Nerd's Eye View blog

#FA Success Ep 262: Asking More Questions In The Discovery Process To Deepen Client Relationships, With Melanie Milam

January 4, 2022 07:04 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 262nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Melanie Milam. Melanie is an advisor with Gateway Financial Partners, a super-OSJ affiliated with LPL Financial located in Texas, where she oversees $150M of assets under management for her 110 client households

What's unique about Melanie, though, is her approach to connecting with clients, mostly in the oil and gas industry, through a tried-and-true list of 34 questions she’s built specifically geared toward maximizing the amount of time clients talk about themselves, to not only gain a better perspective on their goals, but to create deeper, longer-lasting relationships.   

In this episode, we talk in-depth about how Melanie and her husband began her firm by leveraging her knowledge as a CPA and his managerial experience and personal connections in the oil and gas industry (which lead them to find her niche market), the way Melanie’s firm segments clients into tiers to align their services and provide specialized gifts and experiences for her top clients, and how Melanie’s faith drove her to obtain her Certified Kingdom Advisor (CKA) designation so that she can connect with her faith-based clients and give back to her community.  

We also talk about how Melanie managed to begin her firm while homeschooling 6 children, why Melanie believes it’s so important to create stability in your own financial life before launching a business to help advise clients in theirs, and how it was the realization that Melanie does her best work when she’s in front of her clients that helped her build the courage to begin hiring a team that helps ensure she’s maximizing her time in front of her clients. 

And be certain to listen to the end, where Melanie shares her “can have it all” (just not all at the same time) mindset about the women in the financial services industry, the way Melanie weaves her faith into her advice and her own life and business decisions, how Melanie’s passion for helping others inspired her sons to join the firm and further built client trust. 

So whether you’re interested in learning about Melanie’s unique CKA designation and how she translates faith into financial advice, what inspires Melanie to create deeper relationships with her clients, or how she built her firm as a busy but attentive mother of 6, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Melanie Milam.

The Latest In Financial #AdvisorTech (January 2022)

January 3, 2022 07:02 am 1 Comment CATEGORY: Technology & Advisor FinTech

Welcome to the January 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!

In this month’s edition, we look back at the four major trends underway in the financial advisor ecosystem that shaped the big AdvisorTech events that occurred in 2021, and what the trends portend for the year(s) to come.

The first driving trend is the ongoing shift of the financial advisor value proposition itself – from the sale of financial services products, to the sale of financial advice itself – which in turn is slowly but steadily reshaping the entire advisor technology stack. Starting with a growing pressure on financial planning software to go deeper – not simpler – and an expansion of various ‘advice-support’ and plan monitoring tools that augment planning software. Which is leading advisor CRM systems to increasingly become the hub, as new startup planning tools build first to CRM systems (not brokerage platforms or portfolio management tools). And an expansion of tools to support more advice models beyond ‘just’ the traditional AUM model (from Assets Under Advisement [AUA] to subscription and retainer models).

The second trend reshaping advisor technology is the growing focus on back-office automation, as it becomes increasingly clear that “robo-advisors” were never a threat to real financial advisors… but the efficiencies they bring are highly relevant to enhancing the productivity of human advisory firms! Which is driving a new wave of investments into both business process automation systems, and more generally anything that can improve the expediency of back-office workflows (from ‘simple’ client note-taking to more complex multi-system workflows), along with greater automation of compliance technology (“RegTech”) in particular. And the need for more integration across platforms – to achieve those efficiencies – is spawning a new wave of solutions that make it possible for advisors to either begin to warehouse their own data (to facilitate their own integrations), or be able to accomplish everything in a single “all-in-one” system that houses all the data and provides all the necessary services (so advisors can just focus on the business itself!).

In next week’s continuation of our 2022 recap, we’ll look at the remaining two AdvisorTech trends – the hunger for (re-)igniting organic growth as advisory firms scale, and how evolving investment trends (given high market valuations and low bond yields) are fueling some of the biggest opportunities in AdvisorTech (as advisors historically will pay even more for solutions that help to create revenue!).

In the meantime, 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 (Jan 1-2)

December 31, 2021 02:28 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 Social Security Administration will be keeping its local field offices closed for the foreseeable future, despite earlier reports that they would be re-opening in early 2022 for the first time since March of 2020—meaning that those who rely on Social Security will need to continue to use the agency’s website and phone line to access their services, and advisors working with clients will want to keep getting even more familiar with the SSA’s online capabilities as well.

Also in industry news this week:

The SEC has gone back and forth on whether it will allow RIAs to use the term “fiduciary” on Form CRS, frustrating some RIA owners who want the form to better distinguish the standards of conduct for RIAs from those for broker-dealers
A new research report shows that the share of client assets managed by wirehouses has declined significantly since 2010, and projects to shrink even further as more advisors continue opting to go independent

From there, we have several articles on various strategies employed by the ultra-wealthy to avoid taxes, including:

A workaround that allows business owners in certain states to circumvent the $10,000 limit on State and Local Tax (SALT) deductions (if the state enacts the necessary changes)
How billionaires have aggressively claimed business losses on their hobbies and leisure pursuits to offset their other income, in spite of IRS rules that prohibit such “hobby” losses
How Wyoming displaced offshore trusts to become one of the most popular tax havens in the world for the ultrawealthy, owing to the “Cowboy Cocktail” of trusts and business entities that allow individuals to conceal their ownership of assets within the state.

We also have a number of articles on the growing field of ‘financial psychology’:

How understanding financial psychology can allow advisors to help clients make better financial decisions (and lead advisors to create better financial plans)
What advisors can learn from the high-touch world of concierge medicine
Why worrying about money transcends wealth levels and what advisors can do to maximize their clients’ (and their own) happiness

We wrap up with three final articles, all about how the pandemic has affected the lives of Americans:

How the top 1% and the bottom 50% have seen the greatest relative wealth gains during the pandemic, while the middle- and upper-middle class may be getting squeezed (at least on a relative basis)
Why many knowledge workers are quitting their jobs, and how financial advisors can adapt to the new working environment
Why Americans have done little to change their recent behavior, despite newly skyrocketing COVID case counts, and how that might affect both advisors and their clients heading in 2022

Enjoy the ‘light’ reading!

Kitces & Carl Ep 76: Overcoming Imposter Syndrome By Truly Building Confidence In Your Own Value

December 30, 2021 07:04 am 2 Comments CATEGORY: Kitces & Carl Podcast

Much of a financial advisor’s work involves putting themselves out there, whether by pitching their services to a client, writing engaging pitches on their website, or promoting their own educational or written work. For many advisors, though, marketing themselves may initially feel intimidating, but the process becomes less daunting as they find success and get more experience under their belts. For many advisors, diving into new experiences may elicit feelings of “imposter syndrome” – a sense of self-doubt around one’s abilities to the extent that they may feel like a fraud – that are never actually eliminated regardless of their level of subject matter expertise or how long their track record of success gets.

In our 76^th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss their own experiences with imposter syndrome and how they – and other advisors – have successfully dealt with it.

Advisors who struggle with imposter syndrome tend to have trouble internalizing their own capabilities, despite external evidence of their success. And rather than building confidence upon their successes, advisors often find it even harder to acknowledge their skill as they accumulate successes, because they develop the sense that there is simply a further distance for them to fall. Which can present a significant trial to advisors as they progress in their career, as while some uncertainty and feelings of “I don’t know what I’m doing” are normal when first starting out (or trying something for the first time!), when those feelings are continual, they can pose a challenge for advisors to do the things that will help improve their circumstances or represent their skills adequately – such as by asking for a fair fee or promoting their educational content.

Fortunately, there are ways for advisors to mitigate – and even leverage – the effects of imposter syndrome. By first recognizing that imposter syndrome is a very common experience and acknowledging that it can often present opportunities for advisors to stretch and improve themselves, advisors can devise productive strategies to help them effectively cope with their self-doubt. For example, one advisor who had trouble assertively discussing her fees wrote up a detailed script that she pulled up and read when having the conversation with clients, to keep any unfounded reservations about her value as an advisor from discounting her services.

Ultimately, the key point is that imposter syndrome is deep-rooted and challenging for many advisors, but developing coping mechanisms and leveraging the challenges that are presented to advisors can help them advance themselves and elevate the value they offer to clients. Because the advisor who can look back and realize how far they’ve come can increase their confidence over time – and genuinely embrace their expertise!

Analyzing Net Unrealized Appreciation (NUA) Opportunities For Privately Held Company Employee Stock Ownership Plans (ESOPs)

December 29, 2021 07:05 am 2 Comments CATEGORY: Taxes

Allowing employees to enjoy the success of a company can be a helpful motivator and reward. Employer-sponsored retirement plans that allow employees to purchase company stock enable employees to gain a stake in the company, which can also present them with Net Unrealized Appreciation (NUA) opportunities. In most cases, distributions made from tax-preferenced retirement accounts are taxed at ordinary income rates. However, when stock held in an employer plan is eligible for NUA treatment, participants pay ordinary income tax only on the cumulative purchase price of the shares upon distribution, and can enjoy long-term capital gains taxes on the growth of those shares (assuming certain NUA requirements are met).

Advisors with clients who can benefit from NUA opportunities must ensure that three rules are met. First, the distribution must be completed after the participant experiences a “Triggering Event”, which are attainment of age 59 1/2, separation from service (whether voluntary or not), or death. Second, the distribution must be made as a “Lump-Sum Distribution”, which means that assets must be completely distributed within one calendar year. Lastly, the employer stock shares must be distributed from the employer-sponsored retirement plan “in-kind” (i.e., maintained as employer stock shares and not liquidated) into a taxable account. These three rules are non-negotiable, and violating any of them removes any possibility of using the NUA tax break.

Additionally, unlike employees in publicly traded companies, those who work for privately traded companies can be faced with limitations on how their employer stock shares must be distributed (particularly from an ESOP). Because there is no law that requires employers to make this option available to plan participants, some employers may incorporate ESOP prohibitions that make true “in-kind” distributions impossible (in order to limit outside investors from owning the closely held stock). In other cases, the privately held stock may be transferrable, but there are restrictions on holding the stock outside the ESOP which may make NUA transactions complicated to fully realize – or at least not worthwhile.

Which means that advisors can help clients who are employees of private companies determine whether they can take advantage of NUA in the first place. For example, employees who work for S corporations may have distribution contingencies in their plan that result in an immediate long-term capital gain tax on distributions that need to be immediately sold, on top of the ordinary income tax due on the original purchase price.

Ultimately, for participants in these instances, knowledge is power – both pertaining to navigating the requirements to take advantage of NUA tax benefits when they are available, and selecting the best alternative options (such as rollovers into other retirement accounts) if the NUA strategy ends out to be tax-inefficient!

#FA Success Ep 261: Replacing The AUM Fee With A Complexity-Based Fee For (Only) The Time It Really Takes, With Andrew Miller

December 28, 2021 07:05 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 261^st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Andrew Miller. Andrew is the founder of OLIO, a financial planning firm based out of McLean, Virginia, that manages $275 million for over 275 households.

What's unique about Andrew, though, is how he’s been able to craft a scalable business model based on complexity fees, by meticulously capturing the details of every planning analysis he’s done for his clients over the years and translating it into a clear estimate of the time and effort it will take to handle any new client’s planning needs.

In this episode, we talk in depth about how Andrew developed his time-based system to determine how to price his services to clients, why Andrew’s focus on time has led the firm to do less and less investment work for clients and more and more for clients’ other financial planning needs (because as Andrew notes, if your technology stack is good enough, it really does take about the same amount of time to rebalance a $100,000 account as it does to rebalance a $9M account), and the financial planning proposal process that Andrew created to help translate the value of his time into dollar amounts that make his fee worthwhile to the clients he serves.

We also talk about how financial advice given to Andrew developed a skepticism of the financial industry that ultimately helped shape his career and OLIO’s financial planning process, how Andrew’s experience as a civil engineer fostered an understanding of how time and productivity are intertwined (which helped him create the tools that are applied to OLIO’s fee structure), and how Andrew is positioning himself and his firm to be successful as technology encroaches ever further into the realm of financial planning.

And be certain to listen to the end, where Andrew describes how his own financial planning philosophy and ‘money scripts’ began at an early age, how fostering the education of resident advisors means so much to him and his vision for the future of the financial planning industry, and how despite being told by other advisors that his business model would ‘never work’ that it’s been his willingness to create his own definition of success that’s allowed him to achieve it.

So whether you’re interested in learning about how Andrew’s own experience with financial advice and fees inspired him to promote change from within the financial advice industry, how Andrew employed his civil engineering background to create time-based data to determine his fee model, or how Andrew is helping to shape the future by coaching and educating resident advisors, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Andrew Miller.

2021 Highlights – The Top 20 Nerd’s Eye View Blog Posts You Might Have Missed

December 27, 2021 07:04 am 0 Comments CATEGORY: Nerd's Eye View

As 2021 comes to a close, I am once again so thankful to all of you, the ever-growing number of readers who continue to regularly visit this Nerd’s Eye View blog (and share the content with your friends and colleagues, which we greatly appreciate!). This year has been one of mixed feelings for most financial advisors – a year where many people have struggled with the direct and indirect impacts of the ongoing pandemic, from health to employment challenges, but one where many financial advisory firms have managed to adapt and even excel with newfound growth as more consumers realized they need a financial advisor. Personally, it has been a big year of change as well, with a(nother) doubling of the Kitces.com team in 2021 (now more than 20 people who help to make it all happen!), as we expand further into Courses and online Summits to fulfill our own mission of “Making Financial Advicers Better and More Successful”.

We recognize (and appreciate!) that this blog – its articles and podcasts – is a regular habit for tens of thousands of advisors, but that not everyone has the time or opportunity to read every blog post or listen to every podcast that is released from Nerd’s Eye View throughout the year. As many of you noted in response to our Reader Surveys, most choose which content to read or listen to based on headlines and topics that are of interest (and skip the rest). Yet in practice, this means that an article once missed is often never seen again, ‘overwritten’ (or at least bumped out of your Inbox!) by the next day’s, week’s, and month’s worth of content that comes along.

Accordingly, just as I did last year, and in 2019, 2018, 2017, 2016, 2015, and 2014, I've compiled for you this Highlights List of our top 20 articles in 2021 that you might have missed, including some of our most popular episodes of ‘Kitces & Carl’ and the ‘Financial Advisor Success’ podcasts. So whether you're new to the blog and #FASuccess (and Kitces & Carl) podcasts and haven't searched through the Archives yet, or simply haven't had the time to keep up with everything, I hope that some of these will (still) be useful for you! And as always, I hope you'll take a moment to share podcast episodes and articles of interest with your friends and colleagues as well!

In the meantime, I hope you're having a safe and happy holiday season. Thanks again for the opportunity to serve you in 2021, and I’m excited to share more soon about some new initiatives we’re planning to do even more to support the Financial Advicer community in 2022 and beyond!

Weekend Reading for Financial Planners (Dec 25-26)

December 24, 2021 02:28 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 Biden administration will extend the moratorium on Federal student loan payments until May 1, giving some relief to borrowers impacted by the continuing effects of the pandemic (and softening the blow that January’s lapse in monthly Child Tax Credit payments, alongside the original February 1 date when loan payments would have restarted without the extension, was expected to have on household balance sheets).

Also in industry news this week:

Research shows that, after years of being slow to incorporate ETFs into their clients’ portfolios, investment advisors have actually passed retail investors (and institutions) as the largest buyers of ETFs
The Department of Labor has issued guidance for brokers to freshly evaluate the potential conflicts of interest that their payout grids present (especially grids that provide retroactively higher payouts upon reaching the next threshold)

From there, we also have several articles discussing retirement planning:

New research shows that the pace of the observed decline in spending over the course of a retirement can differ based on a retiree’s wealth and health, suggesting that while spending usually declines for retirees in their later years, the typical clients of advisors may actually maintain more level retirement spending after all?
How advisors can help younger clients balance saving for the future with enjoying life today and not ‘over-saving’
How a new tool that helps individuals to search for the best places to live in the U.S. (for them) based on a range of criteria could help advisors better estimate a client’s potential expenses in retirement

We also have a number of articles on advisor marketing:

Why ‘social proof’ is an important part of attracting new clients, and how advisors can use testimonials and online platforms to generate it
Why advisors might not be getting as many referrals as they would like from Centers of Influence, and how they can get more
Why establishing and communicating company culture is important to attract and retain the ‘right’ clients and employees (and should deliberately repel the wrong ones!)

We wrap up with three final articles, all about how advances in technology have the potential to change the way we live and work in the future:

A primer on the buzz around “Web3”, and why, despite the legitimate concerns about its widespread adoption, it’s worth keeping an eye on how blockchain-based Web3 technologies continue to evolve
Why, after decades of Microsoft Word as the default document editor for many organizations, competitors are now springing up to compete (and change the way we create and edit documents in the online era)
How the mass adoption of telecommuting could, despite its short-term benefits, pose long-term threats for knowledge workers who may now face more global competition for their jobs

Enjoy the “light” reading!

Addressing Financial Advisor Anxiety To Help Prospects Overcome Their Fear Of Judgment

December 22, 2021 07:02 am 0 Comments CATEGORY: Client Trust & Communication

Fear of judgment is an emotion that creates anxiety for many people. For example, seeing a doctor can be stressful for people who fear they will be judged for the current state of their health (or for their health choices and behaviors). This anxiety can lead people to avoid going to a doctor altogether, even when they know that going would be the ‘right’ choice for the sake of their own health. Consumer research has suggested that this fear of judgment also extends to people who may benefit from hiring a financial advisor. Because just as it is common to feel anxiety about revealing the details of one’s physical health to a health professional, disclosing details about one’s financial health – and the potential for being judged based on their lack of financial knowledge or their past financial behaviors – can lead to Financial Advisor Anxiety (FAA).

While FAA can affect different people in different ways (for example, women were shown to feel more anxiety about being unfamiliar with financial terminology, while men worried more about being judged on their past behavior), the result often ends out being that people tend to avoid seeking out professional financial advice when their level of anxiety becomes too great.

For financial advisors, then, this means that a possibly significant number of potential clients may never even reach out… not because they don’t want or need financial advice, but because they are simply too anxious about the idea of revealing personal financial details to a stranger to take the step of making an initial phone call or email. However, advisors can help alleviate the impact of FAA on prospective clients – thereby improving the probability of potential clients actually reaching out to the advisor – by taking proactive steps to alleviate the fear of judgment before the initial contact.

For example, because unfamiliarity with financial terminology is a source of FAA for many people, adding a glossary of common financial terms (e.g., IRA, 529 Plan, Fiduciary, etc.) on the advisor’s website can be a helpful resource – not just as an educational tool, but also an acknowledgment that financial jargon can be obscure and intimidating to non-experts, and a signal that the advisor will not judge anyone for being unfamiliar with financial planning terminology.

Advisors can also alleviate FAA by sharing some of their own vulnerabilities by talking about their fears and challenges with finance. For instance, an advisor could record a video for their website about their own journey towards becoming an advisor, the obstacles they encountered in getting there, and the benefits they have realized by working to overcome their own anxiety. And in their own communities, advisors can model non-judgmental behavior to normalize some of the fear and stress that people often have when talking about money by, for example, talking openly in casual conversation about common financial issues that people experience (and how the advisor works with their clients to overcome them).

Ultimately, alleviating Financial Advisor Anxiety comes down to reducing the fear of judgment and shame that can paralyze some people into not seeking financial advice. And finding strategies to help individuals overcome FAA can be a powerful way for advisors to increase the number of prospects who reach out to them (because they were able to overcome their anxiety enough to do so). Which means that those prospective clients who do reach out will also be more likely to have a higher level of comfort and trust in the advisor from the start!

#FA Success Ep 260: Breaking Bread Together To Build New Client Relationships As Their Financial Chef, With David Ortiz

December 21, 2021 07:01 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 260th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is David Ortiz. David is the founder of Financial Chef, an independent RIA operating as a lifestyle practice, serving clients in southern Florida. What's unique about David, though, is the way he combines his experience as a classically trained chef with the growth of his advisory firm, which now includes driving a Sprinter van with a full kitchen, so he can travel to a wider range of clientele across South Florida, to cook custom meals for them and then provide financial advice while they eat their freshly prepared food together.

In this episode, we talk in-depth about how David grew his advisory firm by leveraging his training as a chef, first by building relationships with local charities, where he would provide in-house cooking for a party of 10 as a silent auction offering to get access to high-value prospects who are affluent enough to bid thousands of dollars on his donated chef services, how David then built an office space with a professional kitchen where the timing of client meetings was based on the available breakfast, lunch, and dinner sittings that restaurants use, and why David ultimately decided to make his cooking plus advice services more mobile by buying the van with the kitchen so that he could bring the food directly to his clients in what David calls the Ritz-Carlton of food trucks.

We also talk about how David has evolved his financial planning services for clients, including how David has largely eschewed relying on traditional planning software and instead, built his value proposition directly around the ongoing and never-ending financial planning tasks that his clients need his help to implement, how David built his own custom portals for each client through Microsoft SharePoint to help clients track their financial planning progress over time, and why David has decided to evolve his business model towards charging ongoing planning fees as a percentage of client income for his financial planning task support, in addition to AUM fees where his clients need their portfolios managed.

And be certain to listen to the end where David shares his own journey through the advice business from how he made the transition from being a chef and doing a brief stint at a software company before getting started as a life insurance agent, why David ultimately decided to leave the broker-dealer world and structure his firm as an independent RIA instead, and why David believes that a chef who cooks for his clients in addition to providing them financial advice has been so effective at deepening his client relationships.

So whether you're interested in learning more about why David decided to join his talents as a chef and as a financial advisor into a successful business, why he opts for an almost subscription-style fee model, or how he designs his financial plans with a task-oriented approach, then we hope you enjoy this episode of the Financial Advisor Success podcast.