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Weekend Reading for Financial Planners (Oct 16-17)

October 15, 2021 02:47 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the announcement from Schwab Advisor Services that it will be requiring the 13,000 RIAs on its platform (including those migrating from TD Ameritrade) to hold at least $1 million of Errors & Omissions (E&O) insurance coverage, in the latest attempt by a major custodian to reduce its own liability risk by requiring its advisors to better protect themselves against money movement errors and wire fraud... though, of course, E&O coverage can also be beneficial to the advisors themselves by sheltering their assets from legal claims resulting from any mistaken advice they give, making E&O coverage a good idea for advisors even before Schwab’s mandate to hold it.

Also in the industry news this week:

In a reversal of Trump-era regulations, the Department of Labor is proposing a new rule allowing ERISA-covered retirement plan fiduciaries to consider Environmental, Social, and Governance (ESG) factors in their investment selections after all
SEC Chair Gary Gensler confirms that the SEC will be looking into the psychological ‘nudges’ that online brokerage firms (e.g., Robinhood) use to suggest trades, and when those practices constitute a ‘recommendation’ or ‘advice’ (and trigger a higher standard of care)

From there, we have several articles on different fee structures used by RIAs, including:

A study showing that fee-only RIAs experienced double-digit percentage growth in 2020, both in the total number of firms and in the total amount of assets under management, higher than any other channel of advisors
A profile of several firms successfully using a flat-fee model instead of (or in addition to) AUM, and how those firms use the flat-fee model to focus their own value proposition around financial planning
A commentary on the value of financial planning in the accumulation and decumulation phases of life, and why the increasing complexity of the decumulation phase suggests perhaps advisors should be charging more for their advice to retiring clients in that phase?

We've also included a number of Social Security-related articles:

A research study showing that the framing of media coverage around the financial health of Social Security can affect individuals’ decisions on when to file
How to incorporate Social Security into financial planning for clients (particularly younger ones) who are concerned about the long-term viability of the Social Security system
New research showing that the percentage of individuals filing for Social Security benefits early has declined significantly in the last two decades

We wrap up with three final articles about managing the flood of email in our lives:

The problems with sending “after-hours emails”, which can stress out the recipient when they mistakenly interpret it as urgently requiring an immediate response, even if the sender doesn’t expect one
The ways that time spent on email increases our anxiety, and how some ‘hacks’ and the use of other means of communication can decrease our everyday reliance on email in the first place
Quantifying the time we spend on email every day (particularly the ‘wasteful’ tasks like searching and filtering out irrelevant emails) and a list of practices to increase the effectiveness of the time we do spend on email.

Enjoy the 'light' reading!

Overcoming The Unique Communication Challenges Of Advising Couples

October 13, 2021 07:04 am 0 Comments CATEGORY: Client Trust & Communication

Financial advisors who work with couples (or families) may generally find that their clients often require a special set of communication skills not just to avoid moments of alienation but also to help the couple or family experience a sense of unity as they consider their financial goals. Yet, given the current state of evolving financial planning curricula, these communication skills are not generally included in training provided to financial planners. While advisors may be taught technical skills such as helping clients set savings and retirement goals and creating tax and investment strategies for those clients, they aren't taught how to get two (or more) different individuals in a relationship or family unit to agree on those goals and to successfully execute them together.

Fortunately, there are resources for advisors to learn, develop, and hone relationship and financial therapy skills that can help them communicate effectively with their clients. For instance, researchers James Grubman and Dennis Jaffe created a hypothetical curriculum for individual financial advisors and financial planning firms to use that helps them to identify the most relevant and useful communication skills for their practices and also to design and implement strategies to use with their client couples and families. Additionally, a variety of case studies can be used by advisors to think through the communication needs of their clients, especially when helping them work through financial goals that elicit sensitive and emotional relationship challenges.

Ultimately, the key point is that working with client couples and families presents unique challenges that often require special communication skills to be solved effectively. And while most traditional financial planning curricula do not address financial therapy or relationship skills to prepare advisors to face these challenges, there are resources available for advisors to identify, develop, and practice the skills needed to work proficiently with these clients. Honing the communication skills to address the needs of client couples and families can improve not just the dynamics and flow of client meetings but also the relationship between the advisor and clients, as well!

#FA Success Ep 250: Connecting Better With Prospects By Sharing Stories Instead Of Expertise, With Deirdre Van Nest

October 12, 2021 07:01 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 250th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Deirdre Van Nest. Deirdre is the founder of Crazy Good Talks, a communication coaching firm that helps financial advisors be better communicators, in both private and public settings, in order to help their clients and prospects actually take that next desired step.

What's unique about Deirdre, though, is that she has developed a very specific process that she uses to teach advisors how to employ a variety of foundational stories that in turn lets them make a deeper connection with those they’re trying to reach and connect with.

In this episode, we talk in depth about why Deirdre feels that it’s less important for advisors to worry about whether or not the people they’re communicating with “get” what they’re saying (and how it’s far more important to focus on making an emotional connection instead), how Deirdre teaches financial advisors to take the technical body of content that every other advisor (as well as the public) has access to and present it in such a way that prospects will be more inclined to take a specific next action, and why Deirdre feels that every financial advisor can learn to be a highly effective and emotionally compelling communicator, even for advisors for whom public communication doesn’t come naturally.

We also talk about the key question that Deirdre recommends that advisors should ask in the first 30 minutes of a prospect meeting in order to get, as she puts it, “into their hearts instead of their heads”, why, after getting the answer to that question, advisors should avoid showing prospects how they can solve whatever issue it is that a prospect is dealing with and instead use that opportunity to create empathy by sharing one of their own foundational Why, Desire, or Teaching stories, and why Deirdre believes that advisors who truly feel that the service they’re offering is in the best interest of the people they work for have a duty to learn how to be as persuasive, inspiring, and compelling as possible.

And be certain to listen to the end, where Deirdre shares how advisors can make the intangible service they offer more tangible in the eyes of prospects by emphasizing (and even naming) their planning process (rather than focusing on their service alone), the key mindset shift that Deirdre made in prospect meetings that helped her focus on simply helping the person she was meeting with rather than feeling pressured to do everything perfectly in order to close the sale, and why Deirdre feels it’s so important for advisors to look at their words, message, and stories as business assets that they need to invest their time and efforts into over time.

And so with that introduction, I hope you enjoy this episode of the Financial Advisor Success podcast, with Deirdre Van Nest.

Taking Agency Of Your Time For High-Performance Income, Growth, And Advisor Happiness

October 11, 2021 07:03 am 2 Comments CATEGORY: Practice Management

Financial advisory firm owners face a variety of demands on their time, from working directly with clients, to growing their business, and achieving goals outside of work as well. Trying to address all of these demands can lead owners to feel like they don’t have enough time, their days don’t go as planned, and they can never quite get to the goals they’re trying to reach. A problem that most financial advisors try to solve by seeking out and adopting better tools and technology for time efficiency. But the truth is that everyone has the exact same number of hours to use during the day; breakthroughs in professional and personal fulfillment come not by making those hours more efficient, but by making more conscious decisions about how those hours are spent in the first place.

The key, then, is for firm owners to gain agency—the capacity to act independently and make their own free choices—over their time. Similar to saving enough money to gain financial independence, gaining agency over our time requires an intentional framework that regulates where one’s attention flows, to ensure that it is used in ways that best align time with goals, which in turn drives our growth, income, and happiness.

Creating a system to take agency over one’s time starts with understanding the difference between being available and being accessible. Being available is generally viewed as a best practice, as it means advisors can provide services to clients whenever they need to be served. But as a result, being available also means being at someone else’s disposal. This can lead to a seemingly infinite number of distractions and disruptions that can derail even the most well-scheduled day. In other words, being always available to clients means that a firm owner is never actually in charge of their time.

On the other hand, being accessible means being able to be reached. A firm owner who is accessible still provides services to clients that need to be served, but sets the terms for communication that work for both themselves and their stakeholders. Creating a model of accessibility requires the advisor to set clear expectations about how and when they will be accessible, though. Doing so, however, creates more calendar space and allows the advisor’s time to be more intentionally aligned with the experiences they want to have.

Once a firm owner has adopted a mindset of accessibility (and not just availability), it is important to create clarity about what they really intend to do with their time at work, once that time will be more consciously allocated. The key questions the owner needs to answer include how big they want their firm to be; who the ideal client is; what lifestyle they want to enjoy; and finally, how they can best invest their time based on the previous answers.

It is then time for the firm owner to connect this vision to reality by using time management models and techniques to make it clear to everyone what gets their focus, how their time is allocated, and what actions are assigned along the way. These tools include an annual firm calendar (which first spells out lifestyle goals and then lets the business decide how to use the remaining time), a model weekly schedule (which lays out how the owner spends their time each week), and personal productivity techniques (including morning routines, personal rituals, and professional routines).

Ultimately, moving to an accessible-not-available mindset and creating structures to manage this accessibility can help firm owners gain control over their time and better position themselves to achieve their personal and professional goals. Because at the end of the day, time can be neither created nor destroyed, but it can be wasted if it is not consciously allocated!

Weekend Reading for Financial Planners (Oct 9-10)

October 8, 2021 02:25 pm 2 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the global financial services industry buzz of the “Pandora Papers”, the latest leak of the so-called “shadow financial system” used by certain ultra-high-net-worth households (including world leaders, other politicians, celebrities, and more), highlighting the ways the system is used to hide assets (sometimes legally, and sometimes not), and the surprising extent to which the US has actually become the ‘offshore’ haven for those in other countries looking to hide assets in US trusts… which in turn has already spawned proposed legislation in Congress this week to crack down on the unreported flows of assets through certain US trusts and the lawyers and accountants who facilitate them.

Also in the industry news this week:

As social media becomes increasingly popular for financial services – from meme stocks to testimonials, and the rise of “Finfluencers” – FINRA is taking an increasingly hard look at how social media is used within broker-dealers
Regulators are focused more and more on advisors getting ‘trusted contacts’ for all their clients to serve as the first line of defense to spot diminishing capacity and financial elder abuse

From there, we have several articles on the ongoing rise of (fee-based) annuities, including:

A new Stand-Alone Living Benefit (SALB) offering from RetireOne that allows RIAs to wrap annuity guarantees around their existing managed accounts (without actually being required to liquidate and transfer the assets into an annuity)
A survey from DPL showing that advisors are increasingly looking to use annuities as a bond substitute
A research study from David Blanchett highlighting the risks of using Fixed Indexed Annuities in particular as a bond substitute, and the hazards of comparing historical FIA returns to those that would be purchased today at current (much-lower-than-historical) interest rates.

We've also included a number of marketing-related articles:

Tools that advisors can use to expedite email communication with clients, from recording quick personalized videos to easily catching grammatical errors
The rise of “Local Service Ads” on Google and why they may be better suited than traditional Google Ads for advisors that have a geographic reach beyond their local zip code
A study highlighting how more and more consumers are vetting their advisors on social media before engaging, with 1-in-5 stating that an advisor’s social media presence was the deciding factor in who to work with!

We wrap up with three final articles, all around the theme of investing in ourselves:

Why believing in yourself and building your own self-confidence is foundational to career success
The benefits of hiring a coach, not only when you’re struggling, but whenever you’re trying to get to the next level
Why it’s better to think of your career as a “call option” than simply a stock, because of the significant upside potential that can come from switching careers, launching a business, or simply reinvesting in yourself to make a stretch for that next job (and the outsized rewards that can come if that leap goes well)!

Enjoy the 'light' reading!

Kitces & Carl Ep 70: The Paralyzing Fear Of Being Wrong (In Our Planning Projections)

October 7, 2021 07:05 am 5 Comments CATEGORY: Kitces & Carl Podcast

Presenting a financial plan to a new client offers an opportunity for advisors to answer questions and problem-solve... and to build trust between an advisor and their new client. Clients rely on advisors to create plans that provide a clear path towards their financial goals. However, at the same time, advisors know that even the best laid plans can go awry. Plans could be significantly altered by something as small as a 0.5% rate change in inflation, to say nothing of recessions, new laws, and other economic ups-and-downs. Which creates a conundrum, as while advisors want to promote trust in their advice (and in their own expertise), there's always the caveat that events that are out of our control often interfere with even the most painstakingly crafted plans.

In our 70th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore why advisors experience paralyzing fear around being wrong, how advisors can shift their mindset around their desire to "be right", and how they can nurture self-confidence in the face of the unknown.

As a first step, it’s helpful to frame up the correct mentality around the plan itself. When creating a financial plan, the reality is that advisors are helping clients make important decisions with incomplete information—because no one can even know for certain what the future holds. To be fair, planning projections aren’t haphazard shots in the dark; advisors have the technical expertise and the right tools. But advisors are up against the uncertainty of the future. In fact, Monte Carlo simulations inherently consider countless scenarios that never happen, and might not even include the one that does!

Instead, financial plans aren’t actually about being right... they're about being less wrong. Or put another way, when framing up the conversation to clients, it’s important to remember that a Monte Carlo “failure” results in a course correction, not bankruptcy—and that minor adjustments are needed to get a plan back on track. The reality is that it's highly unlikely that advisors and clients will just wake up one day and see that their plans have plummeted into failure. Financial situations change gradually, and when conversations with clients are ongoing, they can easily be adjusted based on how much risk—and potential for course correction—a client is willing to accept.

Given, then, how adjustments and risk come into play, framing these conversations with clients in black-and-white terms of “success” and “failure” is counter-productive. Instead, it may be helpful for advisors to think of their core projected plan as a line. A line will almost certainly go askew from its projection because it is so narrow. However, a line that has been buffeted with guardrails, with plans for what to do when the unexpected happens, is one that is “successful” at the end of the day. Conveying a guardrail-focused, adjustment-based plan can give advisors more confidence in owning their projections because it acknowledges that no one knows the future; instead, advisors are simply guarding against it.

Ultimately, the key point is that projections are inherently uncertain... and are only the first step. Learning to own uncertainty when presenting a plan to a new client will help set the stage for conversations later on when clients inevitably get nervous about whatever may be going on in the world. At the end of the day, advisors who embrace uncertainty are the ones who are prepared to take action as life happens!

Grantor Trust Estate Planning Strategies To Implement Before The Biden Tax Proposals Take Effect

October 6, 2021 07:03 am 2 Comments CATEGORY: Taxes

Trusts have been used in estate planning for decades as a way for individuals to ensure that their assets are distributed according to their wishes after death. Not only do trusts give owners more flexibility to specify how their assets are distributed upon their death (relative to a simple Will, for example), but strategies using trusts can also reduce the potential income, gift, and estate taxes associated with those assets (thereby allowing heirs to benefit more from the assets left to them). And while numerous trust strategies exist for individuals, many of the most popular strategies have historically revolved around the use of Grantor Trusts.

However, the recently proposed “Build Back Better” reconciliation bill currently under debate in Congress has targeted the use of Grantor Trusts, particularly because of how they are used by wealthy individuals to transfer assets – free of estate taxes! – to their heirs. The bill’s text, released by the House Ways and Means Committee on September 13, 2021, proposes major changes to how assets in Grantor Trusts are treated for gift and estate tax purposes, such as making all Grantor Trust assets includable in the Grantor’s estate, treating transfers between a Grantor and their trust as a gift or sale rather than a disregarded transaction, and treating transfers from the trust to anyone other than the Grantor during their lifetime as a gift. As a result, Grantor Trusts that are frequently used in many estate planning strategies – including Grantor Retained Annuity Trusts (GRATs), Intentionally Defective Grantor Trusts (IDGTs), and Spousal Lifetime Access Trusts (SLATs) – could be seriously impacted or eliminated altogether!

Importantly, for individuals and families who can benefit from these strategies, the proposed bill would only apply to new trusts created after its enactment. Which means that there is still a (very limited!) window of opportunity between now and the bill’s enactment (which can happen anytime in the coming weeks or months) to implement Grantor Trust strategies. Additionally, the Build Back Better legislation would also reduce the taxable estate exemption by 50% (to $5.85 million for individuals, and $11.7 million for couples), meaning that strategies such as Grantor Trusts that currently remove assets from one’s taxable estates could be newly relevant for individuals and families whose assets fall between the old exemption amount and the new, lower one… but because of the proposed changes to Grantor Trust laws, those who can benefit from such strategies only have between now and the date of the bill’s enactment to decide on a strategy and to create and fund a trust!

Ultimately, while the proposed bill would not impact Grantor Trusts already in place, it would place significant limitations on implementing new strategies and leave existing ones with less flexibility to change course. And even though the bill has several steps to take before becoming law, the potential significance of its impact combined with the limited amount of time before its provisions take effect means that the time to plan (and act on!) any Grantor Trust strategy is now… because letting more time elapse between now and the bill’s passage risks running out of time and needing to start from scratch with fewer options!

#FA Success Ep 249: Going Beyond Client Experience With Client Adventures To Drive Organic Growth, With Drew Waldron

October 5, 2021 07:04 am 2 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 249th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Drew Waldron. Drew is the co-founder of Canvas Wealth Advisors, an RIA in Overland Park, KS that manages about $455 million for 150 client households.

What's unique about Drew, though, is the way he and his partner take the implementation of client experience to the next level, by not just reinvesting into client service or better technology, but organizing and executing exotic once-in-a-lifetime excursions for their clients to have a truly differentiated experience as clients of the firm.

In this episode, we talk in depth about the sorts of adventures that Drew and Scott plan for their clients and prospects (and how they assemble groups specifically to foster introductions for clients who might benefit from connecting with others who are also invited along), Drew's observations about how staging the right experience with the right group of people can help his wealth management firm stand out against competing firms, and how Drew's prior experience as a junior advisor on other wealth management teams allowed him to build out a network of affluent professionals in his area that he can call on to make those connections that help their clients and prospects build their own new relationships.

We also talk about how, after launching in the spring of 2019 and bringing along about $50 million in client assets from his previous firm, Canvas Wealth has been able to grow to north of $450 million in assets in just two-and-a-half years with its unique experiences-based marketing approach, the lesson that Drew learned during the height of the pandemic around the importance of staying in touch with clients and being truly proactive with maintaining relationships, and how Drew creates touch-points for every single one of his clients every single month by bringing his team together to meet on Mondays and discuss what value-added items (whether it be an introduction or updated projection) they're going to deliver to the clients they're reaching out to that week.

And be certain to listen to the end, where Drew shares how he and his firm make a clear distinction between those on the team who live solely in the business development side of the firm and those who are in the financial planning and advice-delivery side, how Drew has integrated FinLife's MoneyMind and HonestConversations tools to systematically onboard new clients in a way that better aligns their advice with their clients' unique values, and Drew's focus on recruiting a bench of younger advisors from the Kansas State financial planning program that he can develop into lead advisors so that he continue to scale and grow his practice in the years to come.

So whether you’re interested in learning about the unique adventures Drew and his partner take their clients on, how they’ve been able to 8x their firm in just two-and-a-half years, or how he’s integrated FinLife's MoneyMind and HonestConversations tools into his practice, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Drew Waldron.

The Latest In Financial #AdvisorTech (October 2021)

October 4, 2021 07:03 am 2 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the October 2021 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 Franklin Templeton is acquiring O’Shaughnessy Asset Management and its Canvas direct indexing platform, as yet another ‘traditional’ asset manager makes a bet that the future will be increasingly driven by ‘direct’ indexing over traditional mutual funds and ETFs. Notably, though, OSAM’s Canvas wasn’t simply another platform to turn an index fund into one where its component stocks can be tax-loss harvested for incremental tax alpha; instead, it was part of a ‘second generation’ of direct indexing platforms that are building tools for advisors to create increasingly personalized “custom indexes” for each client based on their own individual preferences… where the asset manager can get paid as a Separate Account Manager to implement those unique-to-each-client portfolios?

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

Morningstar acquires Moorgate Benchmarks to become a licenser of (direct) indexes
Betterment for Advisors increasingly pivots from TAMP to RIA custodian competitor with more custom model-management tools
The SEC opens an inquiry into when FinTech-driven nudges become formal recommendations or bona fide investment advice
Docupace acquires PreciseFP as digital onboarding increasingly focuses not on advisor replacement but back-office business process automation

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

AdvicePay launches Engagements for Enterprises to manage the entire end-to-end process of overseeing fee-for-service financial advice
Vanilla raises $11.6M in Series A funding to scale its estate planning solution for financial advisors
Fidelity partners with Armorblox to help RIAs improve their email cybersecurity to avoid fraudulent wire transfers
MoneyMap.io launches a new API-based service to help existing FinTechs connect their users with financial advisors to ‘upsell’ human financial advice

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 (Oct 2-3)

October 1, 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 Franklin Templeton is acquiring O’Shaughnessy Asset Management and its ‘Canvas’ direct indexing platform, as yet another traditional asset manager stakes a view that the future will increasingly be built not on mutual funds and ETFs but the use of technology to build more customized portfolios down to the individual stock level (configured via a software interface, and implemented as an SMA that asset managers can charge for?).

Also in the industry news this week:

An RIA is forced to pay out nearly $1M in restitution as a settlement for charging advisory fees on “house accounts” without assigning an advisor to service those clients
FINRA institutes a new rule that will allow ex-brokers to reinstate their Series licenses within 5 years (instead of ‘just’ 2 years) as long as they complete their FINRA CE requirement and pay a (nominal) fee

From there, we have tax planning articles, including:

End-of-year tax planning strategies for the fourth quarter, which are taking on a greater focus with the potential for significant tax law changes that may come into effect for 2022
A look at how ultra-popular GRATs have become with ultra-HNW clients (with one estimate that more than 50% of the top 100 wealthiest families are using the estate planning strategy)
The outlook for the Qualified Small Business Stock (QSBS) tax incentive that may be halved (from $10M to only $5M of capital gains that can be excluded) in the years to come

We've also included a number of marketing-related articles:

How to structure an advisory firm if it wants to serve multiple niches at once (hint: each niche needs its own team of advisors within the firm)
Why client satisfaction isn’t just a function of the service they receive, but their expectations of those services
How the future of growth is all about formulating expertise and making it more ‘visible’ to prospects (e.g., through blogging, social media, and other digital marketing channels)

We wrap up with three final articles, all around the theme of how technology is reshaping our world:

Why the rise of technology platforms for small businesses is making it easier to be a successful solopreneur (despite the calls that firms must achieve greater size and economies of scale to survive)
The ways that Decentralized Finance (DeFi) and the blockchain could change the financial services industry (by becoming the next generation of broker-dealers and RIA custodial platforms?)
How the intersection of human and artificial intelligence is proving to be more effective than humans or AI alone… suggesting that the future of financial advice is less about robots versus humans and more that success will be defined by the human advisors who best augment themselves with technology!

Enjoy the 'light' reading!