built upon their centralized investment management process and similar private wealth target clientele, but done in a manner that allows the firm – and each of its advisor teams – to differentiate themselves and create new channels of direct clients to help scale and grow the firm organically.

In this episode, we talk in-depth about how developing business segments such as Fire and Police, Sports and Entertainment, and cross-border Canadians, helped Brad and his firm scale and grow because they could leverage having their advisor teams seen as specialized experts in many different channels without needing to fully commit the entire firm to just one, how Brad and his firm have further accelerated their growth by seeking out and acquiring niche practices to turn into business segments for One Capital (which means they pay an even higher multiple for niche practices than to acquire 'just' a profitable generalist financial advisor), and how Brad has built out his firm's media department by hosting radio programs, podcasts, and YouTube videos, focusing on a specific topic each week that affects clients in one of their business segments, and adjusting the length and depth of the conversation to fit each of the media channels he is using.

We also talk about how One Capital Management began offering its investment management service as a sub-advisory for other advisors (which created the centralized scale that then inspired the firm to delve deeper into its business segments approach to better facilitate the distribution of their investment strategies), how Brad and his partners regularly evaluate the firm's business segments to both ensure that they are continually providing the services their clients want and need and to ensure that they can continue to profitably grow and scale their business segments further, and how Brad and his firm structure their advisor compensation splits based on the overall profitability targets for each business segment.

And be certain to listen to the end, where Brad shares how he learned the hard way that finding the right partners in business endeavors is critically important (after he and his firm worked on an 8-month long project of creating a new vertical to the firm, only to find that the person they partnered with was only using the position to leverage a better job offer elsewhere), how Brad wishes he realized in the earlier stages of his career the benefits of going narrow and deep with specializations because he now understands that his fear of limiting himself in fact ended up generating greater opportunities in pursuing organic growth, and why Brad feels it is important for younger, newer advisors to set the expectation that it may take roughly 10 years to be at a place where they are no longer treading water… but to not be discouraged, and continually push to find the right firm and the right opportunities for them so that they can build a more successful career and get to that long-term level of advisor happiness and financial success.

So, whether you're interested in learning about how focusing on business segments helps Brad and advisors of the firm worry less about business development, how Brad creates and brands marketing content for his firm, or how Brad has restructured his schedule to give him more time to create even more branded content for his firm, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Brad Barrett.

A Roadmap For Solo RIAs Making Their First Hire

July 31, 2023 07:02 am 0 Comments CATEGORY: Practice Management

Many financial advisors who launch solo advisory firms do so with the intention of adding more employees once the firm becomes big enough to support them. And while conceptually it makes sense that the firm will be ready to hire its first employee at some point, in practice, there often isn't a lot of clarity about the right time to actually make an initial hire.

In this post, Kitces Senior Financial Planning Nerd Ben Henry-Moreland offers a framework that solo advisory firm owners can use to decide when their firm will be ready to make an initial hire, based on data from Kitces Research on Advisor Productivity and Advisor Wellbeing as well as industry benchmarking studies on advisor capacity.

There are 2 points in a firm's growth journey that can help solo advisors decide when to make their first hire. One is the advisor's 'capacity wall', which is the point where the advisor has reached their maximum client workload and needs to hire support in order to grow the firm further. Industry benchmarking data suggests that many advisors reach this wall somewhere between 30–40 clients, or $220,000–$320,000 in revenue. And while advisors will sometimes use their capacity wall as a guideline for when to hire, waiting until the advisor is near (or already at) their capacity – and therefore has limited time outside of their existing duties of serving clients and running the firm – to go through the process of searching for, hiring, and onboarding a new employee – can make hiring pretty painful, at least in the short term.

So on one hand, it usually makes more sense for solo advisors to hire well before they reach their capacity, but on the other hand, hiring too early (and before the firm has enough revenue to support the expense of a full- or even part-time employee) can cause a financial strain on the firm and the owner/advisor, whose take-home income is directly impacted by the decision to hire. This brings up the other key point in the firm's growth journey, which is the 'profitability wall': the amount of revenue a firm needs to earn to be able to hire an employee while still adequately compensating the owner/advisor. This amount varies based on the firm owner's goals, but a rough yardstick can be the amount the advisor would earn if they were working as an employee at another firm. Adding this number to the cost of compensating the new employee (including salary plus payroll tax and benefits), plus the firm's other overhead expenses, gives the firm's profitability wall and an estimate of the point in the firm's growth where it can make an initial hire.

Putting these 2 points – the profitability and capacity walls – together gives an estimate of the advisory firm's 'hiring zone', which firm owners can calculate to find the range (in dollars of revenue) where it makes sense to hire a first employee. Furthermore, it can also help firm owners decide whether it even makes sense to hire to begin with, because a firm's profitability wall that is too close to, or higher than, its capacity wall (meaning that the firm owner 'needs' to make a hire before their firm even has the financial ability to do so) can indicate that the firm owner should instead focus on boosting their capacity – either by streamlining their processes or increasing their fees – before focusing on hiring outside help.

The key point, in the end, is that while each firm owner has their own individual roadmap to hiring, they will inevitably need to navigate between the profitability wall and the capacity wall in order to make a smooth transition from a solo firm to one with 1 (or more) employees. And rather than guessing when the right moment to hire will arrive, taking some time to run the numbers in advance can help advisors plan out the hiring process that will work best for them – which should make both the advisor and the new employee happier in the long run!