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Weekend Reading For Financial Planners (Nov 12-13)

November 11, 2022 02:02 pm 5 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that as enforcement of the SEC’s new marketing rule began on November 4, advisory firms are taking a variety of approaches. While some are looking to gain a first-mover advantage by leveraging client testimonials and third-party endorsements (and adjusting their compliance programs before doing so), others are taking a wait-and-see approach.

Also in industry news this week:

Why “SECURE 2.0” appears to remain on track to be passed by the end of the year, no matter the final results of the midterm elections
Amid an “incredibly active” period for cyberattacks, the director of the SEC’s examinations division highlighted the areas of cybersecurity where advisory firms are most often deficient

From there, we have several articles on advisor marketing:

Three tactics advisors can use to improve their ‘close’ rate with prospective clients
How a regular firm newsletter can keep clients engaged and improve retention
The most effective question advisors can use to end initial prospect meetings

We also have a number of articles on retirement planning:

How the recent increase in interest rates has made TIPS a more viable option to increase a retired client’s safe withdrawal rate
Why advisors need to take care when analyzing the expected performance of Registered Index-Linked Annuities (RILAs)
While “free” Medicare Advantage plans might sound enticing, advisors can help their clients assess whether a different plan might actually be more cost-efficient

We wrap up with three final articles, all about personal growth:

How advisors can harness the power of compounding, not just with investments, but to improve their health and relationships as well
How advisors can help their clients overcome the cyclical nature of investment knowledge, particularly when FOMO kicks in
Five mindsets that advisors can use to create success in their professional and personal lives

Enjoy the ‘light’ reading!

Maximizing Health Savings Accounts (HSAs) Tax Benefits With Adult Children Under Age 26

November 9, 2022 07:01 am 12 Comments CATEGORY: Taxes

The passage of the Affordable Care Act in 2014 introduced many changes to the healthcare landscape in the United States. One of these changes was the ability for children to remain on their parents’ health insurance plan until they reach age 26. In addition to having access to health insurance at a lower cost than they might have on their own, this measure also creates a potentially lucrative planning opportunity for young adults who can be covered by a parent’s High-Deductible Health Plan (HDHP), giving them the opportunity to contribute to their own Health Savings Account (HSA) up to the full family maximum contribution limit ($7,300 in 2022).

Health Savings Accounts (HSAs) are one of the most popular savings vehicles because of their triple-tax advantage: account owners can take an above-the-line tax deduction for eligible contributions, growth in the account is tax-deferred, and withdrawals are tax-free if they are used for qualified healthcare expenses. Notably, funds in an HSA that are withdrawn for any reason other than for qualified medical expenses before age 65 are subject to a 20% early withdrawal penalty. After age 65, though, there is no penalty, and funds can be used for any reason (but are treated as taxable ordinary income if not used for qualified medical expenses).

In return for these significant benefits, the IRS imposes certain requirements for who can contribute to an HSA: The individual must be covered by a High Deductible Health Plan (HDHP) (and have no other health coverage or be enrolled in Medicare) and they may not be claimed as a dependent on someone else’s tax return. Notably, the account owner does not have to be covered under their own healthcare plan, so a young adult who is covered under their parents’ HDHP plan (and who cannot be considered a dependent on their parents’ tax return) would potentially be eligible to contribute to their own HSA. Further, while spouses can only make combined contributions up to the family maximum contribution limit ($7,300 in 2022), non-spouses covered under the same health plan can make contributions to their own HSA up to the family limit as well!

Because HSA owners must be covered under an HDHP in order to contribute, it is important to first consider whether choosing an HDHP is the best choice given a family’s medical expenses and financial situation. This presents an opportunity for advisors to assess whether the tax benefits of HSAs outweigh the costs of opting for HDHP coverage (which typically has lower premiums but higher deductibles relative to traditional health insurance plans).

Ultimately, the key point is that because children are now allowed to remain on their parents’ health insurance plan until age 26, non-dependent children covered under a family HDHP may be eligible to contribute to their own HSAs. And as HSAs offer significant tax advantages, advisors can help clients ensure that opting for family HDHP makes sense financially for the family as a whole!

#FA Success Ep 306: Restructuring Partner Compensation And Roles To Align For The Next Stage Of Growth, With Cean Kenefick-Rogers

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

Cean Kenefick Rogers Podcast Featured Image FAS

Welcome back to the 306th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Cean Kenefick-Rogers. Cean is the CEO and co-founder of Ironwood Wealth Management, an independent RIA based in Chandler, Arizona that oversees just under $550 million of assets under management, for nearly 500 households.

What's unique about Cean, though, is how the path that he and his partners took to break away from the insurance and brokerage worlds to run their own independent RIA inadvertently created a three-way struggle to find the proper compensation and accountability structure across their differing books of business, and ultimately forced them to seek third-party intervention from an industry consultant that eventually allowed them to restructure their partnership roles and compensation… which then unlocked their next stage of growth and scaling up the business.

In this episode, we talk in-depth about the journey that Cean and his partners took, from originally starting their careers at an insurance company, then moving on to a brokerage firm, until they ultimately decided to transition to an independent RIA and on the advice of their attorney drop their FINRA licenses altogether to reduce the risks to their RIA and simplify their ADV, how after struggling with infighting over proper compensation and accountability amongst the partners and almost reaching a point of dissolution, Cean and his partners sought help from an industry consultant to help restructure the firm roles and create compensation structures that all partners agreed were fair and would help the firm refocus on growth, and why shortly after taking on the role of CEO after that restructuring, Cean decided to implement a minimum quarterly fee and expand into an assets under advisement model that manages clients’ held-away 401(k) plans through Pontera… increasing both the profitability of the firm, and the happiness of their clients who now receive a more holistic service.

We also talk about how Cean leveraged the firm’s custodial relationship with Schwab to access one of their internal marketing consultants, which then led to Ironwood hiring an external marketing firm that revamped their website and Google searchability, increasing their visibility and digital leads to the point the revenue they received from onboarding new clients more than paid for the consulting, how, even though Cean proclaims to be a competitive person and does well under pressure, he was nervous about doing the right thing when taking on the role of CEO and turned to his friends who inspired him to form a firm advisory board to gain more confidence that he was making the right decisions for the firm, and how, despite understanding it would be difficult to launch and run an advisory firm, Cean was still surprised by how much work it actually takes… and even more surprised by the fact that he truly enjoys it.

And be certain to listen to the end, where Cean shares how, even though all the partners, including Cean, agreed he should take on the role of CEO in their new firm structure, it was challenging to adjust to viewing the firm not just as an advisor but its leader, and navigate the new pressures that come with having sole accountability and decision-making responsibility for the firm, why Cean wishes he and his partners dropped their insurance and FINRA licenses much sooner, as it would have given them more of an opportunity earlier to apply a laser-like focus on how they wanted to provide value to clients, and how Cean measures success beyond just his own contributions to the firm, but instead by building the right internal structure to support his employees so that they can continue to thrive, grow, and find their own successes.

So, whether you’re interested in learning about how designating Cean to the role of CEO helped realign the firm and created clear hierarchal structures, why Cean and his firm pre-schedule all of their client meetings for the year in advance, or how Cean and his firm implement service teams instead of departments, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Cean Kenefick-Rogers.

The Latest In Financial #AdvisorTech (November 2022)

November 7, 2022 07:03 am 1 Comment CATEGORY: Technology & Advisor FinTech

Welcome to the November 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 news that a new RIA custodian – Entrustody – has launched, as independent RIAs continue to clamor for more alternatives than what has now become the ‘Big 2’ of Schwabitrade and Fidelity. As with Altruist, the ‘other’ new startup RIA custodian to launch in recent years, Entrustody is pledging to have a more modern interface with a better user experience, more and deeper integrations, and a more transparent price structure than ‘traditional’ custody services.

Notably, though, the reality is that changing RIA custodians still requires the repapering of clients and retraining of staff (and the latter cost is still incurred even if firms ‘just’ add Entrustody as a second custodial platform without moving existing clients), which raises the question of whether Entrustody has enough efficiency improvements to actually convince advisors to switch. While at the same time, competition has already heated up for new advisors (who can pick a new custodian without repapering or retraining because they’re just getting started) with SSG, Altruist, and even Schwabitrade itself pledging no minimums, and a number of ‘new’ RIA custodial competitors like LPL and SEI are increasingly competing for breakaways as well. Which raises the question of whether and where Entrustody may even be able to make a beachhead in a surprisingly crowded marketplace for the few advisors who are in a potential custodial transition?

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

Orion’s Redtail launches “Redtail Campaigns” in partnership with Snappy Kraken to facilitate CRM-based drip marketing emails
Hearsay Systems rolls out a new small-to-mid-sized RIA platform for social media compliance and website design
Riskalyze signals an intent to rebrand itself away from ‘just’ risk tolerance assessments to a broader focus on helping advisors grow clients and assets

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

Merrill Lynch launches a new ‘Merrill Match’ system that downplays an advisor’s geography and focuses more on advisor ‘fit’ with respect to expertise, meeting preferences, and communication style
Ezra Group launches a new “WealthTech Integration Score” for major AdvisorTech vendors to help advisors better assess which software has the most meaningful deep integrations

In the meantime, we’re excited to announce several new updates to our new Kitces AdvisorTech Directory, including Advisor Satisfaction scores from our Kitces AdvisorTech Research, and the inclusion of WealthTech Integration scores from the Ezra Group!

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 (Nov 5-6)

November 4, 2022 01:58 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 as part of the ongoing integration between the merged companies, Charles Schwab plans to transition advisors currently on the TD Ameritrade custodial platform to Schwab’s platform over Labor Day weekend 2023. And while Schwab executives have asked advisors for patience amid the transition, some advisors currently on TD’s platform could choose from a range of alternative custodial options rather than be subsumed into the Schwab ecosystem.

Also in industry news this week:

How an SEC review of a FINRA proposal to facilitate remote work could signal its thinking on the supervision of remote work for financial advisors more broadly
Morningstar has joined an increasingly competitive market of direct indexing platforms for advisors and their clients

From there, we have several articles on investment planning:

While I Bonds have received significant attention during the past year, TIPS could be an attractive alternative for many client situations
A recent study shows that while many consumers have expressed an interest in ESG investing, such funds within retirement plans have received limited allocations from investors
A survey showing how millionaires allocate their assets and the importance they place on the recommendations of their financial advisors

We also have a number of articles on taxes and end-of-year planning:

The importance for advisors of understanding current RMD rules to ensure their clients take the proper distributions (and avoid a 50% penalty in the process!)
In addition to an announced decline in Medicare Part B premiums for 2023, advisors have a range of other ways to save clients money on medical costs in the coming year
Pundits continue to expect “SECURE 2.0” to pass by the end of the year, while passage of other proposed tax measures appears to be less likely

We wrap up with three final articles, all about RIA deal activity:

What the continued influx of capital from private equity firms means for the RIA industry as a whole
Why the torrid pace of RIA mergers and acquisitions activity seen in recent years could slow down in the current market and interest rate environment
While private valuations have soared in recent years, public markets continue to be less kind to RIAs

Enjoy the ‘light’ reading!

Kitces & Carl Ep 98: Fee Schedule Complexity And Managing The Fear Of Leaving Opportunities On The Table

November 3, 2022 07:08 am 1 Comment CATEGORY: Kitces & Carl Podcast

Kitces Carl Ep Fee Schedule Complexity And Managing The Fear Of Leaving Opportunities On The Table

For many financial advisors, prospecting efforts have traditionally been based on a perspective of scarcity, where the aim was to focus on connecting with and closing as many prospects as possible, regardless of their actual needs. However, in order to accommodate a wide range of clients with wildly diverse needs, firms often need to provide a myriad of services to address those needs. And this can mean developing a fee schedule with so many layers of complexity – to price out the range of all the services offered – that many prospects often end out too confused to understand what the advisor can actually do for them.

In our 98th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how a scarcity perspective can result in a firm’s loss of focus by trying to accommodate any and all clients regardless of their needs. Instead, by conveying a clear and simple message to clients about how the advisor’s value can provide for a very specific type of client and their unique needs, advisors can enhance their business growth by attracting the right type of client while investing less time and fewer resources actively seeking out new prospects.

As a starting point, it’s important to understand that as the financial services industry has evolved into the digital age, it has become increasingly common for financial advisors to rely on web-based business development strategies where the typical number of ‘prospects’ who visit the advisor’s website are often astronomically large. Which means that nearly all advisors who have a website no longer have a shortage of prospects (as they can often rely on organic web traffic alone to bring thousands of visitors to their site); instead, the challenge has become one of attracting the right kind of prospect. And offering a message that will compel even just a small fraction of site visitors to engage in a relationship can lead to a substantial increase in business.

As individuals increasingly rely on the internet to find the right services to meet their needs, more clients are also seeking and engaging with advisors digitally. Which means that understanding the nature of how those visitors use and relate to their website (through website data analytics tools) can give advisors the tools to assess the efficacy of their marketing efforts. Some useful metrics to help advisors understand their visitors include the number of users and visitors, where they look for information, and session length. And monitoring these metrics over time can help the advisor ensure that their messaging is truly offering a clear, meaningful, and relevant value proposition to prospects.

Ultimately, the key point is that trying to cater to all clients out of fear of leaving opportunities on the table – and developing complex fee schedules to meet all of those clients’ needs – will generally only serve to dilute an advisor’s value proposition. But by recognizing that firms already have access to a wealth of prospects through their website, advisors can home in on attracting the right kind of prospects to grow the business without losing the focus of the firm!