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Weekend Reading For Financial Planners (September 7–September 8)

September 6, 2024 02:00 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 Treasury Department has finalized rules requiring most SEC-registered RIAs to implement risk-based Anti-Money Laundering and Countering the Financing of Terrorism programs, including a requirement to report suspicious activity to Treasury's Financial Crimes Enforcement Network, with firms having until January 1, 2026 to comply with the rule. Notably, while the rule will create an additional compliance burden, the due diligence advisers offering comprehensive planning services (as well as their investment custodians) are likely already conducting on their clients to create an effective financial plan could be a 'defense mechanism' for these firms against criminals looking to take advantage of their services.

Also in industry news this week:

A probe by the Government Accountability Office found that the conflict-of-interest disclosures offered by many firms offering financial advice are often inadequate or confusing, making it hard for consumers to understand whether and when a financial professional is operating in their best interest
A recent study has found that accountability for business development within a firm as well as its marketing spend can be catalysts for organic growth

From there, we have several articles on tax planning:

How financial advisors can help clients prepare for the potential sunsetting of key Tax Cuts and Jobs Act (TCJA) measures today, even though their ultimate status likely won't be determined for many months
How the state and county where a client lives will help determine the net financial impact they will experience from the potential expiration of major TCJA provisions
An analysis of the impact of extending provisions in the TCJA that are due to sunset at the end of 2025 shows the various tradeoffs policymakers will face, such as balancing a desire to boost taxpayer income without creating a severe fiscal burden on future generations

We also have a number of articles on practice management:

11 factors to consider for RIAs thinking about adding a custodian to their lineup
Why adding an additional custodian can be a form of "overdiversification" for an RIA
How taking a strategic approach to asset splitting among custodians can ensure that an RIA receives high-level service without sacrificing business goals

We wrap up with three final articles, all about time management:

Why aiming to put in "85% effort" can both prevent burnout and lead to time savings without necessarily sacrificing work quality
How using a "backlog", combined with "timeboxing", can help advisors ensure that their most urgent and important tasks are completed efficiently
Research indicates that time flexibility is a key factor in driving employee job satisfaction, suggesting that firms can promote staff retention by offering flexible work hours, even if employees are expected to be in the office on a daily basis

Enjoy the 'light' reading!

Kitces & Carl Ep 146: Re-Educating Clients (Scalably) After They “Read Something On The Internet”

September 5, 2024 07:01 am 0 Comments CATEGORY: Kitces & Carl Podcast

Kitces & Carl Ep Re Educating Clients (Scalably) After They Read Something On The Internet

A cornerstone service that many financial advisors provide is education. While strategic advice is crucial, advisors also face the challenge of presenting the strategies to clients in context, explaining different financial planning concepts, and showing clients how to implement these strategies (as well as pointing out any long-term consequences). While curious, proactive clients who are ready to learn may be the ideal, this can become complicated when clients bring 'good' advice they've heard from unreliable sources that doesn’t apply to their individual circumstance – or, worse, the advice itself is rooted in misinformation. This puts advisors in a challenging situation to re-educate or redirect the client without becoming combative or condescending.

In our 146th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the "overconfidence gap" that can be created by clients bringing misinformed strategies and suggestions from various sources to their advisors, and how advisors can navigate the conversation to get clients back on track (without also offending them).

One potential dynamic of these conversations might involve the advisor's bruised feelings from knowing the client had been searching for financial planning answers somewhere else rather than coming to the advisor and asking their questions directly. A natural first reaction might be to prove why the client's source is 'wrong' and how the advisor's advice is 'right' – but in doing so, advisors run the risk of alienating their client who may interpret the response as a suggestion that they were ignorant or gullible in believing obvious misinformation. Instead, leading the conversation by thanking the client for bringing the idea to the meeting can be a more helpful approach, and then asking for context around the problem the client wants to solve with the advice they were given by the outside source. This strategy encourages the client to open up about their intent, problems, and even insecurities, giving the advisor an opportunity to better understand the client and solve more problems for them – ultimately building more trust!

While such one-off discussions with 1 or 2 clients in meetings can be fruitful, multiple clients who bring up the same questions can signal an opportunity to address the misinformation for a broader group of clients head-on. For example, if an advisor has clients who are small business owners, and several of its clients consistently have questions about the same tax savings strategy (or consistently come to the wrong conclusion about where it applies, thanks to either what they find on the Internet or hear by word of mouth), many of the advisor's clients may benefit from educational resources created by the advisor themselves, perhaps in a written, video, or audio format; this not only allows the advisor to craft the sort of response they want to send, but also reduces the need to answer the question more than once. Alternatively, advisors can hold educational events to address common questions and give clients an opportunity to voice their specific questions or concerns.

Ultimately, the key point is that when clients bring forward ideas rooted in misinformation, advisors have an opportunity to solve a problem in a way that can further enhance trust in the relationship by providing high-quality resources that help clients with their specific needs. And while there may be some upfront work required to coordinate such resources (or events) for clients, doing so may end up helping the advisor save time by allowing them to answer the same questions that crop up more efficiently, thoroughly, and proactively – not just for the client sitting in front of them, but for several clients with the same questions throughout the firm!

Using Digital Estate Planning Platforms To Complement Attorney And Advisor Roles

September 4, 2024 07:01 am 0 Comments CATEGORY: Estate Planning

As digital software solutions become more sophisticated (and new ones continue to roll out at breakneck speed), they may offer relief with what they offer but, at the same time, they may also introduce a burden for the user to vet and review the results to ensure that it actually provides the 'correct' output. When it comes to digital estate planning solutions tools, this particular burden is amplified not only because of the many clients who need an estate plan (with about 2/3 of Americans estimated to be without a will!), but also because advisors may be concerned that choosing the wrong estate planning solution could create a risk involving legal action, engagement in the unauthorized practice of law, and user error. That being said, advisors who understand how to review and use these tools well can leverage their features and provide considerable value to their clients.

As a starting point, it is important to know what digital estate planning solutions can actually do. Platforms generally help users in the following 3 areas: document creation (creating basic documents such as revocable trusts, powers of attorney, healthcare directives, and wills), document extraction (providing easy-to-read summaries of existing estate planning documents), and estate visualization (creating visual reports that detail the estate plan in a user-friendly matter). Today, services in each of these areas can be provided to users of software technology – without ever having to sit down with an attorney face-to-face.

For some advisors, implementing digital tools as part of their estate planning process can be daunting because they lack the reassuring expertise an actual attorney can provide. Furthermore, a stigma is sometimes associated with 'boilerplate' language or generic document templates. However, in most instances, advisors can help clients realize that boilerplate language can be legally valid, enforceable, and sometimes even preferable (and in many instances, estate planning attorneys themselves often use boilerplate documents anyway!). Accordingly, a digital solution can offer an alternative to the typical process of creating documents after physically meeting with an attorney. Certainly, in more complex situations – such as with ultra-high-net-worth clients, families with unique relationship dynamics, or disabled beneficiaries who need to preserve access to government benefits – an attorney may be required to draft customized estate planning documents or, at the very least, carefully review estate documents created by digital planning solutions. But for the vast majority of 'typical' clients, a digital solution could satisfy a client’s estate planning needs.

One particular concern for financial advisors involved in their clients' estate planning needs is unintentionally engaging in the Unauthorized Practice of Law (UPL) by actually giving estate planning legal advice. While this can create particular liability issues for advisors, digital estate planning solutions can help advisors avoid UPL by providing guardrails that safeguard them from doing so, and by helping them frame their conversations with clients as education and guidance about the options available to them. For example, an advisor may be prompted by the software tool to tell their client: "It may be beneficial to look into whether a spousal lifetime access trust could make sense for you. Here's what it is…". This helps the advisor remain removed from implementing strategies and not risk crossing the line into UPL, but still being able to monitor the client to make sure that things get done.

Ultimately, the key point is that digital estate planning solutions can provide powerful tools that complement the roles both estate attorneys and advisors play for clients, especially for (the many) clients with less complex estate planning needs. With the help of software tools, advisors may find that initiating conversations and offering guidance around estate planning strategies for clients can be carried out much more efficiently and even add to the value they're already providing!

#FASuccess Ep 401: One-On-One Advice Through Financial Wellness Programs To (Profitably) Expand The Reach Of Financial Planning, With Zack Hubbard

September 3, 2024 09:50 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome everyone! Welcome to the 401st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Zack Hubbard. Zack is the Director of Financial Planning and Participant Engagement of Greenspring Advisors, an RIA based in Towson, Maryland, that manages $2 billion of private wealth assets under management for 1,300 client households and advises on an additional $5 billion in retirement plan assets.

What's unique about Zack, though, is how he has built a financial wellness offering that both profitably serves employees at businesses that utilize their fiduciary 401(k) services with not just self-serve technology but outright one-on-one financial advice to plan participants… and provides a stream of referrals for his firm's private wealth services.

In this episode, we talk in-depth about how Zack views fiduciary financial wellness to 401(k) plan participants as a 3-tiered offering consisting of education, one-on-one advice, and implementation support, how Zack's firm is able to generate incredibly strong email open rates of 75%–90%, and click-through rates of 40%–50%, on the (hyper-targeted) educational content his firm provides (with short-form videos having particularly high click-through rates), and why Zack decided to outsource the implementation of their financial planning advice– including on insurance, estate planning, college and student loan planning, and debt counseling – rather than sell products, not only to maintain the company’s status as a fee-only firm, but also to avoid conflicts of interest that could violate his firm’s fiduciary responsibilities under ERISA as a provider to 401(k) plans.

We also talk about how Zack's firm has been able to profitably provide and scale one-on-one advice to employees who are a part of the financial wellness offering they provide to 401(k) plans, including by holding shorter meetings that really focus in to address these clients' immediate concerns (rather than longer meetings being more comprehensive than what clients really asked for), how Zack has developed a career track where newer advisors meet directly with these employee clients, to the tune of 400+ meetings per year, allowing them to quickly build their advisor skills through getting so many client meeting 'at bats', and how Zack's firm leverages the trust built in these on-on-one meetings to convert employees of participating companies into traditional financial planning clients when they ultimately leave their company or decide to retire.

And be certain to listen to the end, where Zack shares why he believes serving the employees of business-owner clients through financial wellness programs can help advisors build loyalty with those business owners themselves, how Zack decided he didn’t want to be a client-facing advisor himself and instead pursued a path where he could be in charge of growing a line of business and employee training and development, and why Zack sees his financial wellness offering not only as an opportunity to serve more clients compared to a traditional planning approach, but also provides an alternative to the traditional "eat what you kill" approach for bringing new advisors into the industry, instead focusing on opportunities for newer advisors to learn and grow with a more stable compensation structure and development path instead.

So, whether you’re interested in learning about how to offer a profitable financial wellness offering, how to convert retirement plan participants to full-time financial planning clients, or how advisors can leverage financial wellness programs to better serve their business owner clients, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Zack Hubbard.

Fidelity Bundles Advyzon With eMoney And Wealthscape In Its New RIA “Tech Stack” (And More Of The Latest In Financial #AdvisorTech – September 2024)

September 2, 2024 07:01 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the September 2024 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 Fidelity has announced a new bundled technology offering for advisors, including its own Wealthscape brokerage and eMoney financial planning software, alongside Advyzon's portfolio management and performance reporting platform – which is rather surprising given that Wealthscape itself was once advertised as an "all-in-one" solution that could replace third party portfolio management software like Advyzon, and suggests that Fidelity's aspirations for (and massive investment into) Wealthscape as a core software offering that would make its custodial platform 'stickier' for advisors and their assets may have been upended by advisors' preferences to use independent standalone software instead?

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

GeoWealth has announced an $18 million investment from BlackRock to enhance GeoWealth's capabilities for offering customized investment models (such as those provided by BlackRock itself) – which raises questions about whether BlackRock's ownership stake in one of its own distribution channels will cause conflicts if BlackRock products are favored on the platform at the expense of other asset managers, or if BlackRock is content to invest passively in GeoWealth (since as long as BlackRock sees some share of the assets on GeoWealth's platform, it will benefit as long as the TAMP continues to grow)?
Estate planning software provider Vanilla has announced an estimated $20 million capital raise as it builds out its estate document preparation service on top of its existing estate analysis tools, reflecting investors' enthusiasm for the growth potential for software tools that can also be packaged as a service (and priced accordingly higher) – although the question remains whether there will actually be enough demand for estate planning documents to sustain the service, given that clients only update their estate documents every 5–10 years (at most)?
Hearsay, the social media marketing and compliance platform for financial professionals, has announced that it is being sold to Yext for $125 million, 11 years after being valued at $171 million – highlighting how even becoming a largely successful AdvisorTech provider (as Hearsay's 260,000 users and $60 million in revenue attest) wasn't necessarily enough to live up to the expectations of everyone who expected social media to be the dominant channel for advisor marketing.

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

Wealthtender, a platform for gathering client reviews and testimonials, has partnered with the AI-powered compliance provider Hadrius to allow advisors to scan all testimonials collected through Wealthtender for compliance with the SEC's Marketing Rule, and flag potential violations for human review – which represents a way to harness AI for a function that it truly does well in reading large amounts of text and flagging passages with specific meanings and implications, although given the relative infrequency that testimonials actually come in, there might not be that much time savings.
Morgan Stanley has become one of the first financial services firms to launch its own internal AI meeting notes tool, which highlights the unique opportunity that mega-firms like Morgan Stanley have (with the reams of internal data at their disposal) to build their own in-house AI tools without the potential for exposing client data to a third-party vendor.

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) 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 (August 31–September 1)

August 30, 2024 02:00 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 a recent benchmarking study suggests that a number of RIAs are looking to move 'upmarket' and work with wealthier clients by expanding their service menu to include family office services, investment banking, and/or trust services. Nonetheless, given that adding services requires an investment on the part of the firm (often in the form of increased staffing to offer high-touch services and add needed expertise), firms appear to be analyzing the costs and benefits of offering these services in-house versus adding value to clients by referring them to trusted professionals in these areas to ensure that they can truly scale profitably (and not 'just' grow in terms of assets).

Also in industry news this week:

While many pre-retirees feel unprepared for retirement, longitudinal survey data suggest most will end up living a comfortable retirement, suggesting a role for financial advisors to show them projections of what their retirement could actually look like
According to a recent survey, high-net-worth individuals are largely satisfied with their financial advisors, though some respondents indicated that communication with a client's other advisors (e.g., attorney and accountant) could be improved

From there, we have several articles on investment planning:

How the "60/40" portfolio has historically offered a strong 'win rate' of positive returns for long-term investors, even when adjusted for inflation
The factors that could drive the future correlation between stock and bond returns amidst concern that the "60/40" portfolio has lost some of its diversification value
Why private investments could potentially play a valuable diversifying role in an 'alternative' 60/40 portfolio

We also have a number of articles on advisor marketing:

3 ways advisors can adjust their websites to convert more referrals into clients
Best practices for financial advisors looking to win referrals from fellow advisors, including the importance of demonstrating emotional intelligence
Recent research indicates that client referrals are 'contagious', with previously referred clients more likely to make referrals themselves

We wrap up with 3 final articles, all about thank-you notes:

Why sending thank-you notes throughout the year (and not just for major occasions) can offer benefits for both the writer and the recipient
An argument against written thank-you notes and alternative options to show gratitude
A 4-sentence structure for writing thoughtful (and efficient) thank-you notes

Enjoy the 'light' reading!