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Weekend Reading for Financial Planners (Nov 28-29)

November 27, 2020 03:00 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the industry news that mega asset manager Blackrock is making a "billion dollar bet" on the future of direct indexing by acquiring SMA provider Aperio (the #2 provider of direct indexing solutions, behind #1 provider, Parametric, that itself was acquired last month as part of the Morgan Stanley acquisition of Eaton Vance), as interest grows in both the tax-optimization benefits of direct indexing and also the ability to "customize" index allocations to clients' ESG or other individual preferences (e.g., the S&P 500, but excluding tobacco stocks and with an overweight to renewable energy?).

Also in the news this week is an interesting J.D. Power survey that finds consumers during the pandemic are perhaps, not surprisingly, more likely to use mobile apps on their smartphone to manage their wealth but, surprisingly, are even more satisfied when they can use the app as a means to contact and communicate with their advisor (not in lieu of their advisor!), and the announcement that the Department of Labor is sending its controversial new fiduciary rule (that would begin to allow ERISA fiduciaries to receive commissions in certain circumstances) to the Office of Management and Budget to finalize... but it may already be too late to finalize the rule before the Biden administration takes office (and is expected to pause the rule for further review in what may ultimately send it back to the drawing table for a more fiduciary revision).

From there, we have several articles on marketing and client communication, including tips on how to make emails more engaging with colleagues, clients, and prospects, using a simple two-sentence directive approach, some thoughts on how to revise our approach and use of virtual meetings as it becomes clear they're likely not temporary but here to stay permanently (at least in some form as part of the annual advisor-client relationship), and a look at whether compliance rules actually require video meetings with clients to be recorded and archived for compliance purposes (hint: probably not, as they're treated like telephone conversations, but any written communication delivered as part of the video meeting does have to be captured and archived!).

We've also included some articles on cash flow and spending strategies, including a look at the immense opportunity of mortgage refinancing in the current environment (as mortgage rates continue to hover below 3%), some suggestions for cash flow/budgeting apps that clients can use to track and manage their own finances, and some ideas on how to engage children with (stock) investing from an early age to get them to begin appreciating the value of compounding (and the benefits of investing in long-term companies for long-term growth!).

We wrap up with three interesting articles, all around the theme of holiday gift-giving as we enter the December holiday season: the first two both explore some year-end gift-giving ideas that are "classy" but not budget-busting (important both for the economic cost to the business, and to avoid running afoul of the FINRA [and often RIA] $100 gift-giving limit!); and the last looks at how, in the end, we're happier when we spend money on experiences and others rather than "things", which can hold, not only for how we spend our own money, but also in how we use it to help others (which means giving services like TisBest or DonorsChoose) or spend on experiences that remain memorable long after the event has passed (available through services like Excitations and Xperience Days)!

Enjoy the 'light' reading!

Year-End Tax Planning Under The Forthcoming Biden Presidency

November 25, 2020 07:04 am 2 Comments CATEGORY: Taxes

The November 3, 2020 elections produced a wholly unsatisfying result for financial advisors and their clients from a financial planning perspective, regardless of their political affiliation. The political clarity – leading to planning clarity – that many had hoped for, did not emerge. Instead, control of the US Senate, which will determine whether Democrats can drive their legislative agenda or if Republicans will have a ‘check’ over a Democratic-controlled White House and House of Representatives that could lead to gridlock instead, continues to hang in the balance.

The problem? The control-determining Senate races won’t be decided until a Georgia run-off on January 5^th of 2021… which is too late to take most actions that influence a client’s 2020 tax bill! Thus, planners are left with a substantial dilemma: act now and make potential changes that could be costly and/or unwanted if substantial changes to the tax code are not implemented for 2021, or wait and risk the chance that such changes may be implemented, potentially dramatically increasing costs.

Given President-elect Biden’s proposal to increase the ordinary income tax rate for those making more than $400,000 per year, and to make the long-term capital gains rate equal to the ordinary income tax rate for income in excess of $1 million, many taxpayers and planners have considered the possibility of accelerating income for high earners into 2020. Problematically, clients who are just slightly above the threshold may actually have the most to lose with potential tax bracket changes, but also the most adverse impact if they accelerate significant amounts of income but no changes occur… while those significantly above the threshold have less potential benefit for accelerating income, but if they’re already in the top tax bracket, there’s limited downside to accelerating income even if tax brackets aren’t changed (and still some benefit if the Biden tax plan is implemented).

With respect to a change in the top long-term capital gains rate, if one is to believe that the Biden-platform income figure of $1 million is ‘real’, the decision of whether to sell or hold positions with existing gains is more nuanced. On one hand, the cost of selling such investments in 2020 (i.e., harvesting capital gains in the current tax year before the increase) would trigger a 20% long-term capital gains tax that might be a tough pill to swallow. But should the Biden proposal become law, it would nearly double the current top long-term capital gains rate from 20% to 39.6%! Which means those with very high income or especially sizable capital gains may still want to take some chips off the table with year-end capital gains harvesting, if only as a form of “tax insurance” to hedge against the risk of potentially dramatic increases in long-term capital gains rates next year.

But, as if that decision wasn’t complicated enough on its own, further complexity is added to the mix when considering the additional Biden tax proposal calling for the elimination of the step-up in basis of capital assets upon death. Ironically, holding appreciated assets until death would rapidly switch from a very desirable tax strategy to an especially undesirable one (because taxing all appreciated investments at death, all at once, would be even more likely to push capital gains into the new higher capital gains rate!).

As the end of the year approaches, clients must also make decisions with respect to expenses that may qualify for itemized deductions. As while in general, a potential tax increase next year means there is a benefit to accelerate income (into 2020’s lower tax rates) and defer deductions (when they’d be more valuable at 2021’s higher tax rates), in practice most high-income taxpayers who already itemize deductions will benefit more by claiming their deductions in 2020 at current rates, due to the potential of the Biden-proposed cap of 28% on the value of itemized deductions! Meanwhile, clients of all income levels should still defer any expenses that won’t be counted as an itemized deduction in 2020 (such as SALT expenses in excess of $10,000, or any potential itemized deductions if the taxpayer’s standard deduction will still exceed their itemized deductions), but at least have the chance of helping boost deductions in 2021 if the rules are changed.

Finally, while the overwhelming majority of taxpayers won’t have to worry about estate and gift taxes whether the exemption remains at its current level, or is dropped back down to its pre-TCJA level as called for by the Biden proposal, advisors must address the ‘lucky’ few clients who do still face Federal estate tax exposure. Though obstacles loom large, for clients who have a net worth that will almost certainly subject their estate to an estate tax liability upon their passing (or may grow to that point in the future), there is a strong impetus to act now and engage in potentially substantial year-end gifting – up to their entire $11.58 million Federal estate tax exemption amount, to ensure they do not lose out on maximizing the current exemption while it lasts.

Ultimately, the key point is that now that the election has passed, clients are looking for guidance as to what they should be doing – or not doing – before the end of 2020 and beyond. And while in many cases, the ‘right’ answer may not be able to be definitively known today, not having a conversation about it at all is decidedly the wrong ‘move’ for proactive advisors seeking to reassure and inform clients.

#FASuccess Ep 204: Being Able To Just Focus On Clients By Choosing To Be An Employee Advisor At A Growing Firm, With Blair duQuesnay

November 24, 2020 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 204th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Blair duQuesnay. Blair is a financial advisor with Ritholtz Wealth Management, an independent RIA based in the New York City area that oversees nearly 1.3 billion of assets under management for more than 1000 affluent clients.

What's unique about Blair though, is the way that she's been able to build her client base of the firm up to $90 million of client assets in barely two-and-a-half years in a role that, by design and her choice, doesn't require her to actively prospect for business and instead lets her focus on the client relationships and the investment committee work she enjoys most, and why she gave up being a partner at her prior firm for this current employee role.

In this episode, we talk in-depth about the journey that Blair has taken through different types of firms in the industry, from starting out at a major wirehouse in various operational and investment support roles to the transition she first made to the independent channel not as a proactive decision to break away from the wirehouse world, but simply out of a need for a job after the financial crisis. Why her decision to launch her own independent RIA was driven more by a family change and limited alternatives than a desire to hang her own shingle. The opportunity that led her to merge her firm into a larger local one. And why finding an advisory firm that had a strong organic growth rate of its own was ultimately such a driving factor in her decision to join Ritholtz Wealth Management.

We also talk about the steps that Blair took to reinvest in herself to advance her career. The reason she decided to pursue the CFA Charterholder as her first professional designation, the path she took to obtain her CFP marks thereafter, why Blair has no regrets for having spent several years working as a sales assistant before becoming a financial advisor, and the moment when Blair was attending a financial advisor conference that she realized she was going to have to make a change.

And be certain to listen to the end where Blair shares the real-world challenges and frustrations that came with starting her career in financial services as a young person straight out of college and as a female in a male-dominated industry. The steps she took to make sure she stayed in the industry, whatever it took until she found the right role. And why, in retrospect, she believes it's so important to be patient and taking early entry-level roles that form the foundation of a long-term career as a financial advisor.

So whether you’re interested in learning about how Blair's career path changed from aspiring professional ballet dancer to financial advisor, how she discovered real financial planning, or how making a mindset shift to optimism changed everything for her, then we hope you enjoy this episode of the Financial Advisor Success podcast.

Why Broker-Dealer Forgivable Notes Aren’t (Really) Forgiven And Are Instead Ultimately Paid Back By Clients

November 23, 2020 07:02 am 0 Comments CATEGORY: Practice Management

In the early days of insurance broker-dealer recruiting efforts, it was so lucrative to attract new brokers who could sell the broker-dealer’s proprietary products to their clients, that insurance broker-dealers began to outright pay for new brokers to join the firm… in the form of a loan that would be forgiven as long as certain proprietary product sales requirements were met. Over time, these “forgivable notes” have morphed from being contingent on the sale of proprietary products, to overall maintenance (or growth) of the broker’s production, to (as regulators began to crack down on the conflicted incentives) simpler time-based contingencies. Yet even as the requirements have changed, the underlying structure remains – where many broker-dealers today try to attract advisors to switch firms by offering potentially substantial upfront recruiting “bonuses” in the form of forgivable notes… in the hopes of making back that recruiting cost (and then some) from the advisor’s clients.

In this guest post, Jonathan Henschen – president of Henschen & Associates, a recruiting firm that specializes in helping advisors find and match themselves to the right independent broker-dealer when making a switch to a new platform – discusses the history and mechanics of forgivable notes, some of the ethical concerns they raise for brokers and their clients, and how the evolving landscape of the industry is encouraging broker-dealers to reconsider their incentive structures (and advisors to reconsider whether forgivable note recruiting bonuses are worth their long-term consequences to clients).

Typically, forgivable notes are structured as a percentage of the broker’s trailing 12-month Gross Dealer Concession (GDC), and have evolved from notes (issued prior to 2000) that ranged from 5 – 20% of trailing-12-month GDC and were forgiven over five years, to notes as high as 40% of trailing-12-month GDC that are forgiven over seven years. Throughout, though, the core principle has remained the same – the advisor receives an upfront “bonus” to join the new broker-dealer, but it is actually in the form of a loan, that the advisor will have to repay (i.e., the unpaid balance of the loan) if certain requirements are not met over time.

Today, forgivable notes have become so ubiquitous that many advisors who switch broker-dealer firms consider forgivable notes as a required component to their job offer. Yet the reality is that broker-dealers only offer such “bonuses” because it is profitable to do so in the long run… which means advisors and their clients must bear higher costs in order for the broker-dealer to recover its own costs!

Specifically, the particular revenue sources driven by broker production that help to recover the cost of forgivable notes include brokerage account transaction charges (often substantially marked up over the raw costs to increase the profit margin of the broker-dealer), revenue sharing with product vendors (e.g., mutual funds, variable annuities, REITs, alternative investments, and to some extent ETFs), markups on No Transaction Fee (NTF) mutual fund expense ratios, markups on third-party money managers, proprietary advisory platforms, advisory administrative fees for advisory accounts managed by the brokers themselves, platform fees for holding TAMP assets directly at the TAMP (which, without this extra fee, would otherwise avoid the broker dealer markup for being held within the TAMP provider), and platform fees for holding advisory assets at third-party RIA custodians (e.g., Schwab, Fidelity, TD Ameritrade). Some or all of which are additional layers of expenses that the advisor and their clients may not have had to pay if not pursuing a broker-dealer’s forgivable note recruiting bonus.

In fact, when determining how much to pay into forgivable notes in today’s marketplace, broker-dealers consider the advisor’s product mix and asset levels, to determine a forgivable note amount based on a profitability matrix that each broker-dealer establishes based on its various profit centers imposed and the actual revenue generated from various asset classes (influenced more by assets held in brokerage accounts or managed by the broker dealer, and less in assets held away).

Notably, though, a new crop of some fiduciary-friendly brokers are beginning to emerge, that aim to compete specifically by limiting the markups and fees (which aren’t necessary if substantial forgivable notes aren’t being paid in the first place).Instead of forgivable note bonuses, these firms often recruit brokers with more limited incentives, that may still include some transition expenses (e.g., ACAT transfer expenses to move assets over to the new broker dealer, registration costs, and broker transition/startup costs), payback loans to cover larger set-up expenses incurred by the new broker (e.g., new office space), and providing 100% of GDC for a short period (e.g., 3-6 months) to accommodate initial cash flow for the new broker… but without the need to place as much burden on the advisor’s costs to their clients.

Ultimately, while forgivable notes can be attractively alluring to brokers seeking new broker-dealer firms, the cost of recovery for broker dealer firms to offer these notes, in the end, is passed onto the client who (often unknowingly) may pay heavily in a wide array of fees and expenses related to proprietary advisory platforms. And while broker-dealers, like any other business, are entitled to generate revenue for the services they provide, the rising attention on fiduciary practices and the recent transition by many large custodians to ‘zero-commission’ trades on stocks and ETFs are pressuring many to rethink how they structure their incentive programs and profit centers, lest their advisors lose clients as the layers of additional cost risk rendering them uncompetitive in the current marketplace. The bottom line, though, is simply to understand the bottom line – that there’s no such thing as a “free lunch”, and that broker-dealer recruiting bonuses come with real costs that must be carefully considered.

Weekend Reading for Financial Planners (Nov 21-22)

November 20, 2020 03:00 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a striking new consumer survey showing that demand for automated investing is on the rise... and so is increased use of human financial advisors as well, as consumers (especially younger consumers) look to both automate what technology can automate and see the value of financial advisors that go beyond what technology alone can provide.

Also in the news this week is a call from the Foundation for Financial Planning that pro bono financial service should become a standard part of every CFP professional's life as a professional (suggesting the CFP Board implement a recommendation of 25 hours/year of pro bono service), and a new Fidelity study finding that 40% of advisors believe that switching firms will be easier than ever as digital adoption in the aftermath of the pandemic makes e-signature and digital onboarding (or digital signing of ACAT transfers!?) easier than ever.

From there, we have several articles on how COVID-19 continues to (re-)shape our world, from a look at how retirement will likely change in the aftermath of the pandemic (e.g., with 40% of COVID-related deaths occurring in long-term care facilities, will demand rise for more aging-in-place planning that doesn't require leaving the family homestead?), why annuity demand fell during the pandemic despite normally rising in times of market volatility (with indications that the annuity industry's reputation for problematic sales practices may finally be catching up to it even as interest in guaranteed income is on the rise), and a look at how the pandemic may permanently shift consumers to be more likely to use the internet to find a financial advisor (as the shift to the virtual world means it's no longer necessary to look locally for a financial advisor anymore?).

We've also included some articles on client communication this week, from a look at how younger clients are not eschewing financial advisors for technology tools and instead expect to meet with their advisors more often than retirees, to a discussion of how to better communicate with clients 'at scale' by grouping them together for common communication messages, and a broader look at how frequency and responsiveness of communication continue to be the #1 driver of client retention (not investment performance results!).

We wrap up with three interesting articles, all around the theme of trying to manage our time in a world where technology makes work seemingly ever-present: the first explores the phenomenon of "time confetti" where smartphone notifications break up our leisure time and make it feel less rewarding (such that even though we empirically have more leisure time than we did 50 years ago, it feels like far less!); the second looks at how the concept of the "morning routine" may be overpromising and underdelivering; and the last explores what it takes to have a "perfect" day of work, which in the end is all about focusing our time on the few tasks that have the highest and best impact, and really making them a priority to get done... because it always feels good to accomplish our best work in a way that meaningfully moves our business or career forward!

Enjoy the 'light' reading!

Kitces & Carl Ep 47: Getting Data Gathering Back On Track When Clients Drag Their Feet

November 19, 2020 07:06 am 1 Comment CATEGORY: Kitces & Carl Podcast

When it comes to financial planning, it’s impossible to create (and then implement) a plan that will improve a client’s life and help them reach their goals if the advisor doesn’t have the data to analyze the situation and formulate recommendations in the first place. Yet even though having the requisite data is the most important piece of a client’s financial puzzle... every advisor at some point experiences the challenge that it’s not always the easiest task to gather a client’s pertinent financial data in the first place. From a client’s perspective, the process of collecting all the necessary facts and figures and then entering it all into a multi-page intake form isn’t anyone’s idea of a good time… and the irony is that the clients most in need of help may not be organized enough to gather their information to give it to the advisor, to begin with. Which in turn raises the question: are there any better ways that advisors can get the data they need to do the planning work they’ve been hired to do?

In our 47th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss a few of the reasons why getting data from new clients may sometimes prove to be such a challenge, how advisors might shift their thinking around data-gathering to overcome the challenge, and some simple strategies to help clients get more comfortable with the data-gathering process itself.

As a starting point, it’s important for financial advisors to take a step back and consider why they’re gathering a client’s financial data in the first place. As while data is a wholly necessary ingredient in every comprehensive financial plan, it’s also important to recognize that financial planning isn’t an event that happens once and is set in stone forever; instead, it’s a process, and initial meetings with new (or prospective clients) are more about building connections and helping them be more comfortable, than they are about getting (potentially too) bogged down in the minutia of account balances and interest rate assumptions. That’s not to say, though, that advisors shouldn’t be asking great questions to learn about a client’s current situation and what’s most important to them. In fact, those are the key ideas and details that can then be used to identify what blanks need to be filled in first!

Meanwhile, advisors can also find themselves in situations where new clients simply aren’t organized enough to collect the necessary statements and get stuck in a downward spiral of guilty feelings over not being able to give the advisor the data that’s being requested. But it’s those clients who most need the help of a financial advisor who can live up to the profession’s promise of “helping people get their financial house in order and focus on a plan for their future”. Which means in such instances, instead of having clients gather, organize, and deliver their own data, advisors may simply wish to have the client bring in their piles of unopened statements… and help them through the process of sorting it all out (with the bonus of helping them finally truly get organized!).

Finally, advisors can also leverage the latest iterations of financial planning software packages to make data gathering more interactive and engaging for the client to want to get through the process. By building out the initial iterations of a plan with clients, not only will the advisor give them a more genuine and tangible financial planning experience, but clients can often get excited about the process itself and begin to feel the motivation to make sure it’s as accurate as possible when they literally see their financial plan taking shape before their eyes… and in the process, end out wanting to actively pursue any missing information that was needed in the first place.

Ultimately, the key point is to recognize that financial planning is a process rather than an event, building long-term relationships is more about making connections than collecting as much data as possible at the early planning stages, and often clients don’t have or know where all of their data is. And by making it easier to get started by meeting clients where they are with the data they have, and focusing on just the most important data points (which will vary on a case-by-case basis) in an interactive setting, financial advisors can demonstrate, in real-time, the connection between the data and the benefit that financial planning will bring to a client’s life.

Maximizing Forgiveness For Paycheck Protection Program (PPP) Loans

November 18, 2020 07:04 am 3 Comments CATEGORY: Debt & Liabilities

Earlier this year, in March 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided funding for individuals, businesses, healthcare entities, and state and local governments to help them meet short-term cashflow needs. One provision of the CARES Act was the Paycheck Protection Program (PPP), which authorized a total of $649 billion in potentially forgivable loans guaranteed by the Small Business Administration, allowing small business owners to maintain their employees and mitigate pay cuts.

For a PPP loan to be forgiven, funds received must be spent on a pre-defined set of qualifying expenses. At least 60% of the amount of a PPP loan that is forgiven must have been used for payroll expenses (which, subject to certain limitations that apply to business owners, include not only salary and wages, but also vacation, family, and medical leave; group health coverage; retirement benefits; and state and local taxes), and the remaining funds (no more than 40%) on rent, mortgage interest, utilities, and business interest on debt incurred before February 15, 2020.

Some forgiveness limitations apply to payroll expenses for business owners themselves and can affect the amount of group health coverage, retirement benefits, and/or state and local taxes paid that are attributable to their own employment. Furthermore, the forgivable amount of the loan only applies to those expenses either paid or incurred during the “Covered Period” of the loan.

If the loan was funded on or after June 5, 2020, the Covered Period is 24 weeks, beginning on the date that the loan is funded. For loans funded before June 5, 2020, the borrower has the discretion to choose a Covered Period of either 24 or 8 weeks long. Business owners who run payroll on a bi-weekly (or more frequent) basis have the option of using the “Alternative Payroll Covered Period”, beginning on the first day of the payroll period that begins after PPP funding is received (instead of the date when PPP funds are received), which may allow for more payroll expenses to qualify for PPP loan forgiveness.

PPP loans were intended to help business owners keep their employees and mitigate pay cuts in times of financial hardship; thus, the amount eligible to be forgiven for certain loans (i.e., those above $50,000) can be diminished if the employer’s Full-Time Equivalent (FTE) employee headcount is reduced by any amount, or if compensation of non-highly-compensated employees (i.e., those with annual salaries of less than $100,000) is reduced by more than 25% (though Congress provided some flexibility through exceptions for borrowers who made efforts to rehire employees or restore wages).

To determine whether a change in FTE employee headcount will impact the eligible PPP loan forgiveness amount, employers must compare the average weekly FTEs during their Covered Period to the average weekly FTEs during the period between either February 15 – June 30, 2019, or January 1 – February 29, 2020 (employers may choose the period with the lower FTE count), where one FTE is equivalent to a 40-hour work-week, regardless of the individual(s) contributing to those hours (though a single worker cannot comprise more than 1 FTE per week if they work for more than 40 hours during that week). A drop in FTE will have a proportionate drop in PPP loan forgiveness; for instance, a 20% drop in FTE will result in a 20% reduction in eligible loan forgiveness. Alternatively, a ‘safe harbor’ FTE calculation can be used by employers if it provides a more favorable result; the safe harbor method counts employees working 40 hours or more per week as 1 FTE, and employees who work less than 40 hours per week as 0.5 FTEs. Meanwhile, cuts of more than 25% to the compensation of workers with (previous) salaries of less than $100,000 will result in a dollar-for-dollar reduction in the forgivable amount of a PPP loan (to the extent the cuts exceeds the 25% threshold).

Ultimately, the key point is that advisors have various considerations to help their small business owner clients with PPP loans maximize the amount eligible for forgiveness. Specifically, choosing a particular Covered Period that the borrower may be eligible for can have a significant impact on the composition of expenses to be considered for forgiveness. The method to calculate FTEs, the FTE comparison period used to determine whether a drop in FTEs has occurred, and changes in (non-highly-compensated) employee wages can also impact whether the eligible forgiveness amount will be reduced. And advisors should be sure to prepare clients who do receive forgiveness of their PPP loans by reviewing the potential tax liability associated with any amounts forgiven!

#FASuccess Ep 203: Adapting Financial Advisor Marketing To The Pandemic By Sticking With What (Virtually) Works, With Maribeth Kuzmeski

November 17, 2020 07:08 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 203rd episode of Financial Advisor Success Podcast!

My guest on today's podcast is Maribeth Kuzmeski. Maribeth is the founder of Red Zone Marketing, a marketing consulting firm with a focus on independent financial advisors that are looking to implement actionable marketing strategies. What's unique about Maribeth though, is the particular research-based, evidence-based focus she takes to financial advisor marketing, and the principle that marketing success doesn't have to be about doing something completely innovative and new and never seen before, but simply looking at what already works in the world of financial advisors and just adapting what is necessary to the specifics of your own business, so you can get started and getting results more quickly.

In this episode, we talk in depth about what Maribeth's research shows that financial advisors are actually doing now, in the midst of the ongoing pandemic environment, to adapt their marketing to a virtual and digital world. From conducting hyper-targeted email marketing campaigns to using third-party email services, and suggesting some of the providers so that advisors are actually using to do it successfully, to conducting virtual educational events with webinars and how to adapt your presentations to get better marketing results when you're delivering in a virtual format, to the rise of virtual client appreciation events, that are less about conducting a celebratory event for clients and more about simply creating meaningful social opportunities in a pandemic environment where we've all been closed off from each other. Whether it's virtual cooking events, virtual team meetup, or for one advisor, weekly virtual Bingo for their clients and prospects.

We also talk about how the pandemic has changed the nature of generating referrals in a world of virtual meetings. Why it's so crucial to turn the video on and ensure that virtual meetings are still face-to-face with tips on how to get reluctant clients, who in the past have preferred phone calls, to actually start meeting with you via video. How video meetings make it possible to connect with clients more frequently in smaller bites in a way that can actually help keep the advisor more top-of-mind for referral opportunities, and how to get opportunities to meet with prospects virtually by offering second opinion meetings to encourage them to meet with you for the first time.

Be certain to listen to the end where Maribeth shares her own journey of finding financial advisors as her niche as a marketing consultant, the way her first financial advisor client grew his business from 10 million to 200 million of AUM in just five years by focusing on a niche of his own, and how, in the end, many of the most successful niches for marketing purposes don't come about by trying to mastermind the ideal perfect niche upfront, but instead by simply finding a segment of clients you're already having some success with and going deeper and deeper and deeper until you look back and realize that what you've created is far more specialized and differentiated than you ever realized it could be.

So whether you’re interested in learning what other financial advisors are doing to adapt to the pandemic, how to adapt your virtual presentations to get better marketing results, or why video calls are crucial to making the face-to-face connection with clients and prospects alike, then we hope you enjoy this episode of the Financial Advisor Success podcast.

Teaching Financial Planning As A Part- Or Full-Time Career Opportunity

November 16, 2020 07:03 am 2 Comments CATEGORY: Personal/Career Development

The traditional role of a financial advisor is to provide financial planning services to their clients, or at least to support the financial planning process in an advisory firm. However, with the growing number of programs that provide the educational foundation required by the CFP Board for rising certificants to earn their CFP designations, there is an increasing demand for qualified teachers of financial planning. This growing opportunity has appealed to many advisors – not only has it offered new career options for financial planning professionals as an alternative to client-facing work, it can also be a unique marketing opportunity that increases the credibility of an advisor as a well-qualified financial planning expert in their work with clients, and gives firms an opportunity to see first-hand the top students in a local program that might be future hires (at least within the limits of what university conflicts-of-interest policies will allow for their instructors).

However, there are many different types of teaching roles that a financial advisor can consider. A position as a part-time instructor may make the most sense for advisors who want to continue serving financial planning clients. Compensation typically ranges from $3,000 to $7,000 per semester course, though part-time instructors at the undergraduate level are generally required to have earned a Master’s degree in a related field in order to get the paid teaching opportunity. For those who are interested, aside from the time commitment of actually teaching courses (which typically involves approximately 45 hours per semester per course), advisors should be aware of the time commitment involved in preparing for the course (for the first-time instructor, this can involve several hours per lecture given). Accordingly, given the relatively low salary range and high time commitment, financial advisors who choose to teach in these roles generally do so out of a love for teaching and as a way to give back to the industry by helping to prepare new advisors.

Full-Time instructors, on the other hand, tend to have a regular assignment of courses with some certainty of when and which subjects will be offered throughout the year. The job security of a full-time instructor is much more stable than that of a part-time instructor and, for non-tenure track positions (i.e., less permanent appointments with little or no research commitments), annual compensation levels generally start in the $50,000 to $80,000 range. However, full-time positions will make it more difficult for an advisor to continue working outside the classroom (though it may still be possible); thus, advisors will typically need to be willing to give up work in their financial planning practices, and should be prepared for an academic career (and academic compensation levels). In addition, advisors again will generally be required to have earned a Master’s degree and have some relevant professional experience for a full-time instructor role.

Individuals interested in pursuing tenure-track professor roles will find opportunities at research and/or teaching universities with financial planning PhD programs (and occasionally PhD programs in other fields, such as Family and Consumer Sciences), though the requirements to qualify for an appointment are much more stringent than for other types of teaching roles. New “assistant professors” can expect starting salaries to range widely from $60,000 to $130,000. While maintaining a financial planning practice may be very difficult for a tenure-track professor because of the work involved in both teaching and research, advisors can find ways to stay connected to their firm, potentially through occasional ad hoc planning work, relying on other firm partners, or by outsourcing work to others.

For those in a tenure-track position, earning tenure involves a long process unto itself, but their positions become very secure as tenured faculty positions are permanent, lifetime appointments (where it’s very difficult to get fired short of very substantive failures to do the core job). However, research universities will generally require a significant amount of research to be done by their faculty in a tenured professor role. For example, some popular CFP Board Registered PhD programs expect their faculty to publish an annual average of three articles in peer-reviewed academic journals every year, though the actual expectation varies greatly and can be gauged by determining what tenured professors published during their own probationary (tenure-track) period. In addition to research requirements, some institutions (e.g., those that are accredited by the Accreditation Council for Business Schools and Programs, or ACBSP) require individuals to have 15 finance graduate credits in order to teach in their programs, though other institutions (accredited by the Association to Advance Collegiate Schools of Businesses, or AACSB) don’t necessarily share this 15-credit requirement, but may have their own standards (which vary by institution, and could still include a 15-credit requirement) that define requirements for teaching eligibility.

Ultimately, the key point is that there are many financial planning teaching opportunities, some of which have relatively low education and experience requirements that can be managed by a financial advisor without having to give up their practice of financial planning itself. On the other hand, for those who actually wish to pursue a financial-planning-based career in academia on a full-time basis, there are also growing opportunities for full-time instructors and even tenure-track faculty positions at a research university. Regardless of the role, though, teaching opportunities in the financial planning field can serve as a great way for advisors to enhance their current job roles (or even switch careers altogether!) and to contribute to the profession by supporting the education of aspiring financial planners!

Weekend Reading for Financial Planners (Nov 14-15)

November 13, 2020 02:58 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a look at what a Biden administration may mean given the increasing odds that the Senate will remain Republican (by winning just one of the two Georgia Senate run-offs), which could stymie major tax legislation from the White House but leaves the way clear for potential new fiduciary regulatory reforms for financial advisors (as a new SEC Chair or Department of Labor Secretary from the White House is all it takes to potentially queue up a new rulemaking process in the coming years).

Also in the news this week is a fresh Risk Alert from the SEC's Office of Compliance Inspections and Examinations highlighting that, as RIAs increasingly expand into multiple locations, they're not always implementing appropriate 'branch office' compliance oversight programs, and the CFP Board has published a new set of "sample" (consumer-tested) Engagement Letters that CFP certificants can use both to describe their services in plain language and also to meet the CFP Board's own new "Duty to Provide Information" obligation that took effect on June 30th.

From there, we have several practice management articles, from a look at how, despite the industry buzz of "consolidate or perish", that small independent advisory firms continue to thrive, and it's some of the largest advisor platforms that appear to be struggling to maintain their size (despite their scale!), to a reminder of the key areas of an advisory business that must be balanced in order to drive (sustainable) growth, and a good discussion of what a COO actually does in a growing advisory firm that has more than 10 employees (and requires an additional level of infrastructure and management to keep the firm organized).

We've also included some articles on client communication this week, from some suggestions on questions to ask new (or prospective) clients to help deepen the relationship, tips on how to make virtual client meetings more collaborative (by not just screen-sharing but creating visuals that the advisor and client can collaboratively fill out and complete), and a good reminder that even though the work-from-home environment may feel more casual it's still important to remember that clients can see you (at least when the video is on!) and that putting together a professional look still matters in a professional services business.

We wrap up with three interesting articles, all around the theme of the ongoing challenges for both teams, businesses, and individuals continuing to work from home: the first explores how effective team communication in a virtual environment is all about "bursty" communication (with concentrated groups of meetings, followed by blocks of focus time); the second explores the ongoing challenge of loneliness when working from home for extended periods of time; and the last looks at what some businesses are starting to do now to head off the growing concern of work-from-home burnout, from 'spontaneous' 3-day weekends to allowing team members the option for 30-hour work weeks or simply having "self-care" days where it's required to turn the computer/laptop off, step away, and unplug from the home office that is otherwise so hard to disconnect from when it's right there in the house!

Enjoy the 'light' reading!