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#FA Success Ep 276: Integrating Tax And Legal Services Under One Roof To Truly Scale A ‘One-Stop Shop’, With John Hagensen

April 12, 2022 07:04 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 276th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is John Hagensen. John is the founder of Keystone Wealth Partners, an independent RIA with offices in Arizona and North Dakota, that oversees $650 million of assets under management for nearly 1000 client households.

What's unique about John, though, is how he is one of the first non-lawyer financial advisors in the nation to build, own, and operate a law firm, which he then leverages, along with his own tax firm, to create a truly one-stop-shop wealth management experience of financial planning, tax, and estate, for his mass affluent clients.

In this episode, we talk in-depth about how the unrealized predictions of fee compression in the financial industry inspired John to concentrate on adding more measurable value for his clients with tax and estate services, how John has been able to leverage his all-in-one service offering to gain a faster pace of referrals, and how John has been able to grow to nearly 1,000 clients in barely more than a decade through a multi-prong education-based marketing strategy that utilizes informational webinars, in-person events, and making a big investment into a weekly radio show.

We also talk about how John transitioned from a career as an airline pilot but still incorporates the same systematized checklist-oriented mindset to build standard processes for his own businesses, how he has become comfortable with the idea of not being a right fit as an advisor for every prospective client, and how he found a sense of renewal after a trip to Ethiopia made him look internally and evaluate his purpose in life and the potential impact of his money.

And be certain to listen to the end, where John shares how the growth of his business led to a mindset shift to focus more on the collective team after realizing how dependent he had become on hiring the right people, how he believes in utilizing the talents and resources afforded to us to help uplift others rather than just himself, and how his plans for the future are centered on a potential merger to scale up even further to expand his all-in-one services across the country.

So whether you’re interested in learning about how John created a true one-stop-shop experience for his clients, how he uses slower, ‘older’ marketing techniques to attract prospects, or how he measures the success of new ventures and avenues explored, then we hope you enjoy this episode of the Financial Advisor Success podcast, with John Hagensen.

FPA Defines Its New Roadmap: Serving CFP Professionals And Building (Trust With) Local Chapters

April 11, 2022 07:08 am 3 Comments CATEGORY: Planning Profession

Leading up to the arrival of new CEO Patrick Mahoney in 2020, the Financial Planning Association (FPA) had experienced a rocky few years. From the continued decline in membership (including a 25% cut between 2018 and 2020) to the angry backlash among members regarding the OneFPA initiative (not to mention challenges brought on by the COVID pandemic), the FPA was in need of a fresh start. With this background in mind, Mahoney has taken several steps since his arrival to revive the FPA’s relationship with its chapters and members and could help the organization grow for the first time in years.

Mahoney’s efforts started with trade and national press outreach efforts, offering interviews to tell the FPA’s story and to communicate the value of the organization – and, more generally, financial planning – to the broader public, emphasizing the efforts made by FPA chapters to drive professionalism among their ranks. Mahoney then focused on rebuilding trust between local FPA chapters and the national FPA headquarters by meeting with FPA chapter boards across the country and reinforcing that the main goal of the FPA home office is to support its members and the profession (in stark contrast to the FPA’s previous message that its members existed to support the FPA). This shift in attitude prompted changes to the FPA staffing structure intended to better serve its chapters and members, and gave rise to a new Chief Membership Experience Officer position, as well as a new membership experience department and chapter experience team whose roles are to help chapters better serve FPA members on their level.

Perhaps most importantly, the new FPA Advisory Council (that originally arose from the initial OneFPA initiative) has brought the leaders of 80 FPA chapters together with Mahoney and key board members, who have been actively brainstorming ways to reverse the organization’s membership decline and put the FPA on what would be its first growth path since its inception. As a result of the Advisory Council’s recommendation to identify the organization’s core members, the FPA has determined that the FPA’s marketing and membership benefits will be oriented to making the lives of CFP practitioners – the organization’s formally defined ‘core member’ – easier and more convenient.

Ultimately, the key point is that while the FPA’s turnaround is going to take time, the first steps have been taken. By focusing on CFP professionals as its core members and restructuring the organization to focus on how it can serve its chapters and members (rather than on the support of members required to sustain the organization), the FPA and its leadership have built a foundation for the organization to grow and thrive in the years ahead!

Weekend Reading For Financial Planners (Apr 9-10)

April 8, 2022 02:03 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 the Biden administration will be extending the current moratorium on Federal student loan payments, originally scheduled to end on May 31, until August 31 (which, while welcome to many borrowers, also leaves many in financial limbo as they try to plan for when – if ever – the payments will restart).

Also in industry news this week:

A new study by Charles Schwab and Ariel Investments shows that participation in the stock market is near an all-time low among Americans amid declining trust in markets and financial institutions (with the effects most acutely seen with Black investors)
How focusing on client experience (rather than simply client service) can help firms generate more revenue by creating emotional engagement with the firm’s most important clients

From there, we have several articles on the current stock market environment:

What advisors can do to keep client investment portfolios on track in the current turbulent market and geopolitical environment
What the recent yield curve inversion means for stock market returns going forward and how advisors might respond
Why investing in international stocks could still provide diversification benefits even as they lag U.S. equities in performance

We also have a number of articles on direct indexing:

While the number of direct indexing platforms has proliferated, one industry observer is skeptical of several of its advertised benefits for advisors and their clients
In the latest sign of direct indexing growth (and its potential to disintermediate ETFs and mutual funds), Charles Schwab plans to launch its direct indexing offering for RIAs and retail investors in late April
Fidelity has gone live with its Fidelity Managed FidFolios direct indexing platform, and its $5,000 account minimum has the potential to bring direct indexing to a wider range of investors (who may not even benefit from it if they’re already eligible for 0% capital gains rates!?)

We wrap up with three final articles, all about productivity:

How the rise of remote work has created a late-evening “peak” of productivity for some workers (which on the positive side could mean more workers are optimizing their schedules to their preferred hours, or on the negative side could mean workdays are simply getting longer)
Why many employees spend at least half of their days “working on work”, including following up on tasks, giving status updates, and searching for information (which comes at the cost of actually getting work done and can prevent organizations from strategizing for the long term)
How workers can optimize their schedule for productivity by grouping meetings together and leaving the remaining time free to work without distractions

Enjoy the ‘light’ reading!

Kitces & Carl Ep 83: When The Big Prospect Doesn’t Want Your Financial Plan

April 7, 2022 07:02 am 1 Comment CATEGORY: Kitces & Carl Podcast

The core value proposition offered by many financial advisors is to serve and help clients solve their complex financial issues through financial planning. As an advisory firm grows, though, so too can the pressure to onboard more remunerative clients. These tensions can be heightened when a prospective high-net-worth client decides they don’t want comprehensive financial planning at all, and instead simply requests one specific service, such as portfolio management. This can create a dilemma for the advisor who wants to serve clients and help their business grow, as agreeing to only a part of the financial planning process, without fully understanding the client’s values and priorities, can feel antithetical to an advisor’s own core values… advisors need this understanding to create meaningful plans that clients can actually use to achieve their financial goals. Even though garnering enough business to maintain a healthy flow of revenue is important to any firm, it is also critically important not to compromise the values of the advisor and the firm!

In our 83rd episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss some steps advisors can take when a prospect objects to financial planning in general because they only want a particular service (e.g., investing their portfolio), how to gain a deeper understanding of why the prospective client doesn’t want financial planning in the first place, and how to understand the client’s goals and values so that the services that are provided to them align with what is most important to the client.

As a starting point, it’s important to understand that while guiding clients through a comprehensive data-gathering process can certainly lead to a good financial plan, some clients may consider the experience tedious, intrusive, and unenjoyable. This can possibly be due to prior experiences with financial advisors, negative associations that a client may make with their own financial challenges, or an unwillingness to divulge personal information with an advisor whom they may just be getting to know. In these instances, advisors can still help clients simply by having a candid conversation to learn about what’s important to the client and their reasons for seeking help with their money goals. Because without the clarity of the client’s deeper purpose, advisors might provide deliverables based solely on performance and not connected to the client’s own values, and even offer services that the client doesn’t even want or need, which can alienate the client from the relationship and eventually result in the advisor losing the client’s business.

However, by asking intentional, yet thoughtful questions to identify why the client wants help can be a great way not only to connect with a client but also to show the value of discussing and reaching financial goals, which can entice them to accept the financial planning process. Because ultimately, having conversations to really understand what’s important to a client doesn’t just help advisors do a better job servicing clients with what they really need (and want), it can also lead to more trust in the relationship, which helps build deeper and longer-lasting client relationships!

Questions Advisors Can Ask To Help Clients Take Action By Exploring Their Money Memories

April 6, 2022 07:07 am 1 Comment CATEGORY: Client Trust & Communication

In recent years, understanding and applying concepts of financial psychology have become increasingly important skills used by financial advisors. While technical knowledge can help advisors develop objectively sound financial strategies, turning those strategies into advice that the client will actually follow often requires some knowledge of the client’s personality, culture, and background, so the advisor can deliver their advice in a way that is meaningful and motivating to the client.

One powerful tool for better understanding a client’s financial behavior and psychology is an exploration of their “money memories” – the key moments in a person’s past that can shape their current beliefs and actions around money. By encouraging clients to reflect on these influential events from their past, advisors can help them examine their current behaviors more objectively and recognize the reasons for feeling so stuck (their change inhibitors), which can make it easier to identify workable strategies that will help their clients get ‘unstuck’ in challenging areas of their financial plan.

However, money memories can be a very sensitive topic for many people given the emotions (both positive and negative) that these conversations can elicit, and clients may feel deeply vulnerable when talking about their money memories and past decisions. If an advisor asks about money memories too early in the relationship – without first having built a deep foundation of trust – the client could feel as if they are being judged on their past or present actions and become put off or defensive, shutting down the conversation until their trust can be rebuilt. Which means that money memory conversations that are approached deliberately and respectfully can make them more productive and insightful.

Advisors can prepare their clients for the conversation by providing an agenda outlining the discussion topics well in advance, which can give clients an opportunity to contemplate their responses ahead of time. And keeping the conversation as an open-ended exploration of attitudes and feelings (rather than using it to diagnose specific problems or behaviors, which can feel overly judgmental to some clients) can help clients feel more comfortable about having a candid discussion of their money memories.

Ultimately, money memory conversations are about giving clients the space to explore their own perspectives and perceptions of their experiences. The simple question “What’s your earliest money memory?”, followed by respectful and open-ended follow-up questions to explore the client’s thoughts and feelings more deeply, can help clients recognize for themselves the ways that past experiences may manifest into current behavior. At the same time, helping clients uncover these memories for themselves can give advisors deeper insight into the client’s psychological approach toward money – helping the advisor give advice that aligns with what matters most to the client (and that can help them tackle their most challenging obstacles)!
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#FA Success Ep 275: Growing Organically Past $4B Of AUM With A Shared Ownership Mentality, With Michael Chasnoff

April 5, 2022 07:05 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 275th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Michael Chasnoff. Michael is the founder and CEO of Truepoint Wealth Counsel, an independent fee-only RIA based in Cincinnati, Ohio that oversees $4.5 billion in assets under management for 750 client households.

What's unique about Michael, though, is how over a 30-year span, he has grown Truepoint entirely organically through a focus on working with business owners and corporate executives, and has scaled his team by creating a distributed ownership structure with a broad equity participation plan.

In this episode, we talk in-depth about how Michael has structured his firm with specialty teams that provide not only financial planning but also in-house tax and estate planning advice in order to provide a more one-stop-shop experience for his clients, the way the firm has been able to leverage its truly higher-touch service offering into a steady flow of referrals with an average household of $6M in AUM, and how Michael’s firm has designed its career tracks with the ultimate goal of offering select team members an opportunity to buy into company equity through the sale of his own founder shares.

We also talk about how, early in his career, Michael was turned off by the marketing and sales-centered financial industry and was inspired to start his own firm that concentrated on offering fee-only financial planning back in the early 1990s, how Michael used a three-tiered approach of writing expert pieces for financial media, establishing relationships with Centers of Influence with a more relationship approach with working together on their joint clients, and becoming an active participant in industry organizations to build his reputation, and how Michael has ultimately gotten comfortable with selling down his founder equity shares as the firm has continued to grow.

And be certain to listen to the end, where Michael shares how being told his ideas for starting a fee-only advice firm would never work motivated him even more to be successful and prove them wrong, how Michael incorporates his values of doing what is right above all in his everyday practices with clients, and why Michael believes giving back to others to create a better life-balance is the key to happiness and fulfillment.

So whether you’re interested in learning about how Michael balances his higher overhead costs by recruiting top-dollar clients, how he built on positive client experiences and business growth to create a culture of client referrals rather than asking directly, or why he believes that the baseline principles of doing what’s right, working hard, and treating others with respect are the foundation of the pathway to success, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Michael Chasnoff.

The Latest In Financial #AdvisorTech (April 2022)

April 4, 2022 07:04 am 3 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the April 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 big news that Wealthbox has raised a new $31M Series B round to capitalize its efforts in moving further ‘upmarket’ to challenge Redtail and especially Salesforce’s hold on the largest advisor enterprises. (As advisor adoption of CRM systems is now so high, it’s a virtual certainty that current CRM systems can only grow by capturing market share away from competitors!)

From the broader industry perspective, though, the real shift that’s underway is the transition of advisor CRM systems from their roots as the tool that captures client contact information and communication history, into one that drives the advisory firm’s key workflows. Because as advisory firms provide increasingly broad and holistic advice to clients, it’s no longer feasible for the firm to run ‘just’ from its RIA custodian or broker-dealer investment platform as the hub; instead, the advisor CRM system is becoming the hub, around which the rest of the firm’s systems and processes are built. Which is expanding the opportunity set for advisor CRM.

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

Summit Wealth Systems raises a $20M Series A round, as its founder Reed Colley (who previously founded Black Diamond) aims to build the next generation of performance reporting for clients
Advyzon launches a new TAMP offering for the advisor users of its portfolio management + CRM system

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

Goldman Sachs reveals that it is still not quite ready to launch its competing RIA custodian, nearly 2 years after it acquired Folio Institutional to speed up the process, highlighting just how hard it really is to compete in the RIA custodial business
Savvy Wealth raises $7.3M to fund its own tech-based advisory firm (in the hopes of out-competing advisory firms that are struggling to build their own tech?)
IndyFin raises $2.2M of capital to become the next ‘Yelp-for-advisors’ platform as the SEC greenlights client testimonials… but raising the question of whether Yelp itself may still be best positioned to be the Yelp for advisors?

In the meantime, we’ve also launched a beta version of our new Kitces AdvisorTech Directory, to make it even easier for financial advisors to look through the available advisor technology options to choose what’s right for them!

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 (Apr 2-3)

April 1, 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 the Securing a Strong Retirement Act (a.k.a. SECURE 2.0) has passed the House of Representatives with strong bipartisan support, meaning that after a long wait since the bill’s introduction, more tax and retirement planning opportunities may be on their way before the end of the year. Though with the legislation still pending review and passage in the Senate, it may take until the end of the year before it is actually signed into law?

Also in industry news this week:

A judge has ruled against the state of Massachusetts in its enforcement action against the brokerage firm Robinhood, and in doing so invalidated parts of the state’s fiduciary rule for broker-dealers (underlining the need for regulators to more clearly distinguish the line between sales and advice and to uniformly regulate firms on both sides of the divide)
RIA Mergers & Acquisitions activity continued at a strong pace in 2021, with the median firm valuation reaching 9x EBITDA – though the growing number of sellers may result in slowing valuation growth in the coming years (even while the total number of deals continues to increase)

From there, we have several articles on the regulation of RIAs and broker-dealers:

The SEC has published its 2022 list of examination priorities for broker-dealers and RIAs, including ESG factors (and concerns about “greenwashing”), crypto, private funds, and managing conflicted compensation models in compliance with Regulation Best Interest
In a new Staff Bulletin, the SEC has reiterated some of the standards of conduct that apply to both broker-dealers and RIAs when making account recommendations, namely the requirement to consider costs to the client (and justify and document the reason for recommending wrap accounts when lower-cost alternatives are available)
As private markets grow in size and influence, the SEC has proposed new rules increasing its oversight and enforcement over private equity and hedge funds and imposing new rules and reporting requirements on private fund managers

We also have a number of articles on retirement:

How clients with health insurance coverage through Medicare might get a mid-year reprieve on their Part B premiums due to price changes in one very-high-cost Alzheimer’s drug
Why some retirees choose to live on cruise ships, and the planning considerations for doing so
Six strategies advisors can use to reduce retirement income risk for clients, including asset-liability matching, dynamic spending, buckets, and more

We wrap up with three final articles, all about career planning:

A survey shows that while current and aspiring advisors agree on the importance of client communication in addition to technical skills, the biggest blocking point for many new advisors is simply the financial burden of jobs that require them to get their own clients from scratch (with little income until they manage to do so)
Why exploring a range of jobs and experiences early on (rather than becoming a specialist right away) can lead to a more fulfilling career
Why time and creating financial flexibility for oneself are two of the most important drivers of success when taking a career risk

Enjoy the ‘light’ reading!

The ‘Yield-Split’ Method Of Asset Location To Improve Tax Efficiency Of Index Funds

March 30, 2022 07:05 am 12 Comments CATEGORY: Taxes

Financial advisors have many ways to add value to clients’ investment portfolios, from selecting an appropriate asset allocation to rebalancing when appropriate. However, because the investor ultimately only gets to spend what they can keep after taxes, another important way advisors can add value to a portfolio is to improve its tax efficiency; after all, if the same returns can be generated in a more tax-efficient manner, in the end, investors will generate more spendable wealth (a form of ‘tax alpha’). And when it comes to individual investors and their typical mix of investment accounts and retirement accounts, one of the best ways to enhance portfolio tax efficiency is through strategic asset location, where the advisor places assets into taxable or tax-advantaged accounts depending on the assets’ specific characteristics.

Implementing an asset location strategy begins with identifying the yield, tax rate, and potential tax drag of each investment in an individual’s portfolio. The investments are then sorted into an asset location priority list based largely on tax efficiency, which can be used to help identify where to house each type of investment, with the least tax-efficient holdings being placed into the most tax-advantaged account. Which means a stock fund with a low yield (and low tax drag) might be placed in a taxable account, whereas a high-yield bond fund (with high tax drag) might be placed in a tax-deferred account, thereby reducing the amount of taxable investment income in the current year.

In addition to using asset location to strategically place investments, advisors can further enhance tax efficiency by replacing the use of broad-based index funds with a corresponding pair of funds – one low-yield tax-efficient fund and another higher-yield, tax-inefficient fund. This process, called “yield splitting”, emulates broad-based index funds in such a way that allows for their component (low- and high-yielding) parts to be invested into separate accounts by tax efficiency.

For example, with a yield-split asset location strategy, rather than investing in a single total-stock-market index fund, an advisor would instead invest in both a low-yield growth index fund and a higher-yield value index fund. The intent would be to maintain a similar return overall, but also to allow the advisor to invest the funds separately, placing the higher-yield value fund in a tax-advantaged account and the low-yield growth fund into a taxable account. Similarly, replacing a total-bond-market fund with a high-yield corporate bond fund invested in a tax-deferred or tax-exempt account and a lower-yielding Treasury bond fund invested in a taxable account would potentially reduce the tax drag while maintaining comparable expected returns.

Over time, asset location can reduce the ongoing tax drag of the portfolio by nearly 10 basis points per year (of hard-dollar tax savings!), and layering the yield split methodology on top can double the asset location tax alpha by another 10 basis points (to a total of 20 bps). Cumulatively, this can add up to a 6% increase in long-term wealth accumulation over an investor’s multi-decade time horizon, simply by restructuring (i.e., yield-splitting) their core index holdings into the component parts for better asset location.

Ultimately, the key point is that while asset location is already a beneficial strategy to create tax alpha, the tax efficiency of a portfolio can be further improved upon with a yield-splitting approach to allow for even more-finely-tuned asset location implementation… all while maintaining a substantively identical overall risk/return profile for the portfolio as a whole. This not only leads to potentially significant tax savings for clients – particularly those who have the capacity for both tax-advantaged and taxable account holdings, and who pay a high Federal tax rate (and/or who live in states with high tax rates) – but also provides a tangible way for the advisor to demonstrate their own value!

#FA Success Ep 274: Succession Planning Vs Continuity Planning In A Seller’s Market, With Maria King

March 29, 2022 07:08 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 274th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Maria King. Maria is the co-founder of Transcend PM, a practice management consulting and coaching firm based in Concord, Massachusetts.

What's unique about Maria, though, is how she not only helps advisors with hiring and compensation plans for next-generation advisors but goes even deeper into constructing legacy plans for advisors to outline not only a plan for succession, but to detail how their firms and clients should be handled if something happens to them along the way.

In this episode, we talk in-depth about how Maria helps advisors focus on their firm’s values from business culture and client experience, to investment philosophy and business strategy, to ensure they choose a well-aligned successor to purchase the business; how Maria utilizes four pillars of consulting, coaching, human resources design and development, and internal firm growth programs to create bespoke legacy plans for advisory firms; and how Maria helps advisors understand why it is important to recognize that their business succession decisions have such a ripple effect that impacts family, staff, colleagues, and clients.

We also talk about how Maria was drawn to working with advisors on succession planning issues after seeing first-hand that only about a third of advisors had a succession or continuity plan in place (not necessarily as a result of lack of planning, per se, but because of how connected succession is to the psychological hurdle of facing our own mortality), how Maria helps advisors distinguish between being in the business for themselves as opposed to just by themselves, and how, with the help of advisor friends, and her entrepreneurial husband and his complementary skills, Maria gained the confidence to start her own consulting business after working nearly 20 years for a large broker-dealer.

And be certain to listen to the end, where Maria shares how after leaving her former career, she entered a period of self-reflection to decide what was next and realized she still had the drive to continue to share her knowledge and expertise, why Maria believes it is so important to have self-awareness when mapping out the bigger picture in building an advisory career, and why Maria views work-life balance as truly a balance to be crafted, rather than as a binary concept where you’re just ‘working’ or not.

So whether you’re interested in learning about how Maria helps advisory firms establish and implement succession and continuity plans, why Maria concentrates on aligning values over a firm’s potential purchase price, or how, after decades in one career, Maria found faith in herself to start a new career path helping others, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Maria King.