feed - Part 64

Financial Planning Research Highlights From The 2018 CFP Board Academic Research Colloquium

March 14, 2018 07:01 am 0 Comments CATEGORY: Planning Profession

2018 CFP Board ARC Research Presented By First Author Institutional Affiliation

From February 20th through February 22nd, the CFP Board’s Center for Financial Planning hosted their second annual Academic Research Colloquium (ARC) for Financial Planning and Related Disciplines in Washington D.C. The event brought together 225 attendees, of which close to 200 were researchers and academic faculty, to share and discuss research relevant to the financial planning profession, as a part of the CFP Board Center’s longer-term goal of establishing itself as the “academic home” for the financial planning profession (and the research that supports it).

In this guest post, Dr. Derek Tharp – a Kitces.com Researcher, and a recent Ph.D. graduate from the financial planning program at Kansas State University – provides a recap of the 2018 CFP Academic Research Colloquium, and highlights a few particular research studies with relevant takeaways for financial planning practitioners.

The 2018 CFP Academic Research Colloquium again had a strong showing from some core financial planning academic programs, with scholars from Texas Tech, Missouri, and Georgia serving as lead authors for nearly 25% of all research presentations and poster sessions. Notably, this representation is more diverse than last year, as last year the top four programs accounted for nearly 50% of research presented. Additionally, the colloquium was successful in drawing in scholars from outside of the core financial planning programs, featuring lead authors from a total of 35 different academic institutions, including Harvard, Duke, Georgetown, and Notre Dame.

The colloquium featured a wide range of topics. Some particularly relevant themes for financial planning practitioners ranged from biases that influence financial decision making among both financial advisors and their clients (e.g., how human use of technology to assist with statistical decision-making can help...or not), to issues related to quality of life in retirement (e.g., are retirees happier living near their friends or children?), and racial diversity in the financial services industry, including an examination of the role of empathy in black consumers choice of a financial advisor.

Overall, the second Academic Research Colloquium again brought together a strong mix of academics and practitioners to present and discuss financial planning research. Notable challenges and opportunities for growth in coming years will include the launch of the Center for Financial Planning’s new academic journal (Financial Planning Review), the Center’s push to establish the ARC as the core conference interview location for financial planning faculty positions, and continuing to attract a diverse group of scholars to build and contribute to the financial planning knowledge base. Only time will tell if Center for Financial Planning can be successful in their pursuit of becoming the “academic home” of financial planning research, but the ARC continues to be a strong conference for both financial planning academics, and practitioners interested in financial planning research.

#FASuccess Ep 063: Overcoming A Material U-4 Disclosure To Build A $125M AUM Advisory Firm with Kevin Kroskey

March 13, 2018 07:01 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome, everyone! Welcome to the 63rd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kevin Kroskey. Kevin is the founder of True Wealth Design, an independent RIA based on Akron, Ohio, that has grown to nearly $125M in assets under management with 6 employees serving 160 clients, built over the span of the last 10 years.

What's unique about Kevin's practice, though, is that he's been able to persevere in building his practice despite what for many advisors would have been a "catastrophic" setback in his early career... the fact that in his mid-20s, just a few months after his first job at a broker-dealer, he went to prison for 17 months after the law finally caught up with him for selling ecstasy back when he was in college.

In this episode, we talk in depth about Kevin's journey, from starting out as a high school physics teacher straight out of college, to switching into the financial services industry by working at that independent broker-dealer in his mid-20s, then finding his entire career and life brought to a halt by his criminal conviction for selling ecstasy – despite the fact he had already stopped and left that life behind several years earlier and how he began the process of trying to rebuild a path back into the financial services industry after he got out, starting with a 3-year ordeal with multiple appeals just to try to get a license to become a mortgage loan officer as an ex-con, before finally switching to hang his shingle has an independent RIA.

We also talk about how Kevin actually built his advisory business, by falling back on his early teaching skills to begin doing local adult education classes on personal finances, borrowing money with a bank loan to be able to send out 10,000 mailers at a time to get participants in the class, and then slowly and steadily accumulating a client and asset base over time, supplemented in more recent years by trying to further establish himself more visibly in his community, including by writing a regular financial column in a local community newspaper.

And be certain to listen to the end, where Kevin shares his advice about what any advisor can do to try to persevere through the highly adverse challenges that can hit us in life, and how he handles the situation today when prospective clients still sometimes ask him about a crime that is still a felony disclosure on his U-4, despite being completely unrelated to the financial services industry, for events that happened in his life nearly 20 years ago now.

So whether you are interested in learning more about visibly establishing yourself within your community through writing, how advisors can address talking through disclosures with prospective clients, or are interested in how advisors can persevere through highly adverse challenges more generally, I hope you enjoy this episode of the Financial Advisor Success podcast!

The 26 Steps I Took To Set Up And Launch My Own Independent RIA

March 12, 2018 07:01 am 5 Comments CATEGORY: Practice Management

One of the virtues of working in a broker-dealer or especially a wirehouse environment is that the firm makes a number of decisions for you as the advisor, greatly expediting the process of being able to quickly launch your business and focus on working with your clients. The bad news is that in at least some cases, it's much less expensive to simply set up your own advisory firm instead - especially if your focus is on charging AUM or other financial planning fees, such that there's no need to have a broker-dealer affiliation in the first place. The caveat, however, is that breaking away to become an independent RIA isn't "just" about the economics of working under a broker-dealer (or as a dual-registered advisor with the corporate RIA) versus your own RIA; it's also about going through the actual steps to actually create and launch your own RIA, because being independent truly means it's your responsibility to handle the setup process and make all the technology, platform, and other vendor decisions! Which for many advisors, is a process that can feel downright overwhelming.

But the reality is that many financial advisors have successfully made the transition, and it isn't necessary to reinvent the wheel with each breakaway to independence. In this guest post, Aaron Hattenbach of Rapport Financial, an RIA that he founded when successfully breaking away from Merrill Lynch in late 2016 (while retaining 100% of his clients), shares his own experience in breaking away from a wirehouse early in his career to go independent, including a detailed, step-by-step overview of his process to successfully launching his RIA.

Ultimately, the process does take a lot of work, from creating the legal RIA entity and going through the compliance registration process, to establishing your business bank and credit card accounts and getting a logo and business cards, setting up your initial technology platform (from a web domain and email provider, to your CRM and portfolio performance reporting tools), to choosing your initial vendors from your RIA custodian, and your office space! Unfortunately, the pressure to get launched quickly - especially when changing firms for a fast-launch RIA - means that a few mistakes may be inevitable, and Aaron does note the areas where, in retrospect, he could have better avoided unnecessary expenses, kept start-up costs lower, and curated better technology and service providers for his firm. But for any advisors who are serious about breaking away and forming their own independent RIA, Aaron's overview should provide much food for thought on your own breakaway, as well as some things you may want to consider in order to navigate it successfully!

Weekend Reading for Financial Planners (March 10-11)

March 9, 2018 02:58 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the news that after several years of scrutiny, the SEC's examination rate for RIAs has risen significantly, up from an average of once every 9-10 years as recently as 2016 to an average of "just" once every 5 years this year (thanks in large part to a reallocation of examiners from the broker-dealer unit into the SEC's RIA unit instead). Also in the news this week is an investigation from the Massachusetts securities regulators into Wells Fargo Advisors, raising the question of whether the firm may be violating the DoL fiduciary rule by switching clients from commission-based accounts into fee-based accounts when it would have been better for them to just continue to pay occasional commissions in the original account. And new legislation has been (re-)introduced in Congress that aims to increase both the number of small businesses that offer an employer retirement plan (with a proposed up-to-$5,000 tax credit to roll out a plan), along with additional tax incentives for employers that create the plan with automatic enrollment provisions.

From there, we have several articles around the theme of marketing and engagement with clients, including a look at how systematically asking existing clients for their input on the agenda for each client review meeting can potentially increase referrals, how to more deeply engage clients by conducting a simple "Hidden Gems" poll with them, and how to reframe the traditional financial planning discovery questions around identifying client goals to more deeply understand what really motivates them and what they really want to work towards in their financial plan (that they may not have even realized about themselves yet).

We also have a few articles on practice management, including the importance of formally articulating the culture of your advisory firm, the issues to consider when it's time to increase the equity stake of next generation advisors who thus far only have a small slice of the business, and the rise of "co-planning" as a means to more deeply connect with clients and provide greater value in a more advice-centric future for financial planners.

We wrap up with three interesting articles, all around the theme of trends in the world of financial planners themselves: the first is a good dive by industry commentator Bob Veres into the world of CPA financial planners, who under the AICPA have their own membership group (now 11,500 strong and up 12% in just the past 2 years alone), their own designation (the PFS), and their own views about the professional status of financial planners; the second is a challenge by CFP Board CEO Kevin Keller on whether CPAs, who admittedly have very in-depth knowledge and training on tax and accounting issues, really have the competency to deliver personal financial planning services without going through training like CFP certification; and the last explores whether the best path forward for the profession is to get away from the rising volume of "disclosures" to address various fiduciary conflicts of interest, and instead establish a simpler system that "grades" conflicts of interest, both to help consumers evaluate which conflict of interest disclosures really "matter" or not, and also to provide a means for advisory firms to want to eschew their conflicts of interest rather than just disclose them (in order to increase their advisor rating!).

Enjoy the "light" reading!

#FASuccess Ep 062: Building A High-Income Lifestyle Practice By Engaging With Clients Deeply And Unfiltered with Lee Munson

March 6, 2018 07:01 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome, everyone! Welcome to the 62nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Lee Munson. Lee is the founder of Portfolio Wealth Advisors, an independent RIA that manages nearly $280 million in assets under management in Albuquerque, New Mexico.

What's unique about Lee's practice, though, is that he built it while overcoming a rather scathing article published about him nearly 15 years ago in the New York Observer, in which he was presented as the poster-child of the excesses of the 1990s wirehouse... at the exact moment that stories on the internet that live forever became a "thing".

In this episode, we talk in depth about Lee's career path, from leaving his early success in the wirehouse world after both the infamous Observer article and the impact of 9/11 and the subsequent recession on the brokerage industry, to working for several years at Charles Schwab as a Schwab Private Client advisor, before ultimately founding his own solo advisory firm, and working over several years of writing on websites like Seeking Alpha and appearing on CNBC and other television media to rebuild his online persona and bring in new clients to grow the firm.

We also discuss Lee's own process for serving clients, where he deliberately does not meet with clients on a regular quarterly basis – despite the fact that he manages their portfolios – and instead focuses not on the frequency of the communication with clients but how meaningful each touch is by engaging with them deeply and unfiltered (whether it's in an in-person meeting once a year, or via a long email), how he justifies a fee schedule that starts at 1.5% on the first $1M despite meeting relatively infrequently with clients (by trying to delight his clients in other ways instead), and the email folder he keeps with all the positive feedback he's received from clients, as an affirmation of the value the firm is delivering to them.

And be certain to listen to the end, where Lee talks about how he's managed to build his practice with everything from active networking at the local level, to regularly appearing on national television... despite the fact that he's actually an introvert, who relishes the quiet refuge lifestyle of living in New Mexico.

So whether you are interested in learning more about engaging with the media to grow your firm, overcoming adversity in the financial advisory industry, or how you can structure your fee schedule and service model based on the depth of contact rather than the frequency, I hope you enjoy this episode of the Financial Advisor Success podcast!

The Latest In Financial Advisor #FinTech (March 2018)

March 5, 2018 07:01 am 2 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the March 2018 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 kicks off with the announcement of Fidelity’s new “Consolidated Data” platform, that aims to become a central account aggregation hub of all the relevant information regarding an advisory firm’s clients and its own business… which creates not only a newfound potential for Fidelity to create new technology value-adds for advisors, but supports Fidelity pivoting to a more open-architecture system (with a newly announced Integration Xchange that would just provide it more data to feed), and appears to be part of an even broader strategic shift that Fidelity is aiming to make Data – and not just technology – its unique custody/clearing value proposition for wealth-management-centric advisors of the future.

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

After castigating Schwab 3 years ago for including its own proprietary funds in its robo-advisor solution, Wealthfront launches a new proprietary mutual fund (at twice its base advisory fee) and defaults its taxable clients into it
LifeYield launches a new Portfolio Advantage solution that aims to make Asset Location a more central value proposition for advisors to help clients make their portfolios more Taxficient
LPL announces the launch of a new Virtual Assistant service for its advisors, though it’s not clear if the company simply wants to develop a new revenue line for its advisors, or more aggressively compete with its own OSJs
A slew of new solutions to help advisors market to and attract clients, including a new Advisor Ratings website called StackUp, a lead generation service from SmartAsset called SmartAdvisor, and a digitally-driven webinar marketing system from Snappy Kraken called Seminar Freedom
Wealthbox launches a new 3.0 version of its CRM, including a native email system with automatic two-way sync to popular email clients like Gmail, iCloud, and Outlook or Exchange Server

Read the analysis about these announcements, and a discussion of more trends in advisor technology in this month's column, including the launch of several new Risk Tolerance Questionnaire tools from PreciseFP, DataPoints, and Capital Preferences, a new version of the robos-vs-advisors battle for consumers playing out in the small business 401(k) space between Betterment and Human Interest (formerly Captain401) versus Vestwell, a new tech-based competitor called Grove that is aiming to scale the monthly retainer fees model with tech-enabled CFP professionals, and the rise of new business intelligence software tools like Advisor Metrix and Advisor Clarity.

I hope you're continuing to find this new 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 (March 3-4)

March 2, 2018 02:45 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the announcement that FINRA is considering a proposal that would reduce the obligation of broker-dealers to oversee outside RIAs of hybrid advisors... though it remains unclear if that means broker-dealers will finally be more hands-off from outside RIAs (and the revenue they charge for supervising outside RIAs), or simply require their hybrid advisors to either use the corporate RIA or the broker-dealer's custody and clearing services for the outside RIA instead.

Also in the news this week is a new letter from the Consumer Federation of America urging the Department of Labor to step up its enforcement of the now-in-effect Impartial Conduct Standards under its fiduciary rule (given the recent enforcement action by Massachusetts securities regulators against Scottrade), and the announcement that David Lau (formerly of Jefferson National, which launched one of the first RIA-friendly variable annuities) is launching a new company called DPL Financial aiming to bring an even wider range of no-commission insurance products to the RIA community.

From there, we have several articles around the theme of practice management, including a look at the new HIFON study-group-cum-membership-organization for operations staff members in advisory firms, a discussion of how the Super OSJ model in broker-dealers is evolving away from "just" providing compliance oversight to a wider range of back-office support and training and technology for their advisors, and a review of the current wirehouse landscape given the ongoing unraveling of the Broker Protocol.

We also have a few articles on financial advisor pricing and compensation, from suggestions on how to handle the infamous question "How do you justify the value of your advisory firm fees?", to a discussion about how advisory firm business and pricing models tend to change over time for an advisor, and why it's important for larger advisory firms to have a compensation model for advisors that covers all of their needs (following Maslow's hierarchy from covering 'basic' needs, to those for esteem and belonging to a community, and finally achieving greater levels of self actualization).

We wrap up with three interesting articles, all around the theme of getting your financial house in order: the first examines the rising trend of financial advice and financial wellness programs in the workplace, as employers are discovering that financial stress is so damaging to employee productivity that it actually "pays" to help employees get more financially literate and shore up their debt and emergency savings shortfalls; the second looks at new research finding that community involvement shows a strong relationship to one's self-assessed financial well-being (providing yet another example of how giving to others helps fulfill our own happiness); and the last is a great walk-through of all the various financial documents that we should keep, don't need to keep, or can at least scan electronically to help declutter the paper in our lives!

Enjoy the "light" reading!

Implementing A Financial Planning (Summer) Internship Program

February 26, 2018 07:01 am 0 Comments CATEGORY: Practice Management

Summer internship programs are a popular way for advisory firms - as with most businesses - to leverage student talent to tackle projects, get support on ongoing business tasks, and even to build a pipeline of talented candidates that the firm can hire for future openings. The caveat, though, is that implementing a financial planning internship program can be a challenge, especially in trying to get it off the ground for the first time. From finding good candidates and creating a proper internship job description, to making the hire and getting the intern up to speed in your firm quickly, there is simply a lot to learn and do, with only a short amount of time to do it all given that a summer internship only lasts a few months. The unfortunate end result is that many financial planners avoid internships altogether, even though they could be great opportunities for students, firms, and the profession!

But the reality is that implementing a financial planning internship program does not need to be an overwhelming task, and it really is possible to get productive value out of a financial planning intern in just a few short months. In this guest post, Jon Yankee of FJY Financial, which has run a successful internship program with 21 summer associates over the past 11 years, shares how they implemented their financial planning (summer) internship program with college students, from the early stages of finding qualified candidates, to the process of (rapidly) onboarding the intern so they have time to contribute productively to the firm, all the way through the late stages of the exit interview to get feedback from interns and discover ways that the program can be improved for future years.

The end result of their financial planning internship program has not just been a way to give back to the profession, students, and the CFP Board Registered Programs training the financial planners of the future, but also a direct benefit to the team members at the firm, a talented pool of vetted candidates from which the firm has hired, and an experience working with young financial planners who have enhanced client deliverables for the firm. Of course, it is always a challenge trying to get an intern up to speed in a short amount of time and acclimated to the culture of a new firm, but with a diligently implemented internship program, financial planners really can launch a successful internship program!

#FASuccess Ep 060: The Written Job Description As A Financial Plan For Employee Talent Development with Kelli Cruz

February 20, 2018 07:01 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome, everyone! Welcome to the 60th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kelli Cruz. Kelli is the founder of Cruz Consulting Group, a human resources consulting practice that specializes in working with mid-to-large sized independent financial advisory firms.

In this episode, we talk in depth about the kind of human resources challenges that begin to emerge as an advisory firm grows, especially once it crosses the $100M and then $200M under management thresholds... where the firm grows beyond half a dozen employees – and the founder's ability to manage them – and suddenly creating the right culture, and designing effective compensation systems that properly incentivize employees, becomes crucial for the business. All of which begins with establishing effective job descriptions for every role in the firm... which Kelli says is like creating a financial plan for employee talent development, forming the basis of what goals the firm and the employee are collectively working towards together.

We also talk about the challenges of hiring dedicated management in an advisory firm, the importance of industry benchmarking studies, how to think about crafting a career track for your employees – especially when your firm isn't even large enough to have formal career tracks yet – and why the growth and evolution of an advisory firm is all about refining employees into increasingly specialized roles over time.

And be certain to listen to the end, where Kelli shares her thoughts on best practices in setting actual compensation plans, why Kelli believes that the traditional model of paying advisors a percentage of revenue for the clients they manage is a fundamentally unsustainable model for advisory firms that ever hope to scale, how Kelli believes that even sales and business development incentives should only last for 1-3 years, and how firms should balance out the combination of base salary, incentive plans, and sales incentives for various advisory, administrative, and other staff positions in the firm.

So whether you are experiencing your own human resources challenges as your firm grows, have been thinking about hiring dedicated management for your firm, or are interested in how to best structure incentive compensation, I hope you enjoy this episode of the Financial Advisor Success podcast!

The Handbook For Next Generation Partners Of Independent Advisory Firms

February 19, 2018 07:01 am 0 Comments CATEGORY: Personal/Career Development

G2 Handbook For Next Generation Financial Advisors Featured Image

While the CFP certification for financial planning has been around since the early 1970s, it wasn’t until the 1980s and 1990s that it began to gain widespread adoption amongst financial advisors. And it’s only been over the past 20 years or so that the highly scalable AUM model gained enough traction and popularity that the typical advisory firm evolved from solo practices into larger ensemble firms with employee advisors and multiple partners.

As a result, while the essential set of skills needed to establish your own advisory firm are now relatively well known, the most effective path to become a partner in an existing advisory firm is still in its earliest stages, with no set industry norms, a wide variety of career paths from one firm to the next, and a number of firms that haven’t yet designed their formal career tracks at all. Which, to say the least, makes it very difficult for next-generation advisors to figure out where to focus and what to do in order to succeed.

Accordingly, practice management consultant and guru Philip Palaveev has published what should soon become the seminal handbook of next generation advisors pursuing partnership. Because in “G2: Building The Next Generation”, Palaveev – who himself joined a major accounting firm in his early 20s and rapidly ascended to partnership by his early 30s – sets forth exactly what so-called “G2” (second/next generation) advisors in large independent advisory firms should be doing to successfully manage their own career track to partnership, what kinds of expectations are (and are not) realistic, and why (and how) the requisite skills to develop will themselves change as the advisor achieves new levels of success.

Perhaps most notable, though, is the simple fact that at the most senior levels of leadership within an advisory firm, it’s really more about leadership and the ability to manage people, than the actual skill set of being a great advisor. And in turn, the path to leadership and partnership eventually entails growing beyond “just” being a great and expert advisor serving clients, but also learning how to manage and develop a team of subordinates. In addition to learning how to “manage up” to the expectations of founders and senior leadership, with respect to everything from projects and initiatives the advisor might champion, to the advisor’s own career and path to partnership.

Of course, the irony is that when it comes to advisory firms and making partner – like in most industries – success just begets more work and burdens, not to mention a substantial financial commitment to buy in to partnership. Yet at the same time, the good news is that for those who are effective at managing the career marathon, the long-term benefits of becoming a partner – both financial and psychological – can be incredibly rewarding.