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Weekend Reading For Financial Planners (August 12-13)

August 11, 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 the Massachusetts Secretary of the Commonwealth has launched an investigation into how investment firms are using artificial intelligence-enabled technologies, echoing concerns expressed by the SEC that these tools could be used to put the firms' interests ahead of their clients if the methods of the developers who create the tools and the 'training' the AI goes through is not scrutinized sufficiently.

Also in industry news this week:

A bill that would allow funds in 529 plans to be used for postsecondary credentials, including the CFP certification, is gaining significant bipartisan support in Congress
A recent survey identified key topics on which financial advisors and investors have mismatched views, from expected investment returns to how they view risk

From there, we have several articles on investment planning:

Why ESG investing appears to be facing skepticism from an increasing number of financial professionals
How advisors can best support clients interested in Biblically Responsible Investing
How fractional share investing has evolved form a tool for individuals with low account balances to a key enabler of direct indexing strategies that are valuable to a wider range of clients

We also have a number of articles on advisor marketing:

How taking an intentional approach can help advisors win more referrals from Centers Of Influence (COIs)
How 'taking a walk in the shoes' of key COIs can help advisors better explain their value proposition to these partners and generate more referrals
A 3-step approach that advisors can use to build relationships with COIs and get exposure to their clients

We wrap up with 3 final articles, all about professional growth:

Why making tough decisions now, rather than putting them off, can ultimately benefit a firm's bottom line, as well as its clients and staff
5 pieces of time-tested advice that can help advisors improve their productivity and client service
Why some advisors are choosing to turn away from serving high-net-worth clients

Enjoy the 'light' reading!

Kitces & Carl Ep 118: (Re-)Building Your Financial Advisor Identity When You Dial Back Working With Clients

August 10, 2023 07:03 am 0 Comments CATEGORY: Kitces & Carl Podcast

Kitces Carl Ep Re Building Your Financial Advisor Identity When You Dial Back Working With Clients

Financial advisors who have established and successfully built up their advisory firms over several years can often go through many stages of firm development, requiring them to hire staff and additional advisors to manage their growing clientele. When a firm becomes large enough, though, the firm owner may be compelled to consider stepping away from their long-standing work as a client-facing financial advisor into a more pronounced business leadership role to manage the growing business. Yet, for owners who have invested years into developing their skills as financial advisors working directly with clients, considering a new professional identity in a non-advisory leadership position with little client interaction can be challenging.

In our 118th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisory firm owners can manage the transition from a client-facing role into a firm leadership position and how they can come to terms with their new career identity in the process.

While there are many business resources available to help advisors address the tactical perspective of making a transition into a leadership role, a fundamental challenge that advisors must also negotiate is the identity shift that tends to come with leaving a long-time position working with clients, as many wonder if they would still be considered a financial advisor if their primary function is to oversee other advisors serving their clients… and they no longer work with those clients directly themselves?

Even though it can be difficult for firm owners to imagine who they will become in their new role, the transition can become easier by understanding and defining what their new responsibilities will entail and acknowledging that, even though they may no longer be working directly with clients, they will still have a substantial impact on how their clients are served (as becoming CEO or president offers firm owners the opportunity to shape how clients are served by managing those who will be serving clients). Additionally, having a clear and detailed vision of what their new role involves (perhaps created with the support of other advisors who have navigated similar trajectories) will help advisory firm owners reconcile the change in their professional identity by connecting how their current responsibilities relate to, and perhaps will even support their new role.

Ultimately the key point is that transitioning away from a client-centric role that a firm owner has dedicated years to develop can be a challenging process, but investing time to visualize the impact and change the firm owner will make (including the responsibility of charging their staff to uphold a standard of excellent client service) can help them appreciate the new opportunities – and accept the new identity – that will come with the new role!

IRS Notice 2023-54 Provides Welcome Relief To 10-Year Rule Beneficiaries And Retirement Account Owners Born In 1951

August 9, 2023 07:02 am 0 Comments CATEGORY: Retirement Planning

The original SECURE Act, signed into law in December 2019, changed many of the long-standing rules governing IRAs and other retirement accounts, and no single measure in the legislation had a more seismic impact on planning than the changes to the post-death distribution rules for retirement accounts. Specifically, the law stipulated that "Non-Eligible Designated Beneficiaries" (i.e., designated beneficiaries who are neither surviving spouses nor fall into a limited number of other categories) would need to empty the inherited retirement account by the end of the 10th year after the decedent's death (and would no longer be able to 'stretch' the distributions over their own life expectancy).

While many observers expected that Non-Eligible Designated Beneficiaries would not be required to take annual distributions during this 10-year period (as long as the account was fully distributed by the end of the 10th year), the IRS in February 2022 issued Proposed Regulations that would make a subset of these beneficiaries (those who inherit accounts from decedents who died on or after their Required Beginning Date) subject to both the 10-Year Rule and annual Required Minimum Distributions (RMDs). The caveat, however was that these were merely proposed regulations, and as the year went on both beneficiaries and their advisors remained in limbo regarding whether they would need to take distributions in 2022 (or should have taken them in 2021) in order to avoid potential penalties. Until finally, the IRS issued a notice in October 2022 waiving any potential penalties for Non-Eligible Designated Beneficiaries for 2021 and 2022 for missing RMDs from their inherited retirement accounts, effectively eliminating the RMD requirements for those years… but notably not addressing the requirements for 2023 and onward.

Amid this backdrop, the IRS in July 2023 released Notice 2023-54, which provides relief for Non-Eligible Designated Beneficiaries who inherited retirement accounts from an owner who died on or after their Required Beginning Date by eliminating any penalties for failing to take (potential) RMDs for 2023, essentially 'punting' RMDs yet again until (at least) 2024 – though still lacking any detail as to when Final Regulations might be expected that could clarify RMD requirements for future years. Notably, however, while this group of Non-Eligible Designated Beneficiaries doesn't have required distributions from their inherited accounts for 2023, they can still make voluntarily distributions – and may actually be better off in doing so, if it can prevent future spikes in taxable income when the beneficiary is eventually forced to make (bigger) distributions to empty the account.

In addition to the guidance regarding inherited accounts, Notice 2023-54 also offers a temporary RMD reprieve to retirement account owners born in 1951, who, as a result of the "SECURE 2.0" law passed in December, are now no longer required to take RMDs until they turn 73 (i.e., in 2024) – but who may not have learned about the delay before taking what would have been their 2023 RMD (or who may not have been able to cancel a scheduled RMD in time) due to SECURE 2.0 being passed so late in the year. Those individuals are now permitted to treat these distributions as a rollover, and unlike traditional rollovers, they may complete the rollover outside of the usual 60-day window (provided such rollovers are completed by the end of September 2023). Further, Notice 2023-54 allows such rollovers to be completed even if they would otherwise be in violation of the once-per-year rollover rule.

Ultimately, the key point is that IRS Notice 2023-54 provides important answers to some of the most pressing questions taxpayers and their advisors have had regarding RMD requirements for 2023. Nonetheless, we're still in the early innings of figuring out how to handle the changes made first by the original SECURE Act and later on by SECURE 2.0, meaning there will be plenty of opportunities for advisors to keep clients up-to-date on the latest changes as further guidance rolls in!

#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!