feed - Part 28

The Latest In Financial #AdvisorTech (December 2021)

December 6, 2021 07:01 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the December 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 Halo Investing has raised a $100M Series C round to fuel the ongoing growth of structured notes, annuities, buffered ETFs, and other “protective” investment vehicles alongside competitors Simon Markets and Luma, as high valuations and diminished forward return expectations for stocks are leading financial advisors to more proactively ‘hedge’ client portfolios against a potential market decline… mirroring a similar trend in the rise of Alternative Investment platforms as below-average expected returns on fixed income are similarly leading advisors to find non-traditional alternatives for their bond allocations as well!

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

Geowealth raises a $19M Series B as a ‘next-generation’ tech-savvy platform TAMP competitor
Orion acquires BasisCode Compliance to expand its compliance capabilities (as a pathway into larger enterprises?)
Skience rolls out new integrations with Redtail as the ‘CRM overlay’ business expands beyond just Salesforce
TIFIN Group raises another $47M Series C round in an attempt to make the whole worth more than the sum of their variously acquired parts
FeeX partners with Advyzon as advisors continue to adopt tools to expand from AUM to the AUA model

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

FP Alpha launches a new prospecting tool to help advisors find new planning opportunities more quickly
Helios Estate Planning announces it is shutting down as advisors continue to de-emphasize estate planning
Vestwell expands into state-sponsored auto-IRAs and 529 plans as it broadens its offering for advisors serving small business owners
CapGainsValet and Blackrock’s Tax Evaluator ramp up with fresh data for end-of-year capital gains distributions from mutual funds (and some ETFs!)

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]!

Kitces & Carl Ep 74: Making Clients Care About Financial Planning By Finding Their (Truly) Critical Issues

December 2, 2021 07:02 am 2 Comments CATEGORY: Kitces & Carl Podcast

While it was once a common practice for financial advisors to apply cold-calling strategies to attract any client willing to engage with them, framing their value in terms that clients would understand was often a challenge for advisors positioning themselves as experts able to solve all of a client’s financial problems. But when clients have financial issues that aren’t clearly obvious or understandable to them, they are generally not very motivated to have an advisor help them address their problems, especially when they don’t understand the specific services – beyond the commonly offered (yet vague) “peace of mind” promise – the advisor can provide.

In our 74th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss strategies that motivate clients to seek financial planning services, and how identifying the right areas of specialization can help advisors to better communicate how their services can help clients address their unique problems.

As a starting point, it is important to acknowledge that clients often don’t seek out help unless their problem becomes a critical pain point. For example, while regular auto maintenance is important to prolong the life of a car, it is often not considered a high priority. By contrast, being stranded with a flat tire in a strange area needs an immediate solution. Similarly, clients who don’t seek financial planning services may not have any critical needs to address; this isn’t to say they are not in need of service, they may simply not consider the service immediately relevant.

However, when a client’s problems escalate to a high level of urgency, they can become very motivated to seek out a clear solution to their issue. Accordingly, advisors can benefit from understanding these truly critical issues that matter most to their own clients and aligning the solutions they provide to their current and future clients. This can present a significant opportunity for the advisor to enhance and improve their business strategy, as communicating specific solutions available to critical problems that clients care about can minimize the indifference many clients (current and prospective) have with advisors who don’t clearly identify the solutions they offer.

Ultimately, by communicating specific solutions that are relevant to their clients’ critical issues, advisors can help clients better understand the value that they offer and enhance opportunities to expand their business. And by asking clients the right questions to identify which issues are most critical to them, advisors not only strengthen their relationships with their clients but also have the opportunity to proactively develop planning and communication strategies to attract more clients. Which, in the end, allows them to refine their financial planning services to best meet their clients’ needs!

How To Choose The Best CFP Exam Review Program (For You)

November 29, 2021 07:08 am 2 Comments CATEGORY: Personal/Career Development

The Certified Financial Planner (CFP) designation is one of the most respected credentials for financial advisors and the process to earn it is rigorous. Candidates must fulfill education, experience, and ethics requirements, in addition to passing the comprehensive CFP Exam, a 170-question, multiple-choice test taken across two 3-hour sessions in one day. Material on the CFP Exam is categorized into the CFP Board’s eight principal knowledge topics, which range from retirement savings and income planning to investment planning, professional conduct, and regulation. With a general recommendation that exam takers study for at least 150 hours before the exam, the cost in time and money of failing can be high. Furthermore, given that the exam covers a broad range of financial planning topics, having an organized and disciplined study routine is a necessity to pass the exam.

Accordingly, CFP exam review courses can be a good option to help exam takers not only review the material that will be on the test but also develop strategies for preparing for and taking the exam. The core of most CFP exam review programs is based on instructor-led review sessions that typically come with extensive pre-study materials, which can include condensed reviews of the principal knowledge topics and practice questions, as well as questions and mock exams to help exam-takers gauge their progress and practice in similar conditions as the actual exam. While the core elements of most CFP exam review programs are similar, they differ in their method of delivery, level of personalization, and cost. Instructor-led sessions for some programs can be held synchronously, either in person or livestreamed virtually, while others are held asynchronously, with recorded lectures available to view on demand. Some programs also offer more personalized instruction, from one-on-one video coaching to email access to instructors. Certain programs also offer students some form of exam-pass guarantee, which can range from being able to retake the program for free, to receiving a refund of the program cost.

With more than twenty different CFP exam review options to choose from, exam takers can methodically approach selecting a program by first deciding whether to take a synchronous or asynchronous program. While synchronous programs can be good for exam takers who want (or need) the structure of set schedules, asynchronous programs can be useful for those with unpredictable schedules and the discipline to complete the program on their own. Individuals can then consider other important factors (e.g., group size, guarantees, and cost) that are most important to them based on their preferred learning style and budget. As an alternative, exam takers with very tight budgets can choose a self-study approach using printed review materials and practice questions without the lecture component.

Ultimately, the key point is that while there is no single ‘best’ CFP exam review program that will be suitable for all test takers, those taking the exam can consider their individual situation to narrow the field of available programs. And while there is no guarantee that an individual will pass the CFP exam after taking a review program, these programs can greatly improve the quality and efficiency of the strategy the exam taker chooses when preparing for the exam. Which is important, because passing the CFP exam requires a high level of commitment and hard work – and finding the right method to review and prepare can make a big difference in helping prospective test takers pass the exam!

#FA Success Ep 256: Living On The Cutting Edge Of Advisor Technology To Build A Better Client Experience, With Vincent Barbera

November 23, 2021 07:09 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 256th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Vincent Barbera. Vince is the founder of Newbridge Wealth Management, an independent RIA based right outside of Philadelphia that oversees nearly $120M of assets under management for 75 client households.

What's unique about Vince, though, is the way he stays on the cutting – or sometimes bleeding – edge of advisor technology by continuously experimenting with new tech tools for his advisory firm, setting a new strategic focus every year to identify a new category of solutions to try out, either internally with his team, or externally with his clients.

In this episode, we talk in depth about the new technology tools that Vince has been trying this year with a theme of improving his Client Experience, including using Knudge to keep track of and collaborate with his clients on their financial planning tasks, Pulse360 to keep his meeting agendas and post-meeting notes more organized, and Hubley to help systematize the firm’s workflows above and beyond what his CRM alone can accomplish.

We also talk about how Vince manages his technology choices and budget to avoid having the cost spiral upwards out of control by just adding more and more technology, how Vince compares the cost of new technology tools to his financial planning software to determine if it’s a ‘reasonable’ price (because if it costs more than his planning software, he’d better be using it more than his planning software!), how Vince regularly assesses how often he’s logging into his technology tools to decide what to prune, and where Vince goes to find the latest and greatest tools to try out (and the gaps he still can’t find a solution for!).

And be certain to listen to the end, where Vince shares his own journey through the financial services industry, from starting out at a major asset manager’s HNW advice department but finding that the advice was still too focused on the firm’s asset management products and not the rest of the client’s financial advice needs, how Vince made the transition to go out and launch his own independent firm (with an eye towards using all the technology tools that are available today to stay competitive without an asset manager’s size and scale), and why Vince ultimately decided that he did not want to try to build the next billion-dollar firm and has actually felt even happier in his business by consciously deciding to take his foot off the gas and grow a little slower for a while.

And so with that introduction, I hope you enjoy this episode of the Financial Advisor Success podcast, with Vincent Barbera.

Weekend Reading for Financial Planners (Nov 20-21)

November 19, 2021 02:14 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 CFP Board is increasing its efforts to enforce its requirement for CFP certificants to report information about their own misconduct or ethical violations… by increasing the sanction for failure to report the information from a private to a public censure. Notably, however, CFP Board will not (yet?) be imposing a fine or “administrative fee” on certificants for failure to report, as was proposed earlier this year. But it is reportedly still evaluating the measure, which would have broad implications, since imposing a fine positions the CFP Board as more of a regulator, and not “just” a standards-setting nonprofit organization?

Also in industry news this week:

The House Financial Services Committee approved a bill that would end the practice of mandatory arbitration clauses in brokerage and advisory client agreements, but the bill faces stiff opposition from the financial industry and Republican lawmakers (that makes its passage unlikely at this point)
FINRA released an overhaul of its Continuing Education requirements, increasing the frequency of its Regulatory Element requirement from once every three years to once per year, and creating a new program enabling individuals who temporarily terminate their registration to reinstate their qualifications within 5 years by completing CE requirements

From there, we have several articles on (the hidden costs of) investing, including:

How “free” investment services often obscure hidden costs, as highlighted by the recent class-action lawsuit against Schwab’s Intelligent Portfolio recommendation of high allocations to its proprietary (and profitable) cash sweep account
Why the practice of Payment-For-Order-Flow remains controversial and highly scrutinized by regulators, even when (as brokerage firms argue) it may actually result in better trade pricing for retail investors
How mutual funds can (and sometimes do) choose benchmarks that make their own performance look better by comparison, and even switch benchmarks to boost their relative historical returns after the fact, potentially misleading investors yet without violating any existing securities regulations

We also have a number of articles on how advisors can approach the upcoming holiday season:

A rundown of the types of gifts different advisors give to clients, from custom-made chocolate to donations to a client’s favorite cause
Why giving experiences rather than “stuff” is more likely to provide a happiness boost to the client who receives the gift
How advisors can write an effective and engaging holiday letter to clients

We wrap up with three final articles, all about the wide range of experiences Americans from different backgrounds have with money and the financial industry:

How culture and identity can impact an individual’s attitudes and behaviors toward money
A survey showing the disparate experiences individuals of different races have with the financial services industry
A study showing how the racial wealth gap could expand in the future, and potential ways advisors can improve financial outcomes for historically underserved groups

Enjoy the ‘light’ reading!

The 11 ‘Best’ Financial Advisor Conferences To Choose From In 2022

November 15, 2021 07:03 am 5 Comments CATEGORY: Conferences

The COVID-19 pandemic has forced a number of dramatic changes for the typical financial advisor, who suddenly found themselves meeting with all their clients virtually, managing their entire team virtually… and trying – usually unsuccessfully – to network with other financial advisors at virtual conferences. As in the end, while the transition to Zoom-based conferences was ‘reasonably’ successful at delivering content for advisors, it’s done very little to alleviate the sense of isolation that has come with 18+ months of a work-from-home environment and the near-total shutdown of financial advisor conferences.

And so as vaccination rates continue to rise across the country – now accelerating as age 5–11 vaccines begin to roll out – advisors are steadily returning to the office, conferences are preparing to re-open their doors for in-person events in 2022… and a lot of advisors are expressing a newfound desire to get out from their 4 walls, take a trip (or an extended vacation!), and reconnect with other financial advisors and get some fresh ideas and inspiration about ‘what’s next’ for their own advisory businesses. Which just raises one key question: if you’re going to go back out for a conference in 2022, for the first time in nearly 3 years… what’s the best conference to attend?

As someone that has been speaking at 50-70 conferences a year for almost 15 years myself, I’ve seen the good and bad of our wide range of industry events, which are spread across membership associations, broker-dealers, insurance companies, RIA custodians, product manufacturers, media companies, private events, and more. And as a result, I am often asked for my own suggestions of what, really, are the industry’s ‘best’ conferences to attend.

Accordingly, back in 2012, I started to craft my own annual list of 'best-in-class' top conferences for financial advisors, allocated across a range of different categories (as what’s best for solo advisors isn’t the same as what’s best for larger advisor enterprises, what’s best for fee-for-service advisors isn’t the same as what’s best for AUM firms, more technically oriented advisors will prefer different conferences than those seeking practice management or marketing ideas, etc.).

Having updated our annual conference list in every year since, I’m excited now to present my newest list of “Top Financial Advisor Conferences” for the upcoming 2022 year, including both some technical conferences, a wide range of practice management conferences, and highlighting a few never-before-seen events that are emerging for the first time in the coming year.

In addition, we've also launched a new "Master Conference List" of all financial advisor conferences in 2022, for both advisors looking for a wider range of events to attend, and for vendors looking for more conferences to exhibit at!

Of course, because of the disruption of the pandemic, it’s not entirely clear whether some events will show up in 2022 differently than they did the last time they were in person (which for most, was all the way back in 2019!). Nonetheless, as long as you find the conference that is the right type for you, the odds are good that your experience will be good when the content is more relevant, and the other attendees are similar to you (because they, too, were looking for the same thing!).

So I hope you find this year’s 2022 conferences list (and our new Master Conference List) to be helpful as a guide in planning your own conference budget and schedule for next year, and be certain to take advantage of the special discount codes that several conferences have offered to all of you as Nerd’s Eye View readers!
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Weekend Reading for Financial Planners (Nov 13-14)

November 12, 2021 02:07 pm 2 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with a report from NASAA finding that the SEC’s Regulation Best Interest rule that took effect on June 30, 2020, has so far failed to achieve its stated goals of requiring broker-dealers to act in their clients’ best interests while making investment recommendations. Among other things, the report found that broker-dealer firms actually offered a higher number of “complex, costly, and risky” investment products than before the rule was implemented (and failed to discuss less costly or risky alternatives when recommending those products), still offered contests to incentivize advisors to sell more products (and thus creating a conflict of interest when recommending strategies to clients), and failed to fully update their policies and procedures to comply with the new rule. But ongoing confusion about Reg BI’s provisions means that the SEC will likely need to provide more guidance to enable more broker-dealers to come into compliance.

Also in industry news this week:

The SEC issued a Risk Alert detailing the issues it found with RIA firms’ advisory fee billing, which included inaccurate fee calculations, inadequate disclosures, and (a lack of) policies and procedures to ensure clients were charged the correct amount
In a different Risk Alert focusing on so-called 'robo-advisors', the SEC stated that it had found deficiencies in nearly every digital advisory firm it had examined, including the failure to collect enough client information to truly make (and monitor) recommendations in the client’s best interests

From there, we have several articles on practice management, including:

Why it is important for advisors to systematize their processes, even if it takes time to implement the new systems, and how to get started
How financial advisory firm owners can get their firms out of a ‘rut’ by focusing on staffing, technology, and reflecting on their own purpose
Why it is important for firm owners to take time to meet directly with their staff, and how to make those conversations more effective

We also have a number of articles on retirement planning:

How the flexibility financial independence provides can benefit both parents and their children
How a personal family crisis led one advisor to shift from focusing on the quantitative aspects of retirement planning with clients to embracing the qualitative impacts of the decision to retire
How the “End of History Illusion” shows that an individual’s interests and goals ten years from now might be very different from their preferences today, which makes it especially hard for clients to predict what they may enjoy in retirement until they’re almost already there.

We wrap up with three final articles on the themes of charitable giving, selflessness, and gratitude:

How generous acts like charitable giving actually produce physiological changes in our bodies and brains that make us happier and healthier
New research shows that people really do become more generous with age
How reflecting on the abundance we have – and challenging ourselves to occasionally live without it – can help restore the gratitude that declines as we accumulate more of the things we want

Enjoy the ‘light’ reading!

#FA Success Ep 254: Maximizing A Firm’s Human Capital To Better Scale Its Financial Advice, With Eliza De Pardo

November 9, 2021 07:05 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 254th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Eliza De Pardo. Eliza is the founder of her eponymous advisor consulting firm, with a particular focus on working with mid-to-large-sized independent advisory firms.

What's unique about Eliza, though, is the focus she takes on the human capital issues that arise as advisory firms try to scale up, recognizing that a financial advice business is first and foremost a service business, which means attracting, retaining, and developing the firm’s people is the biggest key to long-term success.

In this episode, we talk in depth about the unique challenges that advisory firm founders face as they grow and scale their advice businesses, including how the ability to attract and serve clients is so fundamental to growing the first $1M of revenue but takes a back-seat by the third million of revenue (and all the growth thereafter), why it’s the advisors who are most effective at moving away from the client-facing work to develop their team management skills instead that tend to have the most success at scaling their firms, and why even as advisory firm founders take on a greater focus in management as they grow, the long-term key to scaling is about getting comfortable with the scariest hires of all – dedicated management, including a COO and eventually a CEO that isn’t the founder – to create the infrastructure necessary to grow the firm to the next level.

We also talk about some of the key business productivity metrics that advisory firm owners should monitor as they grow, including their average revenue per advisor (which across all firms averages about $500,000 per revenue-generating professional), their average revenue per staff (which leads advisory firms to hire a new team member every $250,000 of new revenue), and how one of the biggest keys to scaling up is about shifting the ratio of non-revenue-producing to revenue-producing team members from a 1:1 ratio when the firm is small, to a 2:1 ratio as it approaches $1B of assets under management.

And be certain to listen to the end, where Eliza shares her own 15-year journey through the advisory business in building her career as a practice management consultant, the parallels between the challenges in the consulting business and the advisory business when you lose out on a big prospect (and why you have to learn not to take those misses personally), and why most advisory firms need to learn to hire sooner but not necessarily faster (because no matter how much you need the next hire, it’s still crucial to ensure you find someone who will represent the firm well to the end clients it serves).

So whether you are interested in learning how hiring a COO affects advisor well-being, how to know when to scale up and hire, or how to leverage "non-revenue" staff for firm growth, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Eliza De Pardo.

Weekend Reading for Financial Planners (Nov 6-7)

November 5, 2021 02:18 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with updates on the proposed tax law changes in the “Build Back Better” Act currently being debated in Washington. The latest version of the bill brings back several IRA-related measures that were in the House Ways and Means Committee’s proposal from September but were omitted from the bill when it was introduced last week, including a return of the ban on ‘backdoor’ Roth IRA contributions (beginning in 2022), a prohibition on IRA contributions for higher-income taxpayers with retirement account balances greater than $10 million (beginning in 2029), and Required Minimum Distributions (RMDs) for retirement accounts with balances greater than $10 million (also beginning in 2029).

Also in industry news this week:

The Public Investors Advocate Bar Association plans to call on the SEC to revise form CRS to add insurance and dispute resolution disclosures, including an explanation of any mandatory arbitration clauses and the amount of E&O insurance a firm is carrying in the event the client is harmed and needs to be made whole
M&A activity in the RIA industry set a record for an eighth consecutive year in 2021, concentrated among the industry’s largest firms, but some in the industry think the pace of M&A could slow down going forward because even large firms with a lot of dollars available to deploy can only digest and integrate ‘so many’ acquisitions at a time

From there, we have several articles on how advisors can better generate client referrals, including:

Why advisors are more likely to get referrals from clients when they show empathy for the client’s concerns, and when the client does not feel pressured to provide them
How generating a clear and specific message of what kind of clients the advisor serves (and what kind of clients might not be a potential fit) can lead to more frequent and successful client referrals
Why it is important for advisors to position themselves to be able to ask clients for referrals and prepare carefully for the referral request so that clients feel empowered to make referrals

We also have a number of articles on retirement planning:

Why clients generally make poor predictions about their life expectancy, and the tools that are available for advisors to make better longevity estimates and more accurate financial projections
How Monte Carlo analysis can be better implemented and the importance of communicating the results of Monte Carlo simulations to clients in a manner beyond ‘just’ a single-number probability of success
An analysis of risk in ‘buffer’ and ‘floor’ products and why these strategies do not offer a ‘free lunch’

We wrap up with three final articles, all about the theme of being intentional when creating goals:

Why seeking out fame and fortune for their own sake might not lead to client (or advisor) wellbeing
Methods advisors and their clients can use to reduce the negative impacts of comparing themselves to others
How acting with intention can lead to greater client happiness (and results in better financial planning!)

Enjoy the ‘light’ reading!

Optimizing Client Recommendations At The Right Behavioral Level Using A Synthesis-Based Approach

November 3, 2021 07:05 am 0 Comments CATEGORY: Client Trust & Communication

When preparing a financial plan, advisors often tend to break down the key issues of a client’s situation into smaller parts in order to ‘zoom in’ and separately analyze each problem. While this analytical approach aligns very well with the education and technical training many advisors have, a ‘synthesis-based’ approach, where the aim is to generate insight from ‘zooming out’ and to garner a more comprehensive understanding of the client’s finances and lifestyle concerns, can be a valuable complementary perspective in the financial planning process. For example, synthesizing a big-picture view of a client’s long-term goals and financial concerns can help an advisor create a long-range tax plan that is likely to be more effective in reducing tax burdens than a “rearview mirror” attempt to plan taxes based on what has already happened within the tax year.

Operating at the analytical level can work well when considering questions that have little behavioral or lifestyle implications (e.g., choosing which tax lot to sell when raising cash); however, synthesis can be particularly useful when thinking about significant choices that do impact the client’s lifestyle or behavior. Furthermore, while synthetic thinking may have a bad reputation as being sloppy or uninterested with the details, sometimes a detailed (and labor-intensive) analysis is simply not necessary to make good decisions. Other times, a synthetically derived reason might be compelling enough to override a decision based on analysis. For example, an advisor operating on an analytical level might eschew a ‘no-consumer-debt’ constraint if expected investment returns would be greater than the interest on the debt. However, this approach could backfire for a client who may not be able to manage credit responsibly and who may be prone to developing reckless spending patterns. A more synthetic approach would consider such big-picture behavioral factors when developing client recommendations.

When it comes to famous financial ‘gurus’, advisors often disagree with their synthetically focused popular recommendations. This is because advisors tend to optimize at a more technical and granular level, while gurus tend to optimize at a more generalized behavioral level. For example, financial personality Dave Ramsey advocates the ‘Debt Snowball’ method, where a borrower pays off the smallest debts first rather than those with the highest interest rates. This approach might not seem optimal to an advisor, but at a behavioral level the momentum (and sense of achievement) built from paying off debts could encourage the client to pay off the remaining debts faster than if they were to use what may seem to some advisors as the more ‘sensible’ approach of tackling high-interest-rate debt first.

Ultimately, the key point is that advisors can use both analysis and synthesis as complementary approaches to help create better financial plans for clients, and that neither approach should be neglected. Advisors can be mindful of their potential biases as they look for solutions through a ‘zoomed-in’ analytic lens and consider when a more ‘zoomed-out’ synthetic approach may be more appropriate. Because understanding the ‘zoomed out’ perspective of a client’s situation and identifying the details that warrant a ‘zoomed in’ analysis can only lead to better recommendations for clients who stand to benefit from both approaches!