feed - Part 46

Weekend Reading for Financial Planners (July 11-12)

July 10, 2020 02:56 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 Small Business Administration has released data on all Paycheck Protection Program (PPP) loans above $150,000, which includes more than 1,000 independent advisory firms and related industry service providers, raising the question of whether advisory firms are being hypocritical advising clients on their finances while needing to rely upon PPP for their own, or simply humanizing the reality that particularly mid-sized scaling advisory firms are still businesses with staff and overhead that face economic business cycles that can include layoffs in difficult times (which PPP loans were specifically intended to prevent).

Also in the news this week are requests from advocacy groups to the Department of Labor to extend its rather-narrow 30-day Public Comment period regarding the potential for ERISA fiduciaries to begin to receive commissions and other revenue-sharing agreements, and a Model Rule proposal from NASAA for more consistent requirements of state-registered investment advisers on their policies and procedures for everything from their code of ethics and proxy voting to handling material nonpublic information and business continuity and succession.

From there, we have a number of additional industry research studies out lately, including Cerulli research that finds the overwhelming majority of the mass affluent still rely on human advisors (and not robo-advisors) and that most clients are still very satisfied with their advisors (so satisfied, in fact, that it may soon become increasingly difficult to find new clients who aren't already attached to another advisor!), a J.D. Power study that finds the majority of advisors at broker-dealers aren't satisfied with their platform's technology tools (despite 92% acknowledging that technology is crucial to their choice of platform), and a LIMRA study finding that almost 3/4ths of advisory firms have shifted their marketing focus to expand relationships with existing clients as prospecting has become more difficult in the world of pandemic social distancing.

We also have a few marketing-related articles this week, including a look at the kinds of online/digital marketing strategies advisors are testing in the face of the pandemic, guidance on how to create an effective sales process that can be tracked and improved over time, and the core outcomes to focus on whenever conducting a client meeting (hint: the #1 key simply boils down to answering the client question: am I going to be OK?).

We wrap up with three interesting articles, all around the theme of managing ongoing stress: the first examines the concept of "goal diversification" as a way for us to break a cycle of stress and burnout by finding new ways to have some 'small wins' that give us more positive feelings of progress; the second is a powerful reminder that in the age of the 'always connected, always be productive' mindset, sometimes it's incredibly powerful and rejuvenating to make a proactive decision to be deliberately unproductive for a little while; and the last explores recent research findings that the greatest adverse effects of stress actually derive from our mindset about stress, that the more harmful we believe stress will be the more harmful it turns out to be, and that by Acknowledging and Owning the stress, we can try to Use it, changing our mindset about stress that takes us down a (literally) healthier path.

Enjoy the 'light' reading!

#FASuccess Ep 184: Building A Premium Financial Planning Experience To Sustain A Premium Advisory Fee, with Reese Harper

July 7, 2020 07:10 am 1 Comment CATEGORY: Financial Advisor Success Podcast

Welcome back to the 184th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Reese Harper. Reese is the founder and CEO of Dentist Advisors, an independent RIA based in Salt Lake City, Utah, that oversees nearly $250 million of assets under management for more than 350 clients. What’s unique about Reese, though, is that his advisory firm doesn’t just have a deep niche in serving dentists, as the name of the firm implies, but that Reese has developed his own unique monthly financial planning process for serving clients and raised capital from outside investors to develop his own technology tools to implement it.

In this podcast, we talk in-depth about the Elements financial planning process that Reese has created; how he boils down the client’s financial planning situation into 12 key metrics to track, including their savings rate, their insurance coverage rate, and their personal burn rate; the systematized series of 12 monthly deliverables that Dentist Advisors produces for all of its clients each month, 1 for each of the 12 financial planning elements; the combination of Salesforce and Conga that Reese’s firm has implemented to increasingly automate the production of their client deliverables; and why Reese thinks the future of financial planning is all about working with clients through an ongoing series of micro-interactions around their financial planning needs.

We also talk about the business of Dentist Advisors itself, how Reese has been able to power the growth of the business with a successful podcast focused into his niche, the combination of AUM fees starting at 1.5% plus monthly subscription fees running from $200 to $700 a month that he charges for his comprehensive service, the ways the firm justifies its fees beyond the portfolio and even traditional financial planning with a focus on helping dentists lift their personal income and the value of their dental practices, and why Reese sees his firm’s approach of charging a premium price for a premium service as sustainable in this modern era of robo-advisors and fee compression.

And be certain to listen to the end, where Reese shares why he ultimately decided to raise capital by selling a portion of his advisory firm to outside investors, even though they were already growing successfully, the valuation and terms they were able to get by showing a strong business plan with a high growth rate, the challenges in growing an advisory firm quickly where clients are long-term profitable but short-term expensive to find and onboard, and why Reese isn’t concerned about the fact that with the second recent round of investor capital to accelerate their growth further, he has diluted his own founder ownership below controlling 50% majority.

The Latest In Financial Advisor #FinTech (July 2020)

July 6, 2020 07:20 am 1 Comment CATEGORY: Technology & Advisor FinTech

Welcome to the July 2020 issue of the Latest News in Financial Advisor #FinTech – 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 and wealth management!

This month's edition, with contributions from special AdvisorTech consulting guests Craig Iskowitz and Kyle Van Pelt, kicks off with the news that Orion Advisor Solutions has acquired Brinker Capital for $600M to form a combined $40B TAMP, as Orion increasingly positions itself as a competitor to Envestnet with a similar portfolio-management-turned-advisor-workstation solution that in turn is becoming a distribution channel for Orion’s model marketplace and platform TAMP offering. The deal was driven by private equity firm Genstar Capital, which similarly had previously acquired the AssetMark TAMP platform in 2013 for $413M and sold it just 3 years later for $780M, though notably in this case it appears to be less about simply growing Brinker as a TAMP and more about expanding Brinker’s reach through the adoption of Orion in broker-dealer channels. The only question is whether or how many broker-dealers are actually willing and interested in changing their portfolio management and advisor desktop solution?

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

Empower acquires Personal Capital in a deal reminiscent of Edelman Financial Engines that similarly positions Empower to end the advisor rollover bonanza by capturing plan participants with in-plan advice long before they ever retire
Venture capital firms make big investments into Origin and BrightSide as financial planning also increasingly heats up as an employee financial wellness benefit (whose cost is validated not by the benefits of advice to the client, but the improved productivity for the business of workers with less financial stress?)
Envestnet launches a new “Opportunities To Engage” solution to bring a Morgan Stanley “Next Best Action”-style recommendation engine to independent advisors
New CFP Board “fiduciary tech” standards may upend historically opaque financial planning and especially insurance product-illustration software

Read the analysis about these announcements in this month's column, and a discussion of more trends in advisor technology, including Mastercard acquiring account aggregation and financial API provider Finicity after losing Plaid to Visa, Apex expands its RIA custodial capabilities with a new more out-of-the-box “Extend” platform, the quiet world of advisor software surveys suddenly becomes hotly debated as inconsistent sampling methodologies show wild swings in market share, and Wealthfront announces a “New Mission” for the 2020s focused on banking as its future, effectively ending the robo-advisor movement as Betterment remains the 'last robo standing' in what has turned out to be a niche solution for a subset of self-directed young investors rather than the ‘disrupt the advisor industry’ movement robo-advisors once predicted they would be.

And be certain to read to the end, where we have provided an update to our popular new “Financial Advisor FinTech Solutions Map” as well!

I hope you're continuing to find this column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!

*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 (July 4-5)

July 3, 2020 02:59 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 SEC has prevailed in its legal challenge against Regulation Best Interest, as the 2nd Circuit Court of Appeals ruled in its favor, clearing the way for this week's enforcement date (but with questions looming about whether XY Planning Network will appeal the ruling). In the meantime, the Department of Labor also revealed its newly proposed Advice Rule this week (which would similarly provide an exemption from the typical ERISA fiduciary obligation for brokers that provide non-fiduciary "Best Interest" advice that conforms to Reg BI), and the CFP Board's own 'fiduciary at all times' standards will also begin to be enforced starting this week (but with questions remaining about whether or how effectively the CFP Board can enforce CFP professionals complying with its rules).

From there, we have a number of investment-related articles this week, including discussion of the news that Dimensional Fund Advisors (DFA) will be launching ETF versions of its funds that many advisors have been demanding (but in the process, will move away from its legacy of being an 'advisor-only' solution as consumers will now be able to buy DFA in ETF form directly), the Fed briefly becomes the #3 holder of the largest corporate bond ETF as its bond stabilization program expands since May (but may soon contract?), and a fresh look from Morningstar finding that, despite the traditional view that actively managed funds will shine in the midst of market turmoil, in practice, actively managed funds only slightly outperformed in Q2 and by less than they underperformed in Q1 (such that 57% are still underperforming year-to-date!).

We also have a few practice management articles about employee morale, including a look at how autonomy is one of the biggest drivers of advisor satisfaction (which may help to explain the explosion of the independent channels over the past decade?), tips on how to boost staff morale (by not letting the team just get 'stuck' in the busy day-to-day management of clients amidst the pandemic), and further tips on how to support employee morale in challenging times (starting with the simple recognition that advisory firms should be at least as proactive in communicating with their teams about the health of the business as they have been with clients about the health of their portfolios and financial lives).

We wrap up with three interesting articles, all around the theme of finding happiness and personal satisfaction: the first examines a recent analysis of long-term longitudinal data that finds higher incomes really are associated with greater happiness, and that consequently a "happiness gap" is emerging that aligns to rising income inequality; the second looks at how higher income may actually be more associated with our evaluation of our life satisfaction but doesn't actually correlate as well to our day-to-day happiness in living our lives; and the last explores how to find our own 'happiness threshold' in trying to draw the line of what constitutes "Enough".

Enjoy the 'light' reading, and happy Fourth of July!

Kitces & Carl Ep 37: How A Mid-Career Crisis Can Turn Advisors To Focus On Public Work

July 2, 2020 07:01 am 0 Comments CATEGORY: Kitces & Carl Podcast

No matter the industry or field, virtually all business owners have experienced the stress of just trying to stay afloat for the first (sometimes several) years of their existence. Those fortunate enough to get through those early ‘lean’ years, building a sustainable and growing business along the way, eventually feel a certain sense of relief when it’s clear they’ll “make it”, and the business can provide the income they hoped for in order to achieve their own personal goals. Yet at some point, many of those same entrepreneurs – including advisory firm owners – often then find themselves wondering “OK, but is this it?” or simply “what’s next?”… the proverbial “mid-life” (or at least, mid-career) crisis!

In our 37th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss how, at a certain point for many financial advisors, thoughts about the next stage in their careers and/or lives often turn towards expanding into wider circles and having a greater impact on the world around them…. even to the point of diminishing their involvement in the firm that they built but may no longer need to be as involved in to keep afloat.

However, the reality is that deciding on how to engage in more publicly focused work can be an overwhelming decision, as there is an endless number of ways to go about doing so, from writing books to speaking to volunteering and other ways to give back. By intentionally working on developing clarity and finding focus, though, financial advisors can begin to identify their best ideas and choose specific areas they want to act on. And allowing oneself flexibility is also important, because even as values and priorities may shift and evolve over time, so too should advisors’ long-term (and shorter-term) points of focus.

Vision statements – often used in the context of the business – can be used by advisors as personal statements of purpose, and become instrumental as “filters” for financial advisors who may feel overwhelmed by an abundance of potential ideas. As while individuals who are successful will tend to find more opportunities to choose from, making a decision that resonates with their values and priorities can be difficult without a clear vision of the direction in which they truly want to go.

Ultimately, the key point is that financial advisors who may be faced with a mid-career crisis of uncertainty, and who are having difficulty deciding how to choose the next step in their lives, may benefit from creating a vision statement based on their own true ‘why’. As while having a clear understanding of what’s most important in one’s life can serve as an effective funneling tool to rule out ideas that may simply sound good, but don’t really resonate with the advisor’s true goals, a good vision statement can keep an individual on target for what really matters most to them!

#FASuccess Ep 183: Structuring Your Advisory Business To Manage Your Time And Fit Your Natural Strengths, with Hannah Moore

June 30, 2020 07:05 am 4 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 183rd episode of Financial Advisor Success Podcast!

My guest on today's podcast is Hannah Moore. Hannah is the Founder of Guiding Wealth, an independent RIA in the Dallas, Texas area, that oversees nearly $25 million of assets under management for 25 affluent clients. What's unique about Hannah though, is the way she has deliberately crafted her advisory firm to support her personal goals, from giving back to the profession through her involvement with the FPA, to building her Everyday Money consumer brand and the unique attitude that she brings to her decisions about where and how she focuses her time to achieve her goals.

In this episode, we talk in-depth about Hannah's philosophy and how she manages her time and focuses her efforts, the way she limits her working time regardless of the length of her to-do list and uses what remains undone as a way to reevaluate her own priorities and what she's delegating, how Hannah hired a virtual integrator to help her manage the implementational aspects of the business so she could focus on the visionary work that she does best, and the systems that Hannah uses to manage tasks and workflows to ensure that her vision is implemented appropriately.

We also talk about Hannah's advisory firm itself and the way she started out by buying into an experienced broker's book of business, how she transitioned from serving nearly 300 clients to going independent with fewer than 30 of them while still managing to keep her income even with about 90% less work, and the budgeting block tool that she has created for her clients to have more meaningful financial planning experiences with them.

And be certain to listen to the end, where Hannah shares the mindset shift that helped her separate the visionary work she loves from the management she doesn't enjoy as much, the way she structures her week to be productive and stay focused, and why the number one piece of advice to financial advisors, and especially those in the early years of their career, is to join and get involved with a membership association in the FPA.

Weekend Reading for Financial Planners (June 27-28)

June 26, 2020 03:00 pm 2 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 CFP Board has been gearing up for its new Standards of Conduct and June 30th enforcement date by launching a comprehensive background check on all 87,000 of its CFP certificants... finding 1,240 that already have potential misconduct in their regulatory reviews or background checks and allocating a whopping $5M over the next two years to investigate them and begin to clean out its own potential 'bad apples'.

Also in the news this week is some surprise relief from the IRS that anyone who took an RMD earlier this year (all the way back to January 1st) that proved to be unnecessary because the CARES Act suspended 2020 RMDs will now have until August 31st to "undo" the RMD and roll it back into their retirement account (even if it's for an inherited retirement account or would otherwise violate the once-per-year rollover rule), and a new industry study finding that the overwhelming majority (78%) of the mass affluent are already using a financial advisor and only 1% of them are dissatisfied with their advisors (suggesting that advisors are generally serving clients well, but that it may be increasingly difficult to get new clients with so many already attached to advisors they're satisfied with!).

From there, we have a number of articles around industry trends, including a look at the slow-but-steady growth of financial planning across the broader financial services industry, a glimpse of just how much money brokerage platforms are still collecting from asset managers behind the scenes in various revenue-sharing and shelf-space agreements, and how ongoing competition and especially consolidation in the RIA custodial world may soon drive a new wave of advisor migrations.

We also have a few marketing-related articles, including: tips on how to leverage any expert content you've created by 'repurposing' it across an advisor blog, social media, videos/YouTube, and podcast; suggestions on what to do to make your advisor website more compelling (hint: treat it like your professional in-person office space and make it look professional); and some new technology tools to help support the advisor marketing process (from Loom for quick videos to Zapier to connect email marketing and advisor CRM systems and Linkfire to more readily share a podcast).

We wrap up with three interesting articles, all around the theme of personal creativity and originality: the first explores how not fitting in and "being a weirdo" can actually support creativity; the second looks at how ADHD is also increasingly being linked with creativity and divergent thinking; and the last examines a recent study that finds we all tend to systematically underestimate our own originality, and that the average person is actually far more creative than they give themselves credit to be, as long as they spend at least a little time iterating on thinking of new ideas (because the first or second idea isn't always original, but the 5th or 6th almost always is even if we don't realize it!).

Enjoy the 'light' reading!

The 15 (Fiduciary) Duties To Clients That CFP® Professionals Must Comply With

June 24, 2020 07:01 am 3 Comments CATEGORY: Ethics

CFP® professionals – like any professional – are expected to give advice in the best interests of their clients. Both as a hallmark of professionalism, and simply because it’s good business to do so. Yet in practice, it’s not enough to just say that CFP® professionals are fiduciaries; professional adherence requires setting forth clear Standards of Conduct about how, exactly, CFP® professionals are expected to deliver their services in a fiduciary manner, so CFP Board can determine when a CFP® professional is not meeting their obligations and may need to be disciplined… or, at worst, have their CFP® marks suspended or revoked.

To provide clear guidance, CFP Board’s new Code of Ethics and Standards of Conduct (“Code and Standards”) delineate a series of 15 Duties To Clients that CFP® professionals must adhere to, from the Fiduciary Duty to Clients itself, to an obligation for providing key information and relevant disclosures of Material Conflicts of Interest, confidentiality obligations, the duty to uphold core professional principles including Integrity, Competence, and Diligence, as well as entirely new Duties regarding the selection of external professionals (to which the CFP® professional may refer clients) and even the selection of technology itself.

In addition, CFP Board’s new Code and Standards also establish new guidance in previously controversial areas, particularly with respect to how CFP® professionals disclose their compensation, and the use of compensation disclosures as a marketing term (e.g., the “Fee-Only” label)… not to induce CFP® professionals towards any mode of compensation in particular, but simply to ensure that whatever compensation methodology the CFP® professional chooses, that they are accurate in how they describe their prospective compensation to their Clients.

In the end, the 15 Duties Owed To Clients by CFP® professionals are not meant to impose substantial new obligations on CFP® professionals – and in reality, are commonly followed and generally recognized as best practices anyway. Still, though, by enumerating the 15 Duties as part of the Code and Standards itself, CFP Board both provides additional guidance to CFP® professionals on what they are expected to do as a matter of not just “best” but standard practices… and also establishes the grounds by which CFP® professionals may be disciplined for failing to meet the minimum standard of their professional duties!

#FASuccess Ep 182: How Private Wealth Management In A Multi-Family Office Differs From Traditional Financial Planning, with Richard Joyner

June 23, 2020 07:02 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 182nd episode of Financial Advisor Success Podcast!

My guest on today's podcast is Richard Joyner. Richard is a wealth manager and the president of Tolleson Wealth Management, a multi-family office based in Dallas, Texas, that oversees nearly $6.5 billion of assets under management for just 180 affluent families. What's unique about Richard, though, is the way he's developed Tolleson to serve ultra-high-net-worth clientele with a breadth of private wealth management services that truly goes beyond the traditional financial planning approach.

In this podcast, we talk in-depth about what Tolleson actually does for clients who have an average family net worth of tens of millions of dollars, from a deeper level of client financial management and support, including bill-paying services and family spending reports, to advanced tax and estate planning services that delve into techniques that can produce seven-figure estate tax savings, private banking services to help clients obtain loans and receive corporate trustee services, and why arguably the biggest value Tolleson provides to their clients is supporting their family learning and helping affluent parents conduct family meetings to develop their children and grandchildren to become responsible stewards of the wealth legacy they will someday inherit.

We also talk about the business of multi-family office private wealth management itself, the composition of 180 staff members that Tolleson employs to support its 180 client families, the combination of flat fees and AUM fees that Tolleson charges its ultra-high-net-worth clients, how the firm justifies what can amount to $150,000 a year or more in advisory fees, and why despite having a heavy component of AUM fees for clients with tens of millions of dollars, that Tolleson has chosen to outsource most of its investment management and serve as a manager of managers instead.

And be certain to listen to the end, where Richard shares the policies that he's had to put in place to train and develop next-generation talent in the firm to be able to manage such ultra-high-net-worth clients, the combination of structured learning through designations like CPWA and internal mentoring the firm uses to balance technical and interpersonal skills development, and how Richard managed to balance his own workload and commitments to serve as the president of a multi-family office with 180 employees and still maintain a client-facing role for himself as well.

Kitces & Carl Ep 36: Protecting Your Own Self-Confidence As A Financial Advisor

June 18, 2020 07:01 am 0 Comments CATEGORY: Kitces & Carl Podcast

When markets turn volatile and clients get stressed, at best, financial advisors face their own stress in trying to help clients stay the course; at worst, they absorb the ‘blame’ from clients who are unhappy with economic and market outcomes beyond the advisor’s control. And when clients turn negative, it is easy for mental exhaustion to set in and for confidence levels to take a hit. Yet when self-confidence suffers, so too can our motivation and productivity. Accordingly, taking measures to protect our self-confidence not only helps to preserve our ability to function optimally at work, but also helps to maintain our mental and emotional well-being by ensuring we focus our time on activities that bring us energy and positive engagement.

In our 36th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss how advisor self-confidence can impact productivity, offering some ideas for financial advisors to protect their personal confidence and keep a positive mindset. As for financial advisors, in particular, healthy confidence levels can help them to avoid ‘imposter syndrome’ (which can distort an advisor’s sense of personal value), grow through the business challenges they’re facing, and support their clients with the ‘rational overconfidence’ they sometimes need to display as effective leaders.

Confidence also plays a crucial role when the advisor needs to establish appropriate pricing levels for their services and value, where a lack of confidence can result in advisors discounting their own value because they fail to realize that clients are willing to pay the price the advisor is actually worth. On the other hand, advisors who are able to preserve a high level of confidence tend to price themselves and their services more fairly and will naturally find themselves facing more business opportunities. Confidence also helps advisors deal with difficult situations, such as losing clients or key employees, with more positivity and the ability to see the circumstance as an opportunity versus a setback, which can ultimately be the key that potentially distinguishes between business growth and stagnation.

Being able to recognize one’s ‘unique abilities’ (like those identified by Dan Sullivan’s Unique Ability Discovery Process program) or key strengths (such as those identified by Gallup’s StrengthsFinder assessment) – activities that a person enjoys and excels at, and that are energizing – are key to maintaining one’s confidence and improving productivity at work. And once these ‘unique abilities’ are identified, finding the time to intentionally do those things as much as possible can help to stabilize energy levels and foster a positive mindset, which in turn tends to help maintain higher confidence levels. Equally important for protecting one’s confidence are recognizing the factors that erode energy levels and identifying how to take counteractive steps against the effects of those factors. For example, spending time outside in fresh air, going for a walk, and getting more sleep are some activities that can help prevent energy levels from dropping and, in turn, keep confidence levels from deteriorating.

Ultimately, the key point is that by taking steps to identify activities that not only drain energy levels but also increase them, financial advisors can protect their energy levels from falling, which is an important step in preserving confidence levels and a positive mindset – key elements of fruitful client relationships, successful career advancement, and overall business growth!