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Asking The Toughest Kinder Question: How To Help Clients Explore Regret Productively And Take Action

September 14, 2022 07:04 am 0 Comments CATEGORY: Client Trust & Communication

When it comes to helping clients clarify their most important financial planning goals and priorities, many advisors may find it difficult to facilitate the insightful conversations necessary to guide clients through an exploration of these values. Clients may be tempted to postpone having such intimately personal discussions, and advisors may not be certain how to frame the discussion so that it is both productive and comfortable for the client. But by first establishing trust and guiding the client through an exploration of what their ideal future looks like, advisors can ask specific questions that help the client identify what specifically is most important to them in their lives right now, that will be most impactful in helping them structure their ideal future.

George Kinder, the father of Life Planning, developed a 3-question discovery process designed to help advisors achieve this by helping clients assess their life values and identify their most important personal priorities. While the first question asks clients to explore what their ideal future looks like (as they deepen a shared trust with their advisor, co-creating a future vision together), the second helps clients imagine the future goals that would be needed to realize their ideal future. The third and final question encourages clients to examine what they would need to do right now, in the present moment, to ultimately achieve their most important goals.

While the first 2 Life Planning questions are forward looking, asking the client to contemplate aspects of their future selves, the third question requires clients to consider what feelings they would have about the future they just imagined if they were told they only had 1 day left to live. What would they miss? What did they not get to be? What did they not get to do? Notably, the question refrains from using the word “regret”, which can have a negative association that, for many people, may discourage them from having an open and positive exploration of their feelings. Despite this, the client’s regret is really the essence of what is being examined by this question, as a way to identify the gap between the client’s dream of a perfect future and the reality of their current situation.

Importantly, because regret can be a powerfully negative emotion that can raise very uncomfortable feelings for the client, it is critical that the third Life Planning question be asked carefully, with unconditional positive regard and empathy for the client. To do this, advisors can offer their support and guidance as a facilitator, responding in a nonjudgmental manner to the client’s responses. In addition, asking thoughtful and engaging follow-up questions can keep the conversation flowing and allow the client to dig deeper into their underlying motivations. While planning recommendations should not be made during the discussion of the 3 Life Planning questions (which is time devoted for the client to explore and imagine their future dreams), the responses and insights that are shared during the process can eventually be used to develop a meaningful and actionable financial plan for the client.

Ultimately, the key point is that George Kinder’s 3 Life Planning questions can help the advisor and client better understand what the client genuinely values most and what they can start doing now to bridge the gap existing between where they currently are and where they want to be in the future. And by helping clients visualize the path they need to take with clarity and objectivity, advisors can provide the support and guidance to help them realize their most meaningful futures!

#FA Success Ep 298: Navigating The Evolution From Broker-Dealer To RIA Platform Leadership, With Carolyn Armitage

September 13, 2022 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 298th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Carolyn Armitage. Carolyn is the President of Thrivent Advisor Network, an RIA platform that offers partnership and affiliate models for financial advisors and oversees $6.5 billion in assets managed by over 20 affiliated independent advisor businesses.

What's unique about Carolyn, though, is how she quickly rose through the corporate ranks in the financial services industry to leadership positions for several major broker-dealers, where she developed and implemented strategies to facilitate their transition from brokerage to advisory models… giving her a unique first-hand perspective over the past several decades on the industry’s ongoing evolution from brokerage to RIA platforms.

In this episode, we talk in-depth about how Carolyn grew her career to become a leader in the financial services industry and made her mark by becoming an established executor for major broker-dealers that wanted to shift away from solely commission-based models and add advisory models, the paths that Carolyn navigated at companies like H.D. Vest and Financial Network to improve upon or outright establish new advisory platforms within their existing brokerage businesses, and how in three short years, Carolyn built a new training and development platform for LPL’s largest advisors – helping them recruit and retain advisors, create better compensation packages, and even build succession and continuity plans – to the point that the program was so successful LPL had to de-emphasize and eventually disband the program just to avoid creating an over-concentration of growth in that subset of firms Carolyn had developed!

We also talk about how, while Carolyn was first working in the broker-dealer space, it was the opportunity she received to explore and analyze the newly emerging advisory side of financial services that led her to truly appreciate the benefits of financial planning for not only the client relationship but also the steady revenue streams it created for advisory firms, how Carolyn faced head-on the internal setbacks and challenges that arose as she was building new kinds of advisory platforms within very large firms that were sometimes resistant to change, and why Carolyn was ultimately inspired to join and lead Thrivent Advisor Network because of their transparency, ethical standards, and their commitment to their mantra of living generously by dedicating volunteer time (and hundreds of millions of dollars in donations) to help improve the communities they operate in.

And be certain to listen to the end, where Carolyn shares why she believes that financial advisors can benefit from focusing on intentionality when managing their business so that they can create space for themselves to concentrate on the parts of the business they love (like working with clients rather than being entrenched in the operational demands needed to scale and grow their businesses), why Carolyn believes in the importance of truly taking the necessary time to find the right employees that align with the values of the firm and can help build a positive work culture, and how Carolyn got comfortable to view her own mistakes and failures in business as learning opportunities to reflect and improve… and now tries to instill that belief within her team so they can feel safe in a nurturing environment where they have room to experiment and ultimately help the firm grow.

So, whether you’re interested in learning about how Carolyn navigated her career path through leadership roles as the financial services industry evolved and shifted toward adopting advisory models and focusing on financial planning, how Carolyn helped broker-dealers adopt RIA frameworks and enhance how they partner with financial advisors, or why Carolyn decided to lead an advisor network that aligns better with her values and focuses on living generously, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Carolyn Armitage.

A 5-Step Prospecting Process To Sell Your Advisor Value With Greater Confidence And Trust

September 12, 2022 07:07 am 4 Comments CATEGORY: Practice Management

For many financial advisors, choosing their profession was based on a genuine desire to help others achieve their financial goals. Yet, while these advisors recognize the importance of business development to grow their firms, they are also very often intimidated by the process of adopting sales techniques to convert leads to clients. It can feel stressful at best and disingenuous at worst. Sometimes, advisors can fall prey to the ‘scarcity’ mindset, which compels them to take any and all prospects who consider engaging them, regardless of whether there is a good fit. This inevitably leads to unsatisfying (and even unprofitable) client relationships and resentment for the sales process itself, making it harder to serve the firm’s full client base. These factors can understandably create a crisis of confidence for advisors, who struggle to market themselves and showcase the value they offer in a genuine manner, despite the business imperative to do so.

In this guest post, Stephanie Bogan, Founder & CEO of Limitless Advisor Coaching, explains that while the ability to sell with confidence is one of the most important skills advisors can develop on their path to success, there are ways for advisors to build their confidence through a ‘no-stress’ sales process that can help them tell their story and quote their fees without apology or hesitation. And by using such a process, advisors will have a systematic way to identify the right clients for their practice and filter out the wrong ones.

Implementing a no-stress sales process involves five steps: 1) the initial inquiry; 2) a brief ‘Learn More’ call to screen prospects for fit; 3) the Discovery Meeting to collect further insight into the client’s needs and goals, clarify expectations and next steps; 4) preparation of a 1-page financial plan that reviews the client’s situation and that defines the value the advisor can add through the relationship; and 5) the 2nd meeting to present the plan, review recommendations, quote a fee, and, if the fit is right, extend an offer.

Core to the no-stress sales process is establishing trust equity with the prospect. This entails the advisor explaining that they deliver their clients’ desired outcomes and that throughout the relationship, the advisor will see, hear, and understand the client’s goals and needs. The end result is that prospects will have a naturally implicit understanding that if they engage with the advisor, the advisor will be there to help them solve their problems. Importantly, using the no-stress sales process can help advisors seamlessly transmute their knowledge of the value that they can deliver to prospects so that they, too, perceive that value.

Ultimately, the key point is that the no-stress sales process offers advisors a structured approach to help them genuinely convey their expertise, credibility, and character while expressing their value with confidence to attract the right clients for their firm. And instead of making advisors shy away from the often-dreaded fee conversation, this process can help them feel more confident (and even convince prospects) that the fee they charge is an honest reflection of the value they offer!

Weekend Reading For Financial Planners (Sept 10-11)

September 9, 2022 02:00 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that as Millennials grow their wealth, they could be increasingly turning to financial advisors for guidance. But amid competition from large asset managers and broker-dealers, advisors can consider how they can shape their service offerings and fee structures to attract Millennials and build client relationships that could last for decades to come.

Also in industry news this week:

As broker-dealers increasingly offer fee-based planning services, RIAs are responding by enhancing their own service offerings, and offering alternative fee structures to differentiate themselves from the competition
More states are adopting continuing education requirements for investment advisers, with three states establishing rules that must be followed by the end of 2022

From there, we have several articles on practice management:

A new company aims to train the next generation of planners and provide a valuable outsourced service to advisory firms
Why creating internal career paths and considering fully remote workers could help firms thrive in the current tight labor market for advisor talent
What advisors are doing to maximize the efficiency of their firms without bringing on additional staff

We also have a number of articles on retirement planning:

How the introduction of new ‘modern’ tontine products could provide retirees with a new way to mitigate longevity risk
The options available to clients who want to reverse their decision to start claiming Social Security benefits
How sequence of return risk can affect accumulators as well as retirees

We wrap up with three final articles, all about time management:

Why scaling your time can be more effective than trying to stretch or save it
How exercise can not only extend your lifespan, but also increase the quality of those years
How the ‘money value of time’ can help explain why certain periods of time are more valuable than others

Enjoy the ‘light’ reading!

Kitces & Carl Ep 94: Is Being A Financial Planner A Service Business Or An Intellectual Property Business?

September 8, 2022 07:05 am 0 Comments CATEGORY: Kitces & Carl Podcast

For many financial advisors, the most valuable part of what they offer comes down to the financial advice that they give, whether it be the expert guidance they give to a certain niche or a unique point of view that presents unique insights to an individual client. However, the advice given to clients is not always the only useful offering provided, as the process through which financial advisors deliver their advice can also be an important part of their value proposition. As while most financial planning advice may ultimately be modeled on similar principles, the process by which a client's situation is analyzed and how the advice is delivered can be vastly different depending on the advisor’s particular areas of expertise, niche, firm size, standards of conduct, and other differentiating factors.

In our 94th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how an advisor’s process can be considered a form of intellectual property, and how advisors can market themselves not only as providers of client-specific financial advice, but also as developers of systematic and effective processes used to deliver their advice.

Marketing a service process as intellectual property can be of great value to an advisor – not just as a business venture itself, but also as a way to articulate a firm’s ethos and brand, and even as a channel for the advisor’s own personal development. While creating blogs, books, podcasts, and other types of creative work can be instrumental in publicly affirming the brand identity of what an advisor is creating, it can even help the advisor grow personally and professionally. Clarifying and formalizing what their process is can help generate leads that are drawn to the unique aspects of the advisor’s process, and thinking through best practices and the reasons for implementation can encourage advisors to understand and articulate their most important personal priorities, helping them to identify their own career goals and trajectories.

Importantly, creating a marketable financial planning process can be intensely time-consuming work and can require substantial creative energy, which means that consistency and perseverance will be key to (eventually!) developing a valuable offering for consumers. In the end, though, advisors who commit to a regular schedule to create their intellectual property offering – regardless of what form it takes – will more likely be successful in creating a relevant and functional tool, and at the same time may come away with a deeper understanding of their own character and values!

Tax-Loss Harvesting Best Practices (And How To Scale It Across A Client Base)

September 7, 2022 07:01 am 7 Comments CATEGORY: Taxes

Tax-loss harvesting – i.e., selling investments at a loss to capture a tax deduction while re-investing the proceeds to maintain market exposure – is a popular strategy for financial advisors to increase their clients’ after-tax investment returns. For many, however, tax-loss harvesting remains somewhat more of an art than a science: Because the value of harvesting losses is so dependent on an individual’s own tax situation, there is no single strategy that can be implemented across an entire, diverse client base. And to complicate things further, when it is decided to go ahead with tax-loss harvesting, there are numerous considerations involved to ensure the strategy is carried out correctly and avoids running afoul of the IRS’s wash sale rules (which could disallow losses and negate the value of the strategy altogether).

But because tax-loss harvesting can be so valuable in certain situations, having a framework for deciding which clients could be good candidates for tax-loss harvesting and a process for executing the strategy properly can be beneficial for advisors. And given the challenges of scaling the strategy across dozens or even hundreds of clients, a key consideration when developing these best practices should be how well they can be systematized and repeated whenever the advisor reviews client accounts for tax-loss harvesting opportunities – a factor which can be aided with technology, including software tools that many advisors already use regularly.

For example, advisors who use a Customer Relationship Management (CRM) tool may be able to use that tool to narrow down the list of clients to those who are good tax-loss-harvesting candidates, such as those in higher tax brackets (who are likelier to realize more value from deducting capital losses). From there, the advisor’s financial planning software may be able to model the client’s future tax rate when the investment is ultimately sold, allowing the advisor to estimate the long-term value of harvesting the loss today. Finally, many software tools for trading and rebalancing may incorporate tools for tax-loss harvesting, such as checking for potential wash sale violations and allowing the advisor to designate replacement securities. With these three tools (i.e., the advisor’s CRM, planning software that models future tax scenarios, and trading and rebalancing tools), advisors can build a systematic start-to-finish process for tax-loss harvesting – and because all three are already core parts of many advisors’ existing technology stack, doing so might require no additional investment in technology!

The key point, however, is that – like many tax planning strategies – tax-loss harvesting requires at least some individual attention to each client’s tax situation to ensure it is the right strategy for that client. Additionally, there are many considerations both in deciding when to harvest losses and in executing the strategy, which makes it all the more important to have a repeatable process to ensure that nothing gets missed.

At a minimum, advisors can consider using a standardized tax-loss-harvesting checklist to reduce the likelihood of overlooking any important information. And because there is often pressure to act fast when markets are down and when tax-loss harvesting opportunities present themselves, having a well thought-out framework for harvesting losses can help advisors focus more of their attention on the clients who will get the most value from it (and fully deliver on that value in the end!).

#FA Success Ep 297: From $0 To $70M In 2 Years By Leveraging Facebook Groups To Share Authentic Expertise, With Andy Panko

September 6, 2022 07:03 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 297th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Andy Panko. Andy is the owner of Tenon Financial, a virtual independent RIA that oversees $70 million in assets under management for 43 retired client households.

What's unique about Andy, though, is how, shortly after launching his practice, he created a Facebook group so that he could share his expertise directly with the types of clients he wanted to serve… which unexpectedly became so successful, that in just two short years, he reached the client capacity goal he set out as he went from $0 in AUM to $70 million!

In this episode, we talk in-depth about how, after seeing little success in his initial ‘traditional’ marketing efforts like seminars and creating profiles on advisor referral sites, Andy decided instead to create a Facebook group focused on “Taxes In Retirement” (so that he could more directly engage with and demonstrate his expertise to the types of clients he wanted to work with), how Andy built the initial list of members for his Taxes In Retirement group to gain enough momentum that Facebook’s algorithm would make his group more visible to sustain its growth in bringing new prospects, and how Andy’s Facebook group is still gaining momentum but he has purposefully decided to not take on any more new clients (so that he can still have capacity and flexibility to serve his current clients) and instead has dedicated a page on his website with a list of advisors that have similar focuses so that they can share in the prospect funnel that he created.

We also talk about how, after listening to industry podcasts on his commute while working in the traditional corporate finance world, Andy’s eyes were opened to the possibilities of financial planning which led him to pursuing his CFP marks (along with some other designations) before he ever quit his old job to launch his new firm (to ensure he could hit the ground running when it was time), how, after seeing how his mother’s advisor was not helping her gain the most she can from her Social Security claims, Andy decided to take it upon himself to learn more about retirement planning to help her, which led to an aha moment for him as he realized he truly enjoyed that type of financial planning and would focus his own practice on helping retirees with value-added tax planning, and how once Andy knew what type of practice he wanted to launch, he intentionally structured it with a flat fee model so he could clearly project what his revenue would be, and then used his business projections to determine the target of how much savings he would need to set aside to cover the first three years while his client base got off the ground and ramped up.

And be certain to listen to the end, where Andy shares how, even though he intentionally set out to be a solopreneur for the flexibility and control, he is looking to fill the gap of camaraderie and brainstorming that he misses from when he was part of a larger firm, how Andy didn’t realize he was inadvertently creating a virtual practice by gaining new clients through his Facebook group but decided that it was a positive for him as he can maintain a more casual appearance and approach with his clients, and why Andy believes that though it may take time and be difficult to achieve, it is important for those starting in the financial services industry to continually work hard to find the right position for them that suits their needs and aligns with their values to ensure they can build a longer, much more fulfilled career.

So, whether you’re interested in learning about why Andy decided to become a financial planner after seeing the benefits it provides to clients and their financial futures, how Andy leveraged the connections he made through his Facebook group to turn prospects into clients, or why Andy decided to add a tax planning focus to create a stronger value proposition for his clients, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Andy Panko.

The Latest In Financial #AdvisorTech (September 2022)

September 5, 2022 07:06 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the September 2022 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 VRGL (pronounced “Virgil”) has raised a $15M Series A round to scale up its tool that can scan investment account statements and automatically extract the available information about their holdings to analyze the prospect’s performance, risk, diversification, fees, and taxes, with the potential to greatly expedite the process of developing an investment proposal with the advisor’s recommendations for improvement.

The deal comes on the heels of similar “data gathering extraction tools” like Holistiplan (which scans tax returns) and FP Alpha (which scans estate planning documents), as more advisor technology solutions recognize that the real opportunity is not trying to develop “artificial intelligence” to replace financial advisors, but instead can make it easier for advisors to collect all the information they need to better analyze and make their own recommendations to prospective clients… effectively helping advisors to give better advice, rather than just trying to make it faster!

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

Farther raises a $15M Series A to try to make a more efficient back-office for advisors to actually be able to take home a 75% payout
FMG acquires Vestorly to map its curation capabilities onto FMG’s existing digital marketing tools
FutureProof and XYPN LIVE announce the finalists for their FinTechX Demo and AdvisorTech Expos to highlight new advisor technology innovation

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

SmartRIA launches an integration with Kitces.com to help RIAs manage the new IAR CE obligation rolling out from NASAA
Orion (re-)partners with Apex Clearing with an integrated financial-planning-and-digital-account-opening experience for younger clients with smaller accounts.

In the meantime, we’re also gearing up for several new updates to our new Kitces AdvisorTech Directory, including Advisor Satisfaction scores from our Kitces AdvisorTech Research and Integration scores from Ezra Group’s research!

And be certain to read to the end, where we have provided an update to our popular “Financial AdvisorTech Solutions Map” 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 (Sept 3-4)

September 2, 2022 02:04 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, in its newly released draft strategic plan for 2022-2026, the SEC has indicated that the enforcement of Regulation Best Interest’s requirement that brokers act in their clients’ best interests when making an investment recommendation will be a priority going forward. Combined with the private arbitration cases that have been filed related to Reg BI, such enforcement in the years ahead would demonstrate the consequences of running afoul of Reg BI for broker-dealers and their representatives.

Also in industry news this week:

How enforcement of FINRA Rule 4111 could further the decline in the number of broker-dealers and registered representatives
A study suggests that some fund companies are misleading investors by changing their benchmark indices to make their performance look better

From there, we have several articles on investments:

How Morningstar plans to simplify its rating system amid continued concerns about its effectiveness
Why private placement life insurance policies could become an increasingly popular option for ultra-high-net-worth clients
Why market capitalization might not be the most accurate way to value the cryptocurrency market

We also have a number of articles on retirement planning:

New research suggests that while the average senior will amass hundreds of thousands of dollars in health care expenses in retirement, the net cost they have to pay is not nearly as high
The upcoming debut of a new tontine product could add another option for advisors looking to mitigate their clients’ longevity risk
The variety of ways individuals approach retirement, from choosing where to live to finding purpose in their daily lives

We wrap up with three final articles, all about mental frameworks:

How operating from a set of ‘big beliefs’ can help advisors assess the needs of individual clients
Why it might be more helpful to compare your current circumstances to alternate versions of your own life than to compare yourself to others
An advisor’s 41 tips for health, wealth, and happiness

Enjoy the ‘light’ reading!

Biden’s Student Debt Relief Plan: Eligibility, Income Limits, Payment Freeze Extension, And More For Advisors!

August 31, 2022 07:03 am 5 Comments CATEGORY: Debt & Liabilities

The Biden administration’s long-anticipated Student Loan Debt Relief plan was finally announced on August 24, 2022, and with it came a flurry of attention on the proposal’s centerpiece of providing $10,000 of student loan forgiveness for Federal student loan borrowers (and $20,000 for borrowers who received a Pell Grant for college) with income levels under $125,000 for single borrowers and $250,000 for married couples.

But student loan forgiveness is just one part of the administration’s plan for student debt relief. In addition to the $10k – $20K of potential forgiveness, the plan also provides another (final) extension to the pause on Federal student loan payments until December 31, 2022; a push for borrowers who may be eligible for the Public Service Loan Forgiveness (PSLF) Waiver to apply for the waiver before its expiration on October 31, 2022 (along with some significant changes to the eligibility requirements for PSLF going forward); and the creation of a new Income-Driven Repayment (IDR) plan that would lower monthly payments and potentially reduce the time period required for loan forgiveness for eligible borrowers.

While parts of the administration’s plan will happen automatically (for instance, many borrowers with IDR plans who have already recertified their income with the U.S. Education Department, unlike other borrowers who have yet to do so, will be automatically eligible for their loan forgiveness), other aspects may require more action. For example, borrowers who have made payments on their loans since the pause on student loan payments started in March of 2020 may want to request a refund of those payments – because although a refund will end out increasing the borrower’s loan balance, it could also result in a greater amount of debt forgiven, while allowing the borrower to simply ‘keep’ their refunded payments!

Consequently, for financial advisors, an in-depth understanding of the details of the Biden administration’s student loan relief proposal will make it possible to give valuable advice to their clients on how these changes will work in real life, how they will interact with the client’s broader financial circumstances, and how to maximize the potential benefits available.

For clients with student loans, advisors can help them understand how much debt they might qualify to have forgiven, maximize any forgiveness routes that may be available to them, and plan for how student loan forgiveness will impact their longer-term financial picture. Additionally, for clients eligible for PSLF, advisors can help ensure they are receiving proper credit for their service under the new Waiver’s provisions, and potentially apply for credit under the Waiver before its expiration date on October 31, 2022. And for clients on IDR plans, advisors can help their clients determine their eligibility for the new IDR plan and how it would compare with their existing IDR plan. Finally, for all Federal loan borrowers, advisors can help their clients prepare for the impact on their cash flow of student loan payments resuming in January 2023 after a nearly 3-year moratorium on payments and interest.

The key point is that because the Biden administration’s proposal will have such broad-reaching effects on borrowers with Federal student loans, the plan represents a great opportunity for advisors to connect with clients who have such loans (or who have family members with student loans). Ultimately, nearly every Federal student loan borrower may be affected – hopefully positively – by at least one of the plan’s provisions and, given the impact of student loans on the situations of so many individuals (both in terms of financial status and psychological well-being), advisors can provide immeasurable value in guiding clients through these changes!