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#FA Success Ep 271: Right-Sizing Your Client Base To Operate As An Intentional High-Margin Solopreneur, With Cady North

March 8, 2022 07:09 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 271st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Cady North. Cady is the founder of North Financial Advisors, a boutique fee-only financial planning firm focused on serving women business owners that is based in San Diego and Washington, D.C., and oversees more than $24 million of assets across 30 client households.

What's unique about Cady, though, is how she right-sized her practice from what was once a much larger number of clients, and now purposefully maintains a limited number of households she serves to create a business that has high earning potential while remaining personally sustainable for herself without the risk of burnout.

In this episode, we talk in depth about how Cady has built her firm to help a younger clientele of women entrepreneurs discover the best uses for their capital and ways to balance their own money goals, why Cady veers away from the traditional corporate full-time philosophy to ensure she has the time and capacity to meet the needs of her clients as well as herself, and how Cady has systematized and automated processes to avoid the pressure of always staying connected as a solo advisor.

We also talk about how Cady’s experience with burnout in her former career inspired her to take a 6-month sabbatical to step back and examine what was truly important to her in life, why Cady believes that being resilient means first recognizing for oneself what is good enough, and how Cady realized after a few years of building her firm that increasing the quality of clients she served was more important than just increasing the quantity.

And be certain to listen to the end, where Cady shares how reflecting on the highs and lows of professional experiences with a support group of peers helped her to learn and grow in her career, the rotating paraplanner program that Cady built to share her knowledge and mentor others to help them find their own paths to success, and how Cady came to let go of the urge to live a life of to-do lists and focus on feeling fulfilled financially and mentally instead.

So whether you’re interested in learning about how Cady helps her clients realize their short-term and long-term money goals, how she organizes her firm to keep a steady work-life balance, or why she enjoys being a guide for women entering the financial advice industry, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Cady North.

The Latest In Financial #AdvisorTech (March 2022)

March 7, 2022 07:05 am 1 Comment CATEGORY: Technology & Advisor FinTech

Welcome to the March 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 FeeX is going all-in on helping financial advisors (get paid to) manage held-away 401(k) plans, providing the ability to facilitate trading and rebalancing without transferring or liquidating the employer retirement plan… and in the process, has raised a whopping $80M of fresh capital and is rebranding away from its “FeeX” roots to a new name “Pontera” to signify how it is building a bridge to retirement plans (“pont” is the Latin root for "bridge"!).

From the advisor perspective, the growing demand for Pontera highlights the ongoing expansion of wealth management services from ‘just’ managing a client’s liquid investment account to providing more holistic advice on their entire household… for which advisors at the least are increasingly charging AUA (Assets Under Advisement) fees, but are increasingly interested in tools that allow the advisor to manage the held-away account and provide their full scope of services (and be able to charge their full scope of AUM fees).

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

Datalign launches a new lead generation service that will allow the advisory firms with the best processes for converting prospects to clients to outbid their competitors for the best leads
Fidelity Labs launches a new compliance solution, dubbed Saifr, to facilitate more rapid compliance reviews of marketing and other advertising materials in large advisor enterprises
Morningstar launches a new Wealth Management Solutions offering in an attempt to TAMP-ify its existing Morningstar Office and related portfolio management tools

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

AssetMark launches a new integration with RightCapital, less than a year after acquiring Voyant, and highlighting the ongoing advisor demand for best-of-breed (over all-in-one) solutions
The SEC proposes new cybersecurity rules that would require RIAs to disclose, to clients and (via Form ADV Part 2) to prospects any cyber incidents they’ve experienced (ostensibly in the hopes that the risk of being ‘cybershamed’ will encourage more advisory firms to invest more into their cybersecurity practices)
NaviPlan founder Mark Evans is preparing the launch of his new financial planning software – Conquest Planning – in the hopes that a ‘strategy-centric’ approach will become the Next Big Thing in financial planning software!

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 (Mar 5-6)

March 4, 2022 02:02 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 response to Russia’s invasion of Ukraine, the United States and the European Union are preparing sanctions on the Russian central bank, which could cause a severe financial shock to the Russian economy… and raises concerns about how the impact of sanctions could ripple back to US investors. But while the war in Ukraine has created a major geopolitical shock (and a humanitarian crisis), historical data show that similar events in the past have not necessarily caused a major decline in the U.S. stock market (at least, not for any sustained period of time).

Also in industry news this week:

Despite ‘SECURE Act 2.0’ stalling in Congress, another potential bill has emerged that would enhance consumer protections and options in workplace retirement plans
While the Biden administration will not halt the upcoming overhaul to the Department of Labor Fiduciary Rule, a pending proposal likely would increase the number of financial professionals who must provide a fiduciary standard of care when providing investment recommendations for 401(k), individual retirement accounts, and other plans

From there, we have several articles on financial advisory industry trends:

A recent study shows that the vast majority of advisors who outsource their investment management are happy with their decision
Why the uptake of model portfolios has stalled out among advisors who are still predominantly focused on making portfolio construction their own value proposition instead
How firms are increasingly trying to expand the number of services they offer to attract clients in a world where more and more advisors are converging on the assets-under-management model

We also have a number of articles on cash flow and budgeting:

How a new database that ranks colleges based on their return on investment can help advisors and their clients determine which college is likely to pay off financially for a given student
How saving on big items (e.g., cars and houses) is important, but spending prudently on the ‘small’ stuff still matters, or it can add up and undermine the big savings
The wide range of ways couples can organize their finances, from a shared household account and separate guilt-free side accounts for spending, to simply splitting every couple’s expenses down the middle to pay from their own assets

We wrap up with three final articles, all about when and how to say ‘no’:

Why the decision on whether to say ‘yes’ or ‘no’ to opportunities can depend on what stage of life an individual is experiencing (and how problems emerge when we start out saying ‘yes’ to everything and fail to realize when it’s time to start saying ‘no’ more often)
How saying ‘no’ to some prospective clients can actually increase a firm’s efficiency and profitability
How using a ‘positive no’ can make saying 'no' a better experience for both the individual saying 'no' and the person who made the offer

Enjoy the ‘light’ reading!

The Impact Of New IRS Proposed Regulations On The SECURE Act: RMDs, Eligible Designated Beneficiaries, Trusts, And More!

March 2, 2022 07:03 am 18 Comments CATEGORY: Taxes

When the SECURE Act was signed into law in December 2019, it ushered in some of the most significant changes to the rules for retirement accounts in well over a decade. At the same time, however, the statutory language included a number of provisions that were either ill-defined or left open to substantial IRS interpretation. To fill this gap, the IRS issued Proposed Regulations on February 23, 2022, to reflect the changes to the Internal Revenue Code made by the SECURE Act. The Proposed Regulations are likely to be amended at least somewhat before they are finalized, but they do provide the best window into the IRS’s current thinking on a variety of issues.

For many individuals, the most significant change made by the SECURE Act was the introduction of the 10-Year Rule, under which most non-spouse beneficiaries are required to distribute the entirety of their inherited retirement accounts by the end of the tenth year after the decedent’s death. But while the general consensus among practitioners was that such Non-Eligible Designated Beneficiaries would be allowed to distribute the entire account as a lump sum at the end of the 10^th year instead of taking annual distributions to empty the account, the new Proposed Regulations seek to implement a system that would require Non-Eligible Designated Beneficiaries inheriting from retirement account owners who died on or after their Required Beginning Date to comply with the 10-year distribution requirement in addition to taking annual RMDs during that period.

The Proposed Regulations also clarify who can be considered an Eligible Designated Beneficiary (and who are able to use the previous ‘stretch’ RMD rules rather than the 10-Year Rule), including the decedent’s minor children, considered minors until they reach their 21st birthday regardless of the age of majority defined by state laws. Which means that minors would use the ‘stretch’ RMD rules until their 21st birthday, and then be subject to the 10-year rule and potential continued RMDs (if the decedent had reached their Required Beginning Date).

Furthermore, the Proposed Regulations provide significant new guidance on trust beneficiaries of retirement accounts, proposing that much of the existing trust-as-a-retirement-account-beneficiary structure be left in place, including the requirements for a trust to qualify as a “See-Through Trust” and the concepts of Conduit and Discretionary Trusts. In addition to continuing to allow remainder beneficiaries of a Conduit Trust to be disregarded when determining the post-death payout schedule of a See-Through Trust named as the beneficiary of a retirement account, the Proposed Regulations also outline other new types of Discretionary Trust beneficiaries that can be disregarded, including secondary beneficiaries who can only inherit trust assets contingent on the death of another secondary beneficiary, and beneficiaries who can only receive distributions of retirement assets from a trust that are first required to be fully distributed to a minor trust beneficiary before the end of the year in which they reach age 31 (provided that they survive to that age).

In a departure from IRS historical norms, the Proposed Regulations would prevent a general power of appointment from causing a trust to fail to meet the See-Through Trust requirement that beneficiaries of a trust be identifiable (given that certain requirements are met). Additionally, in the event that a trust is modified via a method provided for under state law, any trust beneficiaries removed via such a process by September 30^th of the year following the year of death will not be considered when determining the trust’s post-death payout schedule.

Ultimately, the key point is that the IRS’s recent Proposed Regulations provide important insight and clarity on several aspects of the SECURE Act, of particular relevance to certain Non-Eligible Designated Beneficiaries and those with trusts. And while the Proposed Regulations can still be amended before they are finalized, taxpayers (and their advisors) can start preparing themselves now for how their individual situations might be affected!

#FA Success Ep 270: Managing Growth By Building A Team Of ‘A’ Players, With Kyra Hollowell Morris

March 1, 2022 07:09 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 270th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kyra Hollowell Morris. Kyra is the founder of Morris Financial Concepts, one of the oldest independent fee-only RIAs based in Charleston, South Carolina, that oversees $350 million of assets under management for 250 client households.

What's unique about Kyra, though, is how she has steadily scaled the growth of her firm by taking the time to find and retain top talent… and along the way, developed a willingness to quickly let go of any new hire who doesn’t meet the standards the firm is trying to achieve.

In this episode, we talk in depth about how Kyra consciously controls her firm’s growth by trying to grow fast enough to create new opportunities for her team but not so quickly that she can’t hire and develop the talent it takes to serve clients well, how Kyra concentrates on building the company’s culture by hiring employees who see financial planning as a calling and have a combination of competency and personality (rather than settling for those who may have one attribute but not the other), and why, though firing ‘B-team’ employees who are getting the job done can be tough, Kyra refuses to settle when there are so many other people who may be a better fit for the firm.

We also talk about how Kyra built her media presence to drive the growth of new clients in the early years, how that growth eventually squeezed her capacity and made her realize she needed to change how she trained and developed her team so that she can focus on meeting with clients (and be able to spend more time with her family), and how Kyra developed a system to communicate the firm’s expectations and standards effectively with her team while also holding them accountable.

And be certain to listen to the end, where Kyra shares how she draws upon her fourth-degree black belt, meditation, and running half marathons to cope with stress; how Kyra believes in sustaining a ‘life balance’ to ensure personal needs are being met before the needs of production; and how Kyra aims to give back and uplift her community by creating a mixed-use development where minority-run local businesses can thrive.

So whether you’re interested in learning about how Kyra systematized her hiring and on-boarding processes to ensure the retention of top talent, how she determines when and how to scale the growth of her firm, or how Kyra creates a 'life balance' in entrepreneurship, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Kyra Hollowell Morris. Read More...

How Choosing A Niche Can Help Financial Advisors Conquer The 3 B’s Of Marketing Differentiation

February 28, 2022 07:05 am 1 Comment CATEGORY: Marketing

For many financial advisors, marketing themselves is often a challenge because the primary service they offer – providing clients with advice – and how they offer it are invisible and intangible. Which means that prospective clients can’t always make a fair evaluation when they are limited to assessing only the look and feel of the advisor’s business, but not the services the advisor actually provides. And when prospective clients can’t ‘see’ how advisors give advice, they often don’t understand the value that the advisor has to offer.

To overcome this issue, advisors have traditionally turned to one of the “three B’s” of marketing – Boldness (using pronounced marketing messages or media others aren’t willing to use), Blanketing (spending money to spread their message across a wide audience), and Building (leveraging relationships to generate referrals and word-of-mouth business) – to compete with the competition. But conquering just one of the three B’s can be both time- and money-intensive for an advisory firm targeting a broad pool of prospective clients (e.g., retirees and pre-retirees). Instead, advisory firms of any size can easily conquer all three B’s by carving out a niche that no one else serves.

Working with a niche narrows the potential competition, making it more likely that the advisor’s efforts to be Bold will be more likely to be noticed. In addition, serving a niche makes it easier for an advisor to Blanket their message because the population they need to reach is much smaller than targeting a broader pool of prospects. Finally, having a niche makes it easier to Build relationships by generating referrals because the niche gives other professionals a way to differentiate the advisor from their competitors, and opens new referral opportunities from Centers Of Influence (COIs) who work with individuals in the niche!

When brainstorming potential niches, it can be helpful for advisors to consider areas that reflect their passion (which generate energy and excitement that can spread to prospective clients), aptitude (which comes from the advisor’s natural talents, as well as their professional and broader life experiences), and profitability (which ensures that clients in the niche will be able to pay the fees needed to make the business profitable). Once the advisor has potential niches in mind, they can then research these areas to find the niche that is the best fit for them. Interviewing clients and contacts who fall into the niche, as well as COIs with extensive experience in the niche area, can help the advisor decide whether that given niche is potentially viable. Some criteria that can be used to help determine whether a niche market has potential include: whether individuals in that niche have pain points regarding their problem that the advisor can address, whether the niche is easy to find for marketing purposes, whether the niche market is growing, and whether it is possible to dominate the space due to a lack of competition.

Ultimately, the key point is that while marketing can be a challenge for advisors, those who focus their efforts on a suitable niche will find it easier to be Bold so that they are noticed, to Blanket prospective clients with their value proposition, and to Build relationships that generate referrals. By targeting a specific type of client and reducing the amount of competition, the advisor’s business can thrive as ideal clients enthusiastic about working with them pour in!

Weekend Reading for Financial Planners (Feb 26-27)

February 25, 2022 02:05 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the release of the IRS’s long-awaited SECURE Act regulations, which clear up many questions advisors had about how the law’s provisions will apply to IRA beneficiaries after the original owner’s death in numerous scenarios (such as what to do when the original IRA owner was taking RMDs before their death, what options spouses of deceased IRA owners have for distributing the IRA’s assets, and which distribution rules apply to “See-Through” discretionary trusts).

Also in industry news this week:

The IRS has reversed course on its plan to require users of its Online Account feature to submit to facial recognition to verify their identities after blowback from numerous sources (though the agency has yet to announce what will replace the facial recognition process and is still processing facial recognition through its website even after the announcement)
A new report from McKinsey shows that the fastest-growing category of investors are “hybrids” (i.e., those who have self-directed brokerage accounts in addition to a traditional financial advisor), underscoring the opportunity for advisors who can provide financial planning for clients beyond their (increasingly self-managed) investment portfolio

From there, we have several articles on education planning:

How ‘merit aid’ is lowering the cost of college for many families… and increasing the importance of getting strong grades in high school
How to navigate the rules for determining whether a college student is eligible for in-state tuition benefits
How to ‘superfund’ a 529 plan, and when it might (or might not) be a useful strategy for financial planning clients

We also have a number of articles on practice management:

How advisory firm owners can use the “Entrepreneurial Operating System” to systematize organizational meetings, identify and solve issues, and stay focused on the firm’s long-term goals to overcome the challenges that come with being an “accidental business owner”
Why businesses are increasingly considering offering more frequent pay raise schedules in the face of a hot labor market
How realizing the potential of the remote work environment to give employees more flexibility and control over their lives (and make them happier and healthier in the long run) may depend on replacing constant “pings” and meetings with more asynchronous forms of communication like task boards that give employees information when they need it (but don’t interrupt them when they don’t)

We wrap up with three final articles, all about the benefits of learning to become a (better) writer:

How strong writing skills can help advisors refine their ideas, and better communicate with prospects and clients
Strategies for overcoming writer’s block, and how advisors can leverage their clients’ questions to generate content
How writing can turn ideas from raw building blocks into a well-reasoned and coherent discussion with clients and prospects

Enjoy the ‘light’ reading!

Kitces & Carl Ep 80: How Advisory Firms Evolve Their Specializations Over Time

February 24, 2022 07:05 am 1 Comment CATEGORY: Kitces & Carl Podcast

In recent history, implementing a niche or specialization has given many financial advisors a competitive business and marketing edge over the growing number of advisors in the industry. For many, the challenge may not be so much about choosing a niche, but more about when to begin taking steps toward committing to a particular niche and how to let it evolve over time, because taking action toward any major business decision can feel scary and risky, especially when there is uncertainty as to where the business will be years down the line. Oftentimes, the fear of choosing and committing to a niche can be so overwhelming that it stalls the advisor from taking action and making progress, leading to lost business opportunities.

In our 80th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the importance of flexibility when exploring a chosen niche, when to course correct the plan as the initially chosen niche evolves over time, and deciding how far in advance to start planning in the first place.

As a starting point, it’s important to remember that even the most well-laid, analytical plans consist only of best guesses for the future, and that there will be inevitable changes that must be considered. And while financial advisors are typically strategists that enjoy creating detailed master plans for what lies ahead, creating excessively rigid plans to implement a niche decades into the future with no potential flexibility may end out to be more detrimental than helpful. Instead, arranging plans recognizing that niches and specializations will shift and evolve (a lot like our lives and preferences!), can help advisors be more successful in a chosen niche than they could have imagined at the start.

While some advisors may have a general idea of what they want to pursue as a niche, it’s important to note that a niche worth pursuing may not always present itself until later down the road. Other advisors may choose to pursue multiple niches throughout their career and may not end with the niche they began with. But by approaching marketing strategies and niche exploration with the understanding that there is no way to know how things will end out, advisors can incorporate changes into the planning process to maintain momentum as they gather new information that will help them course correct along the way and get to the right spot in the end.

Ultimately, the key point is that advisors don’t necessarily have to choose – and commit to! – a niche at the start of their careers. Instead, as opportunities to select a niche are presented to the advisor, taking steps toward a shorter 3- to 5-year plan (instead of a longer-term 20- or 30-year plan) allows the advisor to explore the niche and decide if it is a good fit. Regardless of whether the initially chosen niche is the one the advisor will stay with, the time spent exploring a niche is an investment for advisors. Because, more often than not, the true value of the process is reflected by the actionable steps that are taken as a result of exploring a niche, which will ideally leave the advisor in a better place than where they started!
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“Why Now?”: One Question Financial Advisors Should Ask To Convert Prospects Into Clients

February 23, 2022 07:05 am 0 Comments CATEGORY: Client Trust & Communication

For financial advisors, one of the main challenges of the initial meeting with a prospective client is demonstrating the value of financial advice – and showing the prospect how they would benefit from becoming a client. But it isn’t always easy for advisors to articulate this value in a way that resonates with the prospect. Because even though the advisor might be able to name several ways in which they could help the client – like professional investment of the client’s investments, behavioral coaching, and retirement planning – it’s possible that none of these will seem relevant to the prospect’s immediate problems.

Much of the research on quantifying the value of financial advice has revolved around the benefits to clients’ investment portfolios, but investment management is not always the highest priority for prospects (nor is it always the main component of an advisor’s services), so advisors often focus on other, less tangible benefits (like behavioral coaching) when explaining their value. However, even though clients of financial advisors often do value these intangible benefits – as research studies have shown – they ironically tend to recognize that value only after they become a client, meaning that many intangible benefits don’t actually tend to make great selling points with prospects either!

A better way for advisors to demonstrate their value might be to first ask the prospect what has caused them to reach out to hire a financial advisor at this particular moment during their first meeting. The “Why now?” approach identifies important nuances around the prospect’s specific pain points, which helps the advisor understand their deeper concerns beyond a generic need for financial advice. And having identified those concerns, the advisor can better understand what the prospect really values – and can subsequently tailor their own value proposition in a way that truly resonates with the prospect.

Another benefit of the “Why now?” approach is that it sets the stage for good follow-up questions. By inviting the prospect to go deeper into how they might be struggling with whatever prompted them to reach out, the advisor can let the prospect articulate – in their own words – why they need financial advice, and how the advisor can help them resolve their immediate pain points. Which means that, rather than the advisor having to guess at what the prospect might value, asking “Why now?” gives them the answer – while reinforcing to the prospect why reaching out was important to them to begin with!

Ultimately, it’s important to remember that every prospect has (at least) one reason for reaching out, and that there are unique ways they can benefit from the advisor’s services. By identifying those reasons, understanding how the prospect wants to be helped, and clarifying the urgency that prompted the prospect to make contact in the first place, the advisor can personalize their response by articulating their value in a way that will resonate with the prospect and that connects to solving their problems (all while affirming the prospect’s reason for being there in the first place)!Read More...

#FA Success Ep 269: Accelerating The Fee-Only Transition By Acquiring A Commission-Based Book Of Business, With Michael Hartman

February 22, 2022 07:02 am 2 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 269th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Michael Hartman. Michael is the founder of Hyperion Financial, an independent RIA based in Shillington, Pennsylvania, that oversees almost $60 million in assets under management for 75 client households.

What's unique about Michael, though, is how he fast-tracked his transition away from his insurance roots to become a fee-only RIA… by making the investment to acquire a commission-based book of clients and convert them to fee-only as well.

In this episode, we talk in depth about the way Michael built a financial planning fee model with a base financial planning fee and then offsets AUM fees against his ongoing planning fee if clients want him to manage assets after creating the comprehensive plan, how Michael and his team leverage a client service calendar and ‘surge’ meetings to more efficiently create a high-touch experience for their clients, and how Michael and his firm present clients with a one-page ‘financial snapshot’ at every meeting to remind clients of their financial goals and reassure them those goals are on track.

We also talk about how Michael’s discovery of the financial planning world through publications and podcasts inspired him to pursue a career change as a financial advisor; how, after being weighed down for years by the contractual obligations of the insurance companies he worked for, Michael realized he needed to acquire his CFP designation to take his career to the next level; and how Michael ultimately recognized he needed to become an independent firm owner to achieve the freedom to serve clients the way he craved and achieve his personal business aspirations.

And be certain to listen to the end, where Michael shares how he persevered through losing 3 out of 6 of his team members (including his wife) while trying to transition the insurance company he worked for into the financial planning space; how taking a personal “pause” with an 8-week road trip gave Michael the clarity to purchase a local insurance firm and convert it into an independent RIA; and how Michael has lived firsthand the challenge that, much like being a parent for the first time, research and preparation can only get you so far, and at some point, you just have to take the leap to make your business what you think it can become.

So whether you’re interested in learning about how Michael guided his newly purchased insurance brokerage firm through fee and model transitions, how Michael encourages other advisors to actively seek advice and resources from professionals outside of their immediate circles to expand their career opportunities, or how Michael believes the hardships and failures he encountered are part of the journey toward personal and professional growth, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Michael Hartman.