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In recent years, financial advisors have increasingly embraced tax planning as a core element of delivering value to clients. This shift reflects the reality that taxes permeate virtually every financial decision clients make – whether related to investing, retirement, business structure, or charitable giving – and often represent one of the largest expenses faced by clients over their lifetime. Historically, tax-related services within advisory firms were primarily focused on investment strategies, like using ETFs for their tax efficiency or implementing asset location and tax-loss harvesting strategies to boost after-tax returns. But as the profession has evolved toward more holistic planning, tax considerations have likewise expanded into more areas of advice, including Roth conversions, charitable strategies, and small business structuring.

Despite this growing interest in tax conversations, most advisors are still quick to distinguish their services as "tax planning", not "tax advice" – a distinction largely driven by liability concerns. While common wisdom suggests that only CPAs, EAs, or attorneys are authorized to give tax advice, this is only strictly true in limited contexts, such as in promoting abusive tax shelters. The broader concern is that giving actionable tax advice can expose advisors to legal and financial liability, especially since RIA compliance policies and E&O insurance typically only cover investment advice. As such, advisors who provide specific tax recommendations (like exact Roth conversion amounts), without the backing of a tax professional, risk legal and financial penalties if those recommendations result in unintended tax consequences.

Understanding the difference between tax planning and tax advice is crucial for advisors seeking to stay on the right side of this liability line. Tax planning may involve discussing general tax rules, modeling hypothetical scenarios, or analyzing the tax impact of strategies for the client – without actually making concrete recommendations. Tax advice, by contrast, involves discussing specific actions with tax consequences, which can expose advisors to significant legal risk, particularly when clients interpret such statements as recommendations. Given how easily clients may conflate a discussion of potential tax savings with an endorsement to act, advisors must be extremely careful in how they communicate tax-related strategies.

Additionally, recent developments in advisory firm practices and technology have further blurred the lines between planning and advice. For instance, the rise of live, collaborative planning sessions in lieu of static, written reports means there are fewer opportunities for advisors to append disclaimers clarifying that they don’t intend to give tax advice. At the same time, the emergence of sophisticated tax planning software like Holistiplan and FP Alpha introduces a higher level of precision and actionability to advisors’ planning conversations, increasing the change that suggestions may be construed as advice.

To navigate this environment, advisors may consider a two-part strategy: First, by proactively setting expectations during meetings with a clear verbal preface explaining that tax advice falls outside the scope of their role; and second, by documenting the conversation to clarify what was discussed, explicitly note the absence of a formal recommendation, and reiterate the importance of consulting a qualified tax professional. This step is especially important in spontaneous or emotionally charged situations where advisors may feel pressure to respond quickly. AI meeting notetakers can assist in documenting these interactions, but advisors should review the tools’ output carefully to ensure no inadvertent ‘recommendations’ are implied.

Ultimately, the rising integration of tax strategies into financial planning is a positive development that enhances the value advisors can deliver. But it also demands new considerations in how those strategies are presented. By clearly delineating the boundary between planning and advice, and by proactively communicating and documenting that boundary, advisors can continue to offer high-impact tax insights while protecting themselves and maintaining the trust of their clients.

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Welcome everyone! Welcome to the 442nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is David Bahnsen. David is the founder of The Bahnsen Group, an RIA based in Newport Beach, California, that oversees approximately $7.5 billion in assets under management for 1,800 client households.

What's unique about David, though, is how his firm has been able to attract $100 million in new client assets per month thanks in large part to his content creation and public commentary on investment markets as well as issues that advisors often avoid, including religion and politics.

In this episode, we talk in-depth about how David's weekly market commentaries (which he has written since 2008 and draws 15,000 weekly viewers across blog, podcast, and video formats) familiarize readers with his firm's investment approach and put it top-of-mind when they are ready to seek out a financial advisor, how David has written multiple books on markets and his other passions that not only have educated readers on his views on these issues but also have led to many television appearances that have expanded his reach further, and how being public with his opinions on divisive topics has allowed David to demonstrate competence and likeability, attracting to his firm both like-minded consumers and some who might disagree with him but appreciate his willingness to be candid.

We also talk about how David's transition from focusing on both business development and client service to spend much of his time on content creation (reducing his client count from 180 to 20 in the process) has led to explosive asset and client growth in his firm during the past several years, why David focuses on hiring advisors with talent in financial planning and relationship management (rather than prospecting, given the robust lead pipeline his content generates), and how David has implemented a pay model that offers advisors a base salary in their early years while providing for significant income upside through revenue-based compensation (and a path to partnership) as they serve more (and higher-net-worth) clients over time.

And be certain to listen to the end, where David shares why he decided to incorporate tax preparation into his firm not as a profit center but rather as a way to offer a comprehensive financial services offering for clients (helping the firm close more prospects and maintain higher client satisfaction in the process), how David has found success opening offices located away from coastal population centers (not only to attract clients in those cities but also to demonstrate that they are a truly national firm), and how David, after growing a successful firm, is now focused on opportunities for his firm's advisors to develop in their careers as well as the ultimate stewardship of his business.

So, whether you're interested in learning about leveraging content across multiple media to attract like-minded clients, transitioning from a lead advisor to management role, or the decision making behind opening offices in new locations, then we hope you enjoy this episode of the Financial Advisor Success podcast, with David Bahnsen.

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How advisory firms charge for financial advice has long been a central question in the profession. While many firms have historically relied on commission-based compensation methods – reflecting a sales-driven approach – financial advice has evolved with technological advancements and a greater focus on financial planning, with the Assets Under Management (AUM) fee emerging as the primary compensation model. Now, as financial advicers expand their services beyond traditional planning into more holistic, personalized advice, the very definition of financial advice continues to evolve. As a result, firms must continually reassess how they structure their fees to align with their growing range of services.

For firms evaluating pricing strategies, considering how others in the industry are adapting provides useful insights. Despite ongoing changes in the philosophy of financial advice, new Kitces Research on How Financial Advisors Actually Do Financial Planning finds that 86% of advisory firms still rely on AUM fees as their primary method of charging for advice. While this model remains widespread, firms have adopted different ways of structuring their AUM fees to align with their service models and client needs.

At the same time, AUM-based pricing is not without its criticisms. One common concern is that an advisor managing a $4M portfolio does not necessarily do twice the work of one managing a $2M portfolio, despite the fee being twice as high. However, most firms do not price their services in such a strictly proportional manner. Only firms using a flat fee structure, where a single rate applies to the entire portfolio regardless of size, use this kind of direct fee scaling. Instead, graduated and cliff pricing structures – which apply tiered or blended rates as assets grow – help balance costs across different client segments. These structures can also help advisors remain competitive on pricing, which may explain why 58% of firms use graduated fee structures, making them the most common pricing approach.

Despite its widespread use, AUM-based pricing has its limitations – it exposes firms to market risks and restricts the types of clients they are able to serve. To mitigate this, some firms 'unbundle' their fees, separating investment management, financial planning, and other services into distinct project-based, hourly, or retainer fees instead of covering everything under a single AUM fee. Notably, across nearly all client segments, research finds that the total fees charged by advisors who offer bundled and unbundled services tend to be nearly identical, suggesting that unbundling could be a viable way to make financial advice more accessible to clients with smaller portfolios. Another way firms reduce reliance on AUM fees is by using multiple charging methods, such as combining AUM fees with project-based or retainer fees. In fact, 72% of advisory firms use more than one charging method, allowing for greater flexibility in serving a broader range of clients.

Ultimately, as financial planning becomes more comprehensive and customized, fee structures are evolving to reflect this shift. While the mechanics of charging fees may not always change, the broader conversation around fees has continued to develop. At the same time, a wider range of fee structures could help firms serve a more diverse client base by expanding access to financial advice, which has traditionally remained concentrated in high-net-worth households. In other words, as financial planning becomes increasingly comprehensive, firms have the opportunity not only to refine their pricing models but also to rethink how they define – and deliver – value!Read More...

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that a recent survey of U.S. investors found that while 96% of respondents said they trust their (human) financial advisor, only 29% said they trust algorithms, suggesting that consumers continue to impose a "trust penalty" on algorithmically generated advice. Other key findings from the survey included a gap between long-term investment return expectations of investors and advisors (12.6% and 7.1%, respectively), continued investor concerns about inflation (with 61% ranking it as their top financial fear), and an increased demand for tax planning services (perhaps amidst the potential sunsetting of several measures within the Tax Cuts and Jobs Act), all of which offer advisors the opportunity to add value through proactive communication and technical planning strategies.

Also in industry news this week:

Under its budget proposal for the fiscal year 2026, the SEC expects to be able to examine 11% of RIAs per year, down from 14% in 2024, as it trims staff throughout the organization
RIAs lead the way among advisory channels in AI adoption, according to a recent survey, as advisors on the whole see themselves as more knowledgeable about technology.

From there, we have several articles on investment planning:

How interested financial advisors can evaluate different types of private investments, whose return profiles tend to be more opaque and challenging to analyze compared to publicly traded instruments
Why one author sees a confluence of factors (including a relatively low cost of capital and a sluggish IPO market) supporting private equity investments in the current economic and market environment
How advisors can offer value by helping clients understand whether they truly need to take the risks associated with certain alternative investments

We also have a number of articles on marketing:

Six ways advisory firms can fuel organic growth, from identifying their "loyal client advocates" to giving staff members specific business development roles that align with their strengths
How advisors can effectively attract and serve women clients, whose wealth has increased significantly and is likely to continue to do so in the coming years
How demonstrating expertise in helping clients during a specific major life transition (e.g., buying a home or claiming Social Security benefits) can help advisors tap into a potential pool of millions of individuals who face that challenge each year

We wrap up with three final articles, all about Artificial Intelligence (AI) and the workplace:

Why natural language processing tools (rather than text generation or more advanced "agents") could be the next big use case for AI in the workplace
Why professionals whose work is "illegible" (a group that likely includes comprehensive financial planners) will be less likely to see their jobs threatened by AI
How a new generation of AI-powered tools allow advisors to create their own applications without needing to have coding skills

Enjoy the 'light' reading!

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Every financial or business decision brings some amount of inherent risk. However, the consequences of those decisions – positive or negative – don't always align with the actual level of risk taken. As a result, when advisors are tasked with (re-)educating clients about the potential consequences of financial decisions, there may be a disconnect between potential risk and what a client actually experiences. So how can advisors help clients understand dangers they haven't personally encountered?

In our 166th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can bridge the gap between planning and a client's lived experience to guide better decision-making.

One helpful framework to contextualize financial decisions is the concept of 'wicked' versus 'kind' learning environments. Kind environments have clear rules, quick feedback, and consistent patterns, making them easier to navigate and learn from. Tax planning often fits the 'kind environment' model: The rules are relatively stable, outcomes repeat annually, and feedback is immediate (e.g., a tax bill or refund). By contrast, wicked environments feature ambiguous rules and delayed or misleading feedback, where individuals can 'learn the wrong lesson'. Investment planning falls into this camp; a client who makes a risky bet and sees strong returns might conclude the strategy is sound, even if it was more luck than skill.

For planners, kind environments tend to allow for systematization and consistent advice delivery. Wicked environments, however, require more narrative focus and concrete examples. Advisors can use historical context and stress testing to show clients how a situation might play out differently under less favorable conditions. And when clients persist in making risky decisions, advisors can help by constructing guardrails, allowing for some flexibility while protecting against catastrophic loss.

The wicked/kind framework also appears in business leadership. Those who thrive in kind environments may excel at optimizing systems and scaling efficiently but might miss warning signs when conditions shift. Leaders in wicked environments may excel in handling ambiguity and disruption but may struggle to maintain stability in calmer business environments. Both leadership styles offer value, but they manage different types of risk and opportunity.

Ultimately, the key point is that the results of a decision don't always reflect the risk involved. Advisors who recognize this disconnect – and who adjust their planning strategies to fit the terrain – can help clients and businesses remain resilient across a wide range of circumstances. That means knowing when to lean into systems and when to pause and reassess, when to simplify, and when to explore new possibilities. And by helping clients understand the type of environment they're in – and shifting between 'peacetime' and 'wartime' toolkits as needed – advisors can offer more than just technical guidance. They become trusted navigators in a changing landscape, offering clarity, perspective, and a steadier path forward in an uncertain world!

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Even with the right messaging and tools, many clients still delay the estate planning process for various reasons. Some may assume that estate planning doesn't apply to their stage of life, especially those in their 30s–50s, who often believe their assets will automatically pass to a partner or children. But that assumption overlooks the nuances of state intestacy laws, which determine what happens when someone dies without a will. Others may agree, in theory, that estate planning is important but never follow through, either because the process feels overwhelming or because they're not sure how to begin.

In this guest post, Dave Haughton, Senior Corporate Counsel at Wealth.com, discusses how advisors can help clients overcome the logistical and emotional roadblocks that often get in the way of taking action. For many clients, the hesitation is more psychological than procedural. Estate planning means confronting death, working through sensitive family dynamics, and making decisions they may not feel ready for. Even clients who are willing to engage may find themselves stalled by the ‘paralysis of analysis' when faced with the complexity of estate planning.

To help move forward, advisors may need to shift the conversation from legal documents to personal values – framing estate planning as a way to preserve family harmony and protect loved ones. These motivators can give clients a clearer sense of purpose and make the process feel more meaningful. Life events such as marriage, divorce, the birth of a child, the sale of a business, or an upcoming international trip create natural opportunities for a conversation about estate planning. When no triggering event is present, timely news stories such as a celebrity estate planning incident can offer a relatable entry point and make the stakes more tangible.

If a client is just starting their estate plan or hasn't revisited it in years, the process can feel daunting. Advisors can ease the burden by focusing first on the essentials: a last will and testament, a revocable living trust, and powers of attorney. Addressing these core documents first can provide clarity and momentum, while creating space to revisit more complex issues over time. Estate planning can then become a recurring agenda item and incorporated into a planning service calendar. This approach can make the process more manageable while reducing the anxiety many clients associate with estate planning.

Ultimately, the key point is that while procrastination around estate planning is common, advisors can play a powerful role in helping clients overcome inertia. By making the process feel approachable and incrementally achievable, advisors can help transform estate planning from an intimidating obligation to an empowering act of care!

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Welcome everyone! Welcome to the 441st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Leila Shaver. Leila is the founder of My RIA Lawyer, a compliance and legal services firm based in Alpharetta, Georgia, that serves RIAs, broker-dealers, and other financial services companies.

What's unique about Leila, though, is how she helps firms navigate the increasing compliance burdens that can arise as they grow in size and complexity to ensure they remain in line with the requirements of their relevant regulators.

In this episode, we talk in-depth about how Leila has found that the time firms need to spend on compliance can vary based on their size (with solo advisors possibly only needing to spend a couple of hours per month and increasing as they add more employees), how Leila finds that firms tend to start looking for outsourced compliance solutions once they reach approximately $500 million in AUM (based on the growing complexity of the firm and the increased time needed to devote to supervision and other compliance tasks), and why Leila thinks that it’s not unreasonable for larger firms to spend 5–10% of their annual revenue on compliance (whether by hiring a sufficient number of internal compliance professionals and/or engaging an outsourced solution that can fully understand the firm’s operations).

We also talk about how Leila finds that while there are similarities between broker-dealer and RIA compliance (for example, in terms of practical testing requirements) many advisors who transition to the RIA model find that compliance is often less burdensome, how Leila sees broker-dealer compliance under FINRA as more rules-based and prescriptive while RIA compliance under the SEC is more principles-based (leaving greater room for interpretation on the part of the firm), and how Leila thinks that firms can benefit from working with a lawyer on compliance issues in order to not only get compliance guidance, but also actual legal advice when needed.

And be certain to listen to the end, where Leila shares why it’s valuable for firms to keep their compliance professionals in the loop when business planning to ensure potential time and/or hard dollar compliance costs are kept in mind when considering new initiatives, why Leila’s firm is building technology tools to both capture books and records needed for compliance but also ease the supervisory burden of compliance professionals, and how Leila has found many similarities between building an advisory business and a legal services firm, including the importance of having a differentiator in the marketplace and the time (and effort) it can take to build a successful practice.

So, whether you’re interested in learning about what it takes for RIAs to stay compliant with relevant regulations as they grow, the differences between RIA and broker-dealer regulation, or how to decide whether to handle compliance responsibilities in house or to hire external support, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Leila Shaver.

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2025 has had a tumultuous start for most advisory firms, as tariffs-driven market volatility has increased client anxiety and the amount of required hand-holding, forcing advisory firms to manage their own expenses a bit more closely in the face of greater revenue uncertainty. In the meantime, the buzz around AI continues to increase as well, less now about whether the tools will replace financial advisors (they don't), and more about how advisory firms can better leverage the technology to be more efficient in serving clients. Still, though, the reality is that the financial advice business is first and foremost a service business – humans in advice relationships with other humans – which means that while technology may help, it's the firms that are best able to attract, develop, and retain talent who are best positioned to win.

With summer approaching, though, we are entering the season of respite – a time when most advisors take more time off (if only because clients are harder to pin down for summer meetings, especially as post-pandemic summer vacations away from home are back in full swing)… and find some time to read and catch up on a few good books!

For those who love to read, though (and especially for those who have limited time and will only get to read just one or two books over the summer), the perennial question is always, "So… what's a good book worth reading this summer?"

As a voracious reader myself, I've always been eager to hear suggestions from others of great books to read, whether it's something new that's just come out or an 'old classic' that I should go back and read (again or for the first time!). And so, in the spirit of sharing, a few years ago I launched my list of "Recommended (Book) Reading for Financial Advisors", and it was so well received that in 2013 I also started sharing my annual "Summer Reading List" for financial advisors of the best books I'd read in the preceding year. It quickly became a perennial favorite on Nerd's Eye View, and so I've updated it every year, with new lists of books in 22014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, and a fresh round last year in 2024.

And now, I'm excited to share my latest Summer Reading list of top books for financial advisors in 2025, from the benefit of not over-diversifying your business strategies and instead focusing on the few things that create the biggest impact, to a pair of books on succession planning (one for founders, and the other for successors) and how to approach succession for mutual success; from how to better position your value as a financial planner by describing not the long-term intangible benefits of financial planning but the shorter-term more quantifiable benefits of particular ideas your clients might implement, to interesting profiles of financial services industry legends like Bill Gross and Ray Dalio; along with a system to better institutionalize your advisory firm culture (and the behaviors its truly meant to espouse), to a primer on what it's really like to continue to manage and lead an advisory firm after private equity becomes an investor.

So as the summer season and summer vacations get underway, I hope that you find this suggested summer reading list of books for financial planners to be helpful… and please do share your own suggestions in the comments at the end of the article about the best books you've read over the past year as well!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that a recent report finds that the number of SEC-registered RIAs, the assets that they manage, and the number of clients they serve all increased between 2023 and 2024 and suggests the industry is robust across the size spectrum, with both smaller and mid-sized firms seeing growth (often pushing them into higher size brackets and/or from state to SEC registration) and remains attractive to new entrants, whether those moving over from other models or totally new firms.

Also in industry news this week:

ETFs remain the most commonly used investment vehicle among advisors, according to a recent survey, while some "alternative" assets saw the greatest growth rates in terms of adoption over the past year
Several large brokerages have jettisoned their robo-advisor arms, signaling the challenges they faced in acquiring users of these services at a low cost as well as the value that human advisors can provide compared to their digital counterparts

From there, we have several articles on retirement planning:

Why pursuing financial independence is often more a matter of gaining flexibility rather than merely seeking leaving the workforce as soon as possible
What the Financial Independence Retire Early (FIRE) movement has contributed to the broader personal financial discourse and why more extreme implementations of its practices could create challenges for its followers
Two alternative types of "retirement" that could provide clients with greater flexibility without necessarily leaving the workforce permanently

We also have a number of articles on supporting clients in the home-buying process:

How advisors can add value by helping clients understand when they might be buying "too much" house
Why the lifestyle benefits of buying a particular home could outweigh financial considerations for some clients when such a purchase doesn't seem to make sense 'on paper'
How advisors can take an actuarial approach to help retired clients assess the implications of a potential home purchase on the sustainability of their financial plan

We wrap up with three final articles, all about building relationships:

Why social relationships, rather than individual effort, are often at the heart of personal and professional success
How to find time to connect with colleagues on a personal level when everyone in the (virtual) office is busy
How finding belonging in professional or personal affinity groups can lead to greater connections and personal fulfillment

Enjoy the 'light' reading!

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When a financial advisor transitions from one firm to another, they're often offered incentives by the new firm based on how much client revenue they bring with them. The challenge, however, is that advisors generally don't have the legal authority to simply transfer clients to a new firm. Because client relationships are technically "owned" by the firm – not the individual advisor – any transition requires clients to take action to shift from one firm to the other. This creates a host of challenges tied to client privacy laws and the advisor's contractual obligations to their former firms.

In this guest post, Isaac Mamaysky, Partner of Potomac Law Group and Cofounder of QuantStreet Capital, discusses the legal and compliance issues that arise when an advisor tries to bring clients with them to a new firm and the key considerations – including data privacy restrictions under SEC Regulation S-P and non-solicit clauses in employment agreements – that create complex dynamics and potentially conflicting obligations advisors must navigate to avoid violating privacy laws or breaching contractual obligations.

From a privacy standpoint, client data held by an RIA or broker-dealer is considered Nonpublic Personal Information (NPI) under Regulation S-P and generally cannot be shared with an unaffiliated third party without the client's consent – unless the firm's privacy policy explicitly allows it and the client has not opted out. Which means that if an advisor leaves a firm whose privacy policies don't permit such sharing, they can't take any client data with them, including names, contact details, or even knowledge that an individual was a client of the old firm. Furthermore, in states with stricter rules, such as California's "opt-in" privacy requirements, clients must affirmatively authorize information sharing at all times, adding another layer of complexity.

Although the Broker Protocol allows for the sharing of limited client contact information between firms, advisors and their firms are still required to comply with Regulation S-P. Advisors may only take information if their firm's privacy policies allow it and clients haven't opted out. In other words, participation in the Broker Protocol doesn't override privacy laws.

Further complicating matters, advisors may be bound by contractual non-compete or non-solicit clauses in their employment contracts with their old firm. These clauses typically prohibit advisors from encouraging clients to move with them to a new firm. So if an advisor is required to obtain client consent before transferring information to their new firm, they may be contractually prohibited from even asking for that consent. In other words, when privacy laws prohibit sharing information without consent, and contractual obligations prohibit asking for that consent, advisors risk violating either privacy law or their agreement with their previous employer!

Ultimately, the key point is that moving clients from one firm to another requires careful coordination across three fronts: Federal and state privacy laws, firm privacy policies, and employment agreements. While obtaining client consent is generally the safest approach, advisors must understand whether asking for that consent could violate their employment contract. While the rules can be complex, a thoughtful evaluation of the advisor's legal and contractual obligations, along with careful planning, can help manage their risk and increase the likelihood of a successful transition!

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Welcome everyone! Welcome to the 440th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Nina Hajjar. Nina is a partner of Stratos CA, a hybrid advisory firm affiliated with Stratos Wealth Partners and based in Los Angeles, California, that oversees approximately $500 million in assets under management for 300 client households.

What's unique about Nina, though, is how she has developed a "money personality" assessment that allows her to both better understand how her clients' money behaviors might affect the financial planning process and to ensure consistent client service among the advisors at her firm.

In this episode, we talk in-depth about how Nina's assessment categorizes clients into one of six different personality types (for example, "dream chaser" or "safety seeker"), which helps her and her team learn how her clients are likely to respond to different planning scenarios and recommendations, how Nina pairs the money personality assessment with a complementary risk tolerance survey (which she uses to help craft appropriate investment portfolios), and how Nina approaches training advisors for what she calls the "art of the meeting" (giving clients the type of service they need by incorporating the lessons learned from their money personality assessments).

We also talk about how Nina has grown her firm in part through three acquisitions (finding that integrating the new firm and retaining its clients is easier when the selling advisor is looking for a good match for their clients), how Nina has structured acquisitions to incentivize selling firm owners to transition a high percentage of their clients and assets to the new firm (while protecting her firm's financial interests), and why Nina has found value by acquiring firms with an older client base (not only for their often high level of assets, but also for the opportunity to have contact with their beneficiaries who stand to inherit down the line and could bring more assets into the firm).

And be certain to listen to the end, where Nina shares the lessons she's learned from hiring employees (including the importance of getting the timing, compensation structure, and job description right for each hire), how Nina's own experience working with a therapist has helped her better understand the psychological challenges her clients face when it comes to money, and how Nina has found that her best business decisions have been made when she trusts her intuition (whether in terms of the types of people she works with or potential acquisitions she's considering).

So, whether you're interested in learning about using a "money personality" assessment to better understand clients' money behaviors and ensure consistent client service across multiple advisors in a firm, the opportunities and potential pitfalls of advisory firm acquisitions, or the key elements to making a good hire, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Nina Hajjar.

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news of a recent survey indicating that while overall client satisfaction with their financial advisors remains high at 95%, potential threats to client retention lurk beneath the surface, particularly amongst clients who experience a major windfall or a life transition. Which suggests firms that can meet clients' evolving needs as they advance up the wealth spectrum (e.g., advanced tax and estate planning) and ensure that both members of client couples remain engaged in the planning process (to encourage a surviving partner to stay with the firm in case of a death of their spouse) could have more durable client satisfaction and, ultimately, higher client retention rates.

Also in industry news this week:

The financial advice industry is facing a potential shortage of 100,000 advisors in the coming decade, according to a recent study, though this is due in part to (the good news) of greater consumer demand for human-provided financial advice
Charles Schwab is planning to raise the fees on its custodial referral program, indicating continued interest in this lead generation tactic despite its steep price for firms

From there, we have several articles on IRA planning:

20 potential mistakes prospects and clients might make with regard to their IRAs, and how advisors can help fix them (or avoid them in the first place)
The potential financial and psychological benefits of spousal IRAs for married couples
How advisors can help clients and their tax preparers correct 'misleading' reporting regarding IRA distributions on IRS Form 1099-R

We also have a number of articles on practice management:

A blueprint for how firms can create employee career paths that encourage staff to grow and advance within the firm, promoting retention and a more consistent client experience in the process
How firms can establish and operate a successful internship program to create a solid pipeline of next-gen talent
The value of hands-on training for newer advisors in giving them more confidence in applying their technical knowledge to actual client interactions

We wrap up with three final articles, all about workplace trends:

How companies that integrate Artificial Intelligence (AI) tools while promoting collaboration among employees could see greater success in the years ahead
Why employee engagement (on a national level) has sunk to a multi-year low and how building a strong firm culture and making a commitment to management training could help reverse this trend
American workers are becoming more productive, according to recent data, creating new opportunities for employees and firms alike

Enjoy the 'light' reading!

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When the Social Security Fairness Act was signed into law on January 5, 2025, it came as a relief to many recipients of state or local government pensions whose Social Security benefits had been, up until now, reduced by the Windfall Elimination Provision (WEP) for individuals claiming retirement benefits under their own name, or the Government Pension Offset (GPO) for those claiming spousal or survivor benefits under a current or former spouse's name. The new law repeals both the WEP and GPO, restoring full Social Security benefits to affected individuals, retroactive to January 2024.

The caveat, however, is that although the law is set to take effect immediately (and apply retroactively to more than a year's worth of prior benefits), the Social Security Administration (SSA) has indicated that it could take a year or more to fully restore benefits due to the complexity of recalculating payments for millions of affected retirees.

While it may take a while for the adjustments to take place, advisors can still help their clients plan for the effect of WEP and GPO's repeal by estimating how much the client will be receiving in Social Security benefits once the new law is implemented. But the challenge in making such an estimate is the fact that SSA doesn't clearly show many individuals what their full benefits would be without the reduction for WEP or GPO. While future retirees can find nonreduced benefit estimates on their Social Security statements or online accounts, those already receiving benefits don't have access to this information – making it necessary to find a different way to predict how much their payments will increase once the law is fully implemented.

For individuals eager to know how much they'll be receiving once their full benefits are restored, the best approach is to use their history of Social Security-covered earnings (or their spouse's history, for spousal and survivor benefits) and apply the actual formulas that SSA uses to calculate benefits. However, not everyone will have access to their full earnings history, and individuals who find the Social Security website and identity verification processes to be too onerous to navigate won't necessarily be able to download their history. In these cases, it's still possible to 'back out' an estimate of unreduced benefits using their current reduced benefit – provided they know key details like the age at which they elected benefits.

Notably, estimating benefits in this way isn't a simple 'back-of-the-envelope' calculation, given the complexity of the rules determining the calculation of Social Security retirement, spousal, and survivor benefits. To help with this, we've developed a downloadable calculator that simplifies the process of estimating an individual's unreduced Social Security benefits, whether or not a full earnings history is available.

The key point is that the question of "How much will I be getting?" will be top of mind for clients affected by the WEP and GPO. And given that the reduction can amount to hundreds or even thousands of dollars per month, having a reliable estimate of the impact of WEP and GPO's repeal can help advisors proactively plan for the impact the new law will have on their clients' retirement strategies. While there's still uncertainty about the actual timing of the law's implementation, advisors can still add value today by helping clients understand how the repeal will shape their financial future!

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Welcome everyone! Welcome to the 424th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is David Grau, Jr. David is the President of Succession Resource Group, an advisory consulting and valuation business based in Portland, Oregon that serves independent financial advisors with RIAs and broker-dealers.

What's unique about David, though, is how his two decades of experience supporting financial advisory firms has helped him uncover best practices for founders and successors looking to execute internal succession plans, even as those succession plans have become more challenging at a time when founders so regularly field a steady flow of inbound inquiries from Private Equity-backed acquirers (often headlining high valuation multiples).

In this episode, we talk in-depth about the best practices David recommends to firms to start preparing in advance for an internal succession (including creating defined career tracks and compensation structures as well as getting the firm’s business metrics in order and receiving a third-party valuation), how David advocates for breaking up an internal succession plan into gradual tranches (for example, starting out by initially selling an internal successor a 1-5% ownership stake and ramping this percentage up with each subsequent tranche purchase over time) in order to make the financial commitment of doing so more palatable and financially feasible to successors, and why David recommends that firm founders start early when it comes to internal succession planning to get the ball rolling on these key actions and milestones, as if it takes at least 5 years to develop a potential successor and 10 more years to execute the transaction in a series of tranches, an advisor who plans to retire in their early 60s should ideally already be laying the succession groundwork by their late 40s!

We also talk about why David thinks that internal successions do remain viable at a time when Private Equity-backed aggregator firms are willing to buy smaller firms quickly and at a loftier headline valuation (in part because those high multiples often come with less attractive terms buried in the fine print of these deals), how David further finds that the publicly announced valuation of a PE acquisition is often misleading because the media only talks about the multiple of revenue or earnings and not the ‘adjustments’ that the buyer made to the firm’s projected earnings before striking the deal, and why David suggests that some firms who sell to PE-backed buyers might found it hard to meet the annual growth targets (often at least 15-20% and sometimes much higher) needed to receive the full compensation as outlined in the deal terms.

And be certain to listen to the end, where David shares why advisors might consider doing a partial sale of their no-longer-as-profitable clients to give them lifestyle flexibility while monetizing at least part of their business (and then continue to serve the smaller group of remaining high-value clients with better profitability and fewer working hours), how David suggests that preparing a firm for an internal succession (for instance by investing in staff to build a tenured advisor cadre) can end up benefiting a founder even if they do decide to do an external sale (in the form of a premium valuation for having a well-established team to handle the clients when the buyer comes in), and why David believes that while internal successions can involve more work than an external sale, they can often end up being more satisfying for the founder by allowing them to leave a well-defined legacy through their firm.

So, whether you’re interested in learning about best practices for preparing for an internal succession, the importance for selling firms of considering both a firm’s valuation and the deal terms when comparing offers, or the value of preparing for succession early (whether or not an internal succession is planned), then we hope you enjoy this episode of the Financial Advisor Success podcast, with David Grau Jr.

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To earn the CFP marks, candidates must fulfill four key requirements: Education (holding a bachelor's degree and completing the required coursework through a CFP Board registered program), Exam (passing the 170-question CFP exam), Experience (gaining hands-on experience providing financial advice to the public), and Ethics (acting as a fiduciary). Among these, the Education component offers the greatest flexibility in how it can be completed. And while the rise of virtual learning during the pandemic has made it easier than ever to find and take courses from the comfort of home, having so many options to choose from can make the selection process feel overwhelming.

Five primary factors can guide candidates in narrowing down their options when selecting a program. First, location – whether in-person, online, or hybrid – serves as an effective initial filter, as in-person and hybrid options are often limited to major cities. Second, delivery format – synchronous (live classes) or asynchronous (self-paced) – is another key consideration. While synchronous classes provide structure and more direct access to instructors (which can help some students stay on track), asynchronous classes offer greater flexibility (which can be ideal for students with unpredictable schedules). Third, additional resources offered with the program – such as exam prep or tutoring access – can add significant value for some learners. Fourth, cost, including the total 'all-in' price of materials, is another critical factor, with synchronous courses generally being more expensive than asynchronous ones. Finally, familiarity with financial planning topics can influence decisions; while those with less experience (e.g., career changers) may benefit more from the live support offered by synchronous programs, individuals with substantial industry knowledge might prefer self-paced formats. Ranking these five factors from most to least significant can provide clarity and simplify the decision-making process.

Once candidates identify their priorities, the next step is to evaluate specific programs that align with their preferences. For example, those seeking synchronous in-person options can use CFP Board's "Find An Education Program" search tool to filter results by city and explore available offerings (if any) in their area. Online learners can explore virtual providers – including the 'big five' (Dalton, Brett Danko, American College, Kaplan [College for Financial Planning], and Bryant Virtual Classroom) – which offer a variety of self-study and live class formats to accommodate different needs and schedules.

Ultimately, the key point is that aspiring CFP professionals have access to a wide range of education programs and can take a systematic approach to find one that aligns with their goals and resources. By carefully evaluating their needs and preferences, individuals can select the best program to fulfill their education requirements and take the next step on their journey to earning the CFP marks!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that CFP Board CEO Kevin Keller this week announced his plans to retire and step down from his position at the end of April next year. During his nearly two-decade tenure, Keller oversaw a near-doubling of the number of CFP professionals, the establishment of a new 501(c)(6) professional organization to promote the benefits of financial advice and planning careers, and updates to the CFP Board's investigation and disciplinary processes, among many other changes.

Also in industry news this week:

Financial Planning Association CEO Patrick Mahoney died this week after a battle with cancer, leaving behind a legacy that includes rejuvenating the relationship between FPA National and its chapters
A group of advisory trade groups and broker-dealers have sent a letter to Congressional committees requesting that the IRC Section 199A deduction (more commonly known as the Qualified Business Income, or QBI, deduction) be extended and expanded to remove the "specified service trades or business" designation that limits the deduction for financial advisors (and clients in certain professions) with income over designated thresholds

From there, we have several articles on retirement planning:

How advisors can incorporate a client's Social Security benefits into their broader retirement income strategy to match client preferences for lifetime income and/or legacy interests
Why a TIPS-based strategy could be an attractive way to meet clients' 'core' spending needs while protecting against future increases in inflation
Why RMDs can potentially affect safe withdrawal rates and how advisors can help clients minimize any potential negative effects

We also have a number of articles on advisor technology:

How using a "core and satellite" approach can help advisory firms build their tech stacks in a cost-effective manner
The potential value for firms in auditing how they use their CRM software, as well as ways they can maximize its effectiveness
One expert makes his selections for the 'ultimate' advisory firm tech stack, covering a broad range of AdvisorTech categories

We wrap up with three final articles, all about maximizing vacation days:

Why "unlimited PTO" policies can sometimes backfire and how firms can ensure that their PTO policies reflect their goals and allow employees to take sufficient time away from the office
How linking PTO days to holidays and weekends can turn 15 days off into more than 50 days of vacation
Why research into vacations and happiness suggests that incorporating novelty into (longer) vacations can make them more enjoyable

Enjoy the 'light' reading!

(Michael's Note: It is with a heavy heart this week that we pay our respects and bid farewell to Patrick Mahoney, the CEO of the Financial Planning Association, who passed away this week after a long battle with cancer. Patrick and his leadership was a breath of fresh air for the FPA, as he worked proactively to repair the national organization's relationships with both its internal chapters and external allies, refocus the organization's staff on supporting its chapters and its core (CFP certificant) member, and stabilize its membership after prior years of declines. It is a tragic loss for the FPA that Patrick's ongoing work was cut short, and he will be greatly missed. Farewell, Patrick.)

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The introductory meeting is a high-stakes moment for both advisors and prospects, often nerve-wracking for both sides. Advisors must decide how to present themselves, respond to questions, explain complex issues in an engaging way, and propose and explain their long-term proposition. And at the same time, prospects are likely to feel vulnerable and equally nervous with their own set of concerns – how to present themselves to the advisor, what questions to ask, and how to explain their issues while still feeling competent. For many, this may be their first-ever meeting with a financial advisor, adding another layer of uncertainty (and potential anxiety) beyond simply evaluating fit.

In the 157th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can alleviate a prospect's anxiety by setting clear expectations for the introductory meeting – both in terms of logistics and emotional preparedness. They highlight how even small details – such as providing directions, clarifying meeting logistics, or outlining the purpose of the conversation – can help prospects feel more in control, making the experience smoother and more productive for both parties.

For most prospects, showing up comfortably and feeling their very best can be challenging when they don't know what to expect – whether it's where to park, how formal the meeting will be, or whether they need to bring any financial documents. While these details might seem minor, they can create unnecessary stress in the lead-up to the meeting. Even prospects who have met with advisors before may find that every firm runs a slightly different introductory meeting. By taking a moment to provide clarity, advisors can make a meaningful difference in setting the right tone and allowing prospects to engage with confidence.

One effective way to alleviate some of the nervousness is to give prospects a clear outline of the call in advance of the meeting. This roadmap can be as simple as a brief email (or similar document) covering basic logistics and setting clear expectations. The email may discuss practical details like directions, parking, and dress code, and include a brief meeting agenda with potential next steps. It may also include a list of which documents to review, bring, or – perhaps just as crucially – not bring. These small but thoughtful details can offer reassurance to prospects, helping to reduce pre-meeting anxiety and allowing them to focus on the conversation itself.

Ultimately, the key point is that small, intentional efforts to reduce uncertainty can go a long way in helping a firm stand out. As while prospects are often bracing themselves for a high-pressure sales pitch, a well-crafted pre-meeting email immediately signals a different experience – one that prioritizes comfort, clarity, and meaningful dialogue. By eliminating distractions and providing a clear roadmap that outlines expectations in advance, advisors can help settle a prospect's nerves the day of the meeting – which, in turn, can lead to more productive conversations and stronger client relationships!

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Health Savings Accounts (HSAs) have become an increasingly popular tool for financial advisors and their clients due in part to the 'triple tax savings' they offer: tax-deductible contributions, tax-free growth, and non-taxable distributions for qualifying expenses. However, HSAs require individuals to be covered by a High Deductible Health Plan (HDHP), which has tradeoffs compared to traditional health insurance plans. Which means that financial advisors, with their knowledge of clients' personal and financial circumstances, are uniquely positioned to evaluate these tradeoffs and help clients balance healthcare costs and savings to align with their financial plans.

While HDHPs are often expected to come with higher deductibles than traditional plans, these deductibles may be higher than they appear. For instance, HDHP deductibles and out-of-pocket limits apply only to in-network coverage, with out-of-network care subject to higher maximums. Additionally, HDHPs typically apply deductibles to nearly all medical services (except preventative care), unlike traditional health plans that often feature fixed copays for prescriptions, specialist visits, and emergency room care. Many HDHPs also use aggregate deductibles, requiring the entire family deductible to be met before coverage begins for any individual – which can lead to higher out-of-pocket costs, particularly when one family member incurs most of the expenses.

Traditional health plans, on the other hand, often provide features that make them more attractive for individuals with moderate or predictable medical costs. For example, traditional plans often come with separate out-of-pocket maximums for prescription drugs and other medical services (while HDHPs typically have a unified maximum) or offer tiered health networks that provide discounts for specific in-network providers. Furthermore, because HSA eligibility requires coverage exclusively under an HDHP, clients nearing Medicare age or those with other disqualifying coverage may need to weigh the benefits of HSA contributions against other health plan options.

While the 'triple tax savings' of HSAs is one of their most attractive features, those with traditional health plans can also benefit from tax-free premiums, which may result in greater tax savings compared to HDHPs with lower premiums. Clients with traditional plans can also take advantage of Flexible Spending Accounts (FSAs), which allow for tax-free contributions and reimbursements (though, unlike HSAs, any unused funds remaining in the FSA are forfeited at the end of the plan year). Combined with the potential cost savings from lower deductibles and total out-of-pocket costs – which could be invested in taxable accounts – clients with higher medical expenses and in lower tax brackets may find that traditional health plans offer a better balance of savings and healthcare coverage.

Ultimately, while HSAs offer significant tax advantages, advisors can play a key role in helping clients weigh these benefits against the potentially higher costs of HDHPs. By aligning healthcare and financial planning, advisors can demonstrate their ongoing value to their clients by helping them choose the plan that best supports their goals – and their peace of mind – while maximizing both annual and long-term cost savings!

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Welcome everyone! Welcome to the 423rd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Cristina Livadary. Cristina is the CEO of Mana Financial Life Design, an RIA based in Los Angeles, California (but works virtually with clients nationwide), that oversees approximately $70 million in assets under management for 119 client households.

What's unique about Cristina, though, is how her firm supports clients in the so-called "sandwich generation" by both creating a financial plan for the clients' personal financial needs and goals, and by addressing (often with a separately paid add-on financial planning engagement) the financial issues facing their aging (and frequently less financially secure) parents who they may someday need to support.

In this episode, we talk in-depth about how Cristina's personal experience dealing with challenging issues with her own aging parents while simultaneously caring for her young children helped her recognize the challenges those in the "sandwich generation" face, how Cristina leveraged the research she did for her personal situation (including finding appropriate care for her mother after she was diagnosed with dementia) to create blog and newsletter content that resonated with both prospects and her current clients, and how this focus evolved into Cristina now providing planning services for both her working-age clients as well as their parents (either as an add-on service to their child's engagement or, for those who can afford her firm's fees, as a separate client household).

We also talk about how Cristina started Mana Financial Life Design from scratch after working as an investment wholesaler earlier in her career (teaming up with her best friend who brings complementary skills to the business), how Cristina used a convertible note to raise money from her friends and family to get her business off the ground (and how she was ultimately able to pay off the note with interest before it converted into equity), and how Cristina successfully transitioned from charging clients a $2,400 annual planning fee to a complexity-based fee (with a $10,000 annual minimum) by linking the fees she charges to the specific service needs of each client (and the amount of time it takes to do so).

And be certain to listen to the end, where Cristina shares how she uses 20-minute "fit" meetings to determine whether prospective clients will be a good match for her firm's service offering and fee model (thereby minimizing the number of bad-fit clients her firm takes on), the key lessons Cristina learned from earlier hiring mistakes (particularly the importance of determining a defined role for each new hire in advance of putting out a job posting), and how Cristina leverages the artificial-intelligence-powered notetaking software tool Fathom AI not only to turn around meeting notes and follow-up tasks faster, but also so that she and her team can be more present during client meetings (without having the burden of simultaneously taking notes while trying to stay focused on what the client is saying).

So, whether you're interested in learning about serving clients in the "sandwich generation" (and their parents), building a firm from scratch alongside a trusted business partner, or how to hold effective "fit" meetings to ensure a solid match with prospective clients, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Cristina Livadary.

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Welcome to the February 2025 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that FP Alpha has released its tax return extraction and analysis module as a standalone product, while RightCapital has separately launched its own tax return extraction tool bundled within its platform – with both announcements coming on the heels of Holistiplan implementing a significant price increase, suggesting that Holistiplan's decision to raise prices may have inadvertently opened the door for more competition within the tax planning technology category (which it had previously had all to itself)

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

Move Health, a service that provides guidance on and implementation of health insurance solutions for financial advisors, has acquired Caribou, a software tool for analyzing and comparing different health insurance plans, creating a single end-to-end platform for healthcare cost analysis and implementation of health insurance – although the question remains how deeply advisors are willing to get into health insurance implementation with their clients when they tend not to be health insurance experts themselves
Advisor Credit Exchange, a marketplace solution connecting advisors with lending solutions for their clients, announced that it plans to shut down – which raises questions for Envestnet (which had an equity stake in Advisor Credit Exchange and featured it on its platform) and if it will further step back from its "marketplace of marketplaces" model as it pertains to non-investment-based solutions under its new ownership; as well as about the outlook for other lending marketplace platforms and whether liability management is too far outside of advisors' core offerings to gain much traction?
Wealthtender, a lead generation and advisor review gathering platform, has launched a new Testimonial Marketing Studio to help advisors better promote their client testimonials in social media and email campaigns, reflecting the reality that advisors have generally been slow to adopt testimonial marketing since the release of the SEC's Marketing Rule in 2021, and that platforms like Wealthtender have needed to offer tools like Testimonial Marketing Studio to encourage advisors to solicit and promote client reviews in order for those platforms to gain traction

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

Mili, one of the most recent AI-powered notetaking solutions on the AdvisorTech Map, has announced a recent $2M seed funding round – although Mili's choice to position itself as the "most secure" notetaker reflects the reality that technology solutions often misunderstand what advisors want to see highlighted in technology (e.g., they expect all the different AI notetaker solutions to have a baseline level of data security, but beyond that they care about which one does the best job of solving their problems than they do about which one is the "most" secure)
Advisor360 has announced its acquisition of the AI meeting notes platform Parrot AI, representing the first existing advisor technology platform to integrate AI notetaking into its own solution – which could be an ominous sign for the many standalone AI notetaker tools on the market, because if the trend to bring AI notetaking in-house picks up speed among existing advisor platforms, the market for standalone tools could shrink very quickly if advisors decide they would rather have AI notetaking as a feature within the tools they already use

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that following the change of administration (and a new incoming chair of the SEC), the Investment Adviser Association is seeking to find ways to help RIAs (particularly smaller firms) manage the compliance responsibilities they face. Which could include measures such as additional time to comply with rules that have been adopted but not yet enforced and perhaps, more broadly, an approach from the SEC that focuses more on whether a firm has robust program controls and a strong fiduciary culture rather than seeking out specific, (sometimes minor) missteps and producing enforcement actions.

Also in industry news this week:

While RIA M&A deal flow hit record levels in 2024 (both in terms of volume and the speed of completing them), firm valuations saw relatively modest gains
In its latest annual regulatory oversight report, FINRA joined the SEC in flagging the potential risks to firm and client data from the use of third-party vendors and products, specifically highlighting risks associated with generative AI tools

From there, we have several articles on retirement planning:

A recent analysis considers 46 factors in determining the 'best' states for retirees, revealing potential locations clients might not have otherwise considered when thinking about a move
The pros and cons for retirees of living near their children (and grandchildren) and how advisors can help them consider the range of financial and emotional implications associated with this decision
Why moving to a state with relatively low (or no) income taxes doesn't always result in lower state taxes on deferred income (and how advisors can help clients avoid this issue)

We also have a number of articles on advisor marketing:

How advisors can identify the four types of prospects and tailor their communication to match their preferences
A simple graph that advisors can sketch during a discovery meeting to demonstrate the value they offer
How using infographics to explain a firm's planning process can leave a stronger impression on prospects than verbal explanations alone

We wrap up with three final articles, all about attention:

Why attention has become one of the most valuable commodities in the 21st century
How a weekend "digital intermittent fast" could lead to fewer distractions and more enjoyable, meaningful time away from work
The value of truly listening to others and how to avoid common conversational pitfalls

Enjoy the 'light' reading!

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As a foundational document, the operating agreement is essential for RIA firms. When thoughtfully drafted, it aligns the interests of the firm's owners, sets clear expectations for operations, and establishes how profits will be distributed. While some RIA owners might be tempted to prioritize moving quickly to the more enjoyable work of providing financial advice, neglecting to thoughtfully draft and update an operating agreement can lead to mismatched expectations, legal risks, and costly disputes. Taking time to formalize and clearly define owner relationships in the operating agreement can be a worthwhile investment in the firm's stability and future success.

A well-crafted operating agreement begins with defining the firm's governance structure. Owners determine whether the firm will be managed collaboratively by all members – promoting transparency but potentially slowing decision-making – or by a group of designated individuals or a committee, which can increase efficiency with the right safeguards like clearly defined leadership roles and decision-making boundaries. The next step is establishing a profit distribution philosophy. In a collective enterprise model, profits are shared equally or in proportion to ownership stakes. By contrast, a production-based model ties distributions to individual contributions, such as the revenue generated by each advisor.

For RIAs focused on growth, the operating agreement must include provisions for onboarding new members or partners. Key considerations include how new members will buy into the firm, how their ownership stakes will affect existing members, and whether they will be granted voting rights. Planning for potential equity dilution is also essential to avoid friction as ownership stakes shift as new members join. In addition, the agreement should address how the firm will handle member departures – whether due to retirement or unexpected circumstances like death or disability, which is important whether the firm has one member or multiple members. Buy-sell provisions clarify how ownership interests will be transferred, ensuring business continuity and minimizing disputes. For example, the agreement might specify whether departing members forfeit their ownership interest or retain rights to sell their interests to other members or external parties.

Finally, the operating agreement must reflect the firm's long-term vision. A firm focused on building a legacy business with multi-generational clients may prioritize stability and sustainable growth, while one preparing for rapid scaling or a future sale may adopt a more aggressive approach to management and profit distributions. Ensuring that governance, compensation, and growth strategies align with the firm's goals lays a strong foundation for long-term success.

Ultimately, the key point is that while drafting an operating agreement may seem like an inconvenient and tedious task, it's an essential step in building a strong foundation for the firm's future success. By taking the time to thoughtfully establish governance, define profit structures, plan for growth, and manage ownership transitions, RIA owners can create a roadmap for navigating challenges and taking advantage of business opportunities. By taking this deliberate approach, RIA owners can feel confident their firm is positioned to thrive for years to come!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the latest Fidelity RIA Benchmarking Study shows that while RIAs saw gains in AUM and revenue last year, their operating margins tightened, suggesting that rising expenses are cutting into firm profits. The study also looked at what “high performing” firms are doing differently than their peers, finding that these firms have a higher close rate on referred prospects, were better able to maintain pricing discipline, and had significantly lower expenses as a percentage of firm revenue.

Also in industry news this week:

NASAA has proposed an amendment to its broker-dealer conduct model rule that would restrict the use of the terms “advisor” and “adviser” for broker-dealers and their registered representatives who are not also investment advisers or investment adviser representatives
A recent study suggests that large RIA consolidators are becoming more like their large broker-dealer counterparts, not only in terms of the AUM they control, but also in the types of services they offer advisors under their umbrella

From there, we have several articles on tax planning:

7 year-end tax strategies advisors can consider to help their clients lower their tax bill this year and into the future
Why seeking to minimize a client’s current-year tax bill isn’t always the optimal strategy when considering their lifetime tax obligations and their lifestyle needs
While RMDs are a fact of life for many retired clients, advisors can help make the most of them by strategically selecting assets to fund the distribution to meet asset allocation and asset location goals

We also have a number of articles on advisor marketing:

How lead segmentation can boost the effectiveness of an advisor’s email marketing campaign
A 3-email sequence to effectively welcome new leads to an advisor’s email list and encourage them to engage with the firm
A review of email marketing software providers, which can vary significantly based on features and price

We wrap up with 3 final articles, all about college planning:

How, contrary to popular belief, the sticker price of college tuition (and particularly the average net price students actually pay) has lagged the broader inflation rate in recent years
Why the increasing use of ‘merit aid’ among colleges makes high school grades important not only for college admission, but also for the breadth of schools they might consider
A tool that lets users evaluate the return on investment of different degree programs, colleges, and majors shows that getting a degree still typically comes with a significant (though not universal) positive financial return

Enjoy the ‘light’ reading!

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As the financial advice industry began shifting from a sales-based model to a more sustainable asset management approach, advisors found their roles shifting along with it. With revenue rooted in more predictable, recurring income, many advisors were able to step off the relentless 'treadmill' of constant sales, allowing them to invest in growth by hiring staff and delegating tasks. Effective delegation, in turn, created a positive cycle, freeing advisors from lower-value activities so they could work on building and scaling their firms. "Delegate and let go" became a common mantra, with advisors encouraged to focus only on the highest-value tasks. Yet, even for advisors who understand the value of delegation, actually letting go is often easier said than done.

In the 151st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the psychological challenges advisors often face when it comes to delegating tasks and the strategies that can make delegation more effective.

Despite the potential upsides of delegation, advisors typically face 3 psychological hurdles to overcome in order to delegate effectively. First, it can be hard to imagine that doing all of an advisor's least favorite tasks would be someone else's dream job (after all, if doing those tasks were so enjoyable, then advisors wouldn't be trying to delegate them in the first place!). Second, people generally enjoy working with those similar to themselves, which can make it tempting to hire a 'mini-me' with similar strengths and inclinations. However, doing so can unintentionally reinforce the advisor's reluctance to delegate disliked tasks. Finally, even if an advisor dislikes a particular task, they may still be the fastest (and most skilled) at completing it, creating an argument for the advisor to continue doing it. Together, these elements create a compelling case for not delegating at all. In reality, though, holding onto these less-favored, non-growth-related tasks can limit a firm's long-term capacity to scale.

The first 2 barriers can be addressed by hiring an 'opposite', rather than a 'mini-me'. For example, while it might seem natural to hire someone similar, bringing in someone who has complementary strengths – such as an operations-focused person who thrives on detailed follow-through – ensures that tasks the advisor may find draining are handled by someone who enjoys them. The third barrier – that no one else can complete a task as well or as quickly as the advisor – may hold true and can be challenging to overcome. Yet, advisors may still benefit from delegating the work, as once a task is offloaded, an advisor's time is freed up for more productive work – or even for taking additional time off! A highly leveraged advisor has more flexibility in shaping their day-to-day business operations.

Ultimately, advisors aiming to delegate effectively can benefit from focusing on a new hire's ideal strengths and aptitudes. Hiring and working with an 'opposite' can feel counterintuitive at first – a checklist-oriented person, for example, may 'just' complete their assigned tasks without exploring beyond the to-do list, which could feel foreign to an ideas-driven advisor. However, this dynamic can also be incredibly freeing. After all, someone who enjoys a particular set of tasks is more likely to take ownership and improve that process – and, by extension, contribute to the firm's long-term success!

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With Republicans appearing to have secured a sweep of the White House and both chambers of Congress, the most immediate question for many financial advisors and their clients is what impact the election results will have on the scheduled expiration of the Tax Cuts & Jobs Act (TCJA) at the end of 2025.

At a high level, the Republican trifecta would appear to set the stage for much of TCJA to be extended beyond the original 2025 sunset date. However, with the makeup and priorities of the incoming Congress differing from those in 2017 – and with President-elect Trump having made numerous promises for new tax cuts on the 2024 campaign trail – there will inevitably be portions of the existing law that Congress will aim to amend or even expand beyond the original tax cuts created by TCJA. Which means that the question going forward is not so much whether TCJA will be extended, but rather which portions will remain in their current form and which may have some 'wiggle room' for change in the next tax bill.

For example, the current 7 tax brackets and increased standard deduction that have been in effect since 2018 are expected to remain largely unchanged. However, the $10,000 limit on State And Local Tax (SALT) deductions, which has been highly contentious with both Democrat and Republican supporters and detractors, is much more likely to become a negotiating point. Some legislators advocate keeping the SALT cap as is, others push for it to be raised in some form, and still others (including the president-elect) want the SALT cap to be eliminated entirely.

Other key areas likely to be impacted include:

The Child Tax Credit, which is currently capped at $2,000 per child, with some bipartisan support to raise it at least to the pandemic-era $3,600 maximum;
The Alternative Minimum Tax (AMT), which currently affects very few taxpayers, could be amended as part of SALT cap negotiations to kick in at lower income levels for households with high SALT deductions, offsetting the impact of raising or eliminating the SALT deduction cap;
The Section 199A deduction for Qualified Business Income (QBI) for pass-through owners, which could conceivably be increased if Congress pursues Trump's proposal to cut corporate tax rates from 21% to 15% in order to preserve the proportionate difference between pass-through and corporate tax rates;
The gift and estate tax exemption, which appears likely to remain at its current elevated level, reducing the urgency for high-net-worth households to gift assets or implement trust strategies to reduce their taxable estate before 2026 (and, in some cases, making it better to avoid gifting assets to preserve the step-up in basis those assets would receive otherwise).

Furthermore, the Trump campaign has proposed a number of additional tax cuts, including tax-free treatment of income from tips, overtime pay, and Social Security benefits, and even eliminating income tax entirely in favor of tariffs. Notably, though, any of these proposals would still need approval from a Congress that may prefer to extend existing tax cuts rather than introduce new ones.

What's certain heading into 2025, however, is that there will be a new tax bill to extend and/or replace TCJA. And while it may not represent as large of a shift from the status quo as TCJA did in 2017, it could still have tax planning implications for millions of Americans – at least until it reaches its own sunset date in another 8–10 years!

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Welcome everyone! Welcome to the 411th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Larry Kriesmer. Larry is the Chairman of Measured Risk Portfolios, an RIA based in San Diego, California, that oversees $350 million in assets under management for a combination of internal retail clients and external financial advisor clients.

What's unique about Larry, though, is how he is able to get clients comfortable with taking equity market risk using an approach that actually puts 85% or more of client funds in Treasuries (effectively creating a floor on potential losses) while investing the rest into options on equity indexes to offer potential upside that still can approximate the returns of a conservative, moderate, or even aggressive balanced portfolio that might have otherwise simply allocated directly to the S&P 500.

In this episode, we talk in-depth about how Larry implements his measured risk strategy, by allowing clients to select a downside floor that determines just how much is invested into short-term Treasuries (and how much is remaining to invest into options to generate equity upside), how Larry's approach differs from fixed index annuities and buffered ETF products by not setting a fixed cap on potential upside returns (and not needing an additional cost for those vehicles as a 'wrapper'), and how clients varying view Larry's measured risk strategy as either a way to have equity exposure with less downside risk… or as a substitute for a portion of a bond allocation by offering the dampened volatility bonds provide with potential greater upside from the options sleeve.

We also talk about how Larry has found that his investment approach seems to provide a certain peace of mind to clients who might be willing to stomach some certain percentage loss in their portfolio but really struggle with the uncertainty that comes during a market downturn where there's otherwise no way to know how much further the decline could go, how Larry's way of implementing Treasuries directly into client portfolios has enabled him to further calm clients during times of market volatility by being able to point directly to the specific line-item allocations to individual Treasuries with defined maturity dates, and why Larry does still have to prepare clients in advance for the possibility that the stability of their Treasuries will be offset by the sheer volatility of a small allocation to individual options contracts that could near zero dollars in value (a potential total loss on the option) as they approach expiration if the market has declined, given that clients typically are not used to seeing individual line items of their portfolio experience such a level of losses (even if the allocation is small).

And, be certain to listen to the end, where Larry shares the special tax benefits of implementing an options-based strategy on not just index-tracking ETFs but on the market index itself, including the potential to realize a mix of long- and short-term capital gains even on options contracts sold within 1 year (and the potential for losses in the current year to be used retroactively against gains from the previous 3 tax years), why Larry recommends that financial advisors considering using an options-based strategy be cautious to ensure they really have both the time and assets needed to implement it effectively (given the sometimes very rapid changes in options pricing), and why Larry has reinvested much of his own firm's profits back into the business, not only because doing so can provide a better return than simply taking cash profits out of the business to reinvest into a traditional portfolio, but also because it's allowing him to build a business that he hopes can endure long after he retires.

So, whether you're interested in learning about managing risk with an options-based investment strategy, how to prepare clients for the potential benefits and risks of such a strategy, or the commitment needed to execute an options strategy successfully, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Larry Kriesmer.

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To sustain firm growth, financial advisors often face a dilemma: to focus on what originally drew them to the profession – like financial planning – they often must first do an extensive amount of business development. Marketing activities such as brand development, event planning, and content strategy often demand skills outside advisors' typical expertise and interest. Even those who do have an interest in marketing may find it challenging to dedicate the time to do it well. As a result, outsourcing parts – or even the entirety – of a marketing strategy can be a highly effective solution. However, with the range of potential solutions, it can be difficult to know where to begin.

As a starting point, understanding the wide variety of marketing tasks that can be outsourced can be beneficial. Advisors might consider outsourcing roles such as social media management, search engine optimization, web development, event management, and performance analytics, among other options. Reviewing both current marketing efforts and aspirational goals for client engagement can help advisors determine where outsourcing may add the most value.

From there, advisors may need to consider whom to outsource to. Quick tasks may only need a temporary contractor from platforms like Fiverr or Upwork. However, more complex needs, such as strategy and brand development, may benefit from someone with industry expertise to ensure deeper understanding with fewer revisions required. Advisors may also want to consider a contractor's communication style and marketing philosophy to assess compatibility with the firm's values.

Once a contractor or firm has been hired, advisors can help set the stage for success by identifying key stakeholders and agreeing on clear definitions of success. Providing examples of effective marketing, existing guidelines, and a timeline for deliverables can establish a strong foundation. And, once work progresses, keeping an open line of communication – through email and video calls – can support feedback exchanges that help contractors align with the firm's style and voice over time. Over the long term, success can be evaluated not only by long-term campaign results but also by cultural fit and the strategic insights the marketing partner brings to the firm.

Ultimately, the key point is that partnering with a skilled contractor or agency can be a win-win for both the advisor and the contractor. By freeing advisors to focus on client service and core business functions, contractors can apply their specialized expertise, often leading to more effective marketing outcomes than an advisor could achieve alone. This collaboration not only enhances the firm's marketing efforts but also allows the advisor to allocate time and energy where it's most impactful, driving growth and fostering stronger client relationships. And with the right fit, an outsourced partner's insights can help elevate the firm's brand, positioning it more effectively in a competitive market and supporting long-term success!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that amidst the impending return of Donald Trump to the White House, observers expect a lighter-touch regulatory environment for RIAs (and the financial services industry as a whole), with many regulations proposed (but not yet implemented) under SEC Chair Gary Gensler (e.g., strengthened rules related to custody and outsourcing) and broader regulatory efforts put forth by the Biden administration that could also affect advisory firms (e.g., the Department of Labor's Retirement Security Rule and the Federal Trade Commission's ban on most non-compete agreements, both of which are currently blocked by courts) likely to be tabled under the new administration. Which could ease the compliance burdens for RIAs (particularly smaller firms that are sometimes stretched thin handling compliance responsibilities), though if lighter-touch regulation leads to more abuses that erode consumer trust in the financial advice industry, fiduciary advisors could have a harder time convincing clients that they truly are acting in their best interests and differentiating from product salespeople who continue to use the "financial advisor" title.

Also in industry news this week:

A study suggests that engaging in a collaborative planning process with clients not only can boost client engagement but also lead to more client referrals as well
A survey of compliance professionals indicates that while many have tried using artificial intelligence tools to boost efficiency in their compliance programs, most have yet to experience significant benefits

From there, we have several articles on client communication:

A recent study identified significant gaps between the retirement planning topics advisors recall talking about with their clients and those that clients remember discussing, suggesting that advisors could consider ways to create better client engagement so that they absorb key messages and recognize the value their advisor is providing
How advisors can make prospects and clients feel 'smarter' by better understanding their financial knowledge and learning style preferences
While many financial planning goals are meant for the long term, advisors can provide value and build loyalty among clients by engaging in regular communication (both synchronous and asynchronous) to help them prepare for and overcome inevitable bumps along the way

We also have a number of articles on Long-Term Care (LTC) insurance:

With some LTC policyholders facing proposed premium hikes of more than 100% in the next year, advisors have a valuable role to play in helping them evaluate their options
A study suggests that LTC policyholders are more likely to accept premium increases when their options are made clear to them and they feel more confident in their decision, suggesting a potential educational role for advisors helping clients facing premium increases
The potential perils of fully self-funding potential LTC needs and why a "50/50" approach might be appropriate

We wrap up with 3 final articles, all about Artificial Intelligence (AI) and everyday life:

A new AI-powered tool allows users to generate their own custom (and entertaining) podcast on any topic
Why a shift toward relying on generative AI tools to write could lead to a decline in both writing and critical thinking skills
While AI-powered search tools provide convenient summaries to user queries, they could ultimately impede the ability of users to discover new content (and disincentivize content creators, including financial advisors, to produce it in the first place)

Enjoy the 'light' reading!

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In the early days of financial planning, serving clients often meant developing transactional relationships focused on facilitating trades and selling insurance. Over time, advisors shifted toward more analytical approaches, such as investment management and retirement planning. Today, the industry has evolved further, with a growing emphasis on aligning financial decisions with clients' personal priorities and life goals. While this shift from numbers-based strategies to a more holistic, values-driven framework has opened the door to deeper, more meaningful conversations, it also presents a challenge for clients who may struggle to define their values or articulate a sense of purpose.

In this article, Jeremy Walter, founder of Fident Financial, and Andy Baxley, founder of Two Trails Financial Planning, discuss how advisors can follow a 3-part framework to help clients craft an informative, values-based statement of financial purpose.

The process begins by helping clients define their core values. This can involve asking reflective questions, such as "What does a perfect day look like to you?" or "How do you define success, security, and a life well-lived?" These questions encourage clients to uncover important themes – such as business growth, building a legacy, or prioritizing simplicity and family time – that guide their decisions. Typically, these values fall into 2 categories: realized values, which are already present in a client's life, and aspirational values, which represent qualities they want to embody. Advisors can then ask follow-up questions to further explore and deepen these themes, helping clients gain even greater clarity.

Once the client's values have been established, the next step is to articulate a statement of financial purpose – a concise expression that captures the "why" behind the client's financial decisions. This statement should go beyond superficial goals or what the client believes they should say, instead reflecting their true, deeply held priorities. Advisors play a crucial role here by helping clients draft, refine, and finalize a statement that feels authentic and actionable. This statement of financial purpose serves as an anchor for the client, providing clarity and direction as they make future financial decisions.

After the statement of financial purpose is created, the focus shifts to taking action. Advisors can help clients use their statement as a guide for assessing financial goals – both existing and future ones. Clients can reflect on whether their current goals are helping them get closer to living out their values or whether they need to revise their plan to better reflect what truly matters. The statement can also be used to establish new goals, ranging from more immediate, short-term objectives to larger, more ambitious stretch goals that, while challenging, may ultimately be more fulfilling. As clients begin to articulate and live by their values, advisors can revisit the statement periodically to ensure it remains relevant and aligned with evolving goals, and to assess whether adjustments are needed to better reflect their client's reality.

Ultimately, the key point is that understanding a client's values and purpose can unlock deeper, more meaningful financial planning conversations, enabling more fulfilling client discussions and allowing clients to do more with their money. And by aligning financial decisions with a clear statement of purpose, clients can foster a more intentional and meaningful relationship with their wealth!

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Welcome everyone! Welcome to the 410th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Emily Biehler. Emily is the co-founder of TrailWise Financial Partners, an RIA based in Golden, Colorado, that oversees approximately $80 million in assets under management for 200 client households.

What's unique about Emily, though, is how her firm ensures every client can be served profitably through a combination of a complexity-based minimum fee arrangement, coupled with a structured data gathering, plan delivery, and client communication processes that encourage client accountability and follow-through on action items recommended by their advisor so every client really sees the value they receive for the fees they’re paying.

In this episode, we talk in-depth about how Emily’s firm created a custom workbook that asks clients to explore their goals and values, on topics ranging from education and travel, to whether they expect to need follow-up from their advisor regarding their follow-through on action items, allowing their advisor to get permission to give nudges to actually implement their recommendations, why Emily’s firm chose to build a custom software program to present her planning analysis, findings, and action items in a more digestible way for clients than just the output of off-the-shelf financial planning software alone, and how Emily’s firm evolved from focusing on full-length financial plans that could reach more than 100 pages to providing clients with a one-page document that clearly explains their advisor’s planning findings and more importantly the action items for them to take during the next year.

We also talk about the meeting and communication cadence Emily designed to further boost client accountability to follow through on their planning recommendations, why Emily’s plan delivery meetings are often split into 2 meetings in order to keep clients focused and engaged (with the first covering overall plan health and cash flow and the second focusing on more specific planning areas such as tax and insurance planning), and how Emily uses what she calls "Accountability Personal Podcasts", 3- to 5-minute videos sent to each client every 90 days during their first year with the firm, to keep them on track with required action items and to remind them that their advisor is there to hold them accountable to getting it all done.

And be certain to listen to the end, where Emily shares how her firm developed a complexity-based fee model that combines both the number and types of planning services they require and the level of complexity in their overall financial situation, to ensure that each client can be served in a profitable manner, how Emily uses a fee calculator not only to clearly demonstrate to clients how their fee is based on their unique planning needs, but also to explain why some clients really might price significantly higher than others (and remove the temptation for her to offer fee discounts to big clients), and how Emily and her business partner faced a failed succession at their previous firm based on their inability to steer the larger firm in the planning-centric direction they desired and decided to start their own firm to give them the freedom to create the accountability-based client service model that they thought was best for their clients.

So, whether you’re interested in learning about creating structured data gathering and plan delivery processes that encourage client accountability, using asynchronous videos to efficiently communicate with clients between meetings, or implementing a complexity-based fee model to ensure each client can be served in a profitable manner, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Emily Biehler.

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Welcome to the November 2024 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that Holistiplan has announced the rollout of a new estate plan document extraction tool to stand alongside its highly popular tax return scanning tool – which highlights how advances in AI technology have allowed tools like Holistiplan to go beyond tax returns and scan nearly any kind of document to locate and pull out the key information within; but at the same time raises questions about how much demand there truly is for document extraction beyond tax returns, given how (relatively) infrequently households create and update estate planning documents?

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

Advisor sales enablement platform Nitrogen has announced its own feature for extracting information from prospects' investment statements that can be automatically fed into Nitrogen's analysis and proposal generation tools, which raises questions about the future of standalone tools like VRGL that have built much of their value proposition around document extraction but could become redundant if more of the platforms advisors already use start to build those features "in-house"
CurrentClient, a text messaging platform that aims to offer a more modern and streamlined solution for advisors to communicate and engage with their clients via text, won the "Best In Show" award at XYPN's recent AdviceTech competition, standing out as a potential solution to what has been a longstanding pain point for advisors in efficiently managing and archiving their text communication
Quivr, a CRM overlay centered around advisor-specific workflows and automation, won the "Advicer's Choice" award at XYPN's AdviceTech competition, reflecting its emerging popularity among advisors who increasingly rely on workflows to scale their business but remain frustrated with the limitations of the current legacy CRM platforms in delivering effective workflow capabilities

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

Farther, one of an emerging crop of "digital RIAs" aiming to achieve better growth and profitability through a purpose-built and integrated technology infrastructure, has raised $72 million in Series C funding – which on one hand reflects the enthusiasm among investors for the possibilities of a highly efficient advisory firm enabled by technology; but on the other hand raises questions about how that efficiency will turn into profitability when the last 30 years of advances in tech-enabled efficiency have actually seen advisory firms become less profitable than they once were?
Freewill, a consumer-facing estate document preparation service, has launched an advisor-facing version called Estately that combines both tools for clients to self-direct their own estate planning documents as well as capabilities for clients to work with a "live" attorney to get their documents done, allowing advisory firms to more efficiently offer estate planning to both complex high-net-worth clients (who need to rely on the expertise of a live attorney) and more simple "mass affluent" clients (who can be more efficiently served with the self-directed option)

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that SIFMA, which represents broker-dealers, investment banks, and asset managers, released a white paper that argues that CFP Board "increasingly functions as a de facto private regulator for CFP certificants" and proposes that CFP Board eliminate rules and standards that duplicate, conflict with, and/or impose in addition to existing SEC and/or FINRA rules and standards. At the same time, CFP Board has noted that advisors pursue the certification voluntarily and that its standards, which cover the entire financial planning process (unlike SEC and FINRA regulations that largely focus on investment management), help to raise standards for the industry as a whole at a time when advisors increasingly offer comprehensive planning services.

Also in industry news this week:

A recent study suggests that while a majority of financial advisory clients surveyed have only had 1 advisor, deteriorating client service is a key risk factor that could sway certain clients to leave for a different advisor
RIA M&A activity in 2024 is poised to surpass the total number of deals seen in 2023, according to one analysis, as lower interest rates and continued interest from private equity-backed firms could as tailwinds for dealmaking

From there, we have several articles on retirement planning:

How advisors can support clients who want to retire early, including quantitative analyses that can show whether it's possible and initiating qualitative conversations about how they plan to thrive amidst this major life change
While followers of the Financial Independence Retire Early (FIRE) movement are often portrayed as penny-pinchers looking to ditch their careers as soon as possible, in reality there are several 'flavors' of FIRE that could be appealing for a wider range of clients
12 tax planning principles for early retirees, from balancing the 0% long-term capital gains with partial Roth conversions, to being aware of how different income levels can affect various subsidies and tax credits

We also have a number of articles on practice management:

How bringing on new clients can offer a variety of benefits for an advisory firm, even if it isn't looking to grow significantly
5 growth strategies for independent RIAs, from building strategic partnerships with centers of influence and hiring a diverse team with a wide range of strengths
A 7-step process for building an efficient, thriving advisory practice, which starts with the firm owner crafting a vision for what they want their client base and personal lifestyle to look like

We wrap up with 3 final articles, all about persuasion:

Why being comfortable with silence can help an advisor build better relationships with prospects and clients
Research-backed tactics for being more persuasive, from eliminating filler words to asking more follow-up questions
How financial advisors can persuade prospects to become clients by leveraging "influence" techniques

Enjoy the 'light' reading!

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For many years, the traditional career track for financial advisors has been an 'eat what you kill' model – where advisors must independently find, convert, and manage their own clients. As such, it isn't uncommon for an advisor's first few years to be characterized by long hours, high rejection rates, and low pay. For many, this can be a stressfully prolonged period that typically eases only as advisors build their client base and establish themselves in the industry. However, the scarcity-driven habits that helped them survive their stressful early years may not serve them effectively in their current state. In fact, these habits may even inhibit their growth, making it harder for them to scale their firm in alignment with their long-term vision.

In the 150th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore how advisors can acknowledge the psychological habits formed during prolonged high-stress periods and intentionally move beyond them to continue to achieve sustained growth.

When stress arises, especially in the early years, many advisors often do whatever it takes to pull through and build their business. But a scarcity-driven mindset can linger, long after the immediate pressures have faded. This mindset might manifest in subtle ways – like the reluctance to raise client minimums out of fear that new clients won't come, even when capacity is maxed out. At this point, the narrative of survival can keep advisors tethered to past habits, even when logistically, an advisor may be well past that point and their current reality calls for a different approach.

To shift from survival mode to a mindset geared for growth, a first step might be to take stock of the firm's logistical reality: cash flow, client load, and overall business capacity. This can help advisors move from reactive habits to proactive strategies. A helpful question that advisors can ask themselves is, "What would it take to feel secure in this scenario?" Sometimes, a few targeted risk-hedging steps can provide a sense of security. In other circumstances, it may be more helpful to acknowledge the gut-level response to stressful situations – the same survival instinct that got the advisor 'here'. However, getting 'there' – to the next stage of growth – requires noticing, acknowledging, and then rewiring those instinctive responses.

Importantly, it's not just about making technical adjustments; it's more about a shift in mindset. It's the ability to internalize success and recognize that the survival instincts, once crucial, might now be holding back progress. Letting go of those old habits means freeing up mental and emotional space to envision new possibilities for the firm's future.

Ultimately, the key point is that survival strategies, while essential in the early stages of an advisor's journey, may not align with the realities of a growing and thriving firm. Sometimes, internalizing that an advisor has 'made it' is not always easy, but it's a milestone worth celebrating. Embracing this recognition allows advisors to ask the more exciting question, "What comes next?" This shift isn't just about growing a business – it's about building a vision that truly aligns with long-term goals, creating the freedom to innovate and adapt with clarity and purpose!

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As fiduciaries, financial advisors are required to disclose any conflicts of interest that exist between themselves and their current and potential clients. The conflicts themselves can range from compensation models that impact how much money an advisor might earn as the result of a recommendation (such as specific product recommendations for advisors compensated on commission and 401(k) plan rollover recommendations for AUM-based advisors) to less direct conflicts such as 'soft dollar' benefits provided by custodial platforms that could incentivize advisors to recommend one platform over another.

But no matter the size or directness of the conflict, it still needs to be disclosed to clients, at a minimum on the advisor's Form ADV Part 2A brochure. And given the sheer number and scope of potential conflicts that do exist in the advisory industry (where a wide range of providers seek to incentivize advisors to recommend their products and services to clients), there's a vanishingly small number of RIAs that don't have at least some form of actual or potential conflict to disclose.

However, despite the large number of potential conflicts that exist for advisory firms, much of the financial media and the general public tend to focus specifically on the conflicts caused by commission-based fee models. Which, in turn, has led a small but growing number of RIA firms to describe themselves as "conflict-free" on their websites and advertising materials as a way to distinguish themselves from other firms that may have more directly conflicted business models.

But the downside to using the "conflict-free" label was put into sharp focus recently, when the SEC announced that it had fined several RIA firms for violating its Marketing Rule. Specifically, the firms had all used some form of "conflict-free" to describe themselves on their website, while at the same time, each firm's Form ADV Part 2A described multiple conflicts of interest – or in other words, the firms' claims of being "conflict-free" were directly contradicted by their own required conflict of interest disclosures!

At a high level, the SEC's cases illustrate that it can be highly problematic for an advisory firm to call itself "conflict-free", since doing so violates the Marketing Rule's prohibition on making any material statements that the advisor can't substantiate when the firm really does have conflicts that it discloses in its own regulatory filings. And given that almost every firm has at least one conflict to disclose, there are almost no firms that could accurately (or compliantly) describe themselves as "conflict-free" – meaning it really might be best for advisory firms to avoid the label altogether.

If an advisory firm wanted to highlight its distinction from the commission-based compensation model, it could, in theory, use a more technically accurate term like "commission-free". However, in a landscape where the number of fee-only, fiduciary advisory firms has grown – making "commission-free" less of a differentiator for any one firm – it's worth questioning whether it makes sense for firms to describe themselves in terms of their relative lack of conflicts of interest at all. Because doing so shifts the client's focus away from the advisor's expertise and the value they provide, and instead draws attention to how their conflicts of interest compare with those of other advisors.

The key point is that with the sheer number of potential conflicts of interest in the advisory business, it's better for advisors to be transparent about their own conflicts (and how they work to minimize them) than to downplay their conflicts in comparison to others in the advisory industry. Not only does this help them stay compliant from a regulatory perspective (as the recent SEC cases showed for firms that called themselves "conflict-free") but it also helps build a foundation of trust with their clients – who are ultimately more interested in how their advisor can solve their financial problems than in questioning which practices pose more of a conflict of interest than others!

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Welcome, everyone! Welcome to the 409th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Travis Hornsby. Travis is the founder of Student Loan Planner, an RIA and student loan consulting company based in Chapel Hill, North Carolina that serves nearly 1,400 households with ongoing financial planning (as well as consulting with over 15,000 clients on student loan debt).

What's unique about Travis, though, is how he rapidly built out a base of 1,400 financial planning clients in barely more than a single year, by hyper-scaling his financial planning offering from a base of nearly 10X as many student loan consulting clients that his firm had already provided advice to over the past decade.

In this episode, we talk in-depth about how Travis originally developed his specialization of student loan planning through first correcting the misinformation given to his (now-)wife and her friends in the medical field (and realized that he could give high value to a chronically underserved population), how Travis first started his student loan consulting firm charging for just 1 hour of highly relevant student loan advice (and how Travis vetted which prospects were serious about wanting that advice), and how, while Travis initially priced his consulting work intentionally below-market in order to get opportunities to practice his advice, and build trust and momentum with a high volume of clients, Travis then raised his fees to the full market rate of his expertise once his brand was established (and then even leveraged his price increase as a marketing tactic to drive more business growth, using campaigns such as, "Book a time with me at this price before it's gone!").

We also talk about how Travis built the onboarding and compensation plans for his own (contracted) student loan consultants to scale the business while incentivizing them to take on a greater volume of meetings (and still ensuring that they could give high-quality student loan advice), how Travis decided to diversify his business's income streams when the pandemic and the ensuing student loan legislation wreaked havoc on his consulting business model, and how Travis navigated the leap from student loan consulting to operating an RIA (with all of the additional compliance obligations that came with it).

And be certain to listen to the end, where Travis reflects on how a high quantity of clients and his own personal journey through FIRE (Financial Independence Retire Early) both give him the leverage to only work with people he truly enjoys, how Travis' journey into niching, even into a fairly broad subject, amplified the number of people who showed up on his website (and subsequently asked for help, paying him for advice that grew his multi-million-dollar business), and how Travis feared launching his own RIA for years but ultimately realized that the risk for the "worst case" for a failed RIA startup was worth the upside ‘risk of success' if he was able to gain traction offering ongoing financial planning to his student loan consulting clients.

So, whether you're interested in learning about developing a profitable client niche, how to effectively raise fees to match the planning value being provided, or marketing strategies that can be used to rapidly gain clients within a niche, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Travis Hornsby.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent survey from Charles Schwab indicates that advisors see technology as the biggest driver of change in the RIA industry, with the growing number of AdvisorTech solutions as the most frequently cited tech-related driver of change. Further, Artificial Intelligence (AI) was the most cited factor driving industry growth during the next 3 years, with client data integration as a primary area for improvement, suggesting an opportunity for AI tools to help advisors make the most of the significant amount of client data they possess (possibly saving time in the process) and potentially offer a deeper planning experience for their clients!

Also in industry news this week:

A recent survey found that while 1/3 of advisory firms are currently using AI tools, another 1/3 are fearful of doing so, indicating that while some firms are eager to be early adopters of this technology, others are taking a wait-and-see approach, perhaps as regulation surrounding this technology evolves over time
National RIA Creative Planning recently received an eye-popping 23x earnings valuation in its sale of a minority stake to a Private Equity (PE) firm, indicating that some acquirers are prioritizing a firm's depth of integration and consistency (and the growth prospects it supports), and not just its size, when making investments and setting a value for advisory firms

From there, we have several articles on retirement planning:

Why now could be a good time for clients nearing and in retirement to trim their equity allocations (perhaps as part of a regular rebalancing strategy), despite the potential temptation to be overweight stocks in the current hot stock market
Why contingent deferred annuities could serve as a middle ground for advisors and their clients who want additional protection from longevity risk without giving up control over their assets
How a "bond tent" approach can help advisors and their clients reduce sequence of return risk without increasing longevity risk in the process

We also have a number of articles on client communication:

How advisors can craft effective stories that can help clients and prospects better understand technical planning topics and the value the advisor provides
Why individuals and companies that have the 'best' story sometimes prevail over those that might have better ideas or products
5 types of stories advisors for advisors to have in their back pocket to deal with a variety of client circumstances

We wrap up with 3 final articles, all about spending on children:

Why some parents are cutting back on financial support for their adult children, and the strategies they are using to do so
How providing "helicopter money" can unintentionally stunt a child's path to financial independence from their parents
Why buying kids the highest-quality goods could give them a skewed perspective on what 'normal' purchases look like and the need to balance financial limitations with their 'wants'

Enjoy the 'light' reading!

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"Building in public" is a common piece of advice for tackling new challenges – whether launching content, starting a business, or setting personal or professional goals – as public commitment fosters accountability and motivation, tapping into the human desire to avoid embarrassment. While this approach can be effective, it ultimately poses its own difficulties; for example, when stakes are public, advisors may feel pressured to endlessly perfect their offerings and over-commit their time and resources before knowing what really works. Alternatively, they may avoid public commitment altogether to sidestep this pressure.

In the 148th episode of Kitces and Carl, Michael Kitces and Carl Richards discuss how advisors looking to try something new can overcome mental roadblocks and take action… without feeling the pressure to publicly announce their plans first.

As a starting point, it may be helpful to remember that, for better or worse… few people pay attention to someone's early public efforts. For example, firm owners often spend an immense amount of time on marketing before referrals or prospects begin to flow in. Most new offerings don't come with a built-in audience. The reality is that, more often than not, recognition for one's 'new' offering tends to come long after the offering was launched, which is why we often hear the phrase about taking 10 years to become an overnight success. On the one hand, it may feel defeating ("What's the point if no one cares?"); on the other, it can feel liberating ("I can build anything I want, and few will notice if I fail.").

The benefit of this slow recognition is that it gives advisors time to refine their product… as long as they start. The desire to create a polished product that matches what clients want is important (and a part of how an advisor has gotten so far) but can also inhibit advisors from getting started in the first place. From that end, it may be helpful for advisors who struggle to start to create a "Version 0" – a version built with release in mind, but not a commitment to a finalized, perfected end product. For example, an advisor creating new video content may record "Version 0" videos, where rather than focusing on perfecting sound, light, and other design elements, they ‘just' turn on their camera and follow a brief script. After recording, they may find that Version 0 is actually good enough to release! And once "Version 0" is out, observing who shows up and engages can inform the advisor about what their audience truly cares about.

The key point is that if advisors can ‘just' begin by iterating new offerings, the process of releasing them gives the advisor space to refine what truly resonates with clients – ultimately leading to a great, relevant product!

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Given the frequent news headlines on the (un)sustainability of the Social Security system, many working-age financial advisory clients might harbor doubts about receiving their full estimated Social Security benefits (and many current Social Security recipients might be concerned that they will not continue to receive their full benefits throughout the remainder of their lives). In this environment, financial advisors have the opportunity to add value for their clients not only by giving a clear explanation about the current status of Social Security and the potential legislative changes that could improve its solvency, but also by modeling what (realistic) changes would mean for their clients' financial plans.

To start, while the state of Social Security's trust fund reserves often receives significant media attention, in reality, the bulk of funding for paying out Social Security benefits comes from Federal Insurance Contributions Act (FICA) taxes, more commonly known as payroll taxes (with workers and their employers each paying 6.2% on up to $168,600 of income in 2024 for the Social Security portion of FICA). Which means that even if the trust fund reserves were to become depleted (currently estimated to occur in 2035), the system would continue to pay the majority of benefits that are simply covered by the ongoing receipt of significant payroll tax revenue. In fact, according to the latest annual report of the board of trustees of the Social Security trust funds, Social Security would still be able to pay 83% of scheduled benefits in 2035 when it is expected to be depleted, though this figure would decline to 73% of scheduled benefits by 2098. Which might come as a surprise to clients who assume that the exhaustion of trust fund reserves would mean that no (or very little) benefits would be paid!

Nonetheless, given the disruption that a reduction of benefits would cause recipients of Social Security retirement benefits (particularly those who rely on such benefits for a significant percentage of their retirement income), policymakers have an incentive to enact measures that would allow the system to continue paying out full benefits for decades to come. Such options include single-policy solutions that would wipe out the entire 75-year shortfall (e.g., the board of trustees report estimates that a 3.33 percentage point increase in the payroll tax or a 20.8% reduction in benefits would cover the gap) or a (perhaps more politically feasible) combination of policies that address system revenues and/or costs (e.g., raising the payroll tax wage cap or increasing the Full Retirement Age) that would close the funding gap.

Ultimately, the key point is that financial advisors have the opportunity to add value for their clients by providing context on the state of Social Security (e.g., even if the trust funds are exhausted, the system would still be able to pay out the majority of scheduled benefits) and potential legislative fixes (which, depending on the legislation passed, might not be as severe as some clients assume), as well as leveraging financial planning tools to show the impact of the possible trust fund exhaustion and/or potential policy actions on each client's financial plan (both in dollar terms and how it changes the probability of success of their plan). Which, together, could provide clients with a more realistic picture of what changes to Social Security could mean for their unique situation!

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Welcome everyone! Welcome to the 405th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Gaetano Sacco. Gaetano is a partner and senior financial advisor at Fountainhead Advisors, an RIA based in Warren, New Jersey, that oversees approximately $900 million in assets under management for 1,000 client households.

What's unique about Gaetano, though, is how after breaking away from an insurance broker-dealer with barely $5M in assets under management, he has been able to quickly build his practice to $75 million in AUM in just 5 years in part by turning what was originally a liability for him in his 20s – being a 'young' advisor who prospective clients didn't always think was credible – into an asset, where Gaetano is now quickly growing his client base of retirees by highlighting how his 'youthfulness' as a 30-something means he's been around long enough to show that he's going to be a financial advisor for the long run, and still young enough that he can do this for another 30 years and actually be their financial advisor for their entire retirement (or basically, the last advisor they'll have to worry about picking in their lifetime).

In this episode, we talk in-depth about Gaetano's experience working in insurance sales starting soon after he graduated from college, including why the need to cold-call for business as a relative newcomer was both a challenge and a confidence-builder as he started to gain traction selling insurance products and some standalone financial plans, the factors that ultimately led Gaetano to decide to make the switch from insurance to the RIA channel and leave friends and mentors he had made in the insurance world despite the success he was having there after winning "Financial Planner of the Year" in his region of the company, and how Gaetano, now in his late 30s, has found his age to be an asset, as getting married and having kids has given him new perspectives in life to be able to better related to his clients and prospects, his years of experience shows that he has credible success, and his relatively young age helps him reassure his older clients that he can really be there for them in the long run.

We also talk about how Gaetano has built his current practice up to $75 million in just 5 years in part through client referrals that came after he got really proactive in addressing client concerns (from phone calls to webinars to additional written commentary and even crafting an expertise on PPP loans while they were available) during the COVID-induced market downturn, how Gaetano has since used in-person client appreciation events, including restaurant crawls and entertaining clients at a popular horse race, to both build loyalty among his current clients and to generate warm introductions to the friends that his existing clients bring to these events, and how Gaetano expanded his capable to be able to serve his 150 clients in part by empowering a newer advisor to take on plan-building and client-facing tasks while building his own book of business.

And be certain to listen to the end, where Gaetano shares how joining an advisor study group, and its structured cadence of 2 multi-day meetings every year, has guided him through multiple changes that allowed him to level up his own practice, why Gaetano turned down his first potentially lucrative job offer with an RIA because of the bad vibes he got from the firm and its leadership, and how Gaetano's realization that he wanted to work in the financial advice business for the long run influenced his decision to pursue a more planning-centric career path… that gives him the opportunity to wake up every day excited to meet with his clients (while still being able to maintain a strong work-life balance).

So, whether you're interested in learning about gaining credibility as a 'young' advisor, driving client referrals through a proactive service experience, or the professional benefits of participating in an advisor study group, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Gaetano Sacco.

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When it comes to focusing on a niche for financial advisors, business owner clients can be an appealing target as they can have complex financial planning problems ranging from cash flow management to tax planning to acquisition strategies. However, while business owners can be compelling clients, they can also be difficult to find and prospect in the first place. One component that feeds this dynamic is that business owners have many people vying for their attention; another is that business owners have limited time and resources. So, the dilemma for advisors looking to find business owners and convince them to become clients often comes down to finding business owners who can benefit from (and want) financial planning services and demonstrating expertise in a way that can build trust.

An effective strategy for attracting business-owner clients is to engage with a CEO Peer Group. These support groups, typically comprising 10–12 business owners, generally meet monthly and allow members to discuss issues, brainstorm solutions, and share resources. Most importantly, CEO Peer Groups provide space for business owners to work 'on' their businesses – rather than 'in' their businesses – with highly trusted peers.

Advisors have a few options for getting involved in a CEO Peer Group. One is to become a Strategic Partner (SP) and create a new group, serving as both sponsor and host. This option allows advisors to establish themselves as experts and resources for other Peer Group members, where they can also better understand what business owners want and need from the complex situations they discuss with their Peer Group. Additionally, when the advisor shows up and facilitates fruitful discussions every month, providing relevant resources as the group's SP, business owners begin to see the real value the advisor can offer. Group members get to know and trust the advisor in a non-sales environment, making them more likely to become prospects (and then clients) of the advisor.

Instead of engaging with a CEO Peer Group by serving as a Strategic Partner (which can be relatively time intensive), a second way for advisors who are firm owners to engage with peer groups is to become members themselves. This lets them reap the benefits of having both the support and guidance of a Peer Group and access to a level of prospective outreach through networking within the group as a group member. A third way for advisors to engage with a CEO Peer Group is to partner with a peer group moderator to serve as a Center of Influence for the group, allowing the advisor to connect their own network of resources with group members to help solve their various problems, or even providing members with resources through their own planning services to answer questions on issues such as taxes, insurance, and scaling.

Ultimately, the key point is that for advisors who work with (or would like to work with!) business owners, CEO Peer Groups can provide an organic way to connect with, market to, and ultimately onboard new clients. Whether serving as a Strategic Partner, a group member, or a Center of Influence, CEO Peer Groups can provide advisors with a valuable opportunity to learn from like-minded business owners to help them expand their own network of trusted peers!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent study by Cerulli has shown a sharp increase in the number of affluent investors willing to pay for advice, which on the one hand reflects the increasing financial complexity in peoples' lives (while they've also gotten busier than ever at work and at home) to the extent that they're more willing to work with someone to navigate those financial challenges; while also highlighting the progress advisors have made in providing more value beyond 'just' portfolio management – and in demonstrate that value to the public.

Also in industry news this week:

As brokerage firms have faced a wave of lawsuits regarding the low interest rates paid on cash sweep accounts, some legal experts believe that RIAs could also be targeted for legal action if they allow clients' uninvested cash to sit in a cash sweep account rather than investing it or moving it to a higher-yielding cash account
In a recent SEC panel discussion, the CFP Board pushed back against claims by the broker-dealer and insurance industries that a uniform fiduciary duty would impose a heavy cost burden on commission-based advisors (and therefore restrict access to financial products and advice for lower- and middle-income consumers) with data showing that CFP certificants, who are held to a fiduciary standard, actually earn more income on average while still serving lower-income clients

From there, we have several articles on investing in the wake of the Federal Reserve's recent decision to cut interest rates:

How the Fed's rate cuts will translate into lower interest rates on cash products like savings accounts, CDs, and money market funds (meaning cash may no longer be a 'free' source of 5%+ returns)
How markets have historically tended to fare surprisingly well following rate cuts, providing some comfort for long-term investors even in the midst of short-term economic uncertainty
Why there's little that investors can do today to take advantage of the recent rate cut (since it was already largely priced into markets) – but it may not ultimately matter much to investors with a longer time horizon, for whom a rate cycle is just a blip in the long-term picture

We also have a number of articles on Mergers & Acquisitions:

Why firms seeking to pursue growth inorganically via M&A will be more successful if they can first figure out how to achieve sustainable organic growth
What business owners (including RIA owners themselves, as well as business owners whom advisors serve) can consider when planning a business exit strategy, and why it's best to start planning several years before the date of the expected sale
How the headline "multiple" of an M&A deal can be misleading, since it may contain caveats like unrealistic performance-based incentives that make the true economics of the deal less attractive for the seller

We wrap up with 3 final articles, all about advisor dress and office decor:

Why the once-ubiquitous necktie has fallen out of fashion, even amid formal attire (although in the end it's not so much about what's in fashion as about what the advisor can wear to feel their best in front of clients)
How advisors use their office décor to project their unique attributes and spark conversations with clients, from personal mementos to an outdoor natural environment
Why even though advisors may feel most 'authentic' in casual attire, they may still find it easier to land clients (particularly if they have less experience or professional accomplishment) if they dress similarly to what clients may expect an advisor to wear

Enjoy the 'light' reading!

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Over the last 60 years, the top Federal marginal tax bracket has steadily decreased from over 90% in the 1950s and 60s to 'just' 37% today. However, with the national debt expanding rapidly, observers of U.S. tax policy are predicting that Congress will inevitably be forced to again increase tax rates in order to raise revenue and balance the national budget – and that the current regime of relatively low tax rates will prove to be a temporary phenomenon.

From a financial planning perspective, the seeming implication of a likely rise in future tax rates would be that, given a choice between being taxed on income today or deferring that tax to the future, it makes more sense to be taxed today when taxes are lower than they'll be in the future. For example, if taxes were expected to rise in the future, it would be better to contribute to a Roth retirement account (which is taxed on the contribution, but not upon withdrawal) than to a traditional pre-tax account (which is tax-deductible today but is taxable on withdrawal). As a result, there's a common line of thinking that people saving for retirement should avoid pre-tax retirement accounts entirely and contribute (or convert existing pre-tax assets) to Roth instead – regardless of which tax bracket they're in today.

While it's true that the top marginal tax rate has decreased dramatically since the mid-20th century, the difference in the actual tax paid by most Americans has been far more modest. Because not only were very few households actually subject to the 1950s-era top tax rates (which were triggered at the equivalent of over $2 million of income in today's dollars), but the long decline in nominal tax rates has also come with the elimination of many loopholes and deductions that have resulted in more income being subject to tax. Which means that it seems less likely that Congress will simply raise the marginal tax brackets in the future than that they will further reduce the benefits of current tax planning strategies – possibly including those of Roth accounts themselves!

Furthermore, focusing only on tax rates at a national level ignores the fact that an individual's own tax rate is likely to change much more during their lifetime based on their own income and life circumstances. In particular, those nearing retirement may see a large swing from the upper tax brackets as they reach their peak earning years, to the lowest brackets upon retirement, and eventually stabilizing somewhere in the middle once they start receiving income from Social Security and Required Minimum Distributions (RMDs). Which creates a tax planning opportunity to make pre-tax contributions while in the peak earning years, and then to convert funds to Roth after retirement – and as long as those funds can be converted at a lower tax rate than they were contributed, it still makes sense to contribute them to a pre-tax account.

Ultimately, while the idea that we currently live in an anomalously low-tax environment that will inevitably reverse course has its appeal, basing one's tax planning decisions around that assumption is still risky. Because even if taxes do creep up nationally, individuals who are already in the highest tax brackets today are still likely to be in a lower bracket upon retirement – which makes it better to contribute to a pre-tax account today and then withdraw (or convert) the funds at a lower rate later on!

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Welcome everyone! Welcome to the 404th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Ann Garcia. Ann is a partner of Independent Progressive Advisors, an RIA based in Portland, Oregon, that oversees approximately $115 million in assets under management for 120 client households.

What's unique about Ann, though, is how she crafted a nationally recognized expertise in college financial planning, and the ways that specialization has evolved as Ann’s advisory business itself has evolved its focus on serving mid-career professionals balancing the competing priorities of saving for college and their own retirements.

In this episode, we talk in-depth about Ann’s path to becoming a recognized college planning expert, which started by becoming the in-house expert within her firm by researching answers to common client questions about funding college for their children, how Ann leveraged the emails she had already been sending to clients to answer their college funding questions to compose the initial articles of a blog on college planning (and how the blog’s singular focus on its college planning specialization allowed Ann to relatively quickly earn acknowledgement and hyperlink traffic back from national publications like the The New York Times), and how Ann has further leveraged this expertise and media exposure to publish a book and build an online course on college planning, allowing her to serve families that she knows need her help but aren’t necessarily a fit for her advisory firm’s core wealth management services.

We also talk about how Ann’s media appearances and college planning expertise have helped her attract clients and grow her firm by serving mid-career professionals balancing college planning with other financial goals (to the point where Ann and her business partner are navigating capacity constraints as they reach 120 client households), how Ann started out on her own as an advisor by buying the practice of a retiring advisor (retaining all but one of her clients in the process) and using that as the foundation to build the practice Ann ultimately wanted it to become, and how Ann’s decision early on in her career to take as many prospect meetings as possible, even if she knew they wouldn’t likely become clients, helped her get in the repetitions necessary to refine her communication and sales process to the point where now prospects who are a good fit almost always become clients after meeting with her.

And be certain to listen to the end, where Ann shares her advice for families going through the college planning process, including the importance of starting these conversations with kids early in their high school years to set expectations for how much the family can afford to pay for college in the first place, how Ann’s volunteer service as a NAPFA study group leader not only helped her connect with advisors with a wide range of experiences, but also enabled her to build a valuable network of COIs in her local community to support her clients, and why Ann decided to leave a firm that did offer her career growth and prestige opportunities to start out on her own instead… so that she could work exclusively with clients that she wanted to work with, who shared her own values.

So, whether you’re interested in learning about how to build nationally recognized expertise in a client niche, helping client families plan for college, or how acquiring a retiring advisor’s firm can jump-start an advisor’s own practice, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Ann Garcia.

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Starting a new firm can be a nerve-wracking time for an entrepreneurially minded financial advisor, as making the jump involves a significant amount of professional and financial risk. Nonetheless, after a year or 2 in business, some firm owners will find that their plate is becoming full and their available time is shrinking as they balance servicing current clients with marketing for new ones and also possibly managing staff. Which presents an opportunity for the firm owner to step back and assess whether they want to change any of the practices that they've established in their first years in business to make the next several years both professionally and personally rewarding.

In this guest post, Jake Northrup, founder of Experience Your Wealth, LLC, discusses 7 lessons he learned in years 3–5 of building his RIA and the changes he subsequently made to his service model, client base, and daily schedule, offering guidance to firm owners who may need to navigate some of the same challenges that come with scaling their advisory business.

When an advisor opens a firm, they might have little to no revenue but a good deal of time to manage their practice. Which means that when their first clients come on board, they might be tempted to overservice them to demonstrate the value that they can provide. Nevertheless, as a client base grows, maintaining such a level of service can take up more time that the advisor may have available, particularly given the added responsibilities of running their growing business. In Jake's case, after deciding that he was overservicing clients during the earlier years of his practice, he started scheduling fewer standard meetings and limited the number of after-meeting action items, freeing up his time and mental bandwidth for other activities to grow and run his firm.

In addition, he also found that he preferred working with certain types of planning clients over others, leading him to refine his niche and ideal client persona over time. While Jake had originally worked with equity compensation clients, current or aspiring business owners, and young professionals with student loans of $100,000 or more, he realized that he didn't care as much for student loan planning, which led him to make the difficult decision to transition 20% of his client base who primarily needed student loan planning.

Jake also learned key lessons on managing daily schedules. For instance, because he disliked the traditional 9–5 work schedule, he offered his team significant flexibility in deciding when they worked. However, this lack of structure actually put more pressure on team members because it didn't allow for sufficient collaboration time, leading him to implement a more standard work schedule that still offered some flexibility during the day and virtual coworking sessions for the team. For himself, Jake time blocked his schedule to ensure that he prioritized his personal life and wellbeing (e.g., taking vacations) and organized his workday to leverage the times of day when he has the most energy. He also conducted a "time audit" based on Dan Martell's 2-dimensional DRIP Matrix system to help him identify tasks based not just on their revenue potential but also their ability to energize and light him up.

Ultimately, the key point is that a new financial advisory firm owner's original vision for their practice is likely to change over time, which can create challenging decision points (e.g., when to hire new staff and whether to adjust the firm's ideal client persona). Nevertheless, as Jake has found, there are strategies to help firm owners mold their business to meet personal and professional needs, which can help them support greater wellbeing for themselves and a more sustainable business in the long run!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that the North American Securities Administrators Association (NASAA) released the latest edition its annual survey outlining the state of state-registered RIAs, showing that the number of state-registered firms and their assets declined slightly in 2023 (perhaps due to many firms seeing their AUM hit the $100 million mark amidst strong market performance and organic growth and moving up to SEC registration, or being acquired by an SEC-registered firm). Further, the survey showed the continued predominance of the AUM fee model amongst state-registered firms (at the same time, more than half of firms said they charge on a fixed-fee or hourly basis, suggesting many firms utilize multiple fee models) and identified the most common areas of regulatory enforcement during the year, with failure to register as an investment advisor or investment advisor representative and fraud topping the list.

Also in industry news this week:

A coalition of organizations representing financial advisors is pressing Congress to include tax breaks for financial advisory fees amidst expected negotiations to address the pending expiration of several provisions of the Tax Cuts and Jobs Act
A recent survey indicates that client referrals remain the chief source of new clients for many financial advisory firms, many of which have expanded their client geographic footprint during the past few years

From there, we have several articles on investment and tax planning:

As the cost of implementing a direct indexing strategy continues to drop, financial advisors can play a valuable role in helping clients determine whether it is a valuable opportunity
How considering the transition costs involved in moving to a direct indexing approach can help advisors avoid creating a potentially costly tax bill for certain clients with significant embedded gains
Why a "segmented ETF" strategy could be simpler and less expensive to implement than a direct indexing approach

We also have a number of articles on advisor marketing:

A research-backed list of potential opportunities for advisors looking to attract next-gen clients, from encouraging online reviews and testimonials to crafting a consistent message to deploy through digital marketing channels
Why assessing (and potentially adjusting) a firm's client value proposition could drive more client growth than additional marketing spending in isolation
How firms can craft an effective client survey to reveal the firm's strengths and potential areas to improve to promote client retention and referrals

We wrap up with 3 final articles, all about books:

8 tips to make it easier to read more books, from creating a more conducive home environment to establishing accountability measures
How to decide whether to move on from an unfinished book or whether to see it through until the end
Why it's often hard to retain details when reading non-fiction books and how including opportunities for regular, interactive feedback could lead to greater comprehension

Enjoy the 'light' reading!

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Given the general trend of advisory firms charging on some percentage of assets under management, market growth can also be a strong indicator of advisory firm growth. For firms with revenue tied to portfolio performance, the additional income that can accompany a healthy market outlook allows firms to dedicate more resources to marketing and other processes to help grow the firm. However, while this business model has worked well with the strong markets that have dominated the last 15 years, there is also an inherent risk that comes with inevitable market corrections, bear market years, and recessions, which poses the question: How can advisors structure their firms to protect against market corrections?

In the 147th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors (especially those who joined the industry after the last correction) can protect their business against the market volatility risk inherent to a business model that uses AUM fees.

As a starting point, a firm's profit margin is usually the first line of protection against a bad market. The average established firm has a profit margin of 20–30% after employee, technology, and operational expenses during 'good' market years. During bear market years (or quarters), any AUM-correlated profit margin will have a corresponding drop, and that profit margin may then drop to 0%. However, unless the profit margin drops below 0%, an advisory firm will likely be able to remain operational as is, without being forced to make difficult decisions to shrink the business. While maintaining a 0% profit margin for a quarter or few may not be pleasant, the advisory firm that is aware of this 'feast-and-famine' cycle and is prepared for it can situate itself to pull through bear markets with minimal business adjustments.

To better visualize how a recession would impact a firm's long-term growth, advisory firm owners may want to model how their business would be affected by several quarters of 'bad markets' and consider how they would need to answer these questions: How would payroll get impacted? What expenses would need to be adjusted? How would several quarters of bad markets impact the firm owner's ability to pay themselves and maintain their lifestyle? These considerations can help advisors better understand their options and the adjustments that would need to be made in the short- and long-term.

Importantly, it's essential to be mindful of the emotional toll along with the logistical side of bracing for a recession. In a bad market, advisors are constantly required to absorb client uncertainty and fear – often while they are equally unsure of what will happen. And, for advisors who are also firm owners, the toll grows as employees are also emotionally stretched to absorb the chaos of an uncertain market – and even more so if owners need to let an employee go to keep the business afloat. Emotional preparation usually poses a different challenge than reviewing a business plan. However, much as how a firm needs a certain level of profit margin to ensure that it will have the resources it needs during tough times, so too can advisors ensure they have the resources they need to maintain their own emotional wellbeing. Even basic self-care practices like maintaining a healthy diet, getting enough sleep, and exercising can provide a crucial barrier against the emotional and physical strain of stress.

Ultimately, the key point is that market corrections, slow years, bear markets, and recessions are inherent risks for firms with revenue models that rely on assets under management. However, advisors who are mindful of the effects of these trends can proactively make small adjustments before an emergency strikes – better protecting their clients and their firms in the long run!

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In the nearly 2 years since the launch of ChatGPT, there has been an explosion of new technology solutions incorporating Artificial Intelligence (AI). Today, AI is now almost ubiquitous across many of the tools that we use, from smartphone cameras to search engines to office productivity software. For financial advisors, too, a ballooning number of new advisor-focused AI tools has appeared over the last 24 months, purporting to save advisors' time and staffing needs by automatically performing previously manual tasks like creating meeting agendas, generating marketing materials, and even analyzing and recommending financial planning strategies.

And yet, despite the flood of new AI tools and the assurances that advisors hear from software providers and AI proponents that AI will soon prove to be life-changing in its ability to 'intelligently' perform any task that the user asks of it, the impact that AI will have in the long term is still unclear. Much like how other forms of technology in the past 30 years (such as online shopping in the early internet era and blockchain solutions in the late 2020s) went through early hype phases only to have the bubble burst when many of the business models based on the new technology proved to be unsustainable, AI is going through its own speculative phase where new AI solutions are popping up for nearly every use case imaginable – except, as the lessons from previous technology bubbles have shown, many of the use cases currently being offered for AI won't actually prove valuable enough to build successful solutions.

But the likelihood that many of today's AI solutions may fall flat in the short term doesn't necessarily mean that AI won't ultimately bring significant benefits for advisors; it just means those benefits may take a long time –possibly a decade or more – to become evident. At least to some extent, this will be the result of generative AI's ability to grow over time, as AI technology itself becomes more reliable and capable of a broader range of functions. Additionally, as it becomes clearer which AI use cases provide real value, those applications will gradually gain traction among advisors and may even become integral to how they serve clients and manage their businesses.

For the time being, however, it may be helpful for advisors to take a realistic approach to the value that AI tools will provide, especially in an environment where technology providers often make bold claims about their solutions' ability to save time and reduce costs. Some of the capabilities of today's AI tools (e.g., automating workflows or retrieving client information using a chatbot) may be useful to some extent, but if the processes that they replace don't take that much time to begin with, then the tools' benefits may not justify the additional cost to implement them. On the other hand, if the tool really does help advisors meaningfully cut the time they spend on inefficient tasks – such as client meeting preparation and follow-up – then they're more likely to be worth the cost outlay.

The key point is that, like any technology, AI itself isn't the solution to making advisors better and more successful; rather, it's a foundation on which solutions can be built to help advisors address specific challenges while maximizing the technology's current capabilities. For now, getting the most out of AI may mean focusing on more narrowly targeted AI solutions (rather than those offering a mosaic of tools, only some of which may hold real value) – as these are more likely to address the advisor's actual needs, instead of trying to be the "One Solution" for everything, regardless of whether the problem truly needs solving!

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Welcome everyone! Welcome to the 403rd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Eric Stein. Eric is a partner at East Bay Investment Solutions, a firm that provides fractional Chief Investment Officer services based in Charleston, South Carolina, that supports over $6 billion in assets under advisement across 26 advisory firms they serve.

What's unique about Eric, though, is how he has chosen not to utilize the investment expertise he's built throughout his career to gather individual clients and manage their portfolios as a 'traditional' financial advisor with investment expertise, but instead to really stay focused on being an "investment nerd" by landing his current role as a partner with East Bay, where he gets to serve as a fractional Chief Investment Officer for multiple advisory firms and all of their clients instead.

In this episode, we talk in-depth about how it works when advisory firms hire Eric's fractional Chief Investment Officer service offering, including conducting investment research, designing model portfolios, and producing written market commentaries for advisors to use with their clients, how Eric's firm differs from the Outsourced Chief Investment Officer (or OCIO) services that have emerged for institutions, and how a fractional CIO also differs from a TAMP by still leaving the actual portfolio implementation responsibilities up to the advisor (which allows Eric's firm to charge a flat fee as a fractional CIO rather than a basis point charge based on client assets that allows it to serve mid-sized independent advisory firms in a cost-effective manner), and Eric's suggested considerations for advisors considering working with a fractional CIO, including most importantly finding a fit with respect to the firm's investment philosophy.

We also talk about Eric's own unique career journey, which started in commercial banking with stops along the way that included a variety of roles at Goldman Sachs Asset Management and working as an internal full-time Chief Investment Officer for a large national RIA before starting his current fractional CIO role, how Eric has leveraged recruiters over the years to both discover new opportunities and to quickly find a new position after being unexpectedly let go when large-firm investment departments go through downsizing (which is more of a hazard for those in investment roles than traditional financial advisor roles), and how Eric went through a metaphorical 'dating' process in approaching his current business partner and why their open discussions of business management contingencies before partnering up ensured their visions were aligned and has allowed the business to now grow and thrive for years.

And be certain to listen to the end, where Eric shares his views on working in massive national businesses versus smaller local firms, including balancing the opportunity to explore multiple positions within the same company with feelings of being 'just' a cog in a much larger system of gears, how Eric's experiences as a manager and the journey he went through in learning how to start letting go and not micromanage team members, and how it was a tennis coach who ultimately taught Eric the value of remembering to pause from time to time to celebrate successes while also learning and moving on quickly from failures, that helped Eric navigate the ups and downs of his own career in financial services.

So, whether you're interested in learning about navigating a career in the financial services industry as an "investment nerd", what it means to hire a fractional Chief Investment Officer, or how to successfully create a business partnership that meets both partners' visions, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Eric Stein.

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The business model of many financial advisory firms revolves around serving clients who are able to pay a certain minimum in annual advisory fees, which reflects not only the value that the advisor can provide for the client, but also the amount that the advisor must charge in order to provide the level of deep planning and investment management that higher-net-worth clients expect (while also earning enough profit to make the venture worthwhile).

However, because many next-generation clients such as those who are Millennials and Gen Zers are still building their assets up, paying $10,000 or more in advisory fees each year may not be feasible for them… at least not yet. This can create tension with the traditional advisory firm business model, because that minimum fee is often necessary for the firm to break even. As a result, serving next-generation clients may require adjustments to the firm's business model to deliver the services younger clients need while also remaining profitable.

In this guest post, Stacey McKinnon, Chief Operating Officer and Partner at Morton Wealth, shares a new business line her firm developed to serve younger professionals, the challenges that the firm faced in developing a sustainable business model to serve next-generation clients at lower cost than retirees, and some of the lessons her team learned from the experience that could be valuable for advisors who want to develop their own next-generation offerings.

At a high level, the challenge of serving next-generation clients is that, although they may not be able to afford higher fees, their financial needs are just as complex – if not more so – than those of retired clients. Importantly, serving next-generation clients effectively doesn't mean just offering fewer or more automated services (e.g., robo-managed portfolios) at a lower fee. Instead, it involves focusing on what clients value most and delivering that value efficiently, without adding unnecessary services that the client may not need or want. For example, most Millennial and Gen Z clients can open their own investing account and buy index funds online with only minimal guidance from their advisor, so full-service investing might not offer enough value to a next-generation client to justify an ongoing planning fee.

However, many next-generation clients have their own unique planning needs – ranging from equity compensation and tax planning to managing debt and even addressing ongoing anxiety about money and wellbeing. Advisors who can focus on and help resolve these issues for clients can prove incredible value to their clients. This, on one hand, requires deep expertise, meaning the firm may need to ensure its advisors have adequate experience and training to handle complex planning strategies that may be beyond the capacity of a relatively junior advisor. On the other hand, by focusing on a few key planning areas, the firm can deliver value more efficiently than one that tries to be "everything to everyone".

The key point is that while serving next-generation clients profitably may be more challenging in the short term, there's significant long-term potential in working with clients who are still accumulating wealth – and who may eventually inherit wealth from their parents. Because ultimately, many of today's high-net-worth retirees were once part of the 'next generation' themselves. Which means that advisors who can deliver value, build trust, and maintain strong client relationships today are positioning themselves to serve the high-net-worth clients of tomorrow!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that the SEC this week fined 4 RIAs for violations of its marketing rule related to their claims that they offered 'conflict-free' financial advice. Which means that while many fee-only RIAs use the reduced conflicts that come with the fee-only model (as opposed to firms that receive compensation from commissions and other sources) as a key marketing talking point, the fact remains that being truly 'conflict free' is nearly impossible and such claims (which are hard to substantiate) appear to be a step too far when it comes to advertising under the SEC's marketing rule.

Also in industry news this week:

A CFP Board study indicates that financial planners with the certification earn 10% more than other advisors and show very high levels of career satisfaction
A Morningstar study has identified 4 main areas where investors find value from their financial advisors, which might not match an advisor's own list of top ways they add value for their clients

From there, we have several articles on behavioral finance:

The behavioral biases that can lead retired clients to over- or underspend and how advisors can support clients in each of these positions
Why feelings of "disempowerment" could lead retired clients to spend well below their means, and how advisors can help them have more fulfilling retirements
Why many seemingly wealthy retirees can sometimes have a hard time spending money, from the 'money scripts' they learned as a child to previous bouts of acute poverty they experienced earlier in life

We also have a number of articles on practice management:

Why creating clear lines of communication among management, compliance officers, and firm staff is an important step to ensure employees understand their compliance responsibilities while not feeling overly restricted by compliance requirements
The key traits of an effective chief compliance officer, from the knowledge needed to identify potential compliance concerns to the communication skills needed to train employees and effectively deal with potential violations
How (solo) advisory firms can use an annual compliance calendar to organize the many compliance responsibilities they face throughout the year

We wrap up with three final articles, all about college planning:

5 common college planning mistakes and how advisors can help clients avoid them
While they offer a range of tax benefits and, recently, more flexibility, 529 plans continue to only be used by a limited number of Americans, creating an opportunity for financial advisors to discuss their benefits and create a savings plan with clients
Why a 4-year college degree remains a good deal for many students, with the benefits not necessarily accruing only to those who go to the priciest schools, but rather to those students who make the most of their college experience

Enjoy the 'light' reading!

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Among all the different types of retirement account beneficiaries, those who are the surviving spouse of the original account owner receive the most preferential tax treatment when it comes to distributing the account's assets after the owner's death. While non-spouse beneficiaries face strict timelines – either starting Required Minimum Distributions (RMDs) the year after the original owner's death and stretching them over their remaining life expectancy (if they were considered Eligible Designated Beneficiaries), or fully distributing the account within 10 years (if they were Non-Eligible Designated Beneficiaries) or 5 years (if they were Non-Designated Beneficiaries) – surviving spouses have more flexibility. They can delay their RMDs until the original account owner would have reached the required age for starting RMDs if they were still alive.

Furthermore, surviving spouses also have the option to roll over the inherited account into an account in their own name, allowing the account to be treated as if it had always been theirs. Meaning that the surviving spouse can wait until their own RMD age to start distributing from the account; and when RMDs do begin, they're able to use the more favorable Uniform Lifetime Table to calculate the RMD amounts (rather than the Single Life Table that's generally used to calculate the RMDs of account beneficiaries).

Prior to 2024, however, spousal beneficiaries faced complex tradeoffs when deciding whether to leave the account as an inherited account or to roll it over into their own name. For example, a surviving spouse under age 59 1/2 may want to do a spousal rollover to take advantage of the more favorable distribution schedule; but if they need to access any of the funds in the account before age 59 1/2, withdrawing them from the rollover account would incur a 10% early distribution penalty (which they wouldn't have incurred if they had left the account as inherited). And a surviving spouse who is older than the deceased spouse may want to leave the account as inherited in order to delay RMDs until the decedent's RMD age, but then they'd be subject to the less-favorable distribution schedule using the Single Life Table.

But the SECURE 2.0 Act created a new option for surviving spouses (effective starting in 2024) that changes the calculus for deciding which option to choose from. The new rule allows spousal beneficiaries who leave the account in the decedent's name to elect to use the Uniform Lifetime Table to calculate their RMDs rather than the Single Life Table as was required under the existing rules. Which means that spouses who choose to keep the account in the decedent's name for any reason will no longer be forced to take higher RMDs for doing so.

Notably, there may still be reasons to complete a spousal rollover in spite of the new Spousal Election rule. For instance, surviving spouses who are younger than the decedent can delay RMDs for longer after rolling the account over; additionally, rollover accounts generally have more flexible and favorable options for the surviving spouse's own beneficiaries (especially if the surviving spouse later remarries). Meaning that, in many cases, the best option might be to keep the account under the decedent's name until RMDs begin and then roll it over into the spouse's name thereafter.

The key point is that even though the new Spousal Election may seem to complicate the planning picture for surviving spouses by adding yet another option, it actually serves to benefit surviving spouses by reducing the tradeoffs between inherited account and spousal rollover options. And while different spousal beneficiaries may have a different 'optimal' choice depending on their own circumstances, the consequences of making the 'wrong' choice are now much less than they were under the old rules!

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Welcome everyone! Welcome to the 402nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is John Mason. John is the President of Mason & Associates, an RIA based in Newport News, Virginia, that oversees $370 million in assets under management for approximately 390 client households.

What's unique about John, though, is how joining a firm that served the niche of Federal government employees allowed him to quickly accelerate his own learning curve and demonstrate his expertise early in his career as a 20-something, ultimately enabling John to more quickly begin bringing in his own clients (which also came about faster because he was able to plug his newfound focused expertise into the firm's existing marketing strategies).

In this episode, we talk in-depth about how John and his entire firm serves the Federal employee niche, with a particular focus on the areas that make their clients' situations different from others, such as the Federal government's unique retirement system that includes both defined-benefit pension and defined-contribution plans, how John finds that specializing has allowed him to serve them with greater efficiency because he doesn't have to 're-learn' the ins and outs of each client's unique employment and retirement benefits (which in turn provides more time and capacity to forge deeper connections with clients as well), and how John was able to build credibility with clients as a very young advisor early in his career by demonstrating his deep knowledge of the particular financial planning issues faced by the Federal employees that made up his firm's client base.

We also talk about how John's firm's marketing specifically emphasizes how Federal employees are unique (and thus why his firm is better suited than more generalist advisors to meet these clients' planning needs), how John's firm long used a radio show to demonstrate their expertise and encourage prospects to attend an in-person seminar put on by his firm, with about half of seminar attendees eventually scheduling individual introductory meetings to become clients, and how John evolved the approach to now attracts clients through a podcast targeted at Federal employees, which similarly both educates listeners… and also directly highlights how his firm does its work with Federal employee clients.

And be certain to listen to the end, where John shares how transitioning his firm from a broker-dealer platform to the RIA model has allowed it to generate more revenue per client while still bringing down the all-in fee costs for clients (thanks in large part to the lower platform fees paid as an RIA), how John handled the challenge of letting go of unprofitable clients during this transition, including by calling each one personally and trying to find those not-a-good-fit-anymore clients a new home with other advisors who would be a better fit, and why John thinks fee-only advisors sometimes underrate the importance of insurance planning, which he believes is a way for advisors to make a life-changing difference in their clients' lives.

So, whether you're interested in learning about how serving a niche can help a newer advisor gain credibility with clients, using a podcast to generate new client leads, or how to profitably transition from a broker-dealer platform to the RIA model, then we hope you enjoy this episode of the Financial Advisor Success podcast, with John Mason.

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

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

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

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

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

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

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

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Welcome to the September 2024 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

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

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

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

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

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

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that a recent benchmarking study suggests that a number of RIAs are looking to move 'upmarket' and work with wealthier clients by expanding their service menu to include family office services, investment banking, and/or trust services. Nonetheless, given that adding services requires an investment on the part of the firm (often in the form of increased staffing to offer high-touch services and add needed expertise), firms appear to be analyzing the costs and benefits of offering these services in-house versus adding value to clients by referring them to trusted professionals in these areas to ensure that they can truly scale profitably (and not 'just' grow in terms of assets).

Also in industry news this week:

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

From there, we have several articles on investment planning:

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

We also have a number of articles on advisor marketing:

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

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

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

Enjoy the 'light' reading!

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Historically, advisors haven't had many avenues to manage clients' 401(k) plan accounts, since unlike traditional custodial investment accounts, advisors generally lack discretionary trading authority in employer-sponsored retirement plans. Which wasn't necessarily a big issue back when most clients hired advisors after they had already retired and were able to roll over their employer plans into an IRA managed by the advisor; but as advisors have increasingly taken on working-age clients (and the 401(k) plan itself has taken on greater importance in retirement planning), the friction between 401(k) and non-401(k) plan assets has grown into a bigger issue from an operational and compliance standpoint.

For advisors who want to advise on clients' 401(k) plan assets but who can't manage them directly, there have generally been 2 options. First, the advisor can periodically review the investment statements issued by the 401(k) plan against the client's goals and risk tolerance and make recommendations that the client must then carry out on their own – which can prove frustrating for both the advisor and the client as it involves making multiple requests for information and then executing the trade, and if the client is busy or forgetful, there's the risk that the recommended trades will never actually be carried out. Alternatively, some advisors have instead opted to collect clients' login information so they can execute the trades in their clients' accounts themselves –presenting numerous data security and compliance issues for the advisor (and can lead to the advisor being considered to have custody over client assets).

In this environment, several data aggregation tools, with Pontera being the most prominent, have emerged to enable advisors to more efficiently and securely manage their clients' 401(k) plan accounts by giving the advisor the ability to view and trade in the 401(k) account. Which would seem to be a preferable solution to the old method of logging in with the client's credentials, since the advisor doesn't need to collect the client's login information (as it is entered by the client themselves and stored securely without giving the advisors access to the credentials), and can allow advisors to more efficiently serve clients with 401(k) plan assets (including those who might not have enough non-401(k) plan assets to meet the advisor's minimums).

However, regulators in several states, including Washington and Missouri, have recently begun to scrutinize advisors' use of Pontera and similar technology, citing concerns that recommending clients to share their login credentials with third-party technology may constitute "dishonest and unethical" conduct by potentially violating clients' user agreements with their 401(k) platforms. On the surface, this doesn't necessarily make sense, because many 401(k) plan platforms don't in fact ban such third-party credential sharing. But at the same time, regulators may have some valid concerns, since the amount of client data that can be seen and collected by the technology often exceeds what is actually needed to view and trade in clients' 401(k) accounts, while their ability to manage clients' investments outside of the traditional (and well regulated) custodial framework might also have spurred regulators to find a way to 'pump the brakes' until they can more carefully determine what is or is not an appropriate use of data aggregation technology.

And yet the fact remains that technology like Pontera may still be preferable to the alternatives that exist for advisors to advise on and manage clients' 401(k) assets (e.g., making recommendations for the clients to execute on their own or collecting client login credentials), while it also doesn't make sense from a fiduciary standpoint to simply leave 401(k) assets out of the financial planning conversation entirely. And so, despite the current regulatory friction around held-away asset management, the most sensible path forward does involve some role for technology to manage clients' 401(k) accounts – albeit with more communication between technology providers, financial institutions, regulators, and advisors to build a system that addresses the concerns of each.

In the short term, however, it's uncertain whether states like Washington and Missouri will remain the outliers in scrutinizing Pontera and similar technology or whether other states (or the SEC) will share those issues. Which makes it important for advisors considering whether to use the technology to understand where their own state regulators stand and for those who use it already to explain to their regulators how it allows them to better holistically manage their clients' assets without resorting to collecting client login credentials. Since ultimately, the advisors who use it every day are best positioned to show how held-away asset management technology can truly be used in the client's best interests!

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Welcome everyone! Welcome to the 400th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Mark Tibergien. Mark is the former CEO of Pershing Advisor Solutions, a former Principal with Moss Adams Consulting, and is a longtime practice management consultant and thought leader in the financial advisory industry.

What's unique about Mark, though, is how, over the course of a 50-year career in financial services, he has seen firsthand the evolution of the financial advice industry, and has measured, tracked, and through his expertise has helped to define the best practices for advisory firms looking to not just "size up" but truly "scale up" to build enduring advisory businesses.

In this episode, we talk in-depth about how Mark views the difference between simply growing in size versus truly gaining scale as an advisory firm (with scale only occurring when revenues are growing faster than expenses, not just growing in line with rising asset or client headcount growth), why Mark thinks advisory firms should aim for a 30%–35% operating margin, with a higher profit margin potentially indicating a lack of reinvestment in the business and a lower margin implying some problem around pricing, client or service mix, or team productivity, and how Mark sees the differences among advisory practices (which revolve around the founder), versus businesses (which start to add employees and build processes and procedures for them to follow), and advisory enterprises (which have professional management, career paths, and organization-wide measures of accountability).

We also talk about Mark's perspective on the ongoing trend of industry consolidation (that was foretold decades ago and now seems to be coming to fruition), including the 3 types of firms looking to buy RIAs: financial buyers looking to make a return over 5–7 years, tactical buyers seeking to purchase a complementary business, and strategic buyers aiming to create a large branded enterprise, how Mark thinks, despite some predictions to the contrary, that smaller advisory firms can continue to thrive amidst consolidation within the industry by being leaders in their local area or by serving a specific client type (akin to how solo accounting and law practices continue to operate despite their respective industries' immense consolidation of national law and big-4 accounting firms), and why Mark believes that relying on client referrals will be insufficient for firms truly looking to scale, as top-growing firms tend to market far more proactively, with clear branding and positioning in their particular industry segment.

And be certain to listen to the end, where Mark shares why he doesn't think there's anything wrong with the AUM model but he does believe that advisory firms thinking in only terms of assets and basis points may be camouflaging some of their own problems (even from themselves), why Mark believes that especially as an advisory business grows and adds headcount beyond its founders, it becomes increasingly important for firm owners to proactively create a succession plan to ensure their firm will continue to operate according to their vision when they are no longer in the picture, and why Mark thinks it's important for advisors to define what success means to them, not just in terms of business size and personal income, but also on the impact they'll have on their family, community, and the profession as a whole… which can ultimately change the business decisions and trade-offs they make about whether and how they build and scale their firms.

So, whether you're interested in learning about building an enduring advisory business by "scaling up" rather than just "sizing up", the changes that come with being an advisory practice, business, or enterprise, or recent trends in RIA consolidation and what it means for smaller firms, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Mark Tibergien.

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For most of its history, the financial advice industry has been very slow to change. Over the last 50 years, even the most substantial changes to occur – such as the movement away from commissions and towards fee-based compensation, and the shift from an investment-centric approach to more holistic financial planning – have taken place over decades and, in many cases, are still ongoing. In the last few years, however, the pace of change seems to have quickened considerably, as the technology landscape has mushroomed, and private equity funding has fueled an unprecedented surge of mergers and acquisitions that has reshaped the competitive landscape.

For many business leaders, the standard playbook for dealing with changes such as those the advisory industry faces today has been based on John Kotter's change framework, which supports organizational change and alignment with a strategic vision that ultimately helps the business move forward. But while Kotter's model may work well for larger firms with ample resources and people available to enact change, it can be less effective for smaller organizations with fewer people available to create coalitions for change (and where the power to block change might even be concentrated among one or a handful of executives or owners).

Therefore, those at smaller firms who want to promote change may benefit from a framework based on an "Agile Change" model adapted for smaller firms. In this model, the groundwork for change is first established by assessing the situation (e.g., reviewing external factors like best practices and services or technology solutions available, as well as internal factors like the current pain points employees have with existing processes or technology), then using that information to communicate the importance of change to create a sense of urgency and build buy-in from the ground-level stakeholders who will be affected by the change. Additionally, those promoting change can be very clear about what the process will entail and how it will be implemented (with the caveat that the plan needs to be flexible to allow for change as conditions evolve).

Ideally, the result of all this groundwork is that when explaining the change process to higher-level management and firm leadership, there will already be solid evidence of the support for the change within the organization and the positive impact it can (or has already served to) create, making it more likely to achieve crucial buy-in from the top needed to go through with the change. Once the change process is implemented, it's critical to track the progress and assess the results so that refinements to adjust and improve the process can be made and, in the best case, can enhance buy-in even more. Eventually, the change becomes part of the normal business process to the extent that it is baked into job expectations with negative consequences for employees who don't buy into the change, setting the stage to begin the next iteration of change as the firm grows and evolves.

The key point is that even as situations develop rapidly and necessitate constant changes – both large and small – the process for dealing with these changes can be systematized in a way that ensures that the people who need to buy into the change, from the bottom to the top of the organization, actually do so. Although it may take time to lay the groundwork and build support for change before actually trying to implement it, these steps can be crucial to ensure that the change is accepted even among team members who may be less eager to change how they work. Which will ultimately make it easier for the firm to make the changes needed to adapt (and succeed!) in today's rapidly changing advisory industry!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a new study indicates that while financial advisory firms are largely satisfied with their tech stacks, they take a range of approaches to applying tech: from "innovators" that invest in tech to differentiate themselves from their competition and to enhance the client experience to "operators" that invest in technology largely to improve operations and internal efficiency to firms that say they don't prioritize technology or use it effectively. The survey found that most firms fall into the middle category, utilizing tech in categories that provide an assessed high return on investment (e.g., financial planning, CRM, portfolio management), while taking a more tailored approach to selecting tech in other categories.

Also in industry news this week:

A Federal judge struck down the Federal Trade Commission's ban on non-compete agreements before it could go into effect, though potential appeals mean the battle over the regulation might not be over
A U.S. District Court this week ruled that Missouri's rules that targeted investment advice based on factors other than return maximization was unconstitutional and preempted by Federal law, striking a blow against state efforts to regulate the activities of SEC-registered advisers

From there, we have several articles on retirement:

7 factors that can help a client choose the best retirement location for their needs, from maintaining social ties to having adequate medical care available nearby
Considerations for clients who are considering moving abroad for their retirement (and their advisors), including the potential implications for the client's taxes and investments
How advisors can help clients determine the most tax-friendly states for retirement, which goes well beyond the 'headline' income tax rate to also include each state's unique treatment of different retirement income streams

We also have a number of articles on practice management:

How advisory firm owners can consider the benefits and tradeoffs of a hybrid work environment to create a structure that best meets the needs of both the firm and its employees
The keys to holding effective team-building exercises and 17 potential options, from in-person retreats to volunteer days
Why creating and reevaluating a collaboration plan is a crucial part of maintaining an effective hybrid work policy

We wrap up with 3 final articles, all about pets and finances:

With the average annual costs of caring for a pet reaching $4,800, these expenses can represent a major (and often unexpected) line item on a client's budget
The pros and cons of pet insurance, from the ability to defray veterinary bills that can add up to thousands of dollars to the sometimes-complicated maze of coverage options and exclusions
How a "pet directive" or pet trust within a client's estate plan can help ensure their pet will be well taken care of after the client's death

Enjoy the 'light' reading!

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As advisory firm websites have become crucial to the prospecting pipeline, displaying fees can present a delicate challenge for advisors. On the one hand, displaying fees can help a client determine whether an advisor will fit into their budget and may build trust when an advisor demonstrates transparency by explaining how their fee applies to their value proposition; on the other hand, even with a clear explanation, prospects may find it difficult to understand exactly how the value of an advicer aligns with their fees. The unique dynamic of presenting fees to clients can be heightened when an advisor offers life planning, which may involve multiple meetings to truly understand the prospect's situation before the advisor even presents the fee for an in-depth plan. Due to the in-depth nature of this sort of planning, fees may be quite high – so spending several meetings on a prospect who balks at that amount is 'expensive', yet presenting that same fee too early may cause clients to balk because they don't see the fee in context.

In our 145th episode of Kitces and Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can navigate the lines of presenting fees early in the process to ensure that prospects can afford their plan while still explaining their value and unique planning strategy to engage prospects who fit their specific target client persona.

As a starting point, providing a fee minimum on their website lets advisors communicate the lowest amount that would still be economically viable for them (and explaining that the fee may change based on complexity). This lets advisors give prospects a contextual starting point, which can minimize the risk of 'sticker shock' when a fee is presented and ensures that the prospect can (likely) at least afford the advisor's minimum fee.

Another key to sell life planning effectively is to target prospects who are more likely to seek this type of comprehensive planning in the first place. Advisors can help prospects who may not even recognize life planning as a solution to their financial problem by framing its value in terms of the 'emotional job' being done – for example, advisors might describe how they help dentists plan for retirement by encouraging them to find purpose beyond their practice and helping them to "unchain themselves from their chair".

Ultimately, the key point is that while engaging prospects with more holistic financial advice strategies – and their potentially higher fees – can pose a challenge, there are several steps that can provide context for potential clients and communicate the problems being solved. At the same time, advisors may find ways to narrow their niche further to make it even more likely that the clients who engage with them in the first place are the ones who seek the specific financial advice they offer!

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Irrevocable trusts lie at the heart of a variety of estate planning strategies, as gifts to irrevocable trusts can allow for the transfer of assets outside of an owner’s estate for estate tax purposes with more structure than an outright gift. The downside, however, is that irrevocable trusts are "irrevocable" and can't easily be undone; in moving assets to the trust, the original owner gives up their authority over the assets, with the trustee taking over the management and distribution of the assets according to the trust's instructions. Sometimes, though, the original owner may want to take a 'mulligan' when the assets inside the trust would be more advantageous back inside their estate. Including the power of substitution when establishing the irrevocable trust can provide the opportunity to redo the funding of the trust, without jeopardizing the estate tax benefits that the trust conveys.

In this guest post, Anna Pfaehler, CFP, AEP, a Partner and Wealth Advisor at Constellation Wealth Advisors, discusses how "swap powers" – the ability to exchange assets in an irrevocable trust with other assets of equivalent value – can be used to add flexibility and income tax efficiency to an irrevocable trust.

At a high level, swap powers are often included in trusts because, under the Internal Revenue Code, they turn an irrevocable trust into a Grantor Trust where any income generated by the trust assets is taxed to the grantor (i.e., the assets' original owner). This can be advantageous given the generally higher tax rates imposed on trusts compared to individuals. If the trust is drafted as an Intentionally Defective Grantor Trust (IDGT), the trust's assets are also considered outside of the grantor's estate for estate tax purposes, giving the grantor the best of both worlds when it comes to income and estate taxation.

However, while grantors often include swap powers in their trust provisions to convey Grantor Trust status, many never actually use the swap power for its nominal purpose of exchanging assets within the trust with others of equivalent value. But swap powers can create planning opportunities to take advantage of the differences between types of assets and to optimize the trust's balance sheet as circumstances shift over time.

For example, if an asset within an irrevocable trust has substantially grown in value, that asset will not receive a step-up in basis when the grantor passes away if it remains in the trust, resulting in significant capital gains tax if it is sold later. But if the grantor uses a swap power to exchange the asset for something equivalent in value but with a higher cost basis, they can maximize their benefit from the step-up in basis by keeping the lowest-basis assets on their own balance sheet and the highest-basis assets in the trust. Swap powers can also be used to meet liquidity needs by exchanging more liquid assets in the trust, or to move assets with higher expected growth into the trust to shield their future growth from estate taxation.

The key point is that life goes on even after an irrevocable trust is drafted and funded, and shifting circumstances after the fact can leave grantors wishing for a do-over. And although swap powers won't necessarily solve every potential issue with the irrevocable trust that could arise after the fact – since there needs to actually be property of equivalent value that can be swapped into the trust to use them – it does at least create the flexibility to optimize the trust for whatever the situation at hand may be. Ultimately, advisors can help clients navigate their changing circumstances by recognizing opportunities to re-optimize their financial situation and by making the adjustments (such as a well-executed asset swap) that increase the chances of a better outcome as the client's future unfolds!

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Welcome everyone! Welcome to the 399th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kelli Kiemle. Kelli is the Managing Director of Growth and Client Experience of Halbert Hargrove, an RIA based in Long Beach, California, that oversees $3.1 billion in assets under management for 750 client households.

What's unique about Kelli, though, is how she leads efforts at Halbert Hargrove to maintain the firm's 4 core values and build a strong culture, even and especially as their team has grown to 50 employees and, with ongoing expansion, is now situated across 10 offices in the western United States (which means even their in-person offices are 'remote' and 'virtual' relative to the leadership team in the firm's main office headquarters).

In this episode, we talk in-depth about how Kelli has worked to develop programs at Halbert Hargrove to maintain communication and strong relationships across the firm and its disparate offices, including by holding twice annual in-person meetings at Halbert Hargrove's headquarters both to discuss firm business and to provide opportunities for more informal social interaction amongst the firm's otherwise-dispersed staff, how Kelli uses weekly, company-wide all-hands meetings first thing every Monday morning to review key company metrics to increase accountability, and how Kelli established a mandatory, 2-year formal mentorship program for all new hires to help them get better acclimated to the firm's culture, and to have an outlet to whom they can ask question and seek advice as they grow into their role.

We also talk about how Kelli has created initiatives that help solidify Halbert Hargrove's core values of being fearless, constantly improving, having fun, and giving back, including by having employees share not only their "Gladiator Stories" of fearlessly going to bat for their clients, but also their "Goofs That Give Us Guidance" to reflect on mistakes that were made to align to their core value of constantly improving, how Kelli has aligned her firm's employee benefits with its core values as well, including by funding educational opportunities for employees, providing a match for employee charitable donations, and offering child care subsidies, and why Kelli finds that her firm's policy of offering what it calls unlimited 'responsible' vacation time doesn't lead to employees taking too much time off, but instead ironically still requires her to encourage staff to take more time off to avoid potential burnout.

And be certain to listen to the end, where Kelli shares how she has helped increase Halbert Hargrove's AUM over the $3 billion mark in part by leveraging a public relations firm as well as local search engine optimization to attract new prospects and lift their organic growth rate, how Kelli brought on a sales coach to help her firm's existing advisors get comfortable trying to close more clients (overcoming some initial skepticism about how a fiduciary firm could ever have "sales training"), and why Kelli decided against pursuing the advisor track at her own firm, instead carving out a role focused on growth and client experience that fit her strengths in creating and managing complex firm-wide workflows and juggling many tasks at once.

So, whether you're interested in learning about maintaining a strong firm culture when offices are spread across the country, aligning company benefits to match those core values, or using third-party marketing and sales coaching firms to drive client growth, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Kelli Kiemle.

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Founding owners of financial advisory firms often spend much of their time focusing on the short-term aspects of running their business, from providing high-quality client service to pursuing client growth. Which means that longer-term projects, such as creating a succession plan to have in place for the firm when the owner retires, may tend to get put on the back burner. And while some founders might assume that finding a successor is similar to filling a job vacancy, in reality, succession planning involves long-term preparation – not just by the firm owner but also by the firm's successors – to provide a seamless transition of knowledge, skills, and culture to ensure that there is continuity of care for clients and the realization of value for owners.

As a starting point, the succession planning process can begin with creating a clear vision statement that addresses what the firm does, why it exists, what its goals are, and how to measure them, which allows the founder and their successor(s) to create a shared language for the future and a clear path forward. A good vision statement will contain several elements, including a concise summary of the firm’s core purpose, specific components that help clarify the overriding statement (e.g., how the firm defines a deeper level of service), measurable elements (e.g., metrics like revenue, profit, impact, clients, or team size), and a timeline for when the goals should be achieved.

Next, the founder and their successor(s) can work together to create a structured process to guide the operational transition between Generation 1 (G1) and Generation 2 (G2). Key components of this transition include client service oversight, sales oversight, strategy leadership, and financial management. And because discussing these topics can become emotionally charged, particularly when there are differing views, open dialogue between G1 and G2 is required to find alignment and create agreements that support an effective transition.

After creating a transition strategy, determining the value of the practice and the payment structure that G2 will take on is a crucial next step, because it's important for the value to fairly represent what the company would be worth to an outside buyer while recognizing that the purchase aligns with the founder's vision and continuity goals. Because there is no single 'right' price, structure, or financing mechanism for every firm, getting clear on G1's financial goals, G2's ability to finance the deal, and the value of the firm (perhaps with the assistance of an external valuation service) can help ensure that all parties are clear on what the succession will look like and whether it meets their financial needs and risk tolerance.

Finally, combining the founder's vision, strategy, and economics along with a decision-making process and cadenced schedule of succession check-ins (to foster regular and open communication between G1 and G2) into a written plan that can be updated over time will help ensure that all parties are on the same page when it comes to the structure and timeline of the succession.

Ultimately, the key point is that just as a financial plan helps ensure a client's near- and long-term goals are met, an effective succession plan can increase the chances that a founding firm owner will reap the financial benefits of selling their firm to the next generation and that their firm will continue to thrive in accordance with their vision for years to come!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that the Securities and Exchange Commission (SEC) announced that a total of 26 broker-dealers, investment advisers, and dually-registered firms agreed to pay combined civil penalties of almost $400 million for failing to maintain and preserve required records for "off-channel" communications, signaling the regulator's interest in cracking down on text messages and other communications that are not properly archived by firms. Notably, this announcement included the first off-channel communication case brought by the SEC as a result of a referral from an RIA exam, which could lead examiners to focus on off-channel communications during regular RIA examinations.

Also in industry news this week:

Fidelity and Advyzon are teaming up to offer RIAs a combined custodial platform-AdvisorTech bundle aimed at smaller RIAs, though its unclear whether Fidelity will take on some of the smallest firms
A report indicates that RIA M&A grew in the first half of the year compared to the same period in 2023, with new firms joining the list of top acquirers and buyers looking to acquire larger firms

From there, we have several articles on retirement:

Why retirement is not just a one-time transition, but a series of opportunities to adjust one's priorities, both financial and personal, and how advisors can help clients navigate them
How one retiree found a sense of purpose (and why he sold his ego-boosting sports car) after a sudden, unexpected retirement
How sabbaticals during one's working years can serve as helpful 'previews' for how an individual wants to structure their retirement

We also have a number of articles on advisor marketing:

How a "zero-click" social media strategy can boost an advisor's visibility and credibility
Why some advisors are turning to in-person events amidst a surge of interest in digital marketing
How "marketing channel harmony" can help advisors increase the efficiency and effectiveness of their marketing messages

We wrap up with 3 final articles, all about fame:

The difference between fame and influence, and why the latter might be preferable for advisors and others
Why famous individuals are often scammed by those they trust the most, and how advisors can help clients of all types avoid some of these schemes
An exploration of the psychology of fame-seeking, and why those who prioritize it can experience more mental stress than those with more internally focused goals

Enjoy the 'light' reading!

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A common concern many individuals have when contemplating retirement spending is that they may live longer than expected and thus risk outliving their money. This sentiment can lead advisors to build financial plans based on the conservative assumption that clients will live a very long time. Yet, while a longer plan will extend the longevity of the portfolio, it also relies on lower annual portfolio withdrawals. For couples, it becomes crucial to consider other income sources, such as Social Security benefits, annuities, and pensions, that may be reduced or eliminated when one spouse dies. The loss of these additional income streams by one spouse can create a significant mortality risk for the surviving spouse, potentially leaving them with less income than expected. Which means that plans that anticipate both members of a couple living to the same (very old) age might overlook the mortality risk of one spouse dying earlier than planned, which can significantly influence the surviving spouse’s sources of income and overall financial situation.

To manage these potential outcomes, advisors can use a more rigorous process to account for and manage both longevity and mortality risk. For example, advisors can calculate a client's spending capacity using expected mortality-adjusted cashflows to manage mortality risk. Rather than giving a plan 'credit' for all non-portfolio income that would be received if clients live to their projected date of death, advisors can instead average out the non-portfolio income that a couple would receive across a wide range of mortality assumptions based on statistical probabilities that treat death as variable and uncertain. Using a comprehensive approach to examine a client's mortality risks can be an opportunity for the advisor to highlight potential pain points and vulnerabilities and offer clients a strategy to plan for them.

In addition to examining the factors that shape mortality risk, advisors can also weigh several factors when assessing a client's longevity risk, from demographic trends (e.g., projecting life expectancy based on the client’s sex and affluence) to health and family history and even to the client's own tolerance for longevity risk. Advisors can establish a systematic process to adjust and optimize plans for longevity, customizing the plan length for clients beyond choosing arbitrary default age settings in their planning software packages.

Ultimately, the key point is that creating a plan based on how long a client will live is most effective when both mortality and longevity risk factors are considered. Actuarial science offers tools that can help advisors assess these considerations so that they can adjust mortality assumptions and longevity expectations as part of an ongoing process of monitoring and updating a plan. And by making these adjustments collaboratively and regularly, advisors can help clients develop a relevant and realistic strategy to manage their mortality and longevity risks as they journey into retirement!

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Welcome everyone! Welcome to the 398th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Eric Wulff. Eric is the CEO of Marcum Wealth, an RIA based in Cleveland, Ohio, that oversees $2.5 billion in assets under management for approximately 2,700 client households.

What's unique about Eric, though, is how he has built Marcum Wealth into a multi-billion-dollar firm under the umbrella of a national accounting firm, in large part by cultivating mutually beneficial relationships with the firm's internal CPAs to get them comfortable providing referrals of their accounting clients to his financial planning business.

In this episode, we talk in-depth about Eric's process for generating internal referrals from the accounting firm's CPAs, which do not necessarily come automatically despite the affiliation between the accounting firm and his RIA, how Eric's firm takes a "give to get" approach with CPAs and their accounting clients to demonstrate the value it can offer both them and their clients (so that advisors in his firm are top of mind when accounting clients have questions on financial planning topics or face a life transition), and how Eric's firm's exit planning services in particular have been able to drive referrals by helping the accounting firm's CPAs maintain their long-term relationships with their business-owner clients as the owners plan to monetize their businesses, encouraging a continued relationship between that client and the financial advisor and CPA when they sell their company (and may no longer need traditional business accounting services anymore).

We also talk about how Eric has created a systematized planning process to create a common standard across its multiple advisor offices nationwide, how Eric's firm uses a centralized planning team to prepare financial plans in a consistent manner (and to allow its advisors to spend more time working directly with clients), and how Eric has found success presenting financial plans to prospects before they become clients, despite the unpaid work upfront that it takes to prepare and present them, as it shows the prospects specifically how Marcum Wealth can meet their planning needs and encourages them to start an ongoing planning relationship to implement the planning recommendations.

And be certain to listen to the end, where Eric discusses the key differences between CPA firms and RIAs, particularly the contrast between the goal of CPAs to maximize the efficiency of their billable hours and the more long-term client relationship-building done by financial advisors, how Eric approaches acquisitions, targeting younger or mid-career advisors who want to grow and develop their practice within the local office of the CPA firm (rather than approaching retiring firm owners for acquisition as they exit), and how Eric's firm not only survived the 2008 Great Financial Crisis, which occurred less than 2 years after he opened Marcum Wealth, but was able to use it as a growth engine for the firm as the Wall Street implosion led more consumers to begin showing a preference for the benefits of the RIA model for financial advice instead.

So, whether you're interested in learning about cultivating client referrals from CPA firms, leveraging a centralized planning team to give advisors more time to spend with clients, or systematizing the planning process to create consistent standards across multiple offices, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Eric Wulff.

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In the modern era of financial advice, the advicer/client relationship is tightly centered on trust. And because of that foundation of trust, in an ideal advisor/client relationship, mistakes, disagreements, and concerns are surfaced quickly; action items are agreed and acted upon by everyone involved; and everyone feels aligned and accountable to their overall objectives.

The reality, however, can be a little more complicated – not only when it comes to getting clients to ask questions, give honest feedback, and raise (productive) disagreements; but also to get everyone truly aligned on (and excited about) action items and objectives. This can be frustrating for advisors: after all, clients are paying for advice, but if they never really seem 'bought into' that advice and don't act on recommendations, it can be hard for the advisor to feel like they've provided much value to the relationship.

In his book "The Five Dysfunctions Of A Team", Patrick Lencioni discusses similar issues that commonly occur among teams in the workplace. He posits that teams can suffer from a series of 5 "dysfunctions" which inhibits a team's ability to align on objectives, act on them, and actually track and discuss the results. Dysfunction in teams can be insidious – the vast majority of people in the workplace are well-intentioned and don't intentionally sow dysfunction. However, even well-meaning people can occasionally contribute to dysfunctional relationships, teams, and company cultures.

In the book, Lencioni gives insights into how dysfunction can be rooted out of a workplace – many of which can also be applied to the client/advisor relationship, where well-meaning clients and advisors can on occasion contribute to a dysfunctional relationship. As an example, a dysfunctional client/advisor relationship can look like one where the client doesn't bring forward their "true" issues to a meeting, or where they have reservations about an advisor's recommendations but feel hesitant to express them to the advisor. Then, because the client isn't "bought in" to the recommendations, they simply don't act on what the advisor recommends.

The good news is that dysfunction isn't necessarily permanent – in fact, it can be improved upon or even resolved entirely. For advisors looking to resolve dysfunction, the first action item often comes with a candid conversation with a client centered on how the client feels the relationship is going, ranging from their comfort with bringing important issues to meetings to their alignment with the advisor on action items. Once an advisor understands not only where they see dysfunction themselves, but also where their client sees it, they can begin the work of uprooting and resolving it. Depending on the situation, this can involve exercises to rebuild trust or working with clients to name how they experience and work through conflict.

Once dysfunction in relationships is worked through and relationships become more functional, an advisor/client relationship can enter a positive feedback loop: clients bring what matters most to meetings, advisors present recommendations, reservations and questions are resolved in-meeting, everyone is aligned on what their actions are and why they matter, and implementation and results are tracked and celebrated. This then incentivizes clients to continue to bring issues forward, and reinforces an advisor's value many times over.

Ultimately, the key point is that few people intend to add dysfunction to relationships – it's something that runs the risk of creeping into client/advisor dynamics often because of good intentions. But the good news is that with proactive and mindful conversations, the advisor and client can not only resolve dysfunction, but in fact create a stronger dynamic than existed previously, where clients and advisors are constantly working through the issues that matter most!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that a recent survey indicates that clients of financial advisors are more confident than others about their financial preparedness for retirement and are more likely to have a financial plan in place that can weather the ups and downs of the economy (perhaps increasingly relevant given recent market volatility), indicating that advisors have an opportunity to frame the value of their advice in terms of the real-world outcomes their clients experience beyond their portfolio value, including greater confidence and peace of mind with their financial situation!

Also in industry news this week:

With a potential SEC regulation requiring RIAs to engage in enhanced "know your customer" practices under consideration, the Investment Adviser Association is arguing for a more tailored approach to identifying risky clients and a longer implementation period to relieve the potential burden on RIAs
The SEC is investigating the cash sweep programs at multiple wirehouses as these firms, as well as RIA custodians, consider raising their rates to make them more competitive with other (higher-yielding) alternatives for client cash

From there, we have several articles on retirement savings:

The pros and cons of maxing out 401(k) contributions, from the ability to take a more flexible approach to tax planning to the potential to create liquidity challenges
Why the tax benefits of investing in 401(k)s compared to taxable brokerage accounts might not be as significant as might be assumed in certain circumstances
A proposed hierarchy of tax-preferenced savings vehicles, from "triple-tax-preferenced" Health Savings Accounts to (grantor) dynasty trusts

We also have a number of articles on estate planning:

The potential advantages for individuals of gifting during their lifetime rather than waiting until their death, including the ability to 'preview' how a recipient will handle the gift before receiving a potentially larger inheritance
While providing a "living inheritance" can be a tax-efficient way to give money to loved ones, it comes with a range of potential considerations, from the sustainability of the giver's financial plan to the potential intra-family conflict it could cause
Why gifting privately held business interests while alive can be a potentially tax-savvy move for business-owner clients

We wrap up with three final articles, all about couples and money:

How understanding the deeper feelings that money generates can help advisors better navigate financial conversations with client couples
How couples in America are organizing their finances today, from the decision of whether to have joint or separate accounts to how they divide expenses
Why financial "translucency" can help couples with different spending philosophies navigate potential money conflicts

Enjoy the 'light' reading!

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Over the past few decades, financial advisors have explored new ways to structure, build, and grow successful businesses alongside a growing acceptance that "successful business" can be defined in many different ways. Nevertheless, while firm owners have a variety of options available for structuring and building their businesses, the reality is that they can only prioritize a limited number of goals at one time, which then begs the question – how can firm owners navigate the options of work/life balance, margins, and firm growth to set and build their businesses to fit their goals?

In our 144th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can navigate the "calculus" between growth, time, and margins to define success on their own terms, then build a firm to fit their vision.

While "success" for an advisory firm can mean several different things, certain commonalities continue to crop up as firms develop: namely, that not all types of growth are possible at once. In the quest to develop and individualize their businesses, advisory firm owners eventually reach a crossroads where they must choose amongst the continual fast growth of the firm, high margins, and the amount of time an advisor puts into the business. And while some firms strive to have all 3 of these features, the reality often comes down to "choosing 2" (e.g., an advisor can have high margins and high growth, but it's extremely difficult to do so while also working a low number of hours).

This "choose 2" dynamic lends itself to 3 kinds of advisory firm owners: enterprise firm owners, who maintain high margins and high growth, but put in longer hours to maintain both of those goals; lifestyle firm owners, who can put in fewer hours with higher margins, but sacrifice high growth to ensure they don't exceed their own capacity; and boutique firm owners, who have high growth and work fewer hours at the cost of lower margins – often because they are more mission- and purpose-driven, and thus may choose business initiatives that are less-focused on 'optimized' business growth.

Ultimately, the key point is that while there are many ways to build an advisory firm, there is no standard definition of 'success', which means that it's up to firm owners to decide which metrics they want to prioritize in order to build the type of firm that matches their personal and professional goals!

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Traditionally, people tend to think of their estate as comprising one big 'pot' of assets, focusing on the sum of all the assets rather than on each individual asset itself. Consequently, when in estate planning, thinking about how to divide their assets after their death, they often aim to simply apportion the whole pot among their beneficiaries, without regard to the nature of each individual asset.

Although the 'one big pot' mindset might be the simplest approach to estate distribution, it may not be the one that results in the most wealth being passed down or the most equitable distribution of assets between each beneficiary. That's because, depending on the beneficiaries' individual situations, different types of assets will have different tax characteristics when inherited, which might make particular assets better or worse for different beneficiaries depending on their tax circumstances. For instance, if a traditional IRA is split equally between 2 beneficiaries in different tax brackets (or in different states of residence with different state tax rates), the beneficiary in the higher tax bracket will pay more tax on their share of the IRA (and consequently receive less on an after-tax basis) than the other.

Consequently, it can be beneficial to approach estate planning on an asset-by-asset basis to make the process more equitable and tax efficient by accounting for the disparity of income tax treatment of the different assets in the estate (and the unequal tax circumstances of the beneficiaries who will inherit them). For instance, an estate with a mix of pre-tax retirement assets (taxed upon withdrawal by the beneficiary) and nonqualified assets (which typically receive a step-up in basis and have fewer tax consequences for the beneficiary) can be allocated such that the pre-tax assets are left to the beneficiary with a lower tax rate and the nonqualified assets to the beneficiary with a higher tax rate. Then not only will each beneficiary receive the asset that results in the highest after-tax value to them, but the total after-tax value of all the assets passed down will be higher than if they were each simply divided equally between the beneficiaries.

Notably, an asset-by-asset approach to estate planning isn't 'just' about drafting documents like wills or trusts; it requires full knowledge of the client and the details of their (and their beneficiaries') financial, tax, and overall life circumstances. Which leaves financial advisors in a unique position to aid in the process of deciding when an asset-by-asset approach will result in sizable tax savings for the estate and beneficiaries and when a traditional 'split-the-pot' approach would make more sense. As while estate attorneys may meet with the client only rarely (if at all) after the actual estate documents are drafted, advisors usually have regular recurring meetings with clients, giving advisors the opportunity to keep up with the family's dynamics and tax situations and recognize when a change would be warranted.

The key point is that, just as clients have different planning needs, goals, and tax circumstances during life, the same applies to their beneficiaries and assets after they're gone. Incorporating the impact of taxes in the financial planning process to help clients keep more of what they've earned in life makes as much sense as using the same approach in the estate planning process, by considering what happens from a tax perspective after the assets reach their intended destination. And, by offering a more equitable distribution scheme for their beneficiaries, advisors can help their clients ensure they pass the most (after-tax) wealth to the next generation!

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Welcome everyone! Welcome to the 397th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Jaime Benedetti. Jaime is the Managing Principal of Benedetti, Gucer, and Associates and BEAM Wealth Advisors, hybrid advisory firms based in Atlanta, Georgia, and Covington, Louisiana that oversee a total of $1.2 billion in assets under management for approximately 900 client households.

What's unique about Jaime, though, is how his firm has grown to more than $1 billion in AUM over the past 20 years in part by making a series of 6 acquisitions, typically buying mixed fee-and-commission practices from retiring advisors in his local area and converting them into ongoing recurring revenue financial planning clientele.

In this episode, we talk in-depth about how Jaime has managed the acquisition of firms ranging in size from under $10 million to nearly $500 million of assets under management, how the way Jaime's firm has financed these deals has changed over time, from scraping together funds from family and personal credit for its first deal to bank-financed business loans for 100% of the purchase price today, and how Jaime's firm convinces clients of acquired firms, who sometimes have only been served on a commission basis, to transition to his firm's fee-based model, including by emphasizing the lower costs and more comprehensive ongoing service that can come with this approach.

We also talk about how Jaime identifies potential firms to acquire, including how he leverages multiple recruiters, deal marketplaces, and personal networking to identify potential targets, how Jaime values firms differently based on the type of revenue being acquired, giving extra weight to recurring, fee-based revenue and less (but still some) weight on commission-based clients, and why Jaime's willingness to buy practices that are not pure RIAs and still have a material amount of commission-based revenue, has allowed his firm to access and win deals even when he ends up in competition with private equity-funded RIA aggregators.

And be certain to listen to the end, where Jaime shares how his firm's own transition from the broker-dealer model to become a hybrid advisory firm not only has offered it greater independence in how it operates, but also in opening the door to new acquisition opportunities outside of practices associated with its broker-dealer, why Jaime's firm takes time (typically at least a year or 2) to 'digest' acquisitions before taking on a new one, recognizing the time it takes for operational changes, making new hires, and ensuring the client experience doesn't suffer, and how Jaime has found over the course of building his business that putting clients' interests first not only leads to better client retention, but also builds his firm's reputation in the eyes of potential selling firm owners who also want to ensure that their clients will be well taken care of after the deal closes.

So, whether you're interested in learning about growing a firm through acquisitions, how to finance these deals, or how to identify and evaluate potential firms to acquire, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Jaime Benedetti.

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Welcome to the August 2024 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that Orion and Riskalyze have both announced that they are "unbundling" several key components of their previously all-in-one offerings, highlighting how, after more than a decade and hundreds of millions of dollars of investment into building all-in-one solutions, providers may now be finding that approach to be too restrictive for their own growth – since in reality, many advisors would rather 'just' buy the individual parts they want (instead of needing to buy the whole package)!

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

Envestnet has announced that it is being acquired and taken private in a $4.5 billion dollar deal with Bain Capital after more than a decade of building and buying tech solutions to compliment and amplify its asset management marketplace core – only to find that assembling a whole that's worth more than the sum of its parts turned out to be a bigger challenge than expected (and even more so at the scale of an asset management business)
Altruist has announced the launch of two new features to its custodial platform and technology suite: A high-yield cash management account offering 5.1% APY, and a tax loss harvesting tool for which it will charge advisors 10bps for accounts using the feature – which perhaps highlights how custodians are finding ways to layer on more direct "platform" fees as the flaws of traditional "indirect" revenue sources like cash sweeps have been increasingly exposed as of late
Powder, which makes an AI-enabled client document parsing tool to reduce the work for advisors of reading through investment account statements and estate planning documents, has announced the completion of a recent $5M seed funding round – but in light of the success of tools like Holistiplan (for tax returns) and VRGL (for investment statements) that have each honed in on one specific use case, the question is whether Powder will similarly find a salient pain point for advisors (that advisors will actually trust technology to handle for them) to build its solution around

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

Future Capital has emerged as a new solution for managing clients' held-away 401(k) assets, competing with Pontera (which had previously been the only major player in this space) – though as new regulatory scrutiny of Pontera has emerged that could conceivably extend to Future Capital as well, the big question is whether held-away asset management tools will need to significantly amend their technology and business practices to comply with regulation, and if so, how that would affect the cost and the value of the services they provide
RISR, a new tool designed to make it easier for advisors to engage with business owner clients by enabling basic business valuation and analysis, has announced a $1.5M pre-seed funding round, highlighting the desire for tools that can demonstrate an advisor's value for business owners for whom what really matters has less to do with traditional investments and more to do with growing (and eventually a successful exit from) their business

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that a Federal district court in Texas has put a stay on the effective date of the Department of Labor’s (DoL’s) new Retirement Security Rule (aka “Fiduciary Rule 2.0”), which had been scheduled to become effective in September, and related amendments to prohibited transaction exemptions. Further, the court indicated that its ultimate decision is likely to favor groups opposing the regulation, which could lead to an appeal by the DoL and leave advisors waiting (potentially much longer) for a final answer on what will be required of them going forward.

Also in industry news this week:

A recent survey finds that a majority of 401(k) plan participants think their financial situation warrants financial advice and are much more likely to trust human-provided guidance over computer-generated advice
With the SEC’s new “T+1” settlement rule going into effect, RIAs could face related record-keeping requests during upcoming examinations

From there, we have several articles on investment planning:

Why historical data and forward-looking projections suggest that small-cap stocks potentially continue to merit an allocation in client portfolios, despite their relative underperformance in recent years compared to their large-cap counterparts
While international stocks have lagged the U.S. market during the past decade, historical data suggest that they could serve as a helpful ballast against sharp inflation-adjusted drawdowns in U.S. stocks
The downsides to allocating to ‘fancy’ investments, from illiquidity to the often-high costs of buying, selling, and even holding these assets

We also have a number of articles on advisor marketing:

How advisors are using Substack to amplify their content marketing efforts beyond traditional advisory firm blogs
Why shorter marketing email subject lines with a clear value proposition tend to lead to strong returns for advisors
How podcasting represents a relatively efficient marketing tool for advisors, though this method tends to take time and commitment to bring results

We wrap up with three final articles, all about work-life balance:

Why striving for work-life “harmony” rather than “balance” can create greater flexibility and less stress
7 relatively simple ways advisors can weave mindfulness practices into their busy schedules to become more “present” in their daily lives
Tactics advisory firm owners can use to bring more balance into their work and professional lives, which can ultimately lead to a more sustainable business and greater overall wellbeing

Enjoy the ‘light’ reading!

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For SEC-registered financial advisors, the prospect of an upcoming examination by the SEC can be a source of high anxiety. This is especially the case with newly registered advisors or formerly state-registered advisors who recently became SEC-registered since they may be uncertain about how the examination process will work, what elements of the firm the SEC will dig into, or what information the advisor will need to provide to the examiners. Even firms with robust compliance programs that do a good job following their required policies and procedures can struggle with examinations if they don't have the information that examiners will ask for readily available.

Thankfully, the SEC has published guidance that details the information typically requested during a first-time examination, as well as the questions examiners are most likely to ask the advisory firm, in the form of a Risk Alert titled "Observations from Examinations of Newly-Registered Advisors". Effectively, then, they've given out a 'cheat sheet' for the exam, from which advisors can glean information that can help them prepare for the inevitable phone call from the SEC initiating their next examination.

At a high level, the exam process typically kicks off with a phone call from the SEC examiner, followed by a secure email detailing the information being requested from the advisor. Advisors generally have about 2 weeks to collect the information for the specified examination period (which, for newly registered advisors, typically stretches back to the effective date of their initial SEC registration). Next, as detailed in the Risk Alert, the list of requested information tends to be similar for most advisors undergoing their first SEC examination and comprises various types of information.

First, the SEC will request information on the firm itself, including organizational charts, employee roles and responsibilities, financial statements, and/or any legal action against the firm that is pending or settled. Next, they'll want information on the firm's clients (including the number and types of clients served), client accounts (including Regulatory Assets Under Management and other assets managed such as "Assets Under Advisement"), and services (including the types of advisory services provided, authority to trade in client accounts, and use of third-party providers like custodians and subadvisors).

At the core of the examination, though, is a review of the firm's compliance policies and procedures and code of ethics, including not just a copy of the 'paper' compliance manual but also how the practices and controls the firm puts into place ensure it adheres to its compliance program. Which means the firm will need to provide records of holdings and transactions for each of its clients (which may require some training and practice for employees to be able to quickly pull the needed data from the firm's custodian), as well as archived client communications and any advertisements produced by the firm.

The key point is that even though the volume of information requested for an SEC examination may be large, advisors will be able to predict a large proportion of what that requested information will be since the SEC has given those details in its Risk Alert. Which ultimately helps advisors better prepare for an eventual examination by putting the systems in place to easily archive and submit information to examiners – and to reduce the chances of extended back-and-forth questions with regulators, so the firm and its advisors can get back to normal business!

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Welcome everyone! Welcome to the 396th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Michelle Klisanich. Michelle is a Wealth Advisor for Financially Wise Divorce, a hybrid advisory firm based in Minneapolis, Minnesota, that oversees $87 million in assets under management for 91 client households.

What's unique about Michelle, though, is how she has leveraged her learnings from several different business coaches over the course of her career, which gave her the clarity to figure out how best to market to the clientele she really wanted to serve… women going through a divorce, who, after the divorce is finalized, typically transition to become ongoing long-term advisory clients with whom Michelle can build a deep relationship.

In this episode, we talk in-depth about how Michelle has created a structured process to help her clients successfully navigate the divorce process, from connecting them to divorce specialists that Michelle has pre-vetted, including attorneys, mortgage brokers, and therapists, as well as providing her divorcee clients with a roadmap for their way forward once the divorce is finalized, how Michelle has built around divorce planning as a way to open the door to prospective new client but still confirms up front that they are interested not only in her flat-fee divorce planning process, but also an ongoing advice relationship afterwards, and how Michelle executes on a strategy of networking online via Zoom meetings to cultivate relationships with centers of influence in the divorce space and generate a steady flow of referrals that fit her ideal client avatar.

We also talk about how Michelle's early-career struggles working in commission-based insurance sales, where she started out earning only $20,000 in her first year, and how her struggles led her to seek out a business coach that led her to work with Deirdre Van Nest to develop both her presentation skills and figure out how to identify and then hone in on her divorce niche, how Michelle realized she had become a true expert in her divorce specialization after working with another advisor coach, Libby Greiwe, who helped her execute with her ideal client more efficiently, and how after taking part in the Strategic Coach program in the next stage of her business coaching journey, Michelle eventually decided to make the leap from the insurance world to the independent advisory space, which allowed her a graceful way to exit from client relationships that weren't profitable or sustainable by simply choosing to leave them behind, resulting in a purposeful reduction in her client base from 350 down to only 90 good-fit clients she really wanted to work with (and losing only 2 clients that she actually wanted to keep in the transition).

And be certain to listen to the end, where Michelle shares how her experience going through her own divorce inspired her to work with women in a similar position, how the small wins early in her career helped Michelle overcome feelings of "impostor syndrome" derived from her perceived lack of experience and build her confidence to navigate the challenges of starting her advisory career as a 20-something who looked like a teenager, and why Michelle recommends that newer advisors shadow more senior advisors to learn how they overcame the early challenges in their own careers… and discover some best practices the newer advisors might want to emulate or at least adapt for themselves.

So, whether you're interested in learning about how to build a successful client niche by creating a structured system to serve them, leverage coaches to gain confidence and grow the business that you really want, or develop relationships with COIs to gain more ideal-fit client referrals, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Michelle Klisanich.

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Most financial advisors strive to provide excellent client care and prioritize a systematic process to maintain regular communication with their clients both on a scheduled (e.g., annual meeting) and an "on demand" basis. And while individual advisors running solo firms are often able to intuitively sense when they're delivering their best, as they grow and scale their firms, that same advisor eventually goes from individually 'owning' every client relationship to sharing the workload with first a client service associate, then a paraplanner, and then another advisor. Suddenly, the question of, "What does it mean to provide the best care for clients at this firm as a team?" becomes a crucial one to solve.

In this guest article, Bob Veres, editor and publisher of Inside Information (and co-producer of the Insider's Forum conference), shares how Brian Martin, co-managing partner of Accredited Investors in Edina, MN, sets company-wide standards for client communications that are both measurable and actionable, and that helped his firm more than double in size.

For firms looking to standardize procedures and create a system to measure the effectiveness of those procedures, a crucial starting point is to identify what the firm's desired outcomes are. Martin and his team drew on the standard of care in the healthcare industry and modified them for their firm by following 3 key principles: first, offering relationships with clients based on constant attention with at least 3 meaningful interactions throughout the year; second, following through on commitments made to clients; and third, providing ongoing and consistent planning for all clients, including the quieter ones.

Once the standards were agreed upon, the main question became how to define metrics and use them to determine whether the standards were being met, as well as identifying potential exceptions and determining when to escalate problems. Martin and his team started by assessing current practices and establishing practical goals based on where the team was already at to set everyone up for success, and mixing in only a few stretch goals (all tracked in the Salentica CRM). Starting with goals that reflected how things were currently being done allowed the staff to get behind the standards and build great momentum.

Over time, tracking metrics to measure the team's performance offered powerful insights that allowed the firm to better plan its capacity, not just by evolving goals to address 'overdue' communication and other high-priority tasks, but also by offering clarity into how to structure team assignments and client relationship allocations more impactfully. Other benefits also manifested from tracking the firm's progress as processes and standards were gradually refined. For example, implementing this system gave Martin's team another way to measure and articulate their workload (and when they were feeling overwhelmed). Additionally, this process helped clarify how the firm could elevate its culture around client service by refining its client interaction standards and offering an objective way for managers to measure advisors' performance.

Ultimately, the key point is that striving for stellar client care is at the heart of many financial planning firms – and devising the right metrics that help a firm assess its areas of excellence and potential areas for growth can be instrumental in establishing a flourishing firm culture based on exceptional client service. By first identifying how the firm wants to define its own standards of client service, and then evaluating how those standards are currently being met, firms can gain a clear and objective way to measure their standards, which can offer valuable insights into further cultivating a proactive culture of outstanding client care across the team!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that Charles Schwab's latest RIA benchmarking study shows that firms saw significant AUM growth in 2023, thanks in part to strong equity market performance, but also thanks to organic growth initiatives that brought in additional assets from new and existing clients. The study also identified attributes of "top performing" firms across a range of metrics, finding that they are more likely than other firms to have a clear ideal client persona, client value proposition, and marketing plan.

Also in industry news this week:

While the number of RIA M&A deals has not surged in 2024, the average size of deals has increased, demonstrating interest from (often private-equity-backed) firms in pursuing larger targets
Off-channel communication tops the list of concerns amongst RIA compliance professionals, with advertising and marketing coming in a close second, according to a recent survey

From there, we have several articles on retirement planning:

How the timing of inflationary periods, as well as a client's spending patterns, can influence whether their portfolio will last throughout their retirement
A recent study suggests that many near-retirees reduced their savings rate and tapped existing assets during the recent inflationary period, with some retiring sooner, reducing the assets available to support their retirement income needs and demonstrating the potential value of a financial advisor to help them navigate this period
How advisors can incorporate "sequence-of-inflation risk" into client plans to account for the volatility of inflation and its impact on the sustainability of a retired client's financial plan

We also have a number of articles on client communication:

How the use of visuals can give advisors more confidence in their knowledge of complex financial topics and explain them more effectively to clients
Why those who receive advice (financial or otherwise) sometimes ignore it, from incongruent lived experiences between the advice giver and recipient to the "Curse of Knowledge", and what advisors can do to increase the likelihood of client follow-through
While behavioral 'nudges' can be effective at getting individuals to make one-time decisions, additional action is often needed on the part of financial advisors to help clients fully understand the implications of the choice being made and stick with it for the long run

We wrap up with 3 final articles, all about Artificial Intelligence (AI):

While the AI field has received significant hype during the past couple years, its momentum appears to be slowing, with companies facing questions about their long-run profitability and impact
7 workplace use cases for the current generation of AI tools, from email organization to summarizing lengthy articles and data sets
Why AI adoption amongst businesses might take longer than initially thought, despite the initial surge in interest in the technology

Enjoy the 'light' reading!

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About a decade or so ago, one of the most pressing issues facing the financial advice industry was the threat of an imminent deluge of advisor retirements coupled with a paucity of succession plans to transition clients to the next generation. While that scenario has yet to materialize as initially feared, the fact remains that transitions do occur on a regular basis, often as older advisors either sell their practices in one fell swoop or gradually offload part of their book while still staying engaged with a smaller group of core clients. In reality, the process of transitioning clients from one advisor to another is often challenging, especially when the legacy advisor and the next-gen advisor approach financial planning from different angles.

In our 143rd episode of Kitces and Carl, Michael Kitces and client communication expert Carl Richards explore the ways that next-gen advisors can navigate transitioning clients who may be accustomed to a more quantitative approach to financial planning, the 3 dimensions that the legacy and next-gen advisors should have alignment in order to increase the odds of a smooth transition, and the importance for advisors to ensure that they have some flexibility if not all of the transitioning clients turn out to be good fits.

As a first step towards making a client's transition away from a legacy advisor – particularly when the paired advisors have different communication and/or planning styles – as smooth as possible, the next-gen advisor might seek to replicate the legacy advisor's meeting structure and agenda in order to keep clients on an even keel. In an ideal world, the legacy advisor would participate in that meeting as well, chiming in as needed to reassure that the client is in capable hands. And, as a way to begin building rapport and trust, the next-gen advisor could reserve a few moments at the end of the meeting to introduce some of the foundational questions meant to establish a deeper relationship, including such hits as "Why is money important to you?" or "Is there anything that's top of mind right now that maybe we haven't addressed yet?" From there, the next-gen advicer could wrap up the meeting by reassuring the client that they've been heard and suggesting that whatever their answer was would be a framework for subsequent conversations.

In practice, even before a transition is initiated, advisors should give careful consideration to 3 broader planning dimensions. Specifically, the odds that a transition will be successful are increased when the paired advisors 1) have similar fee structures, 2) are aligned on investment philosophy, and 3) aren't polar opposites in regard to communication style. Even then, not every client will be a good fit, making it important for advisors to factor that possibility into the deal structure. For instance, rather than a fixed up-front payment, advisors could make an initial payment that's 60–70% of the total price, with the final 30–40% contingent on at least 90% of the revenue still being there a couple of years down the road.

Ultimately, the key point is that a next-gen advisor doesn't have to be a carbon copy of the legacy advisor or adapt their styles indefinitely to facilitate a smooth client transition. It does help, though, to keep transitioning clients on familiar ground, at least initially, and then gradually introduce new ways of framing the relationship and initiating meaningful conversations around money. And as an added bonus, the next-gen advisor can even offer the client the opportunity to reset by asking how they'd like the relationship to work. Because, at the end of the day, what matters most is doing work that is most meaningful for the client and that helps them progress toward their long-term goals!

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When the original SECURE Act was passed in December 2019, it brought sweeping changes to the post-death tax treatment of qualified retirement accounts. One of the biggest changes was to eliminate the prior "stretch" treatment of post-death distributions for most non-spouse beneficiaries, who are now subject to the so-called 10-Year Rule requiring beneficiaries to fully distribute inherited retirement accounts by the end of the 10th year following the original account owner's death.

In early 2022, when the IRS issued its initial Proposed Regulations regarding the SECURE Act's provisions, it included another bombshell: Not only would so-called "Non-Designated Beneficiaries" be subject to the 10-Year Rule, but, if the original account owner had been subject to Required Minimum Distributions (RMDs) prior to their death, the beneficiary would also need to take annual RMDs throughout that 10-year period (in addition to fully distributing the account by the end of the 10th year).

And now, in its new Final Regulations issued on July 18, 2024, the IRS has confirmed the requirement for Non-Designated Beneficiaries to take RMDs annually (although for beneficiaries who would have been required to take RMDs in 2021–2024 but didn't, the IRS has confirmed that there will be no penalty and no requirement to make up the missed distribution, meaning the new regulation effectively starts with RMDs required to be taken in 2025).

Beyond the confirmation of the general post-death RMD rules, the 260-page Final Regulations document offers a slew of other regulatory guidance for specific circumstances where the new rules for Eligible and Non-Eligible Designated Beneficiaries apply. These include:

New rules for handling undistributed RMDs in the year of an account owner's death;
A new "Hypothetical RMD" rule for surviving spouses who initially elect to use the 10-Year Rule but later choose to roll over or treat the inherited account as their own;
Specification that when a plan participant has 100% of their plan balance in a Designated Roth account, any Non-Eligible Designated Beneficiaries are not required to take annual RMDs during the period of the 10-Year Rule;
Clarification of the requirements for successor beneficiaries who, depending on the circumstances, may need to either begin a new 10-year period after which the account must be fully distributed or finish out the original beneficiary's 10-year period;
New definitions of which beneficiaries of a See-Through Trust are also considered beneficiaries of the retirement account and which may be disregarded for retirement account purposes;
A new rule providing that when a See-Through Trust is divided into separate trusts for each beneficiary upon the death of the retirement account owner, the RMD rules will be applied individually for each trust beneficiary rather than uniformly across all beneficiaries based on the beneficiary with the shortest required distribution timeline; and
Clarification that when a retirement account (including IRAs) owns both annuity and non-annuity assets, those assets can be aggregated together for the purposes of calculating the participant's RMD and that payments from the annuity can count against the total RMD for both annuity and non-annuity assets.

Along with the new Finalized Regulations, the IRS also released a new set of Proposed Regulations dealing with some unanswered questions around the SECURE 2.0 Act passed in late 2022. Most notably, the new Proposed Regulations confirm that the RMD age for individuals born in 1959 is 73 (since a drafting error in the final legislation inadvertently set that RMD age to both 73 and 75) and fill in rules around the SECURE Act's new provision allowing surviving spouses of retirement account owners to elect to be treated as the decedent for RMD purposes – although, as the Proposed Regulations make clear, the treatment for surviving spouses won't really be identical to the decedent's since the surviving spouse must still calculate RMDs based on their own life expectancy, and none of their own beneficiaries will qualify as Eligible Designated Beneficiaries.

As a whole, these regulations introduce significantly more complexity to the process of tax planning around retirement accounts, particularly after the death of the account's original owner. Which makes it all the more valuable for financial advisors to get familiar with the new rules and their planning implications for different circumstances, since clients will be more reliant on sound advice to give them clarity and help them avoid pitfalls when deciding what to do!

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Welcome back to the 395th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Dustin Mangone. Dustin is the Director of Investment Advisor Services of PPC LOAN, a firm based in The Woodlands, Texas that facilitates conventional bank loans to financial advisors.

What's unique about Dustin, though, is how his firm allows financial advisors to tap into bank lending, an historically challenging source of debt capital for the advisory industry, to finance both RIA and independent broker-dealer transactions from internal succession plans to acquisitions and other growth initiatives.

In this episode, we talk in-depth about how Dustin's firm works with partner banks to offer loans to financial advisors buying into (or all of) an advisory firm, enabling selling firm owners to receive most or nearly all of the purchase price up front without the need and awkwardness of relying on a seller-financed note that's just paid back to the original owner with the profits they were already getting in the first place, how the repayment success for bank lending to financial advisors has led to increasingly larger loan amounts available, sometimes up to 100% of the acquired firm's purchase price (depending in part on the financial strength of the acquiring firm), and the key financial metrics Dustin's firm ultimately uses to determine the amount it is willing to lend for M&A deals, including the buyer's capitalization, the selling firm's recurring revenue, and the ratio of the firm's cash profits to its anticipated debt payments after the deal closes.

We also talk about how Dustin's company facilitates internal advisory firm successions, including both partial buy-ins and complete purchases, how the metrics Dustin's firm uses changes when considering loans to internal buyers and how firms can structure sequential transactions in tranches to build the borrowing capacity of the next generation advisors to buy out the rest of the firm over time, and why Dustin recommends that potential successors assess their financing options early on in order to be able to set realistic expectations with the seller regarding the buyer's financial capacity before the 2 sides negotiate the terms of the deal.

And be certain to listen to the end, where Dustin discusses current trends in advisory firm valuations, with firms frequently seeing multiples of 2.5–3X recurring revenues (although ultimately the valuation, like the debt financing capacity, is really based on a multiple of profits not revenue), how Dustin sees conventional bank loan offerings differing from the Small Business Administration loans that historically were available to advisors, and how Dustin continues to see robust deal financing opportunities for external firm purchases and internal successions, even in the current elevated interest rate environment, because of how fundamentally sound advisory firm businesses really are because of their long-term relationships with clients.

So, whether you're interested in learning about the dynamics of the bank lending market for financial advisory firms, how potential internal and external advisory firm buyers are evaluated by lenders and what this means for the proceeds received by selling firm owners, and how internal successors can best plan to buy into their firm, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Dustin Mangone.

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Although many advisory firms start out with a single person handling all the work of advising clients, bringing in new business, and managing operations and compliance, there's a limit to how many hours any one person can work, which also means that there's a cap on the amount of client growth a solo advisor can achieve before running up against their capacity limit. The obvious answer to growing beyond the capacity of a single owner/advisor is to build a team of employees (either in advisory and/or other roles like client service or operations) that can accommodate additional room for growth. And yet, not all teams are created equal: While some team members complement each other well enough to facilitate more clients and revenue, others can be problematic to the extent that the firm owner has less time to advise clients because of the additional managerial burden that a poorly functioning team creates.

In this 'hybrid' video-based article, Michael Kitces and John Bowen, CEO and founder of CEG Worldwide and CEG Insights, dive into the data on what makes advisory teams work, how strong teams can help firms attract high-net-worth clients, and how a team-based approach – despite the higher complexity and managerial duties involved – can actually improve the wellbeing of advisors who are stressed beyond their capacity on their own.

Good teams are valuable not just from a productivity standpoint (as they allow the firm to serve more clients); they can also be an asset when it comes to developing new business and attracting high-net-worth clients. Because from the client's perspective, a firm with multiple people working together can be reassuring; they are able to rely on faster responses, more efficient service, and someone who will be available to answer their call when the lead advisor goes on vacation.

But as the firm grows (both in terms of clients and employees), it becomes less about the number of people on the team and more about having the right people in the right roles. Because even though a firm with high revenue might be able to sustain some turnover and loss of revenue due to a team that doesn't work well together, continuous team dysfunction can eventually compromise advisor wellbeing, which can ultimately impact capacity at the revenue level. As while any team can expand a firm's capacity and bring in more revenue, it takes a high-functioning "Dream Team" to both expand capacity and improve everyone's enjoyment of actually working in the business.

In many respects, the ideal team is composed of people who will self-manage themselves without requiring extra involvement from the firm owner. But it isn't enough simply to find self-motivated people: There needs to be a clear vision for the company, communicated during the hiring process and reinforced regularly, that emphasizes not only the values and significance of the business today but also where it's going in the future, to ensure that everyone is working towards the same goal (and to make clear the opportunities that await employees who stick around).

The key point is that advisory firms of different sizes, business models, and growth plans all encounter the same pain points that come with building a team. And even for more seasoned entrepreneurs, the challenges around building a team that can work well together never really stop – they just take on different (and often more complex) forms. Nevertheless, for advisor-owners who can communicate a clear vision of their company's direction (and what that means for employees coming along on that journey), it's possible to build teams that work together to grow the firm – not only in terms of clients and revenue but also in terms of happiness and wellbeing, as everyone recognizes the meaning and significance of what they're building together!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that Charles Schwab and other brokerage platforms are planning to increase the interest rates they pay on client cash held in their platform or cash sweep programs, which could boost the income of clients who maintain a cash balance in their accounts. Notably, the move could have follow-on effects for the industry in the longer term, including the potential for custodians to start charging RIAs platform fees to compensate for the lost revenue from tightened net interest margins resulting from the higher cash sweep rates.

Also in industry news this week:

A new survey of RIAs indicates that about 1/3 of respondents have been in serious M&A negotiations during the past 3 years and that many firms are embracing a hybrid work environment, with employees splitting time between working from home and from the office
The IRS on Thursday issued final regulations regarding Required Minimum Distribution (RMD) requirements for those who inherit retirement accounts, indicating that Non-Eligible Designated Beneficiaries subject to the "10-year rule" will be required to take RMDs starting in 2025 if the decedent had already reached their required beginning date

From there, we have several articles on investments:

Why advisors might still consider using actively managed mutual funds even as the number of active ETFs (which often have lower expense ratios) has grown
A study finds that while large-cap equity funds make up the top category of active ETFs, active fixed-income ETFs and funds using derivative and options strategies have attracted more than $30 billion in assets as well (though these assets continue to pale in comparison to those held by passive ETFs)
How advisors can evaluate and compare active ETFs to decide whether their potential benefits (and typically higher expense ratios) outweigh an approach of using passive ETFs as building blocks to create a custom active strategy

We also have a number of articles on marketing:

A branding expert offers advice for new advisory firm owners considering what to name their business, from whether to use the advisor's name to the need to avoid duplicating the name of another firm
Why some firms decide to change their name and the creative and administrative steps required to do so
Why descriptive logos that explain what a firm offers can be particularly effective for branding purposes

We wrap up with 3 final articles, all about wellbeing:

A new study finds that there is no limit to the relationship between income and happiness, though certain factors can mitigate this relationship
How one individual with a net worth in the hundreds of millions of dollars spends his time (and money) in the pursuit of internal happiness
How the established U-shaped curve of happiness appears to have changed during the past decade, with young adults on average seeing declines in life satisfaction

Enjoy the 'light' reading!

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Buy-sell agreements are a common succession planning tool for business owners where, upon a triggering event like the death of one owner, the surviving owners have either the option or the contractual obligation to purchase the deceased owner's shares of the business. Traditionally, buy-sell agreements are structured either as cross-purchase agreements (where the surviving owners buy the deceased owners' shares directly from their estate) or entity-purchase agreements (where the business itself redeems the deceased owner's shares).

The agreements are usually funded by life insurance policies on each owner: cross-purchase agreements are owned by each owner on every other owner, and entity-purchase agreements are owned by the business on each owner. This has generally made entity-purchase agreements preferable for businesses with more than a small handful of owners, since an entity-purchase agreement only requires the purchase of one insurance policy per owner, while the number of policies needed for a cross-purchase agreement increases exponentially as more owners are added to the group.

Which makes it notable that, in a recent ruling by the U.S. Supreme Court in the case Connelly v. Internal Revenue Service, the court ruled that life insurance proceeds paid to an entity-purchase agreement increase the business's value for the purposes of determining the taxable estate of the deceased owner, with the IRS arguing (and the court agreeing) that if a hypothetical third-party buyer were buying the shares, they would be willing to pay for them based on the full value of the company… including the life insurance proceeds.

As a result, business owners who have implemented entity-purchase agreements face the prospect of the insurance proceeds used to fund those agreements being at least partially included in their taxable estate, which, at a top Federal estate tax rate of 40%, could result in a significantly higher estate tax liability for owners whose estates either exceed the current $13.61 million estate tax threshold or for whom inclusion of the insurance proceeds would bump them over the threshold. And with the threshold scheduled to be reduced by 50% when the Tax Cuts & Jobs Act expires after 2025, many more business owners stand to be impacted by the Connelly decision in the near future.

The challenge of 'fixing' an entity-purchase agreement that may subject owners to higher estate tax is that it isn't possible to simply move ownership of the business-owned insurance policies to the business owners themselves, because doing so could trigger "transfer for value" rules that make the proceeds taxable on receipt for income tax purposes. However, one exception to the transfer-for-value rules makes it possible to transfer a life insurance policy to a partnership owned by the insured person – which potentially opens the door for business owners to create a new "special-purpose buy-sell insurance LLC" that is treated as a partnership for tax purposes and assumes ownership of the insurance policies, which would serve the purpose of moving the policies off the books of the original business without running afoul of the transfer-for-value rules.

The caveat, however, is that despite having recognized such insurance LLCs as legitimate in the past, there's no guarantee that the IRS will continue to do so – and in the wake of the Connelly ruling, they could potentially scrutinize new and existing insurance LLCs, challenging the legitimacy of ones that may lack a valid business purpose – which, if successful, could cause the LLC to be disregarded and the insurance proceeds to become taxable, either to the estate of the deceased owner for estate tax purposes and/or to all of the business owners for income tax purposes!

The key point is that while an insurance LLC may make it possible to transition away from an existing entity-purchase agreement to one that won't create new estate tax exposure without unwinding the entire buy-sell agreement and starting from scratch, doing so does add to the complexity of the business succession plan and introduces potential risks that it won't succeed in meeting the business owners' goals. Which, for some owners, means it might be preferable to simply start anew with a traditional cross-purchase agreement – but for others, who are willing to accept the risks and navigate the challenges of drafting and adhering to an insurance LLC, it may still be worth it for the potential for estate tax savings and flexibility.

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Welcome everyone! Welcome to the 394th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Christi Van Rite. Christi is the Founder of White River Consultants, a firm that provides administrative family office services to 17 ultra-high-net-worth households, and is on track to generate nearly $1.5M in revenue this year from its specialized services.

What's unique about Christi, though, is how she evolved her career into providing this type of unique family office service after nearly a decade of working as a more 'traditional' financial advisor, when she realized that she had developed a unique skill set to get very deeply involved in the (many) administrative demands of running complex ultra-high-net-worth households, slowly becoming the communicative and coordinative glue to manage each family's financial lives with her 8-person team.

In this episode, we talk in-depth about how Christi provides families with 4 primary pillars of administrative family office services – bookkeeping for their personal financial household, payroll for household employees, property management for their multiple homes, and information and document management – in order to both manage the day-to-day logistics such as paying bills, as well as managing their relationships with their other advisors, how Christi actually manages the financial needs of her complex client households, such as ensuring that all bills and household payroll are handled, while also maintaining a high level of cybersecurity and client privacy, and how, because Christi views her company as just one piece of the 'puzzle' that these complex families work with, she provides administrative but not investment management services, and intentionally uses a tech stack that the client owns themselves, not White River Consultants, so that the client can easily move to another administrative services company if they ever needed to.

We also talk about how Christi made the unexpected leap from traditional financial planning and into administrative family management simply by showing up to the unconventional opportunities as they presented themselves, how Christi avoids the sensitivity of marketing high-net-worth family "success stories" by instead building robust referral pipelines from attorneys, accountants, and even other financial advisors who manage their high-net-worth clients' portfolios but don't actually want to get this far into their top clients' billpaying needs and the associated liability exposure, and why Christi insists on her team tracking their time for everything they do (even though they don't bill by the hour) in order to measure team capacity and the complexity of their work.

And be certain to listen to the end, where Christi discusses how she curates, onboards, and trains highly specialized and competent team members to be able to run with the firm's highly sensitive client interactions, how Christi manages the risk of serving relatively few high-dollar families and the potential revenue loss of being 'fired' by even just one family, by maintaining a high cash reserve with a year's worth of payroll (to give her time to find a new client without having to let any team members go), and why Christi believes that administrative family office services is not only a viable and fulfilling career path for financial advisors, but also an underserviced part of the (traditionally very saturated) high net worth financial services industry, with space for new entrants and advisors looking to do less traditional planning and instead simply want to execute on all the tasks it really takes to run high-net-worth families' complex financial lives.

So, whether you're interested in learning about how to profitably provide administrative family office services, what it takes to make the leap from traditional financial planning, or how to build a highly specialized team to serve high-net-worth clients, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Christi Van Rite.

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Associate financial advisors play an important role within a financial planning firm, for both their work today (e.g., preparing financial plan drafts and notetaking in client meetings) and their potential to become the next generation of lead advisors at the firm. Which means their development (and desire to stay at the firm) can contribute to the firm's long-term health. At the same time, working as an associate advisor can come with frustrations based on the extent (and limits) of their job responsibilities and the freedom granted to them. For instance, because they have relatively less experience than lead advisors, their firm might not yet be confident in their ability to present 'live' in client meetings, as a mistake made by the associate in the meeting could reduce a prospect's or client's trust in the firm.

Perhaps reflecting these frustrations, data from Kitces Research on Advisor Wellbeing show that associate advisors are less likely to be "thriving" (and more likely to be "struggling") than more senior advisors and indicate that they are significantly more likely to leave their employer within the next year. Which suggests that creating a collaborative development plan that allows associate advisors to build and practice the needed skills to increase their client interactions and reach the next level could not only lead to more engaged associates, but also better leverage the investment the firm has made in them.

Advisory firms have a variety of ways to gradually increase associates' client interactions, including external training, client-facing practice, and opportunities to progress internally within the firm. This type of support can empower associate advisors and get them ready to advance within the firm, while minimizing the potential for making mistakes in front of clients. External training options include development programs that help advisors build client communication skills (e.g., Amplified Planning's CORE program and FPA Residency) as well as pro bono planning opportunities that can give associates practice working with 'live' clients and give back to the community in the process. Internally, creating a progression that starts with asynchronous client communication to demonstrate the associate's expertise (e.g., drafting substantive emails to clients and/or writing for the firm's blog or newsletter) and leads to the associate presenting during client meetings on a single topic that they have mastered can allow the firm and the associate to increase their responsibilities in a structured manner.

Ultimately, the key point is that while associate advisors tend to have lower overall wellbeing scores than more senior advisors, finding ways to increase their skills and responsibilities, as well as creating a growth path that shows how they can play a bigger part in client meetings and eventually manage their own client households, could give them the confidence and feeling of empowerment that could not only improve their sense of wellbeing (and perhaps the likelihood that they will stay with the firm), but also increase the chances that the investment the firm has made in the associate will pay off in the form of a more skilled (and happier!) advisor who can help the firm thrive for years to come!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that at a time when employee retention has heightened importance for advisory firms given the ongoing competition for advisor talent, recent studies indicate that factors such as firm culture and leadership, as well as providing advisors with a sense of autonomy, can play important roles in building advisor loyalty to the firm. Which suggests that while firms might be tempted to zero in on compensation when it comes to retaining advisors, focusing on these other factors (which do not necessarily involve hard dollar expenses) could pay off in the form of increased advisor (and client) retention over time.

Also in industry news this week:

2 House committees this week advanced legislation that would halt implementation of the Department of Labor's new Retirement Security Rule, which, combined with ongoing lawsuits, threaten to derail the regulation either before or soon after it becomes effective in late September
A Federal judge has put the future of the Federal Trade Commission's ban on non-compete agreements in limbo, issuing a limited temporary injunction and indicating that a final ruling on the regulation (with possible nationwide impacts) could come before the ban goes into effect in early September

From there, we have several articles on tax planning:

Why potential upcoming increases to marginal tax rates and recent changes to RMD rules for inherited accounts could make Roth-style retirement accounts increasingly attractive for many clients
How advisors can add value not only by regularly analyzing whether Roth conversions might be appropriate for a client in a given year, but also by communicating how they work in a clear manner to help the client better understand the strategy and its potential benefits
How working clients can get more money into Roth-style accounts, from in-plan 401(k) conversions to in-service distributions

We also have a number of articles on marketing:

How applying the principles of beauty, simplicity, and creativity when it comes to website design can help advisory firms stand out at a time when differentiation is becoming increasingly challenging
Why targeting a firm's website and marketing content to an ideal client persona can help prospects better understand whether the firm can meet their unique needs
How becoming a "knowledge sharer" online can help advisors build their brand and support higher quality personal financial information amongst a sea of "finfluencers"

We wrap up with 3 final articles, all about exercise:

While middle age is associated with a growing number of aches and pains caused in part by natural muscle loss, regular exercise can help mitigate these trends and potentially lead to a better quality of life
Why resistance training, in addition to aerobic exercise, is an important part of a healthy lifestyle and can ultimately improve longevity
How targeting 4 "pillars" of exercise – stability, strength, aerobic efficiency, and peak aerobic output – can help an individual lead a healthier lifestyle, even if their exercise routine dropped off during middle age

Enjoy the 'light' reading!

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Meaningful communication is crucial to building strong, durable relationships, and asking effective questions is an essential part of facilitating impactful conversations. Being able to initiate and lead those conversations has become an important aspect of any financial advicer's skill set, but for many, it's one that isn't always as straightforward or easy to learn… particularly for advicers who might be happiest when nerding out with spreadsheets and flowcharts! The good news, however, is that every advicer can learn how to be a better communicator, especially when there's a certain podcast host willing to share his roadmap for having Meaningful Conversations About Money.

In our 142nd episode of Kitces & Carl, Michael Kitces and aforementioned client communication expert Carl Richards discuss Carl's "Magical Questions Of Conversation Goodness", how an advicer can 'move through time' to help clients make meaningful connections around their relationships with money, and how advicers can effectively implement those questions in their own practices.

It's generally accepted in the financial planning world that people don't typically wake up in the middle of the night because they've realized they need a comprehensive financial plan. More often, initial outreach from a prospect occurs because there's some urgent issue they need help with. Accordingly, advicers can foster a space for deeper money conversations by helping the prospect (or new client) paint a picture of their desired future state, homing in on whatever the underlying issues may be (which won't always be the same reasons they reached out in the first place). Questions like "What brought you in today?" and "How do you think we could help with that?" are great places to start, while Dan Solin's "3 years", Bill Bachrach's "What's important about money to you?", and George Kinder's EVOKE questions can offer powerful avenues to help clients start to open up.

As conversations (and relationships) deepen, advicers can probe further by 'working through time', asking questions like "What was money like in your home growing up?" and "Were you one of the rich kids or poor kids in middle school (and how could you tell)?" From there, advicers can help clients explore their relationships with money by asking, "If you could go back and talk to yourself with the benefit of hindsight, what would you say?", potentially providing them with insight around experiences that have been informing their lives for years. From a forward-looking perspective, advicers can ask about how the client deals with money in their home, and (if they have children) what they think their kids would say if asked the same series of questions 20 years down the road.

It's important to note that the goal isn't to tackle all these questions in one meeting. Rather, advicers can have multiple conversations over time to deepen the relationship. Initially, advicers can focus on discovery questions to understand the client's future desired state, which (once defined) becomes the basis for a Statement Of Financial Purpose, which in turn becomes the foundation for well-informed goals. And with clear goals, the advicer can then ask about the client's current state, identifying what they owe and what they own.

Ultimately, the goal is to normalize the process of having meaningful conversations about money. And by implementing Carl's Magical Questions Of Conversation Goodness, not only can advicers help their clients buy into their financial plans, implement recommendations, and reach their 'desired future states', but they can also learn a skill set that helps them differentiate themselves in an increasingly crowded marketplace while engendering long-term, durable relationships with their clients!

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The Tax Cuts and Jobs Act (TCJA), passed in 2017, was one of the most extensive pieces of tax legislation to be passed in the last 30 years, touching many aspects of individual, corporate, and estate tax. However, most of TCJA's provisions are set to 'sunset' at the end of 2025 – an event that would have at least as much impact as TCJA's initial passage.

From an advisor's perspective, TCJA's impending expiration raises the importance of planning for clients who will potentially be impacted, which, given the law's broad scope, could be nearly every client. And yet, the timing of the sunset provision at the end of 2025 means that the actual fate of TCJA will largely hinge on the uncertain outcome of the 2024 U.S. elections. In reality, any law that extends or replaces TCJA would likely not pass until well into 2025, creating a very limited window (potentially only days long) in which to implement any planning strategies. And so even though there's uncertainty today about whether or not TCJA will sunset as scheduled, it's still not too early to start making plans for either contingency so they can be triggered quickly once there is more certainty.

For many clients, one of the biggest questions is whether they'll have a higher or lower marginal income tax rate after TCJA expires than they do today, and whether it is therefore reasonable to accelerate income – i.e., to recognize it before the end of 2025, such as by converting pre-tax retirement funds to Roth – or to defer income to be recognized in 2026 or beyond. And although TCJA's reputation as a broad tax cut might give the impression that everyone's tax rates would increase after its expiration, comparing the current Federal tax brackets with their estimated post-TCJA equivalents shows that a fair number of households will actually see their tax rates decrease.

Beyond the tax brackets themselves, however, households will also see significant changes to how their taxable income is calculated post-TCJA. First, the combination of a lower standard deduction and the elimination of the $10,000 cap on deductible state and local tax payments means that many more people will be taking itemized deductions instead of using the standard deduction. Second, the reinstatement of personal exemptions means that households will be able to take an estimated $5,010 exemption per taxpayer or dependent, meaning that larger households could see a large reduction in their taxable income. With the caveat that the expiration of TCJA will also bring back the Personal Exemption Phaseout (PEP) and "Pease limitation" on itemized deductions above a specific income threshold, both of which effectively create a surtax on income within the threshold range, increasing the household's marginal tax rate above their nominal tax rate based on the tax brackets alone.

For owners of pass-through businesses like partnerships, S corporations, and sole proprietorships, the biggest concern around TCJA's sunset is the elimination of the Section 199A deduction on Qualified Business Income (QBI), which allowed for a deduction equal to 20% of the lesser of the taxpayer's QBI or their taxable income. For most pass-through business owners, the end of the QBI deduction will result in much higher marginal tax rates in 2026 or later, with one exception: Owners of Specified Service Trades or Businesses (SSTBs) like lawyers, consultants, and financial advisors, whose QBI deduction phases out above certain income thresholds, will have a much higher marginal tax rate on any income earned within the threshold range – meaning that while it might make sense for most business owners to accelerate income in 2024 and 2025 while the QBI deduction is still in effect, SSTB owners within the phaseout threshold range would be better off doing the opposite and deferring income until after TCJA expires.

The key point is that different households will experience the end of TCJA in a wide variety of ways, with income level, filing status, number of dependents, and QBI all factoring heavily into the impact that the TCJA sunset will have. And although TCJA's ultimate fate may still be undecided, for at least some clients the potential benefit of taking action today (e.g., to recognize income at a lower marginal tax rate today versus after TCJA expires) may be worth taking the risk that TCJA is ultimately extended – since in that case the client would have simply recognized income at the same marginal rate that they would have later on, merely 'costing' them the value of a few years of tax deferral. So by understanding how each client stands to be affected, advisors can narrow their focus on the planning strategies that will have the biggest benefit for their clients.Read More...

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Welcome everyone! Welcome to the 393rd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Alex Lewis. Alex is the owner of Blackbridge Financial, a hybrid advisory firm based in Irmo, South Carolina, that oversees approximately $330 million in assets under management for 415 client households.

What's unique about Alex, though, is how, at age 29, he took on a multi-million-dollar loan to purchase the firm from its founder as his successor, and, in the 4 years since, has made changes to everything from the staff to the technology to the service structure to make the business what he wanted it to be… and in the process, nearly doubled the firm's AUM.

In this episode, we talk in-depth about how Alex gained the trust of his firm's founder and its clients by gradually increasing his client-facing responsibilities over a span of 4 years in advance of a potential succession, how Alex and the firm's founder negotiated a valuation and transaction terms with a seller-financed note with protective covenants that met the needs of both parties, and how Alex got comfortable with a purchase whose first monthly loan payment was higher than his entire annual salary the year before the purchase and resulted in a net income of just $11 in the 1st year after the deal (but ultimately grew enough that he was able to refinance his succession loan to make the former owner whole and reduce the monthly payment).

We also talk about how Alex's firm now segments clients into 5 service tiers based on their assets under management and revenue (and the actual differences in services the firm provides to clients at each level), how Alex tracks his clients' individual preferences to create what he calls "Wow Factors", such having their favorite soda on the table when they arrive for a meeting, which strengthens the relationship between clients and the advisory team, and how Alex, shortly after taking over the firm, made the decision to hire 2 new advisors and support them through getting their CFP marks to be able to continue to offer high-touch services for his rapidly growing client base and ensure they stay under 150 clients per advisor.

And be certain to listen to the end, where Alex discusses how he first entered the financial planning industry, transitioning from the world of public accounting to seek better work-life balance but taking a more-than-50% pay cut to get his foot in the door, how Alex managed to not lose a single client after being forced to call all 400 clients to let them know he had to raise their fees after a service provider dramatically increased its own pricing to Alex's firm… only to cancel the fee increase after the service provider reversed course (and how that action in turn built even more trust with his clients), and how Alex dug into a series of business books to identify best practices to systematize his own firm's operations, from Gino Wickman's "Traction" to Matthew Jarvis' "Delivering Massive Value", as he continues to evolve the business he bought from its prior owner into the one that he wants it to be for himself.

So, whether you're interested in learning about navigating an internal succession plan, handling the financial realities of taking on debt to purchase the firm, or creating a plan to grow the firm and its staff after taking over, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Alex Lewis.

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After several turbulent years in both markets and workforces, 2024 appears to be the 'most normal' year of late, with strong market performance, cooling (or at least no longer rising!?) interest rates, and relatively little new tax legislation (yet).

Yet the need for advisor education – and the regulatory requirements to get it (in the form of Continuing Education obligations) – never ends, with the latest focus for most financial advisors being on the ongoing expansion of NASAA's 2020 Model Rule that implemented the first Investment Advisor Representative (IAR) requirements to get 12 hours of Continuing Education (CE), including 6 hours of Products & Practices and 6 hours of Ethics & Personal Responsibility, in order to maintain their IAR registration. This new model rule is enacted on a state-by-state basis and has currently been picked up by 18 states… though, because it applies not only to firms located within those states but also to any IAR who has more than the de minimis 5 clients in any 1 of these states, in reality, the new IAR CE obligation is quite far-reaching (especially with California and Florida IAR CE requirements taking effect this year!).

Given the continuing growth of advicers who fall under these new IAR CE Requirements, the Kitces platform is not only continuing to offer IAR CE (along with all of its other CE types) through its Nerd's Eye View blog articles, but, starting this year, has also expanded IAR CE eligibility to our webinars as well. And to meet the growing demand for the required "Ethics & Professional Responsibility" content in particular, we're also excited to announce the return of our IAR Ethics CE on August 29, 2024! Attending IAR Ethics CE Day allows advicers to fulfill all 6 hours of their required IAR Ethics & Personal Responsibility CE obligations in just 1 day, preventing an end-of-year CE crunch and providing high-quality education from top experts in the field of ethics and compliance (while also satisfying their CFP Ethics and IWI Ethics requirements, too!).

In addition to IAR Ethics CE Day, the ongoing growth of our Kitces Education team has allowed us to offer more frequent live CE webinars (now running the 1st and 3rd Tuesday of every month at 3:00 PM EST), and next month, we'll be rolling out our newest Kitces Course, a master class taught by our own Jeff Levine and Michael Kitces on "Optimizing Tax-Efficient Roth Conversion Strategies And Implementation", which will let advisors practice the skill of determining the 'right' amount to Roth convert, identify which clients should do Roth conversions and when, and also explore ways to explain the strategic components of Roth conversions to clients (who may otherwise resist the upfront tax liability, notwithstanding the long-term tax benefit!). Additionally, the upcoming Kitces Value Summit, coming December 12, 2024, will tackle how real advisors provide and communicate their ongoing value to their clients.

Along with the expanded CE offerings, we've also been reinvesting heavily into making the Kitces platform easier to use. Our major focus this year has been on supporting the growing number of multi-advisor firms buying Group and Enterprise subscriptions… and then needing to manage all of their Kitces Group members! Going forward, our new Group and Enterprise dashboards will make it far easier for firms administering their Kitces membership to add and remove individual advisors and to enroll their advisors into IAR CE (as more states add the requirement) with just a few clicks of a button! (And yes, in the coming year, we will be looking at a broader overhaul and re-design of the entire Kitces Members Section for all advicers to make it easier to navigate – we've heard your feedback!😊)

Of course, CE is not the only part of the advisory landscape that's changed. Our newly released Kitces Research on Advisor Marketing shows that fewer advisors are reporting client referrals as a methodology to attract new prospects (and the growthiest firms are relying on referrals the least!), but that there is no one dominant marketing tactic taking its place. Instead, the firms that are the most successful at marketing don't appear to be engaging in materially different tactics than the rest; they simply have more clarity of the ideal client they're pursuing, and how to communicate with them, such that they're executing the same marketing tactics but getting much better results (which, in turn, leads them to invest time and dollars into their marketing efforts and further compound their growth lead!).

In the meantime, if you (or anyone else you know) wants to join our Team of Nerds, stay tuned for more openings in 2024, including the Managing Editor role (available now!), an Operations Coordinator (coming soon!), and other roles. We'll be listing these roles as they become available on our Kitces Career Opportunities page, or you can sign up for our separate Career Opportunities mailing list (via that Opportunities page) to be notified when new positions open up! And for those who don't want to join the team full-time but would simply like to 'Nerd Out' with us or a bit and share what they do or know with their fellow advicers, remember to check out our "How To Contribute" page to see how you can engage with the Kitces platform as a guest writer, presenter, or podcast guest!

Ultimately, though, the focus remains the same as it always has been – on our mission to "Make Financial Advicers Better, And More Successful" – through our 4 strategic pillars of creating Navigational resources, insightful Education, original Research, and skills Development for financial advicers across the spectrum of experience and firm sizes (and yes… or organizational strategy does spell N-E-R-D😊). We look forward to continuing the journey with you through the rest of 2024!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent U.S. Supreme Court decision shifting authority to interpret laws passed by Congress from Federal agencies to the judicial system could have significant impacts on regulation of the financial advice industry, including the potential for additional legal challenges to regulations from the Securities and Exchange Commission (SEC), the Department of Labor (DoL), and other agencies, with new groups already joining a lawsuit against the DoL's new Retirement Security Rule following the decision.

Also in industry news this week:

A separate Supreme Court decision struck down the SEC's use of in-house judges to adjudicate cases involving civil penalties (unless both parties in the matter agree to it), likely setting up more settlement offers from the regulator to avoid a drawn-out legal process in the Federal court system
At a time when it has seen an increased staff headcount and budget, FINRA, the self-regulatory agency for broker-dealers, has issued a smaller total dollar amount in fines as well as fewer press releases regarding enforcement actions during the past several years, raising questions about the extent of its enforcement of Regulation Best Interest and other regulatory measures

From there, we have several articles on retirement:

Why some clients have a hard time spending down their assets in retirement while others are more spendthrift
5 ways that can help financial advisors give hesitant clients 'permission' to spend more in retirement
An updated study suggests that for retirees, investment assets generate about half of the amount of additional spending as wealth held in the form of 'guaranteed' income (e.g., Social Security benefits, a defined-benefit pension, or a private annuity), offering a potential opportunity for advisors to help nervous clients boost their spending

We also have a number of articles on practice management:

The 3 types of firms looking to acquire RIAs and why the attractiveness of a deal goes well beyond a firm's valuation
How advisory firm owners can tell the difference between solicitations from M&A brokers solely focused on the financial bottom line of a potential sale and advisors who understand the full implications of a sale, including the importance of a solid cultural fit, for the selling firm owner
The considerations for firm owners considering selling a minority stake in their firm, including the importance of understanding what the investor brings to the table, in terms of the capital and industry knowledge they offer as well as their expectations for a financial return

We wrap up with 3 final articles, all about vacations:

How to set up proper boundaries at work before going on vacation to ensure needed work gets done without having to answer emails or phone calls while away
How to stop 'overplanning' vacations, from setting up loose guideposts for each day rather than strict itineraries to avoiding the rabbit hole of travel review websites
Why vacations that aren't particularly relaxing can still offer value, including the opportunity to have a 'fresh start' on work practices after returning to the office

Enjoy the 'light' reading!

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Over the past few decades, technological advances and plummeting transaction costs have facilitated the emergence of a dizzying variety of ways to gain exposure to very specific areas of the market. As a result, advicers have more options than ever to add value for their clients by tailoring investment portfolios that are specific to their unique needs, goals, and risk tolerance. One approach that has become increasingly popular is the use of factor-based ETFs, which are designed around certain shared characteristics of assets that go beyond the more traditional attributes (e.g., size, industry, location) of early mutual funds. While there are literally hundreds of identifiable factors, the most well-known are Quality, Value, Momentum, Small Size, and Minimum Volatility.

In this guest post, Robert Hum, a Managing Director and U.S. Head of Factor ETFs at Blackrock, discusses why Quality factor ETFs have seen large inflows over the last year, the characteristics that define Quality, and how advicers can implement Quality ETFs in their clients' portfolios.

As we head towards the second half of 2024, investors continue to grapple with many of the same issues that have influenced the overall market action for the past several quarters. While inflationary pressures have continued to trend lower and the jobs market seems to have tightened somewhat, the Federal Reserve remains in a wait-and-see mode in regard to any potential rate cuts, international tensions remain elevated, and the level of concentration in a handful of (arguably overvalued) stocks persists.

As a result, this macroeconomic and market uncertainty has ostensibly driven a preference for overweighting higher-quality companies in investment portfolios. Specifically, 'high-quality' companies share several similar fundamental characteristics. For instance, research has shown that companies whose revenue is driven by their core business functions (versus temporary accounting transactions) tend to have more sustainable earnings and higher future stock returns. Leverage also comes into play, as firms with lower debt-to-equity ratios are less risky, particularly in high-interest-rate climates. Moreover, companies that are more profitable (as measured by their return on equity) tend to outperform their less-profitable peers, even after accounting for the higher price multiples they often carry… and that relative outperformance has tended to increase with longer holding periods!

With those factors (no pun intended!) in mind, there are 3 primary ways that advicers can use Quality ETFs in portfolios. First is from a tactical perspective, where quality strategies that focus on companies with lower debt-to-equity ratios have lower total interest expenses and may be better positioned to weather the current higher-for-longer rate regime. Second, advicers can use Quality ETFs strategically. Quality ETFs tend to have a lower 'tracking error' in comparison to other factor-based products and, therefore, can be used as a large-cap blended fund. Finally, Quality ETFs can be an effective diversifier, particularly in portfolios that are tilted toward the Value factor.

Although Quality ETFs have already shown solid relative performance year-to-date, the longer-term case for Quality may still be compelling, given persistently high interest rates and the ongoing macroeconomic headwinds. Advicers can add value for clients who may be concerned about a possible economic slowdown by maintaining their overall portfolio mix consistent with a strategic focus on an area that tends to show relative strength during downturns. Ultimately, by offering clients strategies to respond to changes in the economic cycle, advicers can help clients stay disciplined and focused on their long-term goals!

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Welcome everyone! Welcome to the 392nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kristopher Heck. Kristopher is a Founding Partner of Tanager Wealth Management, an RIA based in London, England, that oversees approximately $1.1 billion in assets under management (AUM) for 630 client households.

What's unique about Kristopher, though, is how his firm has scaled to more than a billion dollars of AUM while specializing in working with clients whose personal and financial lives touch both the United States and the United Kingdom, a niche for which there is no set 'playbook' to learn the tax, estate, and other planning expertise needed to serve these clients, which makes the expertise they've crafted for themselves over the past decade to be instantly differentiated in the marketplace!

In this episode, we talk in-depth about how Kristopher chose his unique cross-border specialization, in part due to his own experience as a US expatriate navigating the financial issues that come with living and working in the UK, why Kristopher's firm emphasizes the ability to teach other team members about technical planning topics (since team members have to learn most of the specialized knowledge on the job) as a key criterion when hiring and evaluating new staff members to join Tanager Wealth, and how Kristopher's firm uses an internal blog, videos, and regular lunch-and-learns to further transmit their specialized knowledge across all advisors in the firm.

We also talk about how Kristopher's firm has attracted clients within its cross-border US-UK specialization, including by establishing relationships early on with accountants and estate attorneys who were also just starting their practices and working with similar expatriate clients (creating a healthy system of cross-referrals as each of those professionals' own practices have grown over the years), how Kristopher's cross-border specialization has evolved into several sub-niches, including expats who work specifically in the technology, financial, and legal sectors, and how Kristopher's firm's specialized expertise gives them an edge even and including against much larger firms in the broader market for financial advice.

And be certain to listen to the end, where Kristopher shares how his firm's separate advisory and planning teams not only help build and maintain his firm's knowledge base, but also provide separate career tracks for employees who want to be client-facing and those who want to dig deeper into the technical aspects of financial planning, how starting his firm with 2 other partners gave Kristopher the added confidence needed to overcome feelings of impostor syndrome when working with clients in his chosen-but-still-developing specialization, and why Kristopher believes RIAs are, in reality, HR and technology platforms that simply monetize with financial expertise (which emphasizes the importance of having the 'right' people and tech to successfully scale a firm).

So, whether you're interested in learning about how to develop a successful client niche when there is no 'playbook' to learn it, how to organize a firm to ensure institutional knowledge stays within the business, or how to nurture relationships to generate referrals from centers of influence, even when just starting out, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Kristopher Heck.

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Welcome to the July 2024 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that AI meeting support solution Jump has raised $4.6 million in venture capital, as meeting support has increasingly shown itself as a leading use case for AI as it applies to financial advisors given the sheer amount of time advisors spend on meeting preparation and follow-up tasks between multiple systems and the ability of AI tools like Jump to quickly scan through meeting notes and transcripts and produce meeting summaries, draft follow-up emails, and assign tasks.

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

Digital prospecting solution AIdentified has raised $12.5 million in Series B funding as it looks to further develop and scale its solution for finding qualified prospects for referrals among an advisors' network in order to drive more organic growth – though it remains to be seen how many advisors are ready to engage in a more proactive prospecting approach to the extent that it makes sense to adopt a new technology solution for doing so.
AI-driven investment research solution Brightwave has raised $6 million in seed funding for its digital "investment analyst" – although in a tech landscape where solutions tend to cater either towards 'active' advisors who seek out investment opportunities on their own or 'passive' advisors who focus more on educating clients to keep them in the markets, it isn't clear where on the divide Brightwave lies (or whether advisors will want to pay for a solution that seeks to do both, given that most advisors fall in either one camp or the other)
The state of Missouri has joined Washington state in scrutinizing advisors' use of third-party technology like Pontera to access and trade in clients' held-away accounts – which on the one hand, is striking in that those tools seem to be widely popular among clients and advisors alike due to their ability to give advisors secure access to client accounts, making it confusing that regulators would choose to scrutinize them; but on the other hand may be understandable given how quickly the technology to trade held-away assets has emerged, leaving regulators to find any way they can to pump the brakes on further development until they can come up with an acceptable regulatory framework

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

A new technology solution, RIA Growth Catalyst, has launched as a tool for firms to identify potential Mergers & Acquisition partners by using current and historical public Form ADV data to gauge which firms actually have a solid track record of organic growth and productivity metrics
A new survey shows that around 21% of advisors use direct indexing in their practice, which on the one hand, indicates that a large majority of advisors and clients aren't yet sold on the tax efficiency and other benefits of direct indexing (at least enough to make up for the added complexity it introduces), but on the other hand reflects how at least some advisors see direct indexing as a way to more effectively serve high-net-worth clients and values-based investors, leaving the question about whether it will eventually see more widespread adoption than those specific use cases

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that a recent study found that at a time when the number of SEC-registered broker-dealers and their registered representatives is declining, the number of SEC-registered RIAs, their assets under management, and the number of clients they serve all grew in 2023, reflecting the attractiveness of the RIA model to both advisors and clients alike and the ability for firms across the size spectrum to profitably serve clients.

Also in industry news this week:

How the SEC could target dually registered firms for enforcement of their duties to care for and manage conflicts of interest under Regulation Best Interest and the Investment Advisers Act to send a message to the industry and to clarify its expectations for these "dual-hatted" firms and their advisors
Why a shift in IRS priorities away from specifically focusing on taxpayers with more than $10 million in income for audits could result in more clients with incomes above $400,000 being audited in the coming years

From there, we have several articles on investment planning:

5 ways advisors can 'fix' the portfolios of new clients, from unwinding unintentionally concentrated positions to maximizing asset location
While concentrated investment strategies offer the promise of higher returns, the specter of unpredictable risks and, in the case of concentrated funds, misaligned incentives between fund managers and investors, can make them risky propositions
How a "total wealth approach" for portfolio management that takes a client's human capital and other non-investment assets could mitigate the downside risks to their wealth

We also have a number of articles on client meeting note-taking:

Strategies for advisors to take more effective notes in client meetings, from adopting structured frameworks to leveraging software tools
Client meeting note-taking software has emerged as one of the first AI use cases for advisors, though its use comes with compliance and security considerations
A review of available AI-enabled client meeting note-taking software, broken down by price, accuracy, security, integrations with other AdvisorTech tools, and more

We wrap up with 3 final articles, all about productivity:

How the "weighted shortest processing time" strategy can help advisors prioritize their to-do lists and why one of the best ways to boost productivity could be to shorten the list to only include what truly needs to be done
Amidst a work culture that often prioritizes time spent at the computer, why stepping away from the desk for unstructured thinking could boost workers' creativity and productivity
Why the concept of "entrenchment" suggests that achieving a "flow state" can sometimes lead to reduced productivity and wellbeing

Enjoy the 'light' reading!

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The practice of asking questions has always been an integral part of the financial planning process. In the early days of the advicer industry, those questions almost exclusively dealt with facts around a client's or prospect's financial situation to determine (ultimately) what products the adviser should recommend. However, given the industry's ongoing transition away from being primarily transaction-focused and towards being relationship-based, advicers have had to learn how to develop meaningful connections. One of the best ways to accomplish this is by having deeper conversations that go well beyond basic data gathering. Which, naturally, gives rise to the question: How can advicers foster an environment where these conversations can develop, and what are some ways that they can help their clients go deeper?

In our 141st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore some key concepts around facilitating meaningful conversations, ways advicers can help clients take time to focus on more foundational topics (so they can have a clearer picture around where they want to go), and some conversational strategies to give clients the 'permission' to open up.

Since much of an advicer's work centers around finding (and communicating) concrete answers to help solve problems and issues (like, "How big of an emergency fund do I need?" or "When can I retire?"), it's not too surprising that many view the process of facilitating meaningful money conversations from an analytical perspective (e.g., "Just tell me the best questions to ask and give me a flowchart to navigate the rest!"). However, finding the perfect questions and being skilled at asking them can also be cultivated through a sense of curiosity and a space where vulnerable conversations can happen. As while an advicer might want to implement the sort of life planning questions pioneered by George Kinder, the process may feel awkward in a more traditional "financial institution" setting and/or without a genuine interest in what the client has to say.

It's also important to recognize that clients typically don't seek out an advicer so they can explore their dreams, goals, and desires or to discuss their deep-seated feelings around money. Instead, meetings (especially initial meetings) happen because there's some 'presenting problem'. And that's where an advicer is in a position to create the space where meaningful conversations can happen by expressing empathy ("Mr. and Mrs. Client, I hear you. That is a real issue, and just to make sure we get to the best answer, can we back up a bit? Tell me why this is important for you?") and showing what a real financial planning relationship looks like.

The key point is that advicers who can develop their conversational skill set will not only do a better job of getting their clients to buy into their financial plans, implement the advice they're offered, and (ultimately) achieve their goals, but they'll also be better equipped to stand out in an increasingly crowded marketplace. And by greeting a client with genuine empathy, an advicer can create space in a conversation for the client where they can both explore deeper issues, arrive at impactful decisions, and engender a long relationship built on trust and meaningful human connection!

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Traditionally, the challenge in using a 529 plan to save for higher education expenses has been figuring out how much to save to cover the beneficiary's college costs without overshooting and saving more in the 529 plan than is actually needed. Because while 529 plans' combination of tax-deferred growth on invested funds and tax-free withdrawals for qualified education expenses (plus many state-level tax deductions or credits on 529 plan contributions) make it a powerful savings vehicle for college or graduate school expenses, the flip side is that any non-qualified distributions are subject to income tax plus a 10% penalty tax on the growth portion of the distribution. And so the conundrum of people with "too much" savings in their 529 plan – either because they overestimated how much they needed to save, or because they chose a different path entirely that didn't involve going to college – has been how to get funds out of the plan without sacrificing a large part of their value to taxes and penalties.

The Secure 2.0 Act passed in 2022 provided a new 'escape valve' for individuals who, for whatever reason, found themselves with more funds in their 529 plan than they could use on qualified higher education expenses. The new law created the ability for a 529 plan beneficiary to roll funds over tax-free from a 529 plan to a Roth IRA, subject to several key limitations: The 529 plan must have been maintained for at least 15 years, the amount of the rollover cannot exceed the IRA contribution limit for that year, the rollover must be made using funds that have been in the 529 plan for at least 5 years, and the maximum lifetime that a beneficiary can roll over in their lifetime is $35,000.

Because of the strict limitations on when and how the 529-to-Roth rollover can be done, it has limited usefulness as a planning tool beyond its intended purpose of giving individuals with overfunded 529 plans an opportunity to reallocate some of those funds tax-free towards their retirement savings. Similarly, the $35,000 lifetime rollover limit means that it can't be used by parents or grandparents to gift huge amounts of tax-free dollars to their heirs, since anything beyond that lifetime limit would still need to either be used on qualified educational expenses or be subject to taxes and penalties as a non-qualified distribution.

Even so, 529-to-Roth rollovers can still be worth incorporating into college and estate planning as a way to gift beneficiaries the "option" of putting up to $35,000 towards their retirement savings. In other words, families who want to give their kids a head start on their career and life path (but don't want to simply give no-strings-attached cash) can now consider 529 plans as a way to provide a boost not only to their education savings, but also to their retirement savings.

The key point is that while the new 529-to-Roth rollover rules may be limited in terms of how much wealth they can move into tax-free retirement funds, they can still provide real benefits – both in their intended purpose as an escape valve for people who can't or won't use all of the funds in their 529 plan for qualified education expense, and in the symbolic significance of contributing funds to a child or grandchild that can be used for education, retirement savings, or both!

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Welcome everyone! Welcome to the 391st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Christopher Jones. Chris is the founder of Sparrow Wealth Management, an RIA based in Orlando, Florida, that oversees approximately $110 million in assets under management for 68 client households.

What's unique about Chris, though, is how he has built a highly efficient solo practice that allows him to work fewer than 25 hours/ week to have more time for his family and managed to cut his hours down by relentlessly focusing on only the financial planning tasks that really truly matter most to his clients… and either outsourcing, or just eliminating, the rest.

In this episode, we talk in-depth about Chris's efficient planning process, including how he works through clients' financial plans collaboratively during their annual meetings and sends them a final copy afterward (instead of conducting a lot of time-intensive plan preparation in advance), how Chris used to do in-depth cash flow analyses with his clients but now saves time by simply focusing on his clients' stated goals instead, and how Chris cuts down on the time needed to manage cash requests from client accounts by not withdrawing his retired clients' spending needs on a monthly or ad hoc basis but instead simply doing a single sizable annual distribution from their portfolio all at once in January to cover them for the entire year.

We also talk about how Chris has improved the efficiency of his practice by building a carefully curated tech stack, deliberately using the specialized features of a range of best-in-class AdvisorTech products rather than pursuing an all-in-one solution, how Chris saves time by purposefully choosing not to automate certain tasks (and deliberately updates client balances for their annual reviews manually each year instead of using account aggregation tools), and how Chris's decision to transition away from using customized Excel spreadsheets he created himself and instead use a tech stack made up of third-party software tools helped him serve wealthier clients, driving his AUM from $43 million to $110 million in just 8 years.

And be certain to listen to the end, where Chris shares how he has grown his firm with a focus on generating referrals from clients who are well-connected in their professional fields, how Chris managed the transition from operating in an in-person office to running a remote practice (which allowed him to move across the country to be closer to family while still continuing to grow), and how Christopher compensates for his self-acknowledged perfectionist tendencies by outsourcing tasks for which he know he would want to find the 'perfect' solution, allowing someone else to just get it done (and saving him time and reducing his anxiety in the process).

So, whether you're interested in learning about building an efficient solo practice, how to create a tech stack based on 'best in class' tools, or how outsourcing can help save time and reduce anxiety, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Christopher Jones.

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The requirements to run a successful, growing advisory firm are often less about doing the technical work with clients and more about marketing value to get prospects in the door in the first place. Yet, many firms' prospecting strategies have often relied on individual advisors being able to bring business to the firm instead of actively shaping and promoting the firm's own reputation. And as independent financial advisors have shifted away from transaction-based roles into more holistic, person-oriented, and advice-centric ones, many marketing campaigns have adopted a 'good guy' (e.g., comprehensive, planning-centric, fee-based advisors) versus 'bad guy' (e.g., ignorant, overcharging stockbrokers) storytelling approach to promoting the industry. More often than not, though, this type of storytelling only serves to reduce consumer trust in the industry more than building trust in a firm, making business development efforts harder for individual advisors and, ironically, driving more people away from engaging with an advisor at all.

When it comes to a firm's business development efforts, individual advisors benefit most from firms with a strong brand and reputation for offering stellar and relevant client service, otherwise, the advisors often become wholly responsible for marketing themselves to find clients for the firm. If our industry is likened to sports, we can consider firms like teams and advisors as players; in this way, it becomes clear that promoting the industry (sport) as a whole positively and in a constructive manner benefits not just the firm (team), but the individual advisors (players) as well!

Which means that advisors should not be expected to champion the planning industry alone when prospecting for clients. This is especially true for advisors early in their careers; just like rookie athletes, they need the support and resources of their firms. So it behooves firms to prioritize their reputation and client experience to attract clients, who get channeled to the best advisors, who become well-known for their excellent work… which, in turn, builds up the firm's reputation even higher.

While focusing on promoting the industry more positively may be a helpful (and much-needed) shift, individual advisors and firms can also work collectively to sell financial planning by promoting the value of their firms as a whole and not just by showcasing the talent of individual advisors. Incidentally, this strategy can also improve the firm's client retention in the long term, since clients are sold on the firm experience rather than on any one individual advisor. Furthermore, advocates of the industry such as the CFP Board and other professional organizations can also support both the health and growth of the industry by taking the initiative to positively promote it, which can encourage more individuals to seek out financial planning services (and therefore more 'winners' for the firms and their advisors!).

Ultimately, the key point is that, much as how ticket sales to a basketball game are likely influenced by the reputation of the player, the team, and the sport, prospecting for financial planning clients is influenced by the reputation of the advisor, the firm, and the industry as a whole. Rather than marketing with heroes and villains, promoting the overall industry (while still emphasizing the value that makes a particular firm unique) can help firms build robust brands and offer marketing structures to their advisors, empowering them with the ability to provide great, holistic advice to their clients and build trust in the industry themselves – 1 client at a time!

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Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that affluent Americans believe they need an average of $5.5 million in assets to both retire and pass on a legacy interest (though many have yet to establish an estate plan), according to a recent survey. At the same time, they also overwhelmingly recognize the value of financial advisors, not only for increasing their wealth beyond what they could have achieved on their own, but also for helping them feel more prepared and less stressed about their finances!

Also in industry news this week:

A recent survey indicates that financial advisors continue to move towards ETFs and away from mutual funds when it comes to client portfolio recommendations, though a majority of advisors continue to see a role for active management in the investment management process
A former employee has filed a lawsuit alleging Reg BI violations at Fidelity, including a push for advisors to push customers to use the company's own higher-fee managed accounts rather than lower-cost funds, which, if found to be true, could lead to a wider SEC investigation and sound a warning for other firms that might be engaging in similar practices

From there, we have several articles on tax planning:

Amidst a broader tax enforcement push, the Treasury Department this week announced that it plans to crack down on "basis shifting" transactions used by certain partnerships to reduce their tax bills
A recent Supreme Court ruling regarding buy-sell agreements indicates the value advisors can add by reviewing these arrangements to ensure they meet their clients' needs without creating an additional tax burden
How financial advisors can help clients avoid (increasingly punitive) estimated tax penalties, from determining the amount they owe to leveraging strategies to pay the taxes efficiently

We also have a number of articles on advisor marketing:

While an advisor might be tempted to spend most of a prospect meeting explaining their personal story and the value they can offer, active listening could be a more effective approach to build trust with the prospect and increase the chances they decide to become a client
How using a simple visual "road map" can help tie together for a prospect an advisor's verbal explanation of their services and the next steps if the prospect decides to become a client
How flipping pain points into positive, achievable goals to work towards can help prospects better understand the value an advisor offers

We wrap up with 3 final articles, all about the cost of car ownership:

How a combination of elevated sticker prices and interest rates are combining to dramatically increase the cost of purchasing a new (or used) car
How the math behind the decision of whether to drive a car 'into the ground' or buy a new one has changed in recent years
Why car insurance premiums have spiked well beyond the overall inflation rate during the past year

Enjoy the 'light' reading!

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The role of estate planning is most commonly considered to be about transferring assets from one generation to the next in the most efficient manner possible (e.g., how to minimize the burden of estate taxes and avoid the public spectacle of the probate process). And yet, looking at estate planning solely through the lens of assets on a balance sheet can make it easy to overlook the reality that people often have other, intangible assets that they wish to pass on to the next generation, such as values, lessons, and opportunities to pursue lifelong passions that can't be achieved – and in many cases may be contradicted – by a simple transfer of cash.

So it often makes sense to think of estate planning not only in terms of which assets go to which person, but also in terms of how best to use those assets to incentivize the types of behavior that the assets' owner wants to instill in their heirs. As while will-based transfers and cash gifts generally impose no restrictions on how they're used by their beneficiaries, certain types of trust-based estate plans can allow an individual to set very specific guidelines for how their assets are held and under which circumstances they can be distributed.

The most common example involves trust provisions that direct assets to be distributed to beneficiaries once they obtain a certain age (e.g., at age 21 or 30) or stagger distributions at multiple ages. However, it's possible to get much more specific and to allow distributions that are tied to specific conditions that incentivize the beneficiary, such as academic achievements (like maintaining a certain GPA or attaining advanced degrees), life events (like getting married or buying a first home), or even the level of the beneficiary's own earned income (like allowing for 'matching' distributions equal or in proportion to the amount of income that the beneficiary earns).

In addition to incentivizing behaviors, trust provisions can also include tools to disincentivize certain behaviors. For beneficiaries who have known behavioral issues such as gambling or substance abuse, the trustee may be able to delay distributions until there is evidence that the behaviors have been curtailed. Likewise, an individual wanting to avoid litigation or family conflict as the result of a contested estate (e.g., by a family member who feels they were treated unfairly) can include a "no contest" clause that effectively disinherits anyone who takes legal action against the estate.

The key point is that as with most financial planning topics, advisors can play a role in helping to guide clients to the most appropriate solutions for their goals, including how to carry on their legacy of personal values. By asking questions to clarify the client's aims in leaving money to their beneficiaries and then helping them find an estate administrator or trustee and an attorney who can draft a trust that reflects the client's goals, advisors can assist clients in making sure their legacy is preserved for generations to come!

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Welcome back to the 390th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Brent Carnduff. Brent is the founder of Advisor Rankings, a marketing firm based in Boise, Idaho that specializes in search engine optimization for financial advisors.ated near them.

In this episode, we talk in-depth about how Brent helps advisors improve their local SEO, starting by claiming and then accurately and completely filling out their firm's Google Business Profile page, why Brent recommends that advisors ask their clients (consistently and systematically, to be compliant) to write a review on Google in order to boost both the firm's search ranking and the number of prospects who actually visit the firm's website, and why Brent views local SEO as an opportunity for advisors who already work with clients in their geographic area to turn their existing presence into a geographic niche that more effectively attracts new nearby prospects.

We also talk about Brent's advice for maximizing organic SEO to attract clients with planning needs that match the advisor's expertise, including the optimal cadence and length of content for SEO purposes, Brent's recommendations for selecting topics for website content, in particular writing lengthy hyper-specific posts on focused subjects that won't appear on more generalist websites but are relevant to the firm's ideal clientele, and Brent's tips for coming up with ideas for content, such as by simply writing articles to answer the questions that an advisor's clients are already asking.

And be certain to listen to the end, where Brent shares how serving a specific client niche can play a major role in helping an advisor really rise in Google search rankings, why Brent finds that local SEO can have a positive impact in 6 months but organic content-based SEO has to be a more long-term investment for a firm, and why Brent hired a coach to get his own business to the next level, especially by helping him to price his services at their real value, and helping him to get more comfortable in delegating tasks so he can focus his time on providing his SEO expertise to the advisors he serves.

So, whether you're interested in learning about how Brent assists advisors in improving their local SEO, content strategies that Brent recommends that advisors can leverage to resonate with their target clientele, or how Brent advises on maximizing organic SEO, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Brent Carnduff

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Online reviews are commonly given and used by consumers across many industries, from finding a good restaurant in a new town to reviewing a lawn care service provider. Nonetheless, fewer than 10% of SEC-registered investment advisers report using them, even though the SEC’s updated investment adviser marketing rule allows financial advisors to proactively encourage testimonials (from clients), use endorsements (from non-clients), and highlight their own ratings on various third-party review sites. Which suggests that advisers have an opportunity to leverage the power of online reviews, which can act as "evergreen referrals" and drive more prospects to seek out the firm’s services, all while adhering to their firm’s compliance requirements.

While some advisors might be concerned that reviews they encourage clients to make on the firm’s Google Business Profile could be seen as advertisements (creating additional compliance requirements), the language of the rule (and the SEC’s stated intent behind it) suggests that by providing all clients an equal opportunity to leave candid feedback on a Google Business Profile would not in and of itself turn that content into an advertisement (unless the content was later endorsed or approved by the adviser). However, selectively asking a subset of clients for testimonials, or guiding their responses to encourage more positive content (involving themselves in the preparation of the content), would likely result in the content being considered a communication of the adviser, potentially rendering it an advertisement subject to the disclosure and compliance requirements of the marketing rule.

Even though the updated marketing rule has enhanced advisers’ ability to leverage online reviews, some advisers might wonder whether clients will actually leave reviews (and, if, so, whether they will be positive). However, an analysis of thousands of Google reviews from financial advisory firms around the country shows not only that clients are willing to leave reviews (particularly if the firm has a proactive strategy for review generation), but also that firms with the most reviews tended to have higher than average ratings for advisory firms overall. Further, advisers tend to have higher ratings than businesses in other industries (perhaps reflecting the financial planning industry’s high retention rates and ability to make a difference in clients’ lives!).

To create an effective (and compliant) Google review strategy, a starting point for advisers is to update their Form ADV to reflect the use of testimonials and their Policies & Procedures to govern their approach to collecting, approving, and sharing testimonials. Next, by taking a proactive approach to reinforcing where they add value (e.g., because the most enthusiastic testimonials related to clients feeling like their adviser was delivering a personalized plan, advisers who address client concerns directly and make them feel a part of the process could generate more positive reviews). Further, advisers can potentially reduce the number of negative reviews received by ensuring that prospect and client relationships that do not work out (e.g., when a prospect does not meet the firm’s asset minimum) are handled respectfully (e.g., by referring the prospect to another advisor who might be able to better meet their needs) so that the individual does not feel compelled to leave a negative review.

Ultimately, the key point is that the SEC’s updated marketing rule provides advisers with the opportunity to boost their online reputation through the use of online reviews. And by taking a proactive approach (both to encouraging reviews and to meeting the rule’s requirements), advisers can potentially increase the number of inbound prospects they attract while remaining in compliance with the marketing rule’s requirements!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent study found that advisory teams tend to have higher assets under management per advisor, serve wealthier clients on average, and have stronger growth than solo advisors, thanks in part to the efficiencies gained from sharing expertise and back-office support. Nevertheless, these findings could reflect self-selection amongst advisors, with those who don't want to grow past a certain satisfying income (happily and profitably) remaining as solos, and those seeking greater growth upside joining teams.

Also in industry news this week:

While an infusion of Private Equity (PE) capital has shaken up the RIA M&A market, the ultimate implications for advisors, their clients, and the PE firms themselves remain unclear
A recent study has found that a significant portion of 'DIY' investors are open to working with a human advisor (and paying for the service), with 'just in time' advice potentially providing an opening for advisors to demonstrate their value

From there, we have several articles on retirement planning:

Practical considerations for advisors when engaging in (partial) Roth conversions, from assessing the "effective marginal rate" paid on the conversion to deciding when during the year to complete the conversion(s)
Why regular portfolio rebalancing could be sub-optimal for retirees and how a "rising equity glide path" could lead to greater portfolio size and longevity
Why an advisor's tools for helping clients successfully navigate the early years of retirement extend beyond asset allocation

We also have a number of articles on practice management:

A 6-step plan for advisory firms to create a compensation plan that reflects their values and goals
How firms can use cash bonuses, equity opportunities, and non-monetary perks to attract and retain top talent
A survey of Gen Y and Gen Z advisors indicates that many of the factors that make a firm attractive to them, from the company culture to training and mentorship opportunities, do not necessarily have to cost firms in terms of hard dollars

We wrap up with 3 final articles, all about overcoming limiting beliefs:

Tactics for overcoming limiting beliefs and "impostor syndrome" from the "WOOP" technique to participating in "mastermind" groups
How self-compassion can help one overcome excessive self-criticism and become more resilient when things go wrong
A 6-step approach to 'defuse' negative thoughts and shift towards more empowering beliefs

Enjoy the 'light' reading!

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As the financial advice industry continues to move toward providing full-blown professional services rather than focusing primarily on product sales, advisory (advicery?) firms are increasingly experiencing similar stages of growth in their practices. From the initial stage of onboarding their first clients to the point of hitting a capacity wall and deciding whether to increase their headcount, and later to a threshold where an ensemble business eventually becomes an enterprise, advicers face many of the same challenges and opportunities along the way. Conversations around these commonalities often work their way into the broader advicer community, and one topic that frequently crops up is the concept of scale, which denotes a disproportionate increase in revenues over expenses (often because of increased efficiencies within the business), and is distinct from "growth", which involves a proportional increase in both revenue and expenses. Often, advicers whose firms are still in the early stages of development begin thinking about how they can scale their business, which begs the question: Are advicers worrying about how they'll scale their business long before scale is even an issue?

In our 140th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how early-career advicers can sometimes get distracted by questions around how they can scale their practices, the issues they should really be focusing their time and energy on instead, and strategies they can use to identify what sort of business they want to build in the first place.

Advicer concerns around scaling typically present in a couple of ways. The first is based on the fear that, if the advicer introduces a new service, scaling it will be difficult because the margins are too low. Put another way, the advicer has a pricing problem and hopes that the economies of scale can correct for not charging enough. Another concern centers around increasing headcount, where advicers who don't want to hire and manage staff begins looking at technology as the key to achieving better margins while keeping headcount low.

The reality is that most advisory firms run profit margins around 25%, which means that the better way to increase profitability isn't to 'scale' margins by another couple hundred basis points but to grow the business and make the same profit margin on a larger number. In fact. worrying about scale can really be an excuse the advicer leans on to not do the next thing that would help move their business forward. Instead, an advicer's business would be far better served by prioritizing the most immediate problems, and more often than not this involves focusing on how to add more clients to first reach capacity, and then figuring out where to go next. Or put another way, is a major software upgrade really necessary for an advicer to serve their next 10 clients more effectively, or would the advicer's time be better spent re-examining pricing structures, marketing strategies, or service offerings?

The key point is that advicery (😊) firm owners may find it tempting to explore projects that keep them from addressing their most immediate problems. However, the most successful entrepreneurs are those who are able to quickly identify the most pressing issue they face, and solving for whatever may be blocking their progress/ And it's by focusing on doing the next hard thing that will ultimately be the most effective means of moving their practices forward and improving the trajectory of their bottom line!

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Financial advisors, as professionals whose clients rely on their advice to make financial decisions, are legally and financially responsible for the advice that they give. For example, if an advisor recommends an investment that prioritizes the commission they would receive rather than any benefit the client would derive from it, they could incur fines and sanctions for violating their fiduciary duty as an advisor. Or if an advisor knowingly misled a client in giving information that led them to make an investment decision, they could be penalized for giving fraudulent advice under state or Federal law.

But liability for advisors also extends to situations where they may not have intended to give false information, but nevertheless provided advice that caused the client to incur financial loss. In these situations, advisors can still be held liable – and required to pay restitution – for 'negligent' investment advice if they're determined to have failed to exercise due care when making a recommendation to a client.

Which means that when an advisor recommends a certain investment strategy for a client, their standards of care should dictate that they first make sure that the strategy is within the client's tolerance for risk. Otherwise, if the advisor doesn't account for the client's stated risk tolerance when making the recommendation (or doesn't bother to assess their risk tolerance to begin with), and the portfolio declines with the client incurring losses as a result, the advisor could be required by a jury or arbitrator to pay back the client for those losses. And as courts have found over time, even types of advisors' who do not owe a fiduciary duty to their clients – e.g., broker-dealer representatives and insurance producers in certain instances – can still be found liable for giving negligent advice if their customers rely on the information that they give to make decisions about which products to buy.

Notably, even though individual advisors are liable for the advice they give, it is often the advisory firm that employs them that ultimately pays out any liability-related payments to clients. In some cases, that might be because the firm itself is held jointly liable with the advisor (which is allowed when the advisor's negligent advice or recommendations are given within the scope of their duties as an employee). In others, it's because the firm has Errors & Omissions (E&O) insurance that covers the liabilities of itself and its employees. And often, the firm is simply more likely to have the resources to pay a liability claim than an individual advisor. (Although individual advisors may face further consequences, like regulatory fines and sanctions, loss of professional designations, and public disclosure of the advisor's disciplinary history, that affect themselves and their careers.)

The key point is that advisor liability doesn't just affect individual advisors who are held accountable for their own advice: If an advisor is found liable for giving negligent advice, it also impacts the firm they work for and, by extension, the reputations of the other advisors they work with. Which is why it's important for advisors thinking about joining a firm to consider the firm's culture and how well it trains its advisors (and reinforces the training) on exercising due care in giving financial advice. Because ultimately, it's better to be surrounded by others who take care in advising their clients than to be the only one doing so!

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Welcome everyone! Welcome to the 389th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Mark Berg. Mark is the Founder of Timothy Financial Counsel, an RIA based in Wheaton, Illinois, that is on track to generate approximately $5 million in annual revenue this year serving 800 client households.

What's unique about Mark, though, is how his firm has scaled from $1.8 million of revenue to $5 million, in only 6 years, and has maintained a 25% profit margin… all while serving clients by exclusively using an hourly fee model.

In this episode, we talk in-depth about how Mark created a structured process to serve clients under the hourly model, including segmenting client engagements into 5 "levels" based on the complexity of their needs to match them with the right advisor, how Mark's firm uses those levels to provide accurate quotes for how many hours it will take to meet a client's planning needs in the first prospecting call , and why Mark thinks that proper pricing is a key to success using the hourly fee model, with his firm charging either $350 or $450/hour depending on the seniority of the assigned advisor.

We also talk about how Mark's firm attracts clients both through referrals from current clients and from other financial advisors who need to refer prospects who don't meet their asset minimums or whose planning needs don't match their expertise, why Mark created a client waitlist to manage his and his staff's capacity amidst a wave of interest from prospective clients (after realizing that this "wave of interest" could be the new normal that he couldn't just assume was temporary and would pass), and how Mark uses time-tracking software not only to accurately and efficiently bill clients, but also to manage his and his advisors' capacity as well.

And be certain to listen to the end, where Mark shares how hiring a president of the firm – and choosing someone without a financial planning background – helped his firm scale by allowing him to focus on the big-picture ideas for the firm and having the president implement them, how Mark structured the firm's employee hiring, onboarding, and training process to match the unique development curves of his firm's junior employees in an hourly model where nearly everyone contributes to generating revenue, and why Mark compares the hourly fee model to a "blue ocean" of opportunity for financial advisors, with the potential to reach millions of potential clients for whom other fee models might not be a fit, but who are showing a clear willingness to pay several hundred dollars per hour in fees… that advisors themselves can build and scale with.

So, whether you're interested in learning about how to scale a firm using an hourly fee model, how to segment client engagements based on the complexity of their needs, or how to create processes for hiring and training employees in a growing business, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Mark Berg.

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The first half of 2024 has been a solid start for most advisory firms, with markets enjoying moderate growth (a pleasant follow-through after a particularly strong 2023!), client retention rates remaining robust, and at least a bit of client referral growth trickling in. Which is leading to healthy profit margins at the typical advisory firm, as more and more advisors eye the possibility that AI will produce even more business efficiencies (and stronger profitability) in the year to come. Fortunately, change never happens fast in the slow but steady evolution of the advisor industry, which affords advisory firms the time to pause and take a fresh look at the landscape of opportunities.

In this context, the approaching summer season will once again bring its usual respite – a time when most advisors take more time off (if only because clients are harder to pin down for summer meetings, especially as post-pandemic summer vacations away from home are back in full swing)… and find some time to read and catch up on a few good books!

For those who love to read, though (and especially for those who have limited time and will only get to read just 1 or 2 books over the summer), the perennial question is always, "So… what's a good book worth reading this summer?"

As a voracious reader myself, I've always been eager to hear suggestions from others of great books to read, whether it's something new that's just come out or an 'old classic' that I should go back and read (again or for the first time!). And so, in the spirit of sharing, a few years ago I launched my list of "Recommended (Book) Reading for Financial Advisors", and it was so well received that in 2013 I also started sharing my annual "Summer Reading List" for financial advisors of the best books I'd read in the preceding year. It quickly became a perennial favorite on Nerd's Eye View, and so I've updated it every year, with new lists of books in 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and a fresh round last year in 2023.

And now, I'm excited to share my latest Summer Reading list of top books for financial advisors in 2024, from new perspectives on how to transform your business into what you really want it to be (whether the goal is to '10X' the business, scale up the systems and dial back your own time, or get your team working together better), tactics to improve on client communication (from scripts you can use to cultivate more referrals, to better connect with clients and prospects as a 'Supercommunicator'), ideas for reinvesting into your own under-developed capabilities to tap your' Hidden Potential', or ways to take a pause and consider how to improve your health and personal wellbeing (not just the business).

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that recent surveys indicate that consumers continue to trust human financial advisors more than Artificial Intelligence (AI)-powered tools. Nonetheless, respondents (particularly those in younger generations) do not see this as an either-or choice, but rather anticipate benefitting from working with human advisors who leverage AI tools for certain tasks (e.g., detecting fraud or analyzing data) to provide a better client experience!

Also in industry news this week:

Backers announced the new Texas Stock Exchange, which seeks to provide companies with a lower-cost alternative to the NYSE and Nasdaq, which, if successful, could create a more competitive landscape and potentially better execution and reduced trading costs for financial advisors and their clients
The American College of Financial Services is launching a new certification focused on tax planning, offering an opportunity for financial advisors to dig deeper into an increasingly valuable part of the planning process

From there, we have several articles on investment planning:

Why real estate, high-yield corporate bonds, and cryptocurrencies might not offer the diversification benefits one might assume
How exchange funds can potentially help advisors and their clients reduce concentration risk in a tax-efficient manner
Why today's stock market concentration is not necessarily an outlier in historic terms and might not actually be detrimental to client portfolios

We also have a number of articles on the intersection of financial planning and disabilities:

How financial advisors can support clients whose child has a disability, from helping them balance their own financial needs with those of their child to leveraging accounts that do not disqualify individuals with disabilities from receiving government benefits
Why having an ADA-accessible website not only can help financial advisory firms avoid potential legal trouble, but also attract more clients in the process
How advisors can support the estate planning process for clients with a disabled family member, from confirming the clients' goals are communicated clearly to ensuring that any special needs trusts are administered properly

We wrap up with 3 final articles, all about spending time well:

The value of not only considering one's own lifespan and "healthspan", but also those of loved ones when it comes to setting goals and making plans for the future
Best practices for going on a sabbatical that will allow an individual to truly unplug and reflect on their personal and/or professional lives
How engaging in a "depth year" can be a more meaningful alternative to constant accumulation

Enjoy the 'light' reading!

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For the most part, solo advicers launching their first practice often have plenty of time and not a lot of revenue, which means they tend to take care of every aspect of the business themselves. As their practices grow and they start to serve more clients, though, advicers invariably reach a point where they simply don't have the time to do everything on their own and need to decide whether to make their first hire (or not!). If they want to continue to grow and increase their capacity, they'll need to make several important decisions and address a plethora of legal and compliance requirements not only to avoid potential legal issues but also to ensure that their business will continue to operate smoothly.

In this guest post, Jaqueline Hummel, an Independent Compliance Consultant and Director of Thought Leadership at SEC3 Compliance, discusses the initial decisions advicers must make when making their first hire, whether the person they're onboarding will need to register as an Investment Adviser Representative, and the regulatory issues that the newly minted employer may need to address.

Once an advicer chooses to push past their "capacity wall" and make their first hire, the initial step is determining what duties the employee will assume. For instance, if the advicer finds that they have more clients and prospects than they can handle, then they may need an assistant to help with administrative tasks. However, if growth has stalled, hiring (or partnering with) an IAR who can help attract new clients may make more sense.

From there, the next decision will be whether the new hire should be an employee or independent contractor. Notably, onboarding someone as an independent contractor who should actually be hired as an employee (because they work specific hours using company tools and resources, are paid an hourly wage or salary, dedicate their working hours solely to the firm, and receive benefits) can result in significant penalties, including back wages, tax arrears, and other fines.

The advicer must also decide whether their new hire will act as an IAR; in other words, will they provide advice regarding securities, manage client accounts, identify what advice should be given, sell the firm's advisory services, or supervise anyone who performs any of those duties? If so, they will typically need to register with their state regulator. From the firm level, there are several disclosures the advicer needs to make on various SEC forms (e.g., ADV Part 1A, Part 2B, and CRS). Importantly, Form ADV defines anyone who performs advisory functions on behalf of an advisory firm as "employees" – even IARs classified as independent contractors.

Finally, firm owners must determine how they'll supervise their new hire and whether they need to update their compliance manual. While there are multiple issues to consider, some of the higher-risk areas include maintaining client confidentiality, ensuring that marketing materials align with regulatory rules, limiting access to the firm's trading platform and the ability to move funds, securing certain firm documents, investigating the new hire's background, and identifying potential conflicts of interest.

Ultimately, transitioning from a solo-advicer to an employer responsible for hiring and supervising others is a big step that requires serious consideration. For advicers who want to serve more clients, adopting a systematic process can help ensure that the firm complies with all the various regulatory requirements. While doing so may seem daunting, the good news is that making that first hire can be a step towards expanding the advicer's capacity to grow their practice and serve more clients!

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Welcome everyone! Welcome to the 388th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Freeman Linde. Freeman is the Co-Founder of La Crosse Financial Planning, an RIA based in La Crosse, Wisconsin, that oversees nearly $50 million in assets under management (AUM) for 73 client households.

What's unique about Freeman, though, is how despite the conventional industry view that it takes $10s of millions of AUM to go independent, launched his own RIA with just $7M of AUM (and even that was split with a business partner), and found that the subsequent freedom to build their own SEO-optimized website to market themselves the way they wanted in their local community quickly grew the firm from there to $40M in under 4 years.

In this episode, we talk in-depth about how Freeman used a customized spreadsheet to analyze the financials that ended up favoring operating as an independent RIA rather than under a broker-dealer’s grid and platform fees (in particular the ability to boost long-term profitability by paying expenses as a flat cost rather than as a percentage of revenue), how Freeman’s transition to the RIA channel actually allowed him to raise his AUM fees while still providing clients with lower total costs than they had when he was with the broker-dealer, and how Freeman overcame the potential hurdles to going independent, including rebuilding his tech stack and managing his own compliance (in part by communicating directly with his state regulator).

We also talk about how Freeman has been able to turbocharge growth in his RIA, going from $7 million to now approaching $50 million in AUM in under 4 years, by using a local SEO strategy that emphasizes their status as one of the only fee-only fiduciary firms in their geographic area, why Freeman created 3 different websites targeted at the separate niche markets he and his 2 fellow advisors serve to maximize the SEO value of each one, and how Freeman converts prospects into clients using a structured discovery meeting process that includes giving prospects planning recommendations that they could implement themselves regardless of whether or not they become a client.

And be certain to listen to the end, where Freeman shares how he has attracted clients and won their loyalty by expanding his comprehensive suite of services including in-house tax return preparation (by becoming an Enrolled Agent) and outsourced estate document services using EncorEstate, how Freeman feels that operating as an RIA has allowed him to build a more sustainable business by focusing on existing client relationships with recurring revenue rather than product sales that always kept him on the hunt for the next new client, and why Freeman hopes that more newer advisors will be able to get their start learning firm operations and how to serve clients within a fee-only firm rather than starting out in a product sales role and moving to an RIA later.

So whether you are interested in learning why Freeman chose to operate as an independent RIA over remaining under a broker-dealer, how Freeman used local SEO strategy to turbocharge firm growth, or how expanding services to include in-house tax preparation and outsourced estate planning helped him attract and retain clients, then we hope you enjoy this episode of the Financial Advisor Success podcast with Freeman Linde.

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Welcome to the June 2024 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that 'startup' custodian Altruist has completed a $169 million fundraising round as it continues to rebuild the RIA custodial tech stack layer-by-layer while positioning itself as the biggest RIA custodian built from scratch and solely for advisors – which, while making it the clear #3 custodian behind Charles Schwab and Fidelity, leaves open the question of whether it can grow large enough to challenge the dominant position of the 'Big 2', which are able to leverage their massive retail operations not only for economies of scale but also to create a large pool of potential clients for RIAs to convert or be referred to (making it a less attractive proposition to switch to a custodian that by definition has no retail client base)

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

Communications archiving solution Archive Intel has recently raised $1M in startup capital, as it builds a tool that reflects clients' changing communication preferences by including messaging apps like iMessage and (in the near future) WhatsApp – which raises the question of how long compliance archiving solutions can keep up with an ever-growing number of communications channels before they become more expensive than is worth it for advisors to keep communicating via their clients' preferred medium
Financial planning software platform RightCapital has introduced its own built-in risk tolerance assessment tool, RightRisk, allowing users to embed risk tolerance conversations directly within the financial planning process (and for many, possibly eliminating the need for a standalone risk assessment tool)
Couplr, a white-labeled software tool for creating data-based matches between prospects and advisors, has announced a partnership with the American College of Financial Services – which, while addressing a potential opportunity for better matches than existing lead generation platforms based on clients' unique needs, raises questions about how big of a market there is for Couplr's services given that most firms' main challenge is simply bringing in prospects at all, not just 'good' prospects

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

XY Planning Network has announced that applications are open for its annual AdviceTech Competition, which showcases emerging advisor-facing technology for XYPN's network of planning-centric advisors without the high costs of a traditional exhibitor booth (while also giving potential investors a look at early-stage companies that could fuel the future growth and innovation of the AdvisorTech space)
While the initial wave of hype surrounding AI tools has cooled off amid recognition of their inherent limitations, the potential for AI-based meeting notes tools to eliminate hundreds of hours of advisor work around meeting preparation and follow-up has spawned numerous solutions competing for advisors' business – raising the question of how to actually choose between them when new solutions are popping up continuously and the pace of development is such that today's inferior option might be next year's category leader?

And be certain to read to the end, where we have provided an update to our popular “Financial AdvisorTech Solutions Map” (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Financial Planning Association and Money.com are planning to publish a “Best Financial Advisors” list based on advisors’ education, credentials, and experience, as well as harder-to-quantify areas such as trust factors and client communication. Going beyond FPA’s existing PlannerSearch tool, the narrowed-down list is meant to help consumers identify a focused subset of the most reputable planners. Though given that the list will be limited to FPA members who complete a detailed questionnaire, it might not be a truly comprehensive list of the ‘best’ planners… and even more impactfully, could upset current FPA members who pay their dues like every other member but are told they’re “not good enough” to be recognized by their own membership association as one of the “best” to Money.com’s millions of consumers?

Also in industry news this week:

Legislation that has passed through the U.S. House of Representatives and is now being considered in the Senate would increase the number of firms classified as “small entities” and would require the SEC to assess the impact of proposed regulation on this newly enlarged class of investment advisers (which tend to have fewer compliance staff and resources available compared to larger firms)
A recent study indicates that many retirees, particularly those that engage in a “partial retirement”, experience spending volatility at a time when sequence of return risk is the most threatening

From there, we have several articles on tax planning:

The IRS released its annual “Dirty Dozen” list of tax scams, many of which target wealthy individuals, including abuses of certain trusts, monetized installment sales, and improperly valued art donations
How advisors can help clients avoid falling prey to tax scams, from encouraging good cyber hygiene to serving as a second opinion on questionable tax strategies that have been pitched to the client
How advisors can support clients in evaluating the qualitative and quantitative consequences of engaging in geographic arbitrage to reduce their state income tax bills

We also have a number of articles on clients going through a divorce:

How advisors can add value for clients going through the divorce process, from offering an empathetic ear to analyzing the impact of a proposed division of assets
The unique challenges (and rising incidence) of “gray divorce” and the key planning topics for advisors and their clients in this situation to address
The ethical considerations for financial advisors when client couples are going through a divorce

We wrap up with three final articles, all about career satisfaction:

How the concept of the “hedonic treadmill” can help explain why reaching professional goals often leads to fleeting satisfaction, and the alternative practices that can lead to enduring happiness
Why letting go of the “pursuit of happiness” might be more likely to lead to greater contentment than trying to cross off as many items as possible from a ‘to-do’ list
3 mindset shifts that can help advisors find satisfaction from their (incremental) professional accomplishments

Enjoy the ‘light’ reading!

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Over the past couple of decades, the financial advice industry has seen a tremendous shift as the focus has evolved away from being primarily transaction-based and towards forming long-term service-based relationships with clients. Yet, one of the hurdles advicers have faced along the way is figuring out how to demonstrate the seemingly intangible value of financial planning as a service. The good news is that the profession has been blessed with an ever-expanding supply of credentials and software solutions to give advicers the tools and opportunities to expand their expertise and create deliverables to demonstrate their value. However, since advicers tend to be service-oriented and enjoy helping their clients in as many ways as possible, the challenge is that there can be a tendency to always do more for clients. Which begs the question: Is there a point at which advicers might be doing too much where they should stop pressing so hard to expand their service menu and even cut back on some items on their client service calendar?

In our 139th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore ways for advicers who may feel like they are doing too much for their clients to identify the service offerings they can eliminate, implement strategies for phasing out superfluous services, and think about how their own personal learning journeys fit with their visions for their business.

One challenge that advicers may face when figuring out what they can remove from their service calendars is that it's nearly impossible to get all clients to agree that a certain offering is unnecessary. As while most clients would be perfectly happy without certain services, all it takes is for 1 or 2 to say they want to keep them for advicers to feel obliged to continue delivering them, even if eliminating them might create better efficiencies within the practice or help the advicer achieve a better work-life balance.

One workaround advicers can try is to simply stop doing a 'thing' (e.g., quarterly performance reports) and see if anyone notices... and if they do, it's perfectly okay for the intrepid advicer to say it was simply an oversight. Meanwhile, an even more effective (and data-driven 💙) approach would be sending clients a survey asking them to rate the perceived value of all the services they're receiving. From there, the advicer can jettison the lowest-ranking offering, knowing that the odds of a client moving on in response would be relatively low… and even if they were to leave, then maybe the advicer would get the added benefit of realizing that the client wasn't a good fit after all!

Meanwhile, for advicers on their own learning journey, it's important to note that just because they learn something new doesn't mean they have to bring it into their business. Instead, advicers can (and probably should) stop adding to their business as soon as what they're charging aligns with the value they're delivering. And if, along the way, they find something they do want to add, they can always find a lower-value offering for the new thing to replace.

Ultimately, the key point is that, just as clients can experience 'lifestyle creep' as their earnings increase, so too can advicers experience 'service creep' as their businesses grow… especially since many advicers are hard-wired learners and helpers. The key is understanding that it's okay for advicers to stop stacking on additional services even as they continue to expand their knowledge and expertise. And if there's a question around whether or not they're doing enough, advicers can take stock and observe whether they're getting referrals and if their attrition rates are higher than normal. In the end, the odds are that they'll find they are, indeed, enough!

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Small business owners often treat their businesses not only as their source of income during their working years, but also as an asset that can be sold to fund their retirement. And while many businesses can build up substantial value over the years, the downside is that, when that value is realized upon the sale of the business, a large amount of it is treated as taxable income. And for many business sales that create capital gains of more than $500,000, the one-time spike in taxable income created by selling a business can bump the seller into a higher income tax bracket, requiring them to forfeit a significant chunk of their funds needed for retirement to pay their own tax bill on the sale.

One way to reduce the tax impact of selling a small business is by using an installment sale. Under IRC Sec. 453, capital gains on the sale of assets, such as privately held businesses where the payments are spread out over a period of 2 or more years, are deferred until the years when the payments are actually received. Which not only defers the taxes owed on the sale to future years, but can also reduce the absolute amount of tax on the sale by spreading out the tax impact over multiple years and keeping the seller within the lower capital gains tax brackets.

The downside to installment sales, however, is that, being essentially a loan from the seller to the buyer of the business, the seller takes on the risk that the buyer may ultimately be unable to make their payments as required by the installment note. Additionally, it can sometimes be difficult for a business seller to even find a buyer who is willing to agree with them on the terms of an installment note. And furthermore, because an installment sale involves one or more payments being deferred until future years, the seller can't use or invest any of the sales proceeds until they're actually received.

One purported solution to the issues with installment sales that has been promoted by a group of accountants, attorneys, and financial advisors is known as a Deferred Sales Trust (DST), which works by using a third-party (the trust itself) to buy a business or other asset from the seller under an installment agreement, rather than selling directly to the ultimate buyer. The trust then sells the asset to the buyer in a lump-sum transaction and invests the proceeds to pay back the seller under the terms of the installment agreement. As the sales pitch goes, this allows the seller to benefit from installment sale treatment, while eliminating the credit risk of selling to a buyer and giving them at least some ability to choose how the proceeds are invested even before they actually receive them.

However, closer scrutiny of the DST strategy raises significant red flags that aren't included in the sales pitch. For one thing, details of the strategy are kept closely under wraps by the group that promotes and sells DSTs, limiting advisors' ability to vet the DST's legitimacy. Additionally, although DST promoters tout the strategy's ability to eliminate the credit risk of entering an installment agreement directly with a buyer, in reality, the risk is simply shifted to the trust itself: Because the seller cannot be the owner, trustee, or beneficiary of the DST (because doing so would cause the transaction to lose its installment treatment), they are wholly reliant on the trust to be able to make its required installment payments. Meaning that, for example, if the DST trustee mismanaged the sales proceeds and caused them to default on the installment loan, the seller would have no recourse to recover those funds. (While at the same time, any extra funds that are left over after the note is fully paid off go to the DST trustee, not the business seller – a true 'heads I win, tails you lose' proposition.)

In other words, the characteristic that is needed to make DSTs work from a tax perspective – the ceding of all control over the sales proceeds to a third-party trustee – can make them even more risky than a traditional 2-party installment sale. Which is why instead, sellers of small businesses may want to consider other strategies such as structured installment sales (in which the installment note is funded by a large insurance company that has significantly more assets with which to pay off the loan), entering into the installment agreement directly with the buyer, or even simply selling as a lump-sum and taking the entire tax hit in 1 year – which, while being possibly less favorable from a tax perspective, at least ensures that the seller receives all of the sales proceeds to begin with!

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Welcome everyone! Welcome to the 387th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Jenny Martella. Jenny is a Principal and Wealth Manager at Modera Wealth Management, an RIA based in Westwood, New Jersey, that oversees $12.5 billion in assets under management for approximately 4,700 client households.

What's unique about Jenny, though, is how she and her previous business partner were so successful in the early years of growing their advisory firm, that they decided not to hire up the operations staff they would need to keep up, and instead chose to merge into Modera Wealth, and become smaller partners in the much-larger enterprise, so that they could re-focus on their own strengths of serving clients rather than spending more and more time on firm operations.

In this episode, we talk in-depth about how Jenny and her partner grew their firm from $19 million to $250 million of assets under management in just 7 years, thanks in large part to investing in a professionally designed website that highlighted their status as a women-run fee-only financial planning firm, how Jenny felt an increasing burden of operational responsibilities, from hiring to compliance, as the firm grew and there were more clients to serve, and how Jenny's desire to get these operational monkeys off of her back, as well as a lack of a viable internal successor, led Jenny and her partner to look to merge with a larger firm that would reduce these operational burdens and ensure her clients would be served well no matter her own future career choices.

We also talk about how Jenny and her partner managed the merger process itself, including how Jenny first tried to merge with firms their own size and found that many of them wanted Jenny's firm to be their succession plan, the 'courtship process' that led Jenny and her partner to decide to merge into a much-larger RIA like Modera Wealth Management instead, and how Jenny and her partner used the consulting firm FP Transitions to advise them both on their partnership agreement and on the terms of the sale of their firm.

And be certain to listen to the end, where Jenny shares the challenges she experienced going through a merger into a larger firm, including transitioning clients, learning new technology systems, and the loss of the brand identity and client acquisition pipelines from their previous firm, how Jenny carved out a new role for herself within Modera that not only ensured her clients would continue to be well-served, but also allowed her the impact she wanted to help shape Modera as a whole, and how Jenny maintains a running list of quotes and scripts for herself that helps her find the right words at the right time (or occasionally just some personal inspiration) when communicating with clients.

So, whether you're interested in learning about merging with a larger firm to achieve operational efficiencies, how to overcome the technical and emotional challenges of selling a firm, or how to develop better client communication skills, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Jenny Martella.

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The first few years of building an advisory firm from scratch are typically the most demanding for solo advisors since this often means putting oneself 'out there' as much as possible – working through lead generation services, trying to network with Centers Of Influence (COIs) and the community at large, and battling through all of the "no" s needed to get a "yes" (and therefore a client). Next comes the challenge of establishing patterns and processes to onboard and retain clients, getting referrals, hiring and training staff, and doing the (very rewarding) work to turn a fledgling firm into a sustainable practice.

However, as the firm matures, many advisors find themselves at the "capacity crossroads", which marks the point when the ongoing demands of running a firm and caring for clients begins to completely fill an advisor's day-to-day schedule and their capacity to continue to find and onboard prospects becomes severely diminished… at least, if the advisor wants to avoid burnout.

There are certainly many aspects to this capacity crossroads, but perhaps an under-discussed factor is that the marketing tactics often used by new business owners to build their advisory firm – COIs, cold-calling, networking, and online referral services – are, in fact, creating blocking points in an advisor's ability to continue to scale their firm's growth. This is because the tactics generally used tend to be time-based marketing tactics, and as the firm's client base and revenue grows, the advisor's time becomes increasingly valuable and in short supply. Furthermore, even though these soft-dollar marketing tactics don't have an associated bottom-line expense that requires payment with hard dollars, they can still be 'expensive' because of how much of the advisor's time they need.

To alleviate this time capacity shortage, advisors have 3 options to reduce time-based expenses and increase money-based expenses, allowing them to regain their (more valuable) time that they can invest into the continued growth of their business. The first is to automate certain tasks/tactics, such as scheduling social media content, project management for recurring tasks, or sending reminder emails for webinars. The second option is to delegate tasks/tactics by handing off certain tasks/tactics to an employee or contractor, often decreasing the soft dollar cost (when the other person's time is less expensive than their own). The third option is to eliminate certain tactics entirely, thus reducing both the hard- and soft-dollar costs.

Ultimately, the key point is that marketing, when limited by an advisor's own time and energy, can only take a firm so far. To get to the next level, advisors can position their firms for success and protect themselves from burnout and overwork by using marketing tactics with decreased dependency on their own time… while still continuing to grow!Read More...

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that amidst growing cybersecurity threats targeted at the finance industry, the SEC adopted final amendments to Regulation S-P that will require SEC-registered RIAs and other financial firms to develop, implement, and maintain written policies and procedures for an incident response program to detect, respond to, and recover from unauthorized access to or use of customer information. Further, firms will be required to include procedures to notify clients whose sensitive information was or is "reasonably likely" to have been accessed or subject to unauthorized use. And while firms will have between 18 and 24 months to comply with the amendments, adopting strong cyber hygiene practices could help firms proactively mitigate cyber risks, better protecting client data and maintaining the trust of their clients in the process.

Also in industry news this week:

Why the Federal government is proposing new rules targeting the use of donor-advised funds that could impact financial advisors who work closely with them
A recent report indicates that while financial advisory firms prioritize their client experience, they often make such decisions without consulting their clients first

From there, we have several articles on investment planning:

Why the current moment could be an attractive environment for investors considering an allocation to intermediate-term bonds
How fiscal pressures could keep bond yields' higher for longer' and make certain fixed-income investments less attractive
Why market forecasts are often incorrect, even when they are based on seemingly sensible fundamental analyses

We also have a number of articles on practice management:

Financial advisory industry veteran Joe Duran offers a 4-part framework for advisors to achieve greater organic growth in the years ahead
How "embracing discomfort" can help an advisory firm break out of its normal routine and boost its growth trajectory
5 shifts transforming growth for advisory firms, from using technology as a growth driver and capacity builder to leveraging the remote work environment to attract clients regardless of geography

We wrap up with 3 final articles, all about compensation:

Strategies to negotiate a higher salary, from finding senior advocates to lobby on one's behalf to obtaining a competing job offer as leverage during raise discussions with one's current employer
Why autonomy is a key factor in determining job satisfaction and overall wellbeing and what this means for financial advisors
Why one company publishes every employee's salary online and how doing so has helped it and its staff thrive

Enjoy the 'light' reading!

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Non-compete clauses are common features of employment agreements around the business world and are often used to dissuade companies from 'poaching' another's employees, and/or to prevent employees (at least for a certain time period) from taking the knowledge gained from working at one company to a competitor. Which can allow companies to protect the 'investments' they have made in their employees and maintain continuity amongst their staff.

However, these agreements can also be unduly restrictive towards employees, limiting their ability to advance within their chosen industry, which is especially problematic in skilled professions that might have required years of education and training just to enter in the first place. Further, critics of non-compete agreements argue that they restrict dynamism in the overall economy by making it harder for businesses to hire (as the pool of applicants will be smaller in industries where non-competes are prevalent), and for employees subject to non-competes to start new companies.

With these factors in mind, the Federal Trade Commission (FTC) in April of 2024 announced a final rule banning most non-competes nationwide that is expected to take effect (pending legal challenges) on September 4, 2024. To comply with the rule, employers are required to provide written notice to relevant workers (which include employees and independent contractors, among other categories), letting them know that their non-compete agreements are unenforceable and will not be enforced.

Notably, the ban includes exemptions for "senior executives" who previously had signed a non-compete (new non-competes are banned for all employees, including senior executives) and in the case of a "bona fide sale of a business entity, of the person's ownership interest in a business entity, or of all or substantially all of a business entity's operating assets". This latter exemption means that financial advisors with an ownership interest in their company (even a very small one) could still be subject to a non-compete as a term of the sale of their stake (which could impact how they value receiving an ownership interest in their firm).

Furthermore, the regulation does not prohibit non-solicit agreements (which restrict a departing employee from soliciting the clients of their former employer for a specified time period), which are more common than non-competes in the financial advice industry, meaning that non-solicit agreements can remain in place, and might even become more prevalent amongst firms that are no longer able to enforce non-competes. But because enforcing non-solicits can be less clear-cut than enforcing non-competes (given that it is more difficult to tell whether an individual is actively soliciting their former employer's clients compared to obtaining a job at a competitor or starting their own business), the number of legal battles over non-solicits could increase as their use rises. Which could make it more advantageous for firms and advisors alike to consider a more equitable, cooperative approach than strict on-competes or non-solicits to deciding which clients an advisor can solicit if they do eventually leave the firm.

Ultimately, the key point is that the FTC's ban on non-competes may provide advisors with increased flexibility to move amongst firms within the financial advice industry, while also offering the opportunity for both financial advisory firms and their advisors to revisit their employment agreements… not only to ensure that they comply with the FTC's final rule, but also so that they better meet the needs advisors and their firms!

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Welcome everyone! Welcome to the 386th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Dann Ryan. Dann is a Managing Partner of Sincerus Advisory, an RIA based in New York City, that oversees approximately $165 million in assets under management for nearly 150 client households.

What's unique about Dann, though, is how he has channeled the anxiety of having imposter syndrome, which still causes him to be nervous before every client meeting (despite having 17 years of experience in the financial advisory business), as a means to hold himself accountable to always be doing the best he can for his clients, which has allowed Dann to build a thriving financial planning business that generates a steady flow of client referrals.

In this episode, we talk in-depth about how Dann and his partner have 5Xed their AUM in the past 5 years thanks to their firm's commitment to quality client service (which has spurred so many referrals that Dann's firm has implemented a waitlist),why Dann has found that referred clients are willing to remain on the waitlist (because they don't mind as much when Dann explains it's because they're already working so hard for their existing clients!), and the reason that Dann's firm has continued to stick with an AUM fee model despite an increasingly financial-planning-centric service offering.

We also talk about how Dann started his career at a fee-only financial advisory firm in the mid-2000s, when such a path wasn't nearly as common as it is today, why Dann believes that the long hours he put in building financial plans as an employee advisor earlier in his career were a positive career investment that gave Dann the skills needed to be an effective lead advisor today, and why Dann, after not getting an opportunity to become a partner at his previous firm, decided to take the leap and break off to start his own firm.

And be certain to listen to the end, where Dann shares his agile approach to the planning process, proactively analyzing planning issues according to a structured quarterly client service calendar while making himself available when issues arise in the interim, why Dann takes a hands-on approach to the investment planning process and is even open to helping clients implement investment ideas they bring to the table instead of talking them out of it, and how Dann's interest in working with a wide range of client types, rather than focusing on a single niche, coupled with his desire to build long-lasting relationships with these clients, has been crucial to managing his imposter syndrome and building a successful career in financial planning.

So, whether you're interested in learning about how to build a career entirely at fee-only firms, the unexpected upsides of impostor syndrome, or how to handle situations where clients bring their own investment ideas to the table, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Dann Ryan.

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Ongoing research into how advicers can structure their practices to be better and more successful has consistently highlighted the benefits of choosing to serve a specific niche. In fact, the more specific the niche, the better, as a highly specialized niche not only allows an advicer to differentiate themselves in a crowded marketplace of other 'generalist' advicers, but also helps them build a more efficient practice where they serve clients who share similar characteristics (and puzzles to solve!). Along the way, advicers develop deep expertise in serving their clients while creating a repeatable process that expands their capacity to serve more clients than they could possibly serve as generalist advicers. Yet, in practice, 'niching down' can feel like a big step for advicers, who may feel uneasy about turning away potential clients who may not fit their ideal client profile. As a result, many advicers who say they serve a particular niche may instead be targeting a particular market (e.g., business owners, women, or pre-retirees) rather than a true niche.

In this guest post, Kristen Luke, President of Kaleido Creative Studio, discusses her formula for defining a particular niche, steps an advicer can take to evaluate a potential niche for viability and suitability, and strategies for advicers to consider to refine their chosen niche for long-term success.

A first step in fine-tuning a niche is to drill down into a broader demographic or occupational group and pinpoint a segment that shares a common (financial) problem significant enough for them to seek an advicer's help. To do that, advicers can use the "One Client + One Problem" formula, starting with a group that resides within one of 5 broad categories (career, life event, specialty, mindset and values, and affinity) and then identifying a specific problem that they need an advicer's help to solve.

The next step is to assess the viability of the niche and determine whether it is a good fit for the advicer. More specifically, advicers can evaluate 10 factors to answer those questions, including the niche's specific problems, urgency, complexity, profitability, growth potential, findability, the competitive landscape, and the advicer's suitability for working with the niche. While not all of these factors are equally relevant, the strongest niches will have purchasing power, be easy to target, and have complex financial needs.

Even if a niche is well-defined, it might not be viable enough to serve profitably; if that's the case, an advicer can further refine their chosen niche or take other steps to improve their chances of success. For instance, advicers focusing on a niche consisting of people challenged by a particular pain point may target those with a need that other advicers aren't addressing and adjust their offering to make it more affordable, further their own education, take steps to improve their credibility (which might include writing a book or presenting at conferences), and gain better access to members of their niche.

Ultimately, the key point is that advicers who serve a well-defined and narrow niche whose members have a specific and difficult problem are in a much better position to build a thriving, successful business. By addressing the needs of their niche, advicers can better differentiate themselves, craft tailored and compelling marketing messages, become more referable, and create better efficiencies within their practices. And by using the "One Client + One Problem" formula and the 10 Factor evaluation rubric to evaluate and refine a niche, advicers can become coveted go-to experts and beacons for the people they serve!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent study indicates that while overall social media engagement for financial services companies was down in 2023 compared to the previous year, firms boosted their engagement through posts that were entirely original content (rather than sharing third-party content), spoke to the firm's or advisor's principles (with posts responding to current news topics lagging), and were text-based (which was particularly effective for wealth management professionals posting on LinkedIn). Altogether, the study suggests that social media engagement is driven more by the quality (and originality) of the advisor's content, rather than the quantity of posts.

Also in industry news this week:

The SEC this week announced a proposed rule that would require RIAs to collect and verify their clients' personal information in an effort to prevent illicit activity, though many firms likely are taking many of these steps already
Why larger RIAs and those that have been acquired tend to have worse client and staff turnover than other firms

From there, we have several articles on retirement planning:

A recent study indicates that while the median retirement age for current retirees was 62, workers today expect to be employed well past this age, suggesting that some might not be financially prepared for a (perhaps involuntary) earlier-than-expected retirement
7 ways advisors can help their clients plan for an early retirement, from helping clients discover the true motivation behind their desire to presenting the full range of potential outcomes for a retirement that might last 40 years or longer
How incorporating information about a client's chronic health conditions can lead to more accurate life expectancy assumptions and retirement income planning

We also have a number of articles on investment planning:

How the popularity of model portfolios have taken off over the past few years, allowing advisors to spend more time with clients on planning topics beyond investment management
While model portfolios can boost the efficiency of an advisor's investment planning process and allow them to create tailored client portfolios without starting from scratch, they do require some hands-on work by advisors using them
How software can help advisors choose the best model portfolio options for their clients' needs and reduce the amount of time it takes to implement and manage them

We wrap up with 3 final articles, all about the planning profession:

What individual firms, and the financial planning industry as a whole, can do to stave off an impending shortage of qualified advisors
How the financial planning industry can serve as a role model, not only for other types of businesses, but also for how society as a whole views interpersonal relationships and the definition of success
How relatively smaller RIAs can stand out amidst a convergence in the practices of wealth management firms across the size spectrum

Enjoy the 'light' reading!

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In the initial stages of their careers, many financial advicers find that, with little revenue coming in and less than a full load of client-facing work to do, they spend the majority of their time on operations and marketing as they try to establish their practice. As a result, an advicer often has the capacity to say "yes" to any opportunity that comes along as they try to keep busy and (hopefully) improve their cash flow. However, as the advicer's practice grows and their calendars start filling up, they can find themselves at a point where they don't have enough time to start doing anything new until they stop-doing something else. Which begs the question: Is there a systematic way for a financial advicer to determine when it makes sense to say "no" so they can say "yes" to something else?

In our 138th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore the concept of a "Stop-Doing" list (as opposed to a "to-do" list), various ways to figure out what should go on that list, and how advicers can go about executing the list (so they can go on to doing the things that can move their practices and the profession forward).

From a conceptual perspective, saying "yes" to something also means saying "no" to something else. For instance, saying yes to taking on an operational duty might not leave time for going to more networking events. Yet, while saying "no" isn't always easy (especially for many advicers who were attracted to the profession in the first place specifically because they like to help others), one effective way to get more comfortable saying "no" to an item on a "stop-doing" list is to identify and stay focused on a much more meaningful "yes". By having a strong sense of what their ideal practice would look like, advicers may find that it gets easier to filter through those things that impede progress toward their goals. (Not coincidentally, this is also a useful way advicers can help clients stay on track with their financial plan when clients are tempted to overspend or make detrimental changes when markets get scary).

By gaining clarity on a deeper "yes", an advicer can start to identify the best things for them to stop doing. One approach is to determine the dollar value of an hour of their time, and from there, make a list of all the things that they do for their business and identify those tasks that they can outsource at a lower rate. Another method is to conduct a time audit by installing a time-tracking app. As while there might be a menu of small tasks that an advicer might love to take off their plates, the real power of a comprehensive time audit is in the ability to identify large chunks of time that an advicer may be spending on low-value activities (I'm looking at you, TikTok!).

As Parkinson's Law posits, work will expand to the point where it completely fills an advicer's calendar. Ultimately, by conducting a time audit and making a connection with a deeper "yes", advicers can gain a better understanding of how they're spending one of their most precious resources (i.e., their time) and figure out what they should stop doing so they can start doing things that will move their practices forward!

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On April 25, 2024, the Department of Labor (DoL) issued the final version of its Retirement Security Rule (the "Final Rule"), which imposes an ERISA fiduciary standard "that applies uniformly to all investments that retirement investors may make with respect to their retirement accounts". The new rule represents the latest attempt by regulators to define the types of individuals and advice that are subject to a fiduciary obligation, following on the heels of the SEC's Regulation Best Interest (Reg BI) and Commission Interpretation Regarding Standard of Conduct for Investment Advisers, as well as the DoL's own 2016 fiduciary rule (which was struck down by Federal courts in 2020) and Prohibited Transaction Exemption 2020-02.

Specifically, the DoL's new Retirement Security Rule defines an "investment advice fiduciary" as anyone who makes an investment recommendation to a retirement investor which is provided for a fee or other compensation (e.g., commissions), and who holds themselves out as a trusted adviser by either stating they are acting as a fiduciary or otherwise indicates that they are making individualized recommendations based on the investor's best interest. And although many advisors may have been already subject to a fiduciary standard under existing SEC or DoL regulations, the DoL's fiduciary standard is more stringent than others (e.g., requiring advisors not just to disclose but to eliminate certain conflicts of interest), meaning that even advisors who already considered themselves fiduciaries under previous rules may find themselves needing to update their processes to comply with the DoL's new standards.

In practice, the DoL's Final Rule means that financial advisers who advise clients about rolling over assets from an employee retirement account like a 401(k) plan into an IRA are now subject to ERISA fiduciary obligations. Most notably, the new DoL rule is meant to capture one-time recommendations by firms and their representatives made to retail retirement investors for almost any type of investment, meaning that the Final Rule covers not only RIAs and broker-dealers, but also insurance agents, bank employees, and others providing advice about how retirement investors should invest their 401(k) plan or IRA assets. It also covers many types of investments, including annuities, fixed-indexed annuities, CDs and other banking products, digital assets, commodities, and real estate, whereas previous rules like Reg BI and PTE 2020-02 applied only to securities like stocks, bonds, and funds.

In addition to issuing the Final Rule, the DoL modified existing Prohibited Transaction Exemptions (PTE 2020-02 and PTE 84-24) as part of its rollout of new rules around retirement advice. The amendments to the exemptions notably include revisions to PTE 2020-02's disclosure requirements to bring them more in line with SEC's Reg BI.

In sum, the Final Rule expands ERISA's stringent fiduciary obligations to cover almost any situation where advice is provided for a fee to a retirement investor where there is an expectation that the advice being given is in the investor's best interest. The Final Rule covers advisory firms and their representatives providing "fiduciary investment advice" to ERISA and non-ERISA plans, including IRAs. The Final Rule also covers broker-dealers and their representatives, insurance agents, bank branch employees selling bank products, and almost any other entity providing recommendations to retirement investors about investing their retirement assets. And with the new rules taking effect on September 23, 2024 (with a one-year transition period after the effective date for some of the conditions in the Prohibited Transaction Exemptions), the time is rapidly approaching for advisors to begin complying with DoL's expanded fiduciary standards!

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Welcome everyone! Welcome to the 385th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Danielle Howard. Danielle is the owner of Wealth By Design, a hybrid advisory firm based in Glenwood Springs, Colorado, that oversees about $35 million in assets under advisement for 35 client households.

What's unique about Danielle, though, is how she has created a process she calls "Financial Fingerprints To Footprints", where she helps clients who are struggling to implement their financial planning recommendations by working with them to unlock their money memories and help them understand how the financial lessons of their past may be creating a financial identity that's preventing them from taking the actions necessary to achieve their goals of the future.

In this episode, we talk in-depth about how Danielle structures her financial planning engagements, which includes a 5-meeting sequence during their first year that explores both the client's financial situation and the "why" behind how they view money, how Danielle uses tools such as Money Quotient and George Kinder's 3 Life Planning questions to dig deeper into clients' money memories and money identities, and how Danielle positions these conversations to occur after she presents her initial financial planning recommendations, at a point where clients are engaged enough with and buy-in to the process that they're willing to explore these more sensitive topics that can lead to real breakthroughs.

We also discuss how Danielle's transition from having an insurance-focused practice to a planning-centric business was influenced by her and her husband working through Kinder's 3 Life Planning questions themselves, how Danielle has increased and reduced her client headcount to meet lifestyle goals during different stages of her life, and how building a financial planning business has fit Danielle's personality as a 'cook' who is able to make changes and 'season to taste' in the moment, rather than as a 'baker' who has to follow a certain fixed path to the letter.

And be certain to listen to the end, where Danielle shares why she thinks women can make important contributions in the financial planning industry, particularly when it comes to listening deeply to clients and bringing integrity and authenticity to the table, how Danielle's own definition of success over time has shifted from gathering clients and assets to feeling that she is helping her clients succeed, and why Danielle thinks the financial planning industry offers advisors a unique opportunity to blaze a career path for oneself that meets our own individual needs and interests while being aligned to helping clients achieve theirs.

So, whether you're interested in learning about Danielle's transition from an insurance-focused practice to a planning-centric business, how to strategically schedule deeper discussions about money identities, and why Danielle believes women have a unique role in deep listening and authenticity in financial planning, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Danielle Howard.

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The traditional financial advisory firm is blessed with incredibly high client retention rates. Which doesn't change the fact that each and every client loss that occurs is still very painful. But mathematically, most financial advisors only have to add at most a handful of clients every year to maintain positive growth momentum. To the point that most advisory firms don't really need to worry "Am I providing enough value to my clients?" and instead can focus on delivering the value they already provide more efficiently and effectively.

Yet the reality is that client preferences can and do change over time. Sometimes services that were once valued highly (delivery of quarterly performance reports) are no longer so valid (I'll just check on my accounts from my smartphone when I feel like it). Other times the evolution of the client base makes new services more relevant (e.g., from accumulation planning to decumulation planning). You never really know… until and unless you ask!

Every year, we ask you – our readers – for feedback about what you want to make this website even better for you, to ensure we stay on the right track in adding value to the advicer community and making financial advisors better and more successful. And especially after the amount of change over the past few years, from the rollout of our Virtual Summits on Marketing and Advisor Value to our Kitces Courses on Tax Returns, Insurance, and Estate Document Reviews, and most recently, the launch of IAR CE in our Members Section… we're more eager than ever for your feedback about how we're doing, where we can improve, your thoughts about some new ideas we're considering, and your feedback about what else we could be doing to help the advicer community.

Because we really do take your feedback seriously. Over the years, Nerd's Eye View reader feedback has shaped everything from the visual design of the blog (from its original dense small font!), to the ongoing expansion of our Members section from offering CFP to now CPE credits for CPAs and IAR CE for RIAs that can be earned by reading Nerd's Eye View blog articles, the launch of the Financial Advisor Success podcast, our popular "Master List" of all the major Financial Advisor conferences and Best Books for Advisors, and turning our AdvisorTech Map into an entire AdvisorTech Directory that you can use to build your own tech stack.

So regardless of what kind of reader you are: an advisor or someone who works in an advisory firm home office, an individual consumer who reads this blog for your own benefit, a CPA, attorney, or another related professional that works with financial advisors, or you're associated with a vendor who serves advisors... I hope you'll participate in this year's survey. It's only 12 feedback questions, should take no more than a few minutes, and will remain open until the end of next week.

Thanks in advance for taking a few minutes to access our Reader Survey below, and share your feedback! 😊

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Enjoy the current installment of "Weekend Reading For Financial Planners"– this week's edition kicks off with the news that a recent analysis from Morningstar suggests that the Department of Labor's (DoL's) new Retirement Security Rule (aka Fiduciary Rule 2.0) could save retirement plan participants $55 billion over the next 10 years (due to an expectation of more low-cost fees being offered in plans) and those rolling over workplace plans into IRAs to purchase annuities another $32.5 billion (thanks to expected reductions in commissions and the embedded costs in these annuities). Nonetheless, for these potential benefits to come to pass, the rule will likely have to survive legal challenges, including a lawsuit filed led by an insurance industry lobbying group seeking to halt implementation of the rule (which is set to take effect in September), which argues that the rule violates the U.S. Congress' intent in passing ERISA and that the DoL overstepped its authority in adopting it.

Also in industry news this week:

The latest Social Security trustees report offered a slightly rosier picture for the health of the various Social Security trust funds thanks to improved economic conditions, though they warned that time is running out for legislators to take action to ensure the system will be able to pay out full benefits beyond the early 2030s
RIA custodian Altruist has raised $169 million in its latest funding round, giving it a $1.5 billion valuation and added capital to fund technology and staffing upgrades as it seeks to challenge Schwab and Fidelity in the RIA custodial space

From there, we have several articles on retirement planning:

Why considering a client's retirement time horizon and spending flexibility could lead to more accurate (and often higher) safe withdrawal rates than the simpler "4% rule"
While many financial advisors focus on preventing clients from depleting their portfolios in retirement, they might be overlooking the 'risk' that clients might underspend and not achieve their retirement lifestyle goals
How the creator of the "4% rule" is now incorporating inflation and equity valuations when calculating safe withdrawal rates

We also have a number of articles on advisor marketing:

A 4-step process that can help financial advisors craft better stories to use with clients
The best and worst times to use emotional storytelling to communicate an important message to clients
How effective storytelling can increase the likelihood that an advisor's message will resonate with clients amidst a sea of potential information sources

We wrap up with 3 final articles, all about vacations:

How taking a vacation can provide a sense of clarity that can lead to positive changes in one's 'normal' routine
How to decide how much to spend on a vacation, from planning out a year's worth of trips in advance to being aware of "luxury creep'"
Why money spent on vacations and other shared experiences could be considered an investment in an appreciating asset

Enjoy the 'light' reading!

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Measuring a client's tolerance for risk is an essential (and required!) step when onboarding a new client, as making any sort of recommendation is impossible without first understanding how comfortable clients may be when their portfolios inevitably experience volatility. Over the years, 2 types of measurement tools have emerged as the standards for assessing risk tolerance: 1) psychometric tests, which feature a series of questions (such as, "What amount of risk do you feel you have taken with past financial decisions?") that are designed to measure risk based on past behavior, and 2) econometric tools, which involve questions based on a particular scenario (such as, "Suppose you can invest $100 and this time, there is a 50% chance you could receive $207 and a 50% chance you'd receive nothing. Would you agree to this investment?"). These tools provide critical insight into a client's preferences and attitudes, but as is the case with every subjective assessment, the results may not always reflect a client's true feelings about risk.

As many advicers have experienced, a client who might claim that they can tolerate a high level of risk may, in fact, behave quite differently during periods of higher volatility. The reality is that a client's true relationship with risk can only be partially uncovered through the results of a questionnaire alone. Like any other data point that an advicer may collect, there are stories behind the numbers, and the true power of a risk assessment is in its ability to help an advicer begin a conversation that encourages clients to share their stories. And when advicers take the time to listen to those stories, they begin creating long-lasting bonds with their clients.

And while few (if any!) risk assessment tools include suggestions on how to discuss the results with clients, advicers can use a series of questions to have meaningful conversations with their clients. To start, open-ended questions that use a command-style approach (such as, "Share with me what these results mean to you.”) can avoid setting an expectation that there is a 'right' answer. These questions also set the stage for follow-up questions that help advicers better understand if the client's main concerns around risk are focused on either fear of losing money or anxiety around missing out on growth potential.

From there, an advicer can ask how the client has reacted to prior bouts of market volatility. As while past behaviors can have a strong influence on current and future reactions, the advicer can peel back additional layers of the proverbial onion by exploring what (if anything) the client might wish they had done differently. Lastly (and perhaps most significantly), the advicer can ask (again using the command-style approach), "Tell me how I can best serve you when the market is rising and when the market is falling". Using this approach, the advicer can highlight one of the real values in a true financial planning relationship and start to set expectations around the working relationship as a whole.

Ultimately, the key point is that, while determining a client's risk tolerance is a critical step during the onboarding process and while developing an appropriate portfolio, the true usefulness of risk assessment tools lies in creating stronger bonds with clients. Because the opportunity for advicers to start meaningful conversations not only helps them understand their clients' true concerns, but also demonstrates the value of a real financial planning relationship while clarifying how they can best serve their clients!

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Welcome everyone! Welcome to the 384th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Hannah Provost. Hannah is a partner and financial advisor at Lomanto Provost Financial Advisors, a hybrid advisory firm based in Plattsburgh, New York, that oversees approximately $150 million in assets under management for about 380 client households.

What's unique about Hannah, though, is how she began her career in retail banking, where she rotated positions from lending to working as a teller and eventually becoming a bank-based financial advisor, and then, after realizing she would benefit from time spent learning from a more senior advisor than just continuing to work with her bank clients, took a step back to work as an assistant under an experienced advisor, which ultimately led to becoming a lead advisor with his firm, and eventually a joint partner of their firm.

In this episode, we talk in-depth about how Hannah embarked on this career journey while also building a family, including how Hannah balanced work, family, and the educational demands of building the credentials needed to effectively serve clients (by reminding herself that the demanding workload was a temporary stop on the way to more long-term rewards), how Hannah found that the path towards attaining her CFP certification was able to serve as a north star while navigating her career path through the industry, and how Hannah was able to jump-start the process to becoming a lead advisor by finding an opportunity where she could sit in on client meetings from day one (and be treated as a peer by her mentor).

We also talk about how Hannah and her partner have leveraged referrals and visibility in their small-town community to drive client growth, how Hannah uses email and calendar automations to more efficiently manage their growing client base while still maintaining a personalized touch using email merge fields in MailChimp, and how Hannah has structured her week to treat Wednesdays as "flex days" that give her the opportunity to spend time with family, go for a hike, or get some catch-up work done, and how she holds that space for herself despite averaging 20 client meetings per week between her and her partner.

And be certain to listen to the end, where Hannah discusses the importance for those getting into the financial advice business not just to avoid 'red flags' but to find 'green flags', or people who will see and support their human value from Day 1 as a new advisor, how Hannah's reflections on how her experiences with mentorship and rotational work were the key to leveling up her skills and presence and kickstarting her advisor career, and how Hannah has found that the investments she made in herself earlier in her career, including 5AM wakeups to study for the CFP Exam, have paid off today in the form of a successful practice and strong work-life balance.

So, whether you're interested in learning about entering the financial advice industry as a career changer, how to build a partnership with a more senior advisor, or how to maintain work-life balance while advancing in your career, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Hannah Provost.

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Welcome to the May 2024 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that self-directed retirement planning software provider NewRetirement has raised a $20M Series A round as the company demonstrates that its DIY tools really do turn a subset of consumers into bona fide prospects for financial advisors. Which positions the software as either a white-labeled solution for advisory firms that want a way to engage a high volume of prospects in their funnel, or simply a solution to convert its own 70,000+ active users into paying clients of NewRetirement's own financial advisors. Especially given that NewRetirement has already managed to get some sizable 401(k) providers and recordkeepers to offer the software on a paid basis to their own plan participants… which means NewRetirement is effectively getting paid to market its own advice services (a marketing funnel that pays for itself!?).

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

Betterment Premium raises fees for its human CFP service to 0.65%, putting it remarkably close to the 0.70% average revenue yield of the typical advisory firm, as the robo-advisor ends up emulating the human advisor service and pricing model it once sought to disrupt
Trust & Will announces a strategic partnership with LPL and its 22,000 advisors, as more and more advisory firms look to include estate document preparation as part of their suite of value-added services to clients (while outsourcing the actual legal work)

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

A pair of new research studies (one from Cerulli, another from Fidelity) highlight how "tech-savvy" firms with high technology adoption are outgrowing the rest… not by attracting more clients with a better digital experience for clients, but simply by finding more of their own operational back-office efficiencies to be able to scale faster
The SEC serves up a series of very sizable fines to make examples of financial services firms that didn't do enough to supervise their employees' use of texting and other messaging apps (e.g., WhatsApp), in a reminder to all advisory firms that all business-related communication must be archived (and reviewed!)
As the buzz and hype continue around AI, a warning (coupled with a pair of enforcement actions) from the SEC not to engage in "AI-washing"… advisory firms that promote how they're using artificial intelligence in their practices need to be certain that they are actually doing so

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent study indicates that nearly a third of advisors in the independent broker-dealer channel have considered transitioning to the RIA channel during the past year as they seek higher payouts and not just "independence" but greater autonomy over how they run their businesses and serve their clients. At the same time, the study found that potential breakaway brokers view the operational and compliance requirements of transitioning to and doing business as an RIA as a major concern, which could lead some of them to either leverage the growing number of service providers available to RIAs, or perhaps join an existing corporate RIA platform to take advantage of its existing infrastructure.

Also in industry news this week:

Large asset managers offering hybrid digital-human advice services are eating into the market share of purely human advisors, signaling that a smaller firm's ability to offer a differentiated value proposition could be a key to success in the coming years
A recent study indicates that tech-forward advisory firms not only are seeing greater client and AUM growth than are other firms, but also are associated with greater advisor income and job satisfaction

From there, we have several articles on healthcare planning in retirement:

Why framing Health Savings Accounts (HSAs) as "Medical IRAs" could lead clients to better leverage their potential for tax-advantaged, compound returns and have more money available for healthcare spending in retirement
How financial advisors can help clients evaluate the health insurance options available in early retirement, from staying on their previous employer's plan through COBRA to obtaining a (potentially subsidized) plan on their state health insurance exchange
How advisors can adapt clients' financial plans to account for the unpredictable healthcare expenses they will experience in retirement

We also have a number of articles on practice management:

How the ongoing competition for advisor talent and a lack of viable successors at many firms could drive a flurry of RIA M&A activity in the coming years
Instead of pursuing an outright sale, a 'merger of equals' can give owners of firms with similar sizes and compatible cultures an opportunity to boost profitability and scale relatively quickly while maintaining a high degree of control, though successfully consummating a deal requires delicate negotiations between the potential partners
A review of the revenue and profitability metrics that are most often used to value RIAs, and how selling firm owners can maximize the ultimate payout they receive by negotiating the underlying terms of the deal

We wrap up with 3 final articles, all about handling challenging political conversations:

How preparation and empathetic listening skills can help a financial advisor prevent political conversations from derailing client meetings
How advisors might respond when clients want to make major portfolio changes based on the upcoming presidential election
How teams can create ground rules to promote constructive discussion on political issues and other challenging topics

Enjoy the 'light' reading!

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A career as a financial advicer can be remarkably rewarding, as it offers the opportunity to have a meaningful impact on clients' lives all while making a good living. However, the main hurdle that almost every advicer faces, particularly those who launch a practice from scratch, is that the early years are often a struggle as new advicers try to attract clients, generate revenue, and start to build their businesses. And, even for those advicers who have deliberately identified a particular niche to serve, the need to generate cash flow can sometimes mean onboarding clients that might not ideally fit into their long-term vision. However, many advicers successfully navigating those first few years can find that they've reached a point where they've taken on too much and need to be more selective about using their time and the clients they serve.

In our 137th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the most important factor that determines an advicer's eventual success, issues that can arise from early-stage dynamics in their career, and strategies to implement once they've reached their own professional capacity.

The financial advice industry is notorious for having a high failure rate among new entrants, which makes getting through the first few years crucial. In fact, research shows that the single greatest determinant of an advicer's success is the number of years in the profession, and it's often the case that the only way to stay in the game long enough to get through those difficult early years is to say "yes" to any source of revenue they can generate. For many advicers, though, the challenge isn't always about taking on the 'wrong' clients; instead, it's more often about making unsustainable promises around pricing and relationship length; advicers who have successfully built viable businesses can feel guilty about having to break promises made to early clients who might be better served elsewhere.

Meanwhile, targeting a particular niche is one of the most important decisions an advicer can make to help them focus on serving ideal clients and transition out of those initial difficult years. While newer advicers might chafe at the notion of marketing to a smaller audience, the reality is that, while growth rates for advicers who niche versus those who don't are similar over the first 3 years, over the ensuing years, the niching advicers tend to grow much faster, not because they decided that they wouldn't serve anyone who wasn't their ideal client, but because they put all their marketing 'eggs' in their niche 'basket'!

Figuring out where an advicer's own personal capacity tipping point lies can also be a challenge. Instead of determining where that point is ahead of time, advicers often realize that they've reached their limit only after they've blown past it and are starting to feel uncomfortable. It's at that point where implementing some sort of filtering mechanism can be most helpful, whether it be creating a "stop-doing" list, getting accustomed to saying "no" to tasks that don't benefit their business and wellbeing, or implementing an "automate, delegate, or delete" framework.

Ultimately, while many advicers face the same initial challenges, those who avoid making unrealistic promises early on and focus on serving a niche often transition out of those first few difficult years more easily. The key point is that, by being intentional about the market they serve and the work they do, advicers can put themselves in the best position they can to offer their clients the excellent service they deserve!

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A little over 20 years ago, when the Internet was still just a few years into gaining widespread use, the SEC understood its potential to transform how financial advisory firms conducted business with the ability to deliver advice digitally, lowering the barriers to serve clients across the country. However, the challenge for firms that wanted to use their websites to advise clients, but didn't otherwise qualify for SEC registration, was that they would ostensibly need to register in all 50 states… at least until they qualified as a "multi-state adviser".

Understanding that this would place an unnecessarily heavy burden on advisors, the SEC issued an exemption in 2002 allowing for certain "Internet advisers" to register with the SEC even though they wouldn't otherwise qualify to do so. The rule, colloquially referred to as the "Internet Adviser Exemption", applied to "entities that exclusively provide investment advice through an interactive website", save for a de minimis exemption of fewer than 15 clients served outside of the interactive website within the preceding 12 months.

A lot has changed over the ensuing 20+ years since the issuance of the Internet Adviser Exemption, and after observing numerous instances of non-compliance (and issuing a Risk Alert to that effect in 2021), the SEC issued an amendment to the Exemption on March 27, 2024. The amendment didn't make any sweeping changes to the requirements for firms to qualify for the exemption, but instead was intended to offer additional clarification around "what it means in 2024 truly to provide an exclusively internet-based service."

Specifically, the amendment clarifies that an interactive website (which now also includes mobile applications or similar digital platforms) must be "operational" at "all times", save for temporary outages due to periodic maintenance or factors outside the adviser's control. Moreover, the advisory services must actually be delivered through the website using "software-based models, algorithms, or applications" only, thus barring investment adviser personnel from generating, modifying, or providing "client-specific investment advice through the operational interactive website or otherwise." The amendment also eliminates the previous de minimis threshold, now requiring Internet investment advisers to provide advice to all of their clients exclusively through an operational interactive website without exception, and requires that advice be provided on an "ongoing basis" to at least 2 clients at all times.

Ultimately, the key point is that while the original intent of the Internet Adviser Exemption created in 2002 was to reduce the regulatory burden of SEC registration for advisers who provide advisory services through a website using software-based models, algorithms, or applications, the recent 2024 amendment offers several clarifications and updates to the rules for qualifying for the exemption. And while the updates may have constricted the already narrow path to SEC registration even further, the good news is that the amendment remains agnostic in regard to technology, which means that the Internet Adviser Exemption should remain evergreen for years to come.

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Welcome everyone! Welcome to the 383rd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Troy Sharpe. Troy is the Founder and CEO of Oak Harvest Financial Group, an RIA based in Houston, Texas, that oversees approximately $750 million in assets under management for about 1,000 client households.

What's unique about Troy, though, is how his firm's emphasis on driving organic growth through a multi-pronged marketing strategy, including a radio show, in-person seminars, and most substantively and scalably, a YouTube channel, that has allowed the firm to grow its AUM from $85 million to $750 million during just the past 5 years.

In this episode, we talk in-depth about Troy's approach to marketing, from how his firm has built a strong prospect pipeline in part by taking educational topics he covered in his seminars and turning them into YouTube videos aimed at his firm's target client of pre-retirees and retirees, why Troy typically does not issue immediate calls to action during these videos to get prospects, instead preferring to build trust with viewers over time and providing them a trail of breadcrumbs to find their way back to the advisory firm when they're ready, and how Troy structures his marketing efforts into what he characterizes as short, medium, and long-term marketing initiatives, for which he targets an overall ROI of generating 3 times the dollars in new revenue for every marketing dollar spent.

We also talk about how Troy's firm has hired a number of marketing professionals to improve the performance of its marketing campaigns, how Troy has also grown his advisor staff to meet the needs of the rapidly expanding client base, and adopted a 3-advisor pods approach to ensure clients have touchpoints with multiple advisors (and that advisors can focus their work on what they do best), and how Troy created a system for his firm called the "Retirement Success Plan" that encompasses their approach to dynamic retirement income planning, incorporating both a client's willingness and capacity to take risk, and then generating a spending plan that adapts (and that the firm monitors) over time.

And be certain to listen to the end, where Troy explains why he believes that his firm's ability to communicate in a jargon-free way that prospects can relate to is what's really driving his firm's growth (across all the in-person, radio, and video channels it markets towards), how Troy learned patience and the need to be more measured when committing to a new marketing strategy that sometimes takes 6-12 months to really start to pan out, and how Troy's constant growth focus has often led to a lot of self-doubt over whether he was over-investing and still not getting to where he wanted to be, and how the book "The Gap and the Gain" helped to build more appreciation for how far the firm has already come.

So, whether you're interested in learning about leveraging YouTube videos to drive client growth, how to measure marketing efficiency and set goals for the output of marketing spend or how to manage a rapidly growing firm, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Troy Sharpe.

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Financial advisors add value for their clients not only by helping them grow their wealth, but also by working with them to create a plan for how to use it. While much of this process may focus on the client's own lifetime planning needs (e.g., helping them develop a retirement income plan), it often also addresses the client's goals for their wealth after their death. With this in mind, many financial advisors offer estate planning guidance to clients. However, because few advisors are also legal professionals (who can offer more detailed guidance and draft legal documents), many often collaborate with estate planning attorneys to ensure their clients' estate planning needs are met.

In this guest post, David Haughton, Team Lead for Advanced Planning at Commonwealth Financial Network, explores the relationship between financial advisors and estate planning attorneys, how advisors can add value for clients during the estate planning process, and how advisors and attorneys can create mutually beneficial arrangements.

Financial advisors can play a valuable role in the strategy, implementation, and funding stages of the estate planning process. For example, advisors can start by identifying whether a client even has an estate plan in the first place and, if so, what the current plan entails. The advisor can then consider whether the current plan (if it exists) meets the client's estate planning goals and, if needed, encourage the client to engage with an estate planning attorney who can recommend potential solutions (ideally in consultation with the advisor, who will be intimately familiar with the client's financial situation and goals) and draft the legal documents necessary to execute them. In the implementation phase, financial advisors can review the estate planning documents to ensure they are appropriate to meet their client's needs and confirm that the client actually executes the documents. Finally, in the funding phase, advisors can provide value by ensuring that accounts are retitled as necessary so that the client's assets are appropriately positioned to meet the goals of their newly crafted estate plan.

Sometimes, estate planning attorneys might be reluctant to work closely with a client's financial advisor. For instance, an attorney might balk at the estate planning suggestions offered by a client's financial advisor (who does not work on estate planning issues full time), while an advisor might question an attorney's proposed strategy (e.g., the attorney might not be aware of a client's ability to actually execute the proposed plan). Nevertheless, the reality is that both the financial advisor and estate planning attorney have much to gain by cooperating with each other, not just to ensure that their mutual client receives a properly prepared estate plan that meets their goals, but also because building a trusting relationship could lead to mutual client referrals down the line (as many estate planning clients could benefit from financial planning services, and vice versa)!

Ultimately, the key point is that financial advisors can add significant value for their clients throughout the estate planning process, from evaluating their current plan to helping them find a qualified estate planning attorney, to working with the attorney to ensure the new or updated plan meets their client's goals and is executed and funded appropriately. And while the advisor's engagement in the estate planning process can increase the level of trust and loyalty between the advisor and their client, it also sets the table for a strong relationship with their client's heirs when the client's assets are distributed at their death, continuing the legacy of providing valuable financial planning to family members when they may need it most!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that the Department of Labor released the final version of its Retirement Security Rule (a.k.a. the Fiduciary Rule 2.0), which is set to go into effect in September and (if it survives anticipated legal challenges) would represent a significant shift toward greater fiduciary standards in the financial services industry, including by defining as a fiduciary act a one-time recommendation to roll funds from a company retirement plan to an Individual Retirement Account (closing what historically was a loophole that the fiduciary obligation only applied to "ongoing" advice, such that one-time sales transactions avoided its scope).

Also in industry news this week:

The Federal Trade Commission released a final rule that would ban most non-compete agreements, which could lead to an increasing number of non-solicit agreements (and, potentially, lawsuits regarding their enforcement) between financial planning firms and their advisors
The Securities and Exchange Commission issued a risk alert outlining how some investment advisers are failing to comply with its marketing rule, from making misleading statements about adviser awards to claiming that a firm operates free of conflicts of interest

From there, we have several articles on client communication:

How jargon checks, standardized communication frameworks, and post-meeting surveys can help advisors overcome the "curse of knowledge" when communicating with clients
5 mistakes that can undermine client meetings, from asking too many closed-ended questions to engaging in conversations on political topics
How paying attention to the phrases and idioms clients use frequently can help advisors build trust and rapport

We also have a number of articles on cash flow planning:

How the explosive growth in many of the 'hidden' costs of homeownership could impact clients' budgets
How financial advisors can help clients analyze the choice of whether to rent or buy a home, from modeling unknowable financial variables to helping them explore the non-financial considerations of the decision
How advisors can add value for clients navigating a continued elevated mortgage rate environment

We wrap up with three final articles, all about effective networking:

How financial advisors can network more effectively, from tactics that can make conversations more memorable to choosing when to enter an existing conversation
How advisors can evaluate financial advisor conferences and other networking opportunities to make the most worthwhile investments of their time and money
Tips to master the art of small talk, from seeking out common interests to managing the inevitable end of the conversation with minimal awkwardness

Enjoy the 'light' reading!

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Over the past few decades, advicers have used Monte Carlo analysis tools to communicate to clients if their assets and planned level of spending were sufficient for them to realize their goals while (critically) not running out of money in retirement. More recently, however, the Monte Carlo "probability of success/failure" framing has attracted some criticism, as it can potentially alter the way that a client perceives risk, leading them to make less-than-ideal decisions. In reality, retirees rarely experience true failure, and instead find that they may need to adjust their spending (in both directions!) in order to meet all of their goals. And while some have suggested pivoting to a more accurate "probability of adjustment" framing, there is a simpler way to talk about "retirement income risk" that relies on the concepts of overspending and underspending, which can help both advicer and client better understand the trade-offs inherent in the ongoing decisions around spending in retirement.

Determining whether clients are overspending or underspending during their working years is relatively straightforward and is simply a matter of observing if they are spending more or spending less than they make. However, once the client retires, the "how much they make" part of the equation becomes much less clear. But by accounting for all of a client's income sources and balancing them against their various spending goals with a set of future assumptions around such factors as life expectancy and market performance, the advicer can arrive at a "best guess" answer to the question of how much the client should be spending. From a mathematical standpoint, that best guess is the level at which a client is equally likely to overspend as they are to underspend. Yet, in the Monte Carlo success/failure framework, that balance point exactly represents a 50% probability of success, which seems intuitively 'wrong' given that the analysis targeted the precise spending level that would preclude both overspending and underspending!

The Monte Carlo success/failure framing, in essence, focuses only on minimizing the risk of overspending, hiding a bias towards underspending by calling it a "success". Or, put another way, a 100% probability of success is exactly a 100% probability of underspending. Which means that solving for higher probabilities of success generally necessitates underspending to the point where clients, while comfortable knowing that they almost certainly won't run out of money, may have to significantly revise their desired expectations for their standard of living. By contrast, the overspending/underspending framework allows advicers to mitigate the Monte Carlo bias toward underspending while using concepts that clients are already familiar with. For instance, an advicer might communicate that their job is to help the client find a spending level that balances their goals of living the life they want while not depleting their resources.

Helping a client determine a balanced spending level in retirement is only the beginning of the journey. As time goes on, odds are that various factors (including circumstances, expectations, market returns, and inflation, to name just a few) will require spending levels to be adjusted. And by relying on the overspending/underspending framework, advicers can communicate how clients will be able to make those adjustments over time and, in the process, minimize the biases that incentivize lower spending that ultimately prevent them from living their lives to the fullest!

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Welcome everyone! Welcome to the 382nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Tyson Ray. Tyson is the CEO of FORM Wealth Advisors, a hybrid advisory firm based in Lake Geneva, Wisconsin, that oversees approximately $900 million in assets under management for just over 800 client households.

What's unique about Tyson, though, is how he has developed a planning process he calls their "Total Relationship" approach, which puts an emphasis on determining a client's near-term lump sum spending needs like a new car purchase or a big vacation, and ensuring the portfolio is built around having sufficient cash available for those goals, which Tyson has found can reduce the number of panicked phone calls that come during a market downturn (when sometimes clients aren't really upset about their performance, per se, they're just stressing over a near-term cash flow need that they don't want to liquidate for when their portfolio is down).

In this episode, we talk in-depth about how Tyson's "Total Relationship" approach leads to particularly close relationships with their clients, including by developing a system to send what he calls "wow factor" gifts to mark key moments in the lives of the firm's clients, their families, and even their pets, why Tyson's firm breaks out its AUM fee between portfolio management and ongoing client service instead of presenting clients with a single unified fee, and how Tyson's firm has grown through acquisitions, including the hard lessons Tyson learned about conducting appropriate due diligence on potential acquisition targets.

We also talk about how Tyson discovered that by hiring additional junior advisors, he could reduce his stress levels by only stepping into client conversations when his more experienced level of expertise was really needed, why Tyson found the transition from 7 to 12 people on staff was particularly difficult and how growing beyond that point has made his life much easier, and why Tyson wished he had started earlier in hiring a Chief Operating Officer to help manage their growing staff team.

And be certain to listen to the end, where Tyson shares his experiences writing 2 books about the financial advice industry (including how Tyson once received hand-written feedback on a draft from industry guru Nick Murray), the benefits Tyson sees for newer advisors of 'apprenticing' under more senior advisors to learn industry best practices (and spot those that might be out of date), and how Tyson's experience when he was asked to be a pallbearer at a client's funeral cemented for himself the tremendous impact financial advisors can have towards the end of their clients' lives.

So, whether you're interested in learning about how to build "Total Relationships" with clients to ease their stress and strengthen their loyalty to the firm, how to navigate staffing issues as a growing firm, or about the opportunities and challenges of growing through acquisitions, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Tyson Ray.

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Broadly speaking, there are 2 models of working as a financial advisor: operating independently as a firm owner or with a large affiliate platform such as a wirehouse broker-dealer, independent broker-dealer, or larger corporate RIA. Deciding which model to work under is a key moment in beginning or evolving a career as an advisor.

In the independent model, owners/advisors are generally paid directly by the clients they serve, and they select and pay for the vendors, services, and employees that support them, whereas in the affiliated model, a number of the advisory firm functions are covered by the affiliate platform, with the cost of those services being bundled into the affiliate platform's fee. The key difference from a financial standpoint is that while clients of independent advisors usually pay the entire amount of their fees directly to the advisor, clients of affiliated advisors often pay their fees to the affiliate platform itself, with the platform passing on a percentage of the income to the advisor (and the amount that the platform keeps represents the platform's fee to the advisor for the services they provide).

As a result, many advisors using the affiliate model don't really 'see' the fees that they pay to their affiliate platform, since the only revenue they see is what's left over after the platform has taken their fee. Which in turn makes it more difficult to assess how much the advisor is really paying the affiliate platform, and what they're receiving in exchange for their fee – and ultimately, whether the amount that the advisor is paying the platform is worth what they're getting in return.

Notably, different affiliate platforms have different payout rates; those that pay out the most (and thus have the lowest fees) tend to cover relatively few functions such as compliance and technology, while those that pay out the least (and therefore have the highest fees) cover a significant amount of the advisor's overhead costs. Which means that using the platform with the highest payout rate won't necessarily result in the most take-home income for the advisor (since they're still responsible for paying all of the overhead costs that aren't covered by the platform); rather, it's more about whether and how the platform's services align with what the advisor needs to succeed in their role – for instance, if an advisor earning primarily fee-based advisory revenue affiliates with a platform that puts a lot of resources towards FINRA compliance for broker-dealer representatives, they'll end up paying significantly for a service that they rarely (if ever) use.

The key point is that regardless of whether advisors use the independent or affiliate model, achieving success as an advisor involves finding the best use of the advisor's resources to leverage support for the functions that they can't perform (or don't want to manage) on their own. Being clear on how an affiliate platform's services align with what the advisor truly needs to outsource can help save advisors from putting resources towards functions that they don't need or use. Ultimately, while some advisors might simply prefer the autonomy of the independent model, it's possible to be successful in whichever model provides the support that the advisor needs to make the best use of their time.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that CFP Board announced that it has crossed the milestone of 100,000 CFP professionals in the United States, and despite having just celebrated its 50th anniversary last year, just set a record high in the number of advisors sitting for the CFP exam this March, reflecting the value many financial advisors and consumers place on the brand, including the requirements to obtain it as well as the standards CFP professionals must follow (though, as CFP Board has recognized, there is potential room for it to improve in both of these areas!).

Also in industry news this week:

The Office of Management and Budget (OMB) has completed its review of the Department of Labor's new "fiduciary rule", indicating that it could be released in the coming days or weeks (though, like its predecessors, its ultimate disposition is likely to be determined in the courts)
The IRS announced this week that it is excusing Non-Eligible Designated Beneficiaries who inherited IRAs and are subject to the "10-year rule" to distribute these accounts from having to take RMDs again in 2024 (just as it did for 2021, 2022, and 2023) and indicated that Final Regulations regarding RMDs for those in this position could be coming this year

From there, we have several articles on retirement planning:

4 unique risks retirees face when drawing down their assets, from sequence of returns risk to tax risk, and how financial advisors can help clients mitigate them
How the differential effects of the "Great Recession" have led to younger Baby Boomers having fewer assets than their older Boomer counterparts
How financial advisors can help their clients identify and avoid a potential retirement income "death spiral", whereby a client's assets are depleted over the course of only a few years

We also have a number of articles on financial advisor marketing:

5 relatively low-cost marketing tactics for financial advisors, from expanding the types of Centers Of Influence they approach to leveraging "social proof" to attract clients
How advisors can boost the relevancy and effectiveness of the "Calls To Action" (CTAs) on their website
Strategies advisors can use to build urgency and help reluctant prospects overcome their hesitance to sign on to become clients

We wrap up with 3 final articles, all about online security:

A recently released feature can help protect iPhone owner's private data from thieves who are able to access their phone and passcode
How activating 2-factor authentication and other security measures can help protect users' social media accounts
Why the "private browsing" feature of internet browsers does not provide the level of anonymity users might assume

Enjoy the 'light' reading!

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For over a decade, the financial advice industry has been bracing for an "any-minute-now" tsunami of advisor retirements and concomitant sales of financial planning practices. Although that wave has yet to materialize (as many advisors may find that they'd prefer to stay engaged and earn well past the 'traditional' retirement age), the fact remains that, at some point, many aging advisors will have the opportunity to capture the enterprise value that they've spent their careers building. For many firm owners, an internal succession plan can be an attractive strategy to sell their practice, as it provides both continuity of service for clients and opportunities for the next generation of advisors to become firm owners themselves. However, younger advisors don't typically have the same deep pockets as large 'serial acquirer' firms, making affordability a hurdle that both buyer and seller must navigate. Which begs the question, to what extent should an advisory firm owner discount the sale price of their firm for a next-gen successor?

In our 136th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards explore the extent to which a firm owner might consider selling their practice at below-market value to an internal successor, why both buyer and seller might reconsider the valuation metrics that have been common in the industry, and ways to structure an internal succession deal that can make sense for both parties.

The primary risks when selling an advisory firm are that the deal may fall through, and existing clients may choose to leave the firm. Firm owners can maximize the value from a sale by ensuring that the buyer is a "good fit", which, if they aren't, can have real financial consequences. In the case of an internal successor, some risk is mitigated as the next-gen advisor has likely developed a relationship with clients already and is doing a good job servicing them. And maintaining pre-existing client relationships not only lowers the overall risk of the deal, it also makes the transaction a whole lot smoother. However, while that may be worth a modest discount (say, 5% or so), offering 20%–30% below fair-market value may be unrealistic. In other words, while an owner might have preferences beyond 'just' getting the highest dollar amount possible, there shouldn't be an expectation (or obligation) for the owner to offer a steep discount because the next-gen advisor can't afford it.

On the other hand, there are times when the seller's or buyer's price expectations don't align with the reality of how the firm operates. Traditionally, a standard benchmark for advisory-firm sales has been 2X annual revenue; with many firms running at an average 25%–30% profit margin, this results in 7X–8X earnings valuations. However, firms with margins outside a traditional range might result in unrealistically high earnings multiples for the buyer.

Ultimately, the key point is that advisory firm owners interested in selling their firms to next-gen advisors within their practice don't always have to structure a deal as a high-stakes, all-or-nothing transaction. Instead, the owner can facilitate a gradual sale over multiple years, allowing the buyer to adjust to the logistics of note payments and the firm's cash flows on a much more manageable scale, while the seller can continue to benefit from the ongoing growth in their firm's enterprise value. And while shifting ownership in tranches over time might not feel like the optimal deal for either seller or buyer, the end result is a deal that's fair and beneficial for both sides!

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After advisors do all of the work of bringing on a new client (Marketing! Prospecting! Onboarding! Compliance!), it can sometimes feel natural to let the relationship go into "maintenance mode". And while all may appear well on the surface – the client rarely contacts the advisor with problems but they show up for every annual meeting – they may actually be feeling quite disengaged with the financial planning services being provided. This can result in fewer referrals and even the loss of the client, who might eventually opt to move their accounts to another (more appealing) advisory firm.

Some types of client disengagement can be difficult to detect until it's too late, as client disengagement manifests, by definition, as a lack of action, up until the client decides to leave the advisor altogether. Given how difficult it can be to detect forms of disengagement, it may be helpful to think of different levels of client engagement as part of a spectrum, where the most engaged client recognizes their advisor as a partner and guide; they are open to exploring new ideas proposed by their advisor, ask questions, and are willing to develop and maintain good habits. Clients on the lower levels of client engagement may tend to disregard their advisor's instructions or have a limited understanding of what their advisor can do, simply viewing them as problem-solvers for pain points and not as sources of guidance to plan for – and reach! – important goals.

One particular key attribute of many disengaged clients is that they tend not to reach out when issues arise, which can create a vicious cycle precluding an advisor from providing deeper value (because they didn't know there was an opportunity to do so in the first place) and resulting in the client's failure to recognize the advisor as someone who could have provided guidance and value, reinforcing their decision not to reach out for help… and so on.

However, advisors can address client disengagement by using questions that encourage client participation and invite them to engage more actively in the financial planning process. Questions such as "What is different from the last time we met?" and "What changes are coming up soon?" can help to reveal relevant talking points and planning opportunities at the beginning of the meeting that the disengaged client may not have thought about mentioning on their own. Additionally, checking in with clients deeper into the meeting to monitor any potential financial anxiety can facilitate a more open and honest discussion if there are issues that a client has, but have not yet surfaced. For example, advisors might ask how confident the client feels with their financial plan or what worries them most (or least) about their finances. Finally, asking for feedback at the end of the meeting can help the client recognize that the advisor values their engagement and input; it also helps them recognize the progress they've made and the advisor's role in achieving that progress. Facilitating another opportunity for honesty and discussion provides another way to build trust and encourage client engagement.

Ultimately, the key point is that highly engaged clients not only provide more referrals and recognize their advisors' value, but they also tend to be more enjoyable to work with. And by carefully choosing the right questions to ask, advisors can recognize their clients' engagement levels and ensure that more of them are (and stay!) fully engaged!

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Welcome back to the 381st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Ashley Quamme. Ashley is the Founder of Beyond The Plan, a consulting firm based in Evans, Georgia, that offers a Fractional Financial Behavioral Officer service including consulting and training to advisory firms and even direct meeting support for new or existing clients.

What's unique about Ashley, though, is how her background in psychology and couples therapy allows her not only to be able to help clients navigate their relationships with money but also to help advisors get their clients unblocked so they can actually move forward and implement the advisor's financial planning recommendations to achieve their financial goals.

In this episode, we talk in-depth about how Ashley helps advisory firms figure out why their clients are getting stuck in their financial journey and, through an offering of advisor training and even supporting directly in client meetings, guides clients through the necessary changes in behavior to achieve their desired outcomes, how Ashley assists advisors with the "Self-Work" of better knowing and understanding their own behaviors, biases, and potential blind spots that could otherwise result in certain types of clients being more challenging to work with, and how Ashley developed an Office Hours format for advisors to talk through particularly challenging client situations and receive structured feedback on how they might improve their approach with their most difficult clients.

We also talk about how Ashley built on her experience as a couples therapist, after hearing 20-25 clients/week come in for couples therapy that often ended up tying into a discussion of financial issues, to pursue and learn how certain therapy tools and techniques could effectively translate to the world of financial advice, how Ashley uses the Klontz Money Script Inventory and Datapoints' Building Wealth Assessment to help advisors' planning clients gain a better understanding of themselves through an analysis of their relationship and mindset as it relates to money, and the way that Ashley introduces herself into advisors' client meetings to reduce any perceived awkwardness when joining the meeting and ensure that clients themselves feel supported.

And be certain to listen to the end, where Ashley shares the surprises and challenges she went through when she decided to launch her own consulting practice as an independent business owner to serve financial advisors (which unfortunately came right in the midst of the COVID pandemic), how surprised Ashley was when she realized how much of a demand and support there is for financial behavioral services within the financial advisory industry, and the way Ashley's focus and success shifted when she stopped trying to find her compass and figure out what was next after the first decade of her career, and instead simply looked internally to figure out what she enjoyed doing… and let that become her compass instead.

So, whether you're interested in learning about how to get clients unstuck on their financial journey, how the principles of couples therapy can be applied in the financial planning context, or tools that can help clients better understand their relationship and mindsets with regard to money, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Ashley Quamme.

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Growing an advisory firm is no easy task – and advisors who start firms often have few resources to spare (beyond their own knowledge and time), face huge to-do lists, and are required to wear a number of hats. Foremost among their responsibilities is business development, which compels them to seek out prospects who will eventually become clients (so that they can grow their firms, allocate resources accordingly, and do even more financial planning!). That being said, the latest Kitces Research on Advisor Marketing suggests that the more marketing techniques (which can range from referrals to drip marketing to webinars) that advisors can implement, the faster their firms grow – advisory firms who cover at least 5 marketing techniques consistently land in the top third of growth for firms, regardless of their size. But with limited resources to invest in elaborate marketing campaigns, how can newer advisors leverage a multi-tactic approach to attract new clients and grow their firms?

In this article, Managing Editor Sydney Squires explains how 1 piece of video content can be reused to cover 6 different marketing techniques: the video itself, podcasting, social media, blogging, newsletter drip marketing campaigns, and Search Engine Optimization (SEO) boosts. This approach allows advisors to get their name and brand spread across more areas, increasing the breadth of their marketing with just 1 piece of content.

The first step of this process is to record a video, being mindful to verbally describe any visual elements (so that the video can work in an audio and transcript format). Small video snippets can then be selected from the video as highlights to share; additionally, 1–2 sentence summaries, bullet-point lists, and overviews of individual video segments can also be impactful supplements. Thankfully, not all of this has to be done manually by the advisor – there are many software tools that can help advisors reformat most of their content relatively quickly without needing much technical knowledge.

With all of this "supporting material" taken from the original video, an advisor can make the most out of 1 recorded video. For example, a video with a transcript can be published as a blog post, and a summarizing sentence can be paired with a snippet and released on social media channels. As an added bonus, many of these techniques also impact the SEO score of the site, meaning that search engines may find the website more trustworthy – and thus, make it more visible in internet searches.

Ultimately, the key point is that by investing time upfront and using a bit of creativity to develop a repeatable process, advisors can get 1 piece of relevant content to cover a wide breadth of channels and mediums, both appealing to a variety of learning styles (e.g., podcasts for auditory learners, videos for visual learners, and transcripts for learners who prefer to read) and increasing the likelihood of finding prospects where they are. And as advisors gain more experience and their firms' needs change and evolve over time, advisors can observe both what they enjoy and what clients respond to, which can offer valuable clarity on where to focus future marketing dollars and efforts!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent study has found that many small- and mid-sized advisory firms that use "supported independence" platforms for their technology and back-office needs, have the potential to see greater growth in the years ahead given the efficiencies gained (and potential cost savings compared to creating a tech stack and hiring their own staff 'a la carte'), and give aspiring firm owners a platform to get their firms up and running quickly (whether breaking away or starting anew). Implying that part of the potential appeal to such support platforms is not simply about whether it's more cost-effective to use their tech and services to replace the advisor's own overhead costs, but that it's easier to scale up quickly as a fast-grower by leveraging incrementally more of the support platform's capabilities than needing to take the time to manage their own hiring and technology additions.

Also in industry news this week:

A recent study indicates that advisors charging clients on a monthly subscription basis hiked their fees by an average of 6% in 2023, raising the salience of how advisors can most effectively communicate fee increases to clients
A survey suggests that while financial advisors are increasingly aware of Artificial Intelligence (AI)-powered software tools and are frequently leveraging them in their personal lives, they appear to be more skeptical about using them to craft financial recommendations

From there, we have several articles on talent management:

How financial advisory firms can expand the pool of candidates for open positions, from leveraging employees' professional networks to recruiting firm clients with relevant professional skills
How effective leadership techniques, including inclusive vision-setting and giving employees autonomy, can help promote employee retention
A recent report identifies actions financial planning firms can take to be more attractive (and fair) to women advisors, from boosting "sponsorship" programs that can help women advance within the firm to creating a culture that rewards performance rather than time spent in the office

We also have a number of articles on long-term care insurance:

Why starting conversations about long-term care needs with a discussion of the client's care preferences rather than the products that might meet their needs could be a more effective approach for financial advisors
Why costs for long-term care facilities tend to go well beyond the monthly rent charged and how advisors can adjust financial plan assumptions to reflect these expenses
How advisors can help clients choose between traditional long-term care insurance policies and hybrid policies that combine long-term care coverage with life insurance

We wrap up with 3 final articles, all about health and wellness:

How light movement, from a walk outside to climbing a few flights of stairs, can boost creative thinking
Why sustained, moderate-intensity exercise can be particularly effective in boosting an individual's fitness and overall health
Why, at a time when individuals can access increasing amounts of biometric data, constantly monitoring one's blood sugar levels might be counterproductive

Enjoy the 'light' reading!

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Financial advicers are intimately familiar with the phrase, "Past results are not indicative of future performance." Every document that considers the facts around any particular asset class will invariably include that disclaimer, but constructing a portfolio consisting of a mix of equities, fixed income, and other assets requires investors and advicers to make some fundamental assumptions around long-term expected returns and correlations between assets. 3 common assumptions that have driven asset allocation decisions for decades are that 1) equities have historically outperformed fixed income over the long-term, 2) bonds act as an effective diversifier in a portfolio since they are negatively correlated to stocks, and 3) various combinations of non-correlated assets improve a portfolio's expected return per unit of risk. However, as investors learned in 2022, when the S&P 500 and 20-year Treasury Bonds fell 18.1% and 26.1%, respectively, historical "tendencies" don't always hold over shorter timeframes, prompting the question: How reliable are our assumptions around the long-term performance of stocks and bonds?

On the one hand, in an analysis of data going back to 1802 in his seminal book, "Stocks For The Long Run", Jeremy Siegel concluded that stocks outperformed bonds over long periods. However, Edward McQuarrie, author of the 2023 study "Stocks for the Long Run? Sometimes Yes, Sometimes No," reached back even further to 1793 and expanded the data set to include 3–5X more stocks and 5–10X more bonds. Accordingly, McQuarrie found that, while stocks did indeed far outperform bonds between 1942–1981, not only did stocks and bonds produce about the same wealth accumulation during the 150-year period before 1942, but the same held true from 1982–2019 as well.

So, although the entire 227-year span of McQuarrie's analysis from 1793 to 2019 was weakly supportive of Siegel's conclusions, there were subperiods where bonds actually outperformed stocks, leading McQuarrie to conclude that there was no consistent relationship between asset outperformance and length of holding period to which values must revert. Instead, McQuarrie argued that the changes over various periods depend solely upon the 'regime' in place, where a regime is defined as "a temporary pattern of asset returns" characterized by "ceaseless variation" over time.

Meanwhile, McQuarrie also found that stock-bond correlations have also been "highly variable over 20-year intervals, ranging all the way from about −0.70 to 0.90", suggesting that, in addition to performance, correlations are also subject to regime changes and that bonds don't always effectively diversify risk. In fact, they can even magnify risk, as was the case for the 7 decades between 1926–1999, when the stock-bond correlation was a positive 0.18.

Finally, over time, regime changes have also lowered the overall risk of equity investing. For example, the creation of the Federal Reserve in 1913 and the SEC in 1934 have helped to reduce economic volatility and increase corporate transparency. These changes, along with lower trading costs, have made the world a much safer (and less expensive) place for investors, who, as a result of reduced investment risks, may experience lower future returns.

There are several takeaways for advicers as they serve their clients. First is the fact that stocks (specifically because they carry a higher risk level) have not always outperformed bonds, and while stocks should carry a risk premium, advicers can turn to Monte Carlo simulations to consider a wider dispersion of outcomes, versus relying on 'expected' returns when developing investment plans. Second, the stock-bond performance-correlation relationships are regime-dependent, and those regimes are neither time-dependent nor mean-reverting.

As a result, an advicer's primary consideration when developing asset allocation plans should be the diversification of risk, while accounting for the fact that bonds won't always be an effective tool to achieve such diversification. Moreover, advicers might consider incorporating alternative investments into client portfolios, including things such as long-short factor strategies, private equity debt, reinsurance, consumer and small-business lending, among other assets. Ultimately, the key point is that there are asset classes outside the traditional stock-bond universe that can be used to create portfolios that are more diversified and that may be better suited to address a particular client's ability, willingness, and need to take risk!

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For many financial advisors, encouraging new prospects to "think it over" at the end of an initial meeting can seem like a gentle way to offer the prospect space to decide whether the relationship will be right for them, while at the same time, keeping the advisor from feeling that they may be coming acrossRead More...

The post Why The Common Approach Of “Think It Over” Might Work For Product Sales, But Undermines Service-Based Financial Planning Relationships first appeared on Kitces.com.

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Welcome back to the 350th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Jason Wenk. Jason is the CEO of Altruist, a relatively new RIA custodian that has quickly grown to serve more than 3,500 advisory firms across the country, making it the 4th-largest independent RIA custodian by firm count.Read More...

The post #FA Success Ep 350: The RIA Custodian As The All-In-One Investment Operating System Of The Future, With Jason Wenk first appeared on Kitces.com.

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When a financial advisory firm owner first starts their business, much of their time is spent on finding clients that they can serve. But as they (hopefully) onboard more clients and get busier with servicing those clients, they will also find that they eventually start to run short on time. Because in addition to providingRead More...

The post Outsourcing (Parts Of) The Financial Plan Preparation Process To Boost Solo Advisor Capacity first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the SEC this week issued a risk alert outlining how it selects firms to examine, the areas it focuses on during exams, and how it chooses which firm documents to request, details that could ultimately help firms be better prepared for their next exam and make it a shorter, less painful process!

Also in industry news this week:

Changes to CFP Board’s procedural rules went into effect September 1 and are intended to make the disciplinary process more efficient for respondents as well as CFP Board staff, and to expand the CFP Board’s ability to pursue more complaints against CFP professionals
A NASAA model rule follows in the footsteps of FINRA and CFP Board in extending the amount of time advisors can leave their jobs without having to retake qualification exams

From there, we have several articles on advisor marketing:

3 behavioral science principles advisors can put into practice to attract more clients
How advisors can build understanding and trust with their clients to foster long-term relationships
How advisors can tactfully address the behavioral and emotional challenges prospects and clients face when it comes to money

We also have a number of articles on investment planning:

A survey indicates that many advisors currently using alternative investments with clients are looking to increase these allocations to further boost portfolio diversification
While clients might be tempted to move assets from equities to cash amidst the higher interest rate environment, doing so could limit their progress toward long-term financial goals
How the new interest rate environment presents an opportunity for advisors to reevaluate their clients’ fixed income allocations

We wrap up with three final articles, all about economic trends:

How suburbs have experienced a renaissance that started well before the pandemic
Why poverty persists in the United States and what might be done to fix the problem
How a pandemic-era tax break has led to a booming business of affiliate marketers targeting small businesses

Enjoy the ‘light’ reading!

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A recent McKinsey report surveying growth in the wealth management industry predicted that the struggles of small RIA firms would increase as larger firms continue to grow and overshadow the industry... again. Although the messaging that smaller RIAs must scale to survive has been offered many times before over the past few decades, many smaller lifestyle firms and solo RIA practices have thrived in their preference to stay small. Yet, despite that many smaller firms have enjoyed success, scaling the business remain to be challenging prospects for those aiming to grow.

In our 120th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges that small to mid-size RIAs face when trying to scale and grow and how the pressures of competing with larger firms can affect those endeavors.

Even when smaller RIAs didn’t have access to many of the resources that help advisory firms operate and grow decades ago, they were still successful because many of them learned how to leverage their relevance by intimately and impactfully understanding and addressing their clients' unique financial challenges. And for many firms, this specificity and relevance has been amplified by homing in on a particular client niche, allowing them to focus on very specific types of problems that their clients face. Yet, while cultivating impactful relationships with clients has always been a powerful means of maintaining a firm's relevance and success, many business owners are challenged with growing their firm, even with the boon of abundant technology and platform solutions available today that make it easier than ever before for small firms and solo advisors to be successful.

As while a business grows, there are more employees, clients, and operational logistics that come with growth that the firm must manage. And as these elements of growing a firm increase, problems also increase, and more solutions are inevitably needed to solve for those problems. Some firm owners believe the solution to address these problems is to add resources and grow further until they reach some attainable point they imagine where all their problems will become manageable and their growth can be capped, allowing them finally to maintain their firm at a comfortable equilibrium level. The reality is, though, that as a firm continues to grow, new problems will always arise and it is very rare for a firm to address with growth, to the extent that at some point they no longer need to grow! Which suggests that identifying a firm's expectations for success is what's most critical, as a firm who wants to stay small needs to define what success means to them in terms other than growth – whether that means they earn more revenue per client, develop a more focused niche, or enjoy a shorter workweek.

Ultimately, the key point is that despite surveys that may foreshadow the demise of the small lifestyle practice, small (and mid-size) RIAs are not going away anytime soon. Small firms who want to stay small can increase their success by finding more impactful and/or efficient ways to remain relevant to their clientele and provide meaningful financial planning services. And smaller firms who truly want to grow have more options than ever before that will help them succeed – from choosing the right platform, merging their business, or acquiring other businesses to help them grow and scale more efficiently and effectively. In the end, understanding which path to success a firm owner wants to pursue can help them decide whether scaling for growth is really the solution that will give them the best options for solving the issues they face today, or whether they need to remove themselves from the constant cycle of growth objectives and identify the real objectives that represent a successful future for the firm!

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Financial advisory clients are routinely concerned about lurking threats to their hard-earned wealth in the form of a large unforeseen judgment on a liability claim. While asset protection is a popular planning topic for High-Net-Worth (HNW) and ultra-high-net-worth clients, those who are not HNW are susceptible to the same threats to wealth. However, while some protection options come with a high cost (that might not be practical for non-HNW clients), asset protection can come in many forms, some of which do not involve excessive fees or complexity. Which means that by taking into account a client's net worth, realistic liability risks, and level of sophistication, advisors can help assess what types of strategies may be appropriate for the client to explore.

Notably, certain client assets have built-in creditor protection without the use of (often expensive) products or tools. For instance, qualified plan assets (e.g., 401(k) and 403(b) plans) offer purportedly unlimited creditor protection for plan participants, meaning that if an individual were to be sued or file for Federal bankruptcy protection, balances in these accounts would not be at risk. However, these benefits do not automatically extend to other types of retirement accounts (such as IRAs), the protection for which varies by state. Other sources of (often) built-in protection include homestead protection for a primary residence (some exemption is offered by most states, though not always automatically in place) and the benefits of joint account ownership (e.g., tenancy by the entireties and community property).

For other assets, insurance can represent the first line of defense against liability for a client, with other tools to fill in the remaining gaps, insulate assets from each other, and protect against any judgments that exceed coverage limits. For instance, an umbrella insurance policy can be an effective way to protect against significant personal liability claims in excess of any existing coverage the client possesses. Beyond insurance, advisors and their clients can also consider options such as the use of corporate entities such as Limited Liability Companies (LLCs) for business interests, and estate tax planning tools such as Spousal Lifetime Access Trusts (SLATs) that can offer both estate planning and asset protection benefits for married couples.

In addition to helping clients identify which assets might already have creditor protection and selecting the tools and products that could help protect other assets, advisors can play an important role in ensuring that asset protection plans do not run afoul of the law or are not subject to reversal. For instance, because most states have adopted the Uniform Fraudulent Transfers Act (UFTA), any transfers made less than 4 years prior to a creditor claim in those states may be reversed, which means that if a client gives something away (or transfers it for less than fair market value) with the intent to 'outsmart' creditors by transferring or hiding assets, then a judge can order the transfer undone and the asset returned to be used to cover the creditor claim (assuming the claim is made less than 4 years after the transfer).

Ultimately, the key point is that financial advisors can play an important role in helping their clients protect their assets, both in terms of educating clients on the protections they currently have and the options available to protect other assets, as well as in helping them avoid pitfalls that could put their asset protection plan at risk. Which means that knowing how to use the pantheon of strategies and understanding existing laws can help an advisor provide clients with the highest and best asset protection for the peace of mind their clients seek!

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Welcome back to the 349th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Olivia Luper. Olivia is the Founder of Lexicon Advisor Marketing, a virtual outsourced digital marketing company that specializes in working with financial advisors to generate a steady flow of prospects.

What's unique about Olivia, though, is how she started out as a ghostwriter creating content for financial advisors and their blogs, but saw first-hand that great content alone doesn't generate prospects if there isn't more of a marketing system around it… so she expanded her firm to begin offering a full suite of outsourced marketing services to make the content actually generate results, from building lead magnets and mailing lists, to running social media ads to grow the list further, to writing the emails that get readers to actually schedule a first meeting.

In this episode, we talk in-depth about how Olivia has developed a 3-step process to building a marketing strategy for her advisor clients by focusing first and foremost on clarifying the advisor's message and vision for the firm, crafting an execution plan for top to bottom marketing funnel, and then if advisors don't want to do it themselves, providing ongoing implementation of the strategy, how Olivia has found success for her advisor clients using social media – even paid social media ads – not by trying to get clients directly but simply getting them to the advisor's website to collect an email address that will be used to turn them into a warmer lead over time, and how Olivia warms up those new email contacts with a welcome email sequence of 7 emails over the span of their first month that is structured to not only engage with prospects, but to help build trust and nurture the relationship with the advisor to increase the likelihood of the prospect becoming a client in the future.

We also talk about how, after having her son and just finishing her Master's degree in English, Olivia found herself between careers and was recommended by her mother-in-law (who also works in the financial advisor space) to try specializing in financial advisors because she saw the need for Olivia's content marketing expertise in the financial services industry, how Olivia experienced some frustration early in her advisor work because she was good at creating content for advisors and getting it out there but realized that advisors didn't know how to draw prospects to it to sustainably scale their growth, and why Olivia believes that most advisors are too timid about communicating the value of what they can provide to their prospects and that the key to better marketing success is about being more willing to simply share stories about how the advisor has helped other clients in similar situations.

And be certain to listen to the end, where Olivia shares how, while she was growing her business, she had a moment of reckoning for herself when she realized that she was employing marketing scripts that were too 'salesy' and focused on maximizing revenue and revamped her own marketing process to better align with how advisors aim to help their own clients in the first place, why Olivia believes that younger, newer advisors can find build more successful careers by being self-aware to find the types of clients they want to work with most and becoming increasingly well versed on the financial issues those specific people face, and why Olivia now feels fulfilled in her career as she can dive deep into her passion of helping advisors get unstuck and find the marketing messages that feel truly authentic to them so that they can continue to find more of their ideal clients and grow their firms, too.

So, whether you're interested in learning about why Olivia takes the time to learn about her advisor clients' vision and goals for their companies to make sure their marketing strategy is in alignment and can really help them grow, how Olivia structures each of the 7 emails in her welcome email sequence, or how Olivia develops marketing funnels to connect with warmer leads, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Olivia Luper.

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Welcome to the September 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that WiserAdvisor, one of the longest-running lead generation services in the industry, has acquired IndyFin, a startup advisor rating platform that had aspired to be the 'Yelp for Advisors' – which on the one hand provides WiserAdvisor with an opportunity to jump into the business of client reviews and ratings (which has garnered significant interest from multiple AdvisorTech startups hoping to promote such services in the wake of the SEC's new Marketing Rule allowing client testimonials), but on the other hand, raises questions about how much demand there really is for a standalone advisor rating tool, since few advisors are likely to accumulate enough ratings from current or former clients to actually draw in new clients (and advisors with enough clients to get a critical mass of reviews likely have enough clients that they can just rely on client referrals… or don't even need to add new clients anymore?).

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

Former United Capital Partners founder/CEO Joe Duran is reportedly exploring the launch of a new RIA 4 years after selling his firm to Goldman Sachs, with a reported emphasis on providing lead generation opportunities for advisors on its platform – which if successful, could provide a new model for boosting organic growth without the high cost of outsourcing to a third-party lead generation service or relying on inorganic growth via mergers & acquisitions.
Onramp Invest, the platform that aimed to solve the challenges of cryptocurrency investing for financial advisors, was acquired by Securitize, a platform specializing in blockchain-based tokenization of private market investments, suggesting that advisors' interest in recommending digital assets for their clients – already limited during previous rallies in the price of Bitcoin and other cryptocurrencies – has declined further amid the price crash and ensuing scandals that have happened in the year-plus since
Wealthtender, a lead generation and advisor rating service, has announced a partnership with custodial account provider UNest to bring its find-an-advisor technology to UNest's customer base of parents opening investment accounts for their children – which, while expanding Wealthtender's footprint in the competitive lead generation market, raises questions about how large of a potential customer base UNest can provide (and whether Wealthtender will be able to secure any larger enterprise partnerships that can help it secure a spot as the "One and only" advisor rating service)

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

With AI technology proliferating in the financial services industry, regulators are increasingly concerned about possible conflicts of interest if the technology can be manipulated to recommend a company's products and solutions over others (despite being under a technological veneer of 'objectivity'), as highlighted most recently by the SEC issuing proposed regulations for RIAs for evaluating and eliminating conflicts of interest in their technology, and Massachusetts Secretary of State William Galvin sending a request for six companies from different areas of the industry to detail their use of AI in their business practices
Over the last 10–15 years, a number of AdvisorTech providers have gained the majority of market share in certain core categories like financial planning and CRM; but as the most recent Kitces Research on AdvisorTech has found, a new crop of tools has arisen in more recent years that has garnered higher satisfaction ratings than the incumbents, and have been steadily gaining market share – suggesting that the traditional advisor tech stack might eventually be upended and replaced by a new 'next-generation' tech stack that reflects the growing shift of advisors into deeper financial planning and non-AUM fee models

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that the Massachusetts Supreme Judicial Court ruled that the state's fiduciary rule for broker-dealers can stand, potentially opening the door for other states to impose similar standards that exceed the requirements of the Securities and Exchange Commission's Regulation Best Interest rule.

Also in industry news this week:

A legal challenge to FINRA's operations as a self-regulatory organization has the potential to upend the current regulatory system for broker-dealers and their registered representatives
A recent study indicates that while many consumers appear confident handling their finances on a 'DIY' basis during their careers, the percentage seeking professional financial advice increases as they approach retirement

From there, we have several articles on retirement planning:

Why some individuals believe they need to save more money than they really do in order to have a sustainable retirement and how advisors can support them
A recent study suggests that average inflation-adjusted spending among retirees decreases by 3% annually, a sharper decline than previous estimates
The value in deciding how much is 'enough', and how advisors can support their clients in doing so

We also have a number of articles on practice management:

Best practices for giving praise and constructive criticism to motivate employees and help them grow
How developing and communicating a clear strategic plan can not only set the long-term direction for a firm, but also help employees better understand the value of their work
Why advisor happiness leads to better client service, and how firms (and clients) can assess whether their advisors are happy

We wrap up with 3 final articles, all about wealth:

Why those in the upper class are taking a more understated approach to displaying their wealth compared to previous generations
The services and skills that can help advisors move 'upmarket' and attract wealthier clients
How "social debt" can serve as a psychological and financial challenge for wealthy individuals and what they can do to avoid this burden

Enjoy the 'light' reading!

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Non-compete agreements (where a company prohibits an employee from working for competitors, at least for a certain period of time) are often used to help companies protect their investment in the employee (e.g., the time and money spent training the employee) as well as preventing the employee from taking the company's best practices to aRead More...

The post Crafting More Equitable Advisor Non-Solicit Agreements With The ACRES Agreement first appeared on Kitces.com.

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Welcome back to the 348th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Jeff Jones. Jeff is the Owner and Founder of Cypress Financial Planning, an independent RIA based in Haddon Heights, New Jersey, that oversees $275 million in assets under management for 380 client households. What's unique about Jeff,Read More...

The post #FA Success Ep 348: Building Your Own Planning Spreadsheets To Show Clients What They Need To See, With Jeff Jones first appeared on Kitces.com.

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The announcement of the merger between Charles Schwab and TD Ameritrade in November 2019 kicked off a marathon of preparation for advisory firms to transition their clients on the TD Ameritrade custodial platform to Schwab. And with the final conversion of clients scheduled to take place over the upcoming Labor Day weekend of 2023, theRead More...

The post TD Ameritrade To Schwab Conversion Tips For Financial Advisors first appeared on Kitces.com.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent CFP Board survey indicates that consumers do not expect AI tools to replace human financial advisors, but rather supplement advisors' work. Further, 87% of respondents said they would trust advice from human advisors,Read More...

The post Weekend Reading For Financial Planners (August 26-27) first appeared on Kitces.com.

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For many next-gen financial advisors who start with or move their careers to an established firm, eventually earning an equity stake in that firm can be an exciting prospect and is often a major career goal that many advisors aspire to achieve. However, when these aspirations are delayed or blocked by senior advisory firm partnersRead More...

The post Kitces & Carl Ep 119: Navigating Succession Plans When Founders Are Having Second Thoughts On Retirement first appeared on Kitces.com.

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Charitable Gift Annuities (CGAs) have long been a popular way for individuals with charitable intentions to plan their legacies. By contributing a lump sum to a charity in exchange for fixed recurring payments for life (with any leftover funds after the donor's death going to the charity), the individual can ensure that their funds areRead More...

The post “Legacy IRA” Rollover To A Charitable Gift Annuity: Using This New Tax-Advantaged Opportunity To Help Clients Achieve Charitable And Retirement Goals first appeared on Kitces.com.

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Welcome back to the 347th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Cary Carbonaro. Cary is the Senior Vice President & Director of Women and Wealth Services for Advisor Capital Management, an independent RIA with offices around the country and headquartered in Charlotte, North Carolina, that oversees more thanRead More...

The post #FA Success Ep 347: When The Firm You Sell To Gets Sold And You Have To Reinvent Yourself, With Cary Carbonaro first appeared on Kitces.com.

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Many financial advisors start their own firm because of an entrepreneurial itch, a desire to work with a specific type of client, or perhaps because they want to have more control over their work life. But typically, the opportunity to create and implement a marketing strategy is not one of these reasons. In fact, dataRead More...

The post How Niches Improve Advisor Marketing Satisfaction And Efficiency first appeared on Kitces.com.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a recent study has found that consumers are increasingly likely to spread their portfolios across a range of asset managers, and that this trend is particularly pronounced amongst more affluent clients (e.g., millionaires), suggesting thatRead More...

The post Weekend Reading For Financial Planners (August 19-20) first appeared on Kitces.com.

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Financial advisors create value for clients not only by giving good advice, but also by ensuring that the advice they give is actually implemented. After all, financial planning is worth a lot more to clients when they act on the advisor's recommendations (and realize the projected outcomes), in contrast to the advisor simply handing clientsRead More...

The post Motivational Interviewing Techniques To Help Clients Talk Themselves Into Implementing Advice first appeared on Kitces.com.

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Welcome back to the 346th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Jim Ludwick. Jim is the founder of MainStreet Financial Planning, an hourly, fee-only financial planning firm, and also created Procrastination Junction, a coaching program for fee-only financial advisors looking to improve their sales skills. What's unique aboutRead More...

The post #FA Success Ep 346: Moving Procrastinating Clients To “Yes” Instead Of Selling As A Fee-Only Advisor, With Jim Ludwick first appeared on Kitces.com.

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When a financial advisor first opens their own firm, they often start with few (or no) clients and little revenue. And while they might have an ideal target client in mind, it can be tempting to bring on any client who can pay the advisor’s fee so that the advisor can simply ‘keep the lightsRead More...

The post Using “Kill Criteria” To Move On From Clients Who Aren’t A Fit first appeared on Kitces.com.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that the Massachusetts Secretary of the Commonwealth has launched an investigation into how investment firms are using artificial intelligence-enabled technologies, echoing concerns expressed by the SEC that these tools could be used to put the firms'Read More...

The post Weekend Reading For Financial Planners (August 12-13) first appeared on Kitces.com.

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Financial advisors who have established and successfully built up their advisory firms over several years can often go through many stages of firm development, requiring them to hire staff and additional advisors to manage their growing clientele. When a firm becomes large enough, though, the firm owner may be compelled to consider stepping away fromRead More...

The post Kitces & Carl Ep 118: (Re-)Building Your Financial Advisor Identity When You Dial Back Working With Clients first appeared on Kitces.com.

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The original SECURE Act, signed into law in December 2019, changed many of the long-standing rules governing IRAs and other retirement accounts, and no single measure in the legislation had a more seismic impact on planning than the changes to the post-death distribution rules for retirement accounts. Specifically, the law stipulated that "Non-Eligible Designated Beneficiaries"Read More...

The post IRS Notice 2023-54 Provides Welcome Relief To 10-Year Rule Beneficiaries And Retirement Account Owners Born In 1951 first appeared on Kitces.com.

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Welcome back to the 345th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Lori Van Dusen. Lori is the CEO of LVW Advisors, an independent RIA based in Pittsford, New York, that oversees more than $2 billion in assets under management for over 450 small-to-mid-sized institutions and ultra-high-net-worth families. What'sRead More...

The post #FA Success Ep 345: Differentiating With Institutions And Ultra-High-Net-Worth Investors As A Serious Investment Firm, With Lori Van Dusen first appeared on Kitces.com.

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Welcome to the August 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, underlying trends, and developments that are emerging in the world of technology solutions for financial advisors! This month's edition kicks off with the news that estate planning platform Wealth.com has launched Ester, anRead More...

The post The Latest In Financial #AdvisorTech (August 2023) first appeared on Kitces.com.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that credit ratings agency Fitch on Tuesday downgraded its assessment of the U.S. government's creditworthiness from an AAA rating to AA+. While the downgrade has made headlines and might be startling to advisory clients (particularly thoseRead More...

The post Weekend Reading For Financial Planners (August 5-6) first appeared on Kitces.com.

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Adoption, the social and legal process in which an adult is formally made the parent of another individual (typically a child), helps fill a critical need in society: to unite children who need loving families with those who want to raise children. At the same time, adoption can be expensive, with costs that can addRead More...

The post Planning For Adoption: Understanding Different Pathways And Their Costs, Tax Breaks, And Financial Assistance Available first appeared on Kitces.com.

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Welcome back to the 344th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Brad Barrett. Brad is the Managing Director and Partner of One Capital Management, an independent RIA based in Westlake Village, California, with locations across the country, that oversees $5.3 billion in assets under management for more thanRead More...

The post #FA Success Ep 344: Scaling To $5B By Going Narrow And Deep Across Multiple Business Segments At Once, With Brad Barrett first appeared on Kitces.com.

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Many financial advisors who launch solo advisory firms do so with the intention of adding more employees once the firm becomes big enough to support them. And while conceptually it makes sense that the firm will be ready to hire its first employee at some point, in practice, there often isn't a lot of clarityRead More...

The post A Roadmap For Solo RIAs Making Their First Hire first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that RIAs appear to be building more comprehensive and more integrated tech stacks, and are benefiting from greater operational efficiencies, according to the latest Schwab RIA Benchmarking Study, with larger firms seeing gains in clients andRead More...

The post Weekend Reading For Financial Planners (July 29-30) first appeared on Kitces.com.

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While many financial advisory firm owners have long-term goals that involve building a career based in a profitable and sustainable advisory firm, there are some firm owners who develop their firm as a means to explore and pursue other business endeavors. These firm owners may opt to take a backseat role in running the firm,Read More...

The post Kitces & Carl Ep 117: Sustaining A Profitable Advisory Business That Allows You To Explore New Endeavors first appeared on Kitces.com.

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Financial plans play an important role for both clients and advisors, as they not only help clients gain a clear perspective of their current financial position, but also provide advisors with a systematic way to organize their analyses and communicate their recommendations to the client. However, there is no standard style of what is includedRead More...

The post The Growth Of Collaborative Planning – And Decline Of “The (Written Financial) Plan” first appeared on Kitces.com.

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Welcome back to the 343rd episode of the Financial Advisor Success Podcast! My guest on today's podcast is Rita Robbins. Rita is the Founder and President of Affiliated Advisors, a Super-OSJ with Royal Alliance that provides support to 90 financial advisors and collectively oversees $3.5 billion in assets under advisement. What's unique about Rita, though,Read More...

The post #FA Success Ep 343: The Evolution Of Super-OSJ Platforms To Support Independent Advisors, With Rita Robbins first appeared on Kitces.com.

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As a financial advisor, there are many potential sources of advice on running a practice and serving clients, from fellow advisors to coaches to academic researchers and others. Sometimes, it can be tempting to rely solely on the advice of those with an ‘in-the-trenches’ perspective, as these individuals have actually lived out a similar experienceRead More...

The post Academic Research Vs Industry Experience: Evaluating The Value Of Practice Management Advice first appeared on Kitces.com.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that Charles Schwab's latest annual RIA Benchmarking Study shows that while average firm assets under management fell in 2022, due largely to weak market performance, organic growth remained strong, mitigating a portion of the market effectsRead More...

The post Weekend Reading For Financial Planners (July 22-23) first appeared on Kitces.com.

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Continuing Education (CE) requirements are common for many professions, but historically there has been no minimum CE requirement for individual Investment Adviser Representatives (IARs) of advisory firms. While holders of certain credentials (e.g., CFP certificants and CFA charterholders) have CE requirements to retain their credentials, IARs without such credentials haven’t traditionally had any ongoing CERead More...

The post IAR CE: Continuing Education Requirements For Investment Adviser Representatives And How Different States Adopt NASAA’s Model Rule first appeared on Kitces.com.

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Welcome back to the 342nd episode of the Financial Advisor Success Podcast! My guest on today's podcast is Nancy Hetrick. Nancy is the Founder and CEO of Smarter Divorce Solutions, a consulting firm based in Phoenix, Arizona that provides financial expertise to individuals and couples (and sometimes, mediators and attorneys) going through the divorce process.Read More...

The post #FA Success Ep 342: Scaling To $1M Of Financial Planning Fee Revenue By Specializing In The Divorce Niche, With Nancy Hetrick first appeared on Kitces.com.

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In the early days when financial advisors were first and foremost salespeople for insurance and investments products, the reality is that "advisor training and education" wasn't really about finance or advice… it was mostly just about learning how the company's products worked and how to effectively sell them to consumers. But as technology (in particular,Read More...

The post Announcing IAR Ethics CE Day And The State Of The (Nerd’s Eye View) Blog first appeared on Kitces.com.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that while the new social media app Threads, designed to compete with Twitter, has surpassed 100 million users in its first week alone, its potential utility for advisors remains unclear and has raised compliance concerns forRead More...

The post Weekend Reading For Financial Planners (July 15-16) first appeared on Kitces.com.

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Establishing successful client relationships as a financial advisor relies on good communication skills not just to present information persuasively and with confidence, but also to establish client rapport that allows meaningful and engaging relationships to be built. For many who are new to the financial planning profession and who have no experience working with clients,Read More...

The post Kitces & Carl Ep 116: Getting Training As (Or For) An Associate Advisor To Talk More In Client Meetings first appeared on Kitces.com.

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Last year, the Biden Administration announced a sweeping package of student loan relief programs intended to ease the pressure on borrowers affected by the skyrocketing student debt of recent years. The two key pillars of the administration's package were a proposed one-time cancellation of up to $10,000 of Federal student debt per borrower, and aRead More...

The post Changes To Student Loan Planning With The New SAVE Income-Driven Repayment (IDR) Plan first appeared on Kitces.com.

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Welcome back to the 341st episode of the Financial Advisor Success Podcast! My guest on today's podcast is Thor McIlrath. Thor is the Owner of McIlrath & Eck, an independent RIA based in Arlington, Washington, that oversees more than $610 million in assets under management for 970 client households. What's unique about Thor, though, isRead More...

The post #FA Success Ep 341: Bolstering The Quality Of Advice By Deliberately Rotating Advisors For Each Client, With Thor McIlrath first appeared on Kitces.com.

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As owners of financial planning firms approach retirement, some may decide to sell to an external buyer, while others may plan for an internal succession. Sometimes, this succession plan can include the owner's child, providing an opportunity to keep the business in the family. At the same time, the business strategies that worked for theRead More...

The post From Unprofitable To $115M AUM: Reinventing A 2nd Generation Advisory Business By Finding The Right Niche first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that recent survey data indicate that advisors are more satisfied and productive when they have more time to spend with their clients and when those clients fit within their ideal client profile, in terms of needs,Read More...

The post Weekend Reading For Financial Planners (July 8-9) first appeared on Kitces.com.

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As the U.S. stock market has, on average, outperformed international equities over the last 15 years since emerging from the Great Recession of 2008, many investors argue that international diversification is a poor allocation of dollars that would otherwise be earning more in the U.S. market. The outperformance of U.S. stocks has led to theRead More...

The post Why International Diversification Is Still The Prudent Strategy (While Keeping Behavioral Biases, Risks, And Results In A Healthy Perspective) first appeared on Kitces.com.

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Welcome back to the 340th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Melissa Joy. Melissa is the Founder of Pearl Planning, an independent RIA based in Dexter, Michigan, that oversees more than $175 million in assets under management for 251 client households. What's unique about Melissa, though, is howRead More...

The post #FA Success Ep 340: Operating Agreement As Pre-Nup: Splitting Away From Ensemble Partnership To Launch Your Own Firm, With Melissa Joy first appeared on Kitces.com.

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Welcome to the July 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors! This month's edition kicks off with the news that Pershing X has announced the launch ofRead More...

The post The Latest In Financial #AdvisorTech (July 2023) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that NAPFA has announced that it will no longer exclude advisors who receive up to $2,500 in annual trailing commissions from previous product sales, if they agree to donate that money to a non-profit organization andRead More...

The post Weekend Reading For Financial Planners (July 1-2) first appeared on Kitces.com.

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For most financial advisory firm owners, ensuring that their business or practice is remunerative and that it can remain viable is often a key priority. And while there are many factors that help owners determine whether their firm is making enough money to profitably sustain itself, one common variable that can help them adjust theirRead More...

The post Kitces & Carl Ep 115: Setting The Right Minimum Fee Per Client And The Revenue Model Generator first appeared on Kitces.com.

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One of the key steps in the financial planning process is presenting the plan to the client, which has traditionally been done as part of a single 'plan presentation' meeting that takes place once the advisor has gathered and analyzed all of the client's data. While this approach may have made sense in a timeRead More...

The post Flip ‘Plan Presentation’ Into ‘Plan Engagement’ Meetings To Generate More Focus And Reflective Questions From Clients first appeared on Kitces.com.

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Welcome back to the 339th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Eric Roberge. Eric is the Founder and CEO of Beyond Your Hammock, an independent RIA based in Boston, Massachusetts, that oversees $47 million in assets under management for more than 80 client households. What's unique about Eric,Read More...

The post #FA Success Ep 339: Resetting The Business For Its Next Stage Of Growth After Hitting The 10-Year Capacity Wall, With Eric Roberge first appeared on Kitces.com.

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One of the biggest challenges for small, independent RIA firms is that they are self-reliant with respect to designing, choosing, and implementing the systems, technology, and processes that they use. Some firm owners relish the responsibilities of building and maintaining a firm from the ground up, but others – who may be happier with simplyRead More...

The post Learning Experiences Advisor Firm Owners Wished They Knew Before Merging Or Selling first appeared on Kitces.com.

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week’s edition kicks off with the news that amid a flurry of SEC-proposed rules for investment advisers, the Investment Adviser Association this week called on the regulator to assess whether the compliance burden these regulations would put on advisers outweighs the potential benefitsRead More...

The post Weekend Reading For Financial Planners (June 24-25) first appeared on Kitces.com.

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All investment advisers are fiduciaries that owe a duty of care and loyalty to their clients, and, in an ideal world, advisory firms and their staff would abide by these requirements without the need for a prescriptive code of ethics. However, the early 2000s were plagued by a variety of SEC enforcement actions that allegedRead More...

The post RIA Code Of Ethics: Important Nuances To Note In Relatively Straightforward Requirements first appeared on Kitces.com.

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Welcome back to the 338th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Tony Hixon. Tony is the Co-founder and COO for Hixon Zuercher Capital Management, an independent RIA based in Findlay, Ohio, that oversees more than $300 million in assets under management for nearly 330 client households. What's uniqueRead More...

The post #FA Success Ep 338: Finding Your Why In Helping Clients Figure Out What To Retire Towards (Not From), With Tony Hixon first appeared on Kitces.com.

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Recent years have seen an increase in the number of RIAs charging fixed monthly retainer fees, and while retainer fees can have several advantages over other types of fees, one notable disadvantage – particularly as compared to traditional AUM fees, which tend to increase automatically in line with financial markets – is that financial advisorsRead More...

The post Communicate (The Necessity Of) Fee Increases With A Client-Centric, Value-Based Approach first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the SEC issued a risk alert highlighting areas of increased focus regarding its new marketing rule for upcoming examinations, including whether there is clear disclosure of whether the person giving a testimonial or endorsement isRead More...

The post Weekend Reading For Financial Planners (June 17-18) first appeared on Kitces.com.

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For many financial advisors, keeping an open line of communication with clients is a key component of building trust, understanding the client’s values, and developing a meaningful plan to help them reach their financial goals. However, despite efforts to ensure all clients understand the ‘big picture’ of their comprehensive plans, some clients may be temptedRead More...

The post Kitces & Carl Ep 114: When Clients Are Tempted By The Siren Song Of (A Competitor’s) Investment Results first appeared on Kitces.com.

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One common sales tactic for financial advisors is to offer prospective clients a free (or low-cost) financial plan to demonstrate the advisor’s expertise and to let the prospect ‘test drive’ the advisor’s services. However, creating these pre-commitment strategies and plans can take up a significant amount of an advisor’s time and there is no guaranteeRead More...

The post Why Pre-Commitment Strategies Can Work And 3 Steps To Implement Them With (The Right) Prospects first appeared on Kitces.com.

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Welcome back to the 337th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Danika Waddell. Danika is the President and Founder for Xena Financial Planning, a virtual advisory firm that advises 40 client households of women in tech and supports more than $275K of ongoing revenue. What's unique about Danika’sRead More...

The post #FA Success Ep 337: Becoming An ‘Accidental’ Entrepreneur When Independence Isn’t Chosen But Forced By Circumstance, With Danika Waddell first appeared on Kitces.com.

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While 2023 got off to a bumpy start for many advisory firms, still smarting from a rough prior year of market returns (and volatile revenue), a relative return to ‘normalcy’ means that for most, the advisory business has reached whatever its new post-pandemic normal will be. Firms that were returning to the office have doneRead More...

The post Summer Reading List Of “Best Books” For Financial Advisors – 2023 Edition first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the House has passed legislation that would expand the definition of who qualifies as an accredited investor eligible to invest in certain private investments to include those who pass an exam designed by the SEC,Read More...

The post Weekend Reading For Financial Planners (June 10-11) first appeared on Kitces.com.

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All Investment Adviser Representatives (IAR) of registered investment advisory firms are required to file Form U4, a regulatory filing containing public disclosures of certain information about financial professionals. And while IARs are responsible for keeping their own Form U4 up-to-date, Form U4 – unlike other regulatory forms like Form ADV that require an annual amendmentRead More...

The post Form U4: Common Missteps And Best Practices For RIAs first appeared on Kitces.com.

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Welcome back to the 336th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Adam Holt. Adam is a principal with RubinGoldman and Associates, and the Founder and CEO of Asset-Map, a financial planning tool that helps financial advisors create a visual representation of their clients’ financial situation, reaching over 1.25 million users.

What's unique about Adam, though, is how he combined his early career training in geographic information systems to make land use decisions using maps, with his work as a financial advisor sitting across from ultra-high-net-worth clients, and began to create “mind maps” to visually capture for himself all the details of their very complex financial situations… which became so popular with his clients, and then other financial advisors in his firm, that he eventually turned it into an advisor software company – Asset-Map –that helps financial advisors create their own visual representations of their clients’ financial situation.

In this episode, we talk in-depth about how, while working with ultra-high-net-worth clients, Adam began to draw his own financial maps to help him better visualize his clients’ complex financial situations on one page (and then realized that by showing his financial planning maps to his clients, they became better engaged in the financial planning process, why Adam structures his Asset Maps to concentrate on 5 components – important people in the household, income sources, assets, liabilities, and insurance policies – to illustrate a holistic picture of the clients’ financial journey, and how Adam designed his Asset-Maps to be used as tear sheets (instead of serving as a “one-page financial plan”) because the goal is not to conduct a complex analysis, but instead simply to provide clients with a quick and easy-to-understand visualization of the topic to facilitate a complex conversation, instead.

We also talk about how Adam almost didn’t land his first job with Equitable because he didn’t do well on his insurance exams and only lucked into the job because a newly-hired manager happened to need one more insurance producer to meet his own numbers, how, in the early stages of his career, Adam wanted to work with business owners and found that by asking people he knew for help to connect him with business owners (instead of asking for a referral), he ended up gaining referrals more genuinely and consistently, and how, after getting his initial version of Asset-Map approved by the compliance department of his firm, Adam tripled his production each year for 3 years… which caught the attention of other advisors in the firm, eventually leading to Asset-Map being incorporated into the financial planning process for 1,600 of the firm’s clients and eventually become the standalone software company it is today.

And be certain to listen to the end, where Adam shares how he didn’t initially think Asset-Map would grow beyond his practice but found that having mentors and hiring the right people for the right roles helped support his journey and get him where he is today, why Adam encourages advisors looking to launch their own fintech companies to pursue their ideas as long as it is innovative and they feel can solve a real problem, but still have a realistic understanding of the amount of sacrifices, lifestyle changes, and support that is needed to really build a software business, and why Adam believes the key to success for younger, newer advisors is being committed to continually learning from the industry and to acquire their CFP marks… not for the credentials themselves, but so they can gain knowledge to become credible educators to attract and serve their future clients.

So, whether you’re interested in learning about how Adam leveraged his education in geographic information systems to create his Asset Map, why Adam believes that surrounding oneself with the right people can help increase accomplishments, or why Adam feels, in financial planning, direction is better than precision on a 30-year journey, then we hope you enjoy this episode of the Financial Advisor Success podcast, with H. Adam Holt.

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Welcome to the June 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors! This month's edition kicks off with the news that Riskalyze has completed its previously-announced rebranding, andRead More...

The post The Latest In Financial #AdvisorTech (June 2023) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that a recent study found that advisory forms working with a younger client base tend to have relatively stronger growth in assets under management and revenue over time. In addition, the researchers found that referrals from centers of influence were one of the strongest drivers of new client growth, with client referrals playing an important role as well.

Also in industry news this week:

How Goldman Sachs’ RIA custodial platform is leveraging the resources of its parent company as it seeks to build momentum amidst a highly competitive environment among custodians
How NASAA has changed the substance and/or scoring of the Series 63, 65, and 66 exams

From there, we have several articles on college planning:

How the college financial aid landscape is changing this year, from a redesigned FAFSA form to new planning opportunities for grandparents
How the newly-updated College Scorecard tool can help advisors and their clients better understand the costs and potential benefits of attending certain colleges
How advisors can help clients decipher college financial aid letters, which can vary significantly across different schools

We also have a number of articles on investments:

Why financial planning clients might not be clamoring for the personalization that direct indexing offers
Why investing in today’s largest companies and holding the shares for an extended period might underperform a more dynamic index
A study has found that advisors often invest client assets more conservatively than what their client’s risk tolerance might allow

We wrap up with 3 final articles, all about resilience:

How a series of mental exercises can help individuals build resilience and overcome challenges they face
Why taking ownership of the inevitable pain that comes in life can lead to greater personal resilience
How adopting a “gift-giving” mindset can help an individual live their best life both today and into the future

Enjoy the ‘light’ reading!

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While advancing a career in any industry can be challenging, the lack of formal career development programs offered in the workplace for associate advisors can make it particularly difficult for them to gain the experience they need to become lead financial advisors. And since managing the client relationship – a key responsibility for lead advisors – relies so heavily on nuanced ‘soft’ skills that are gained only through direct experience, finding ways to get hands-on experience is crucial for associate advisors to demonstrate their value and gain the skills to advance in their careers.

In our 113th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss what it means to be a lead advisor, the paths associate advisors can take to advance into a lead advisor role, and how to communicate career growth goals with senior advisors.

While different firms may use different titles, the common theme of all lead advisor roles goes beyond providing advice to the client to managing the client relationship. This means actively engaging with clients to create an exceptional client experience, managing expectations, ensuring that questions are answered, and resolving issues in a timely manner. And even though there may be numerous books on managing relationships, there are few resources that actually offer associate advisors the opportunity to apply the information in the workplace. Which means it’s essential for them to take a proactive approach to find those opportunities, most often in the forms of hands-on experience (e.g., working with clients directly) and observation (e.g., participating in client meetings led by senior advisors).

For associate advisors who don’t (yet) have the opportunity to work directly with clients, communicating their career goals and positioning themselves as an asset that lead advisors find valuable can benefit both the associate and lead advisor. For example, the associate can ask to gain experience by attending meetings and taking meeting notes; this allows the lead to focus more on the client, who can also ask the associate to draft follow-up emails. And by asking for increasing responsibility to handle tasks that smaller clients may need, associate advisors can eventually gain the confidence of lead advisors to be permitted to gradually take over those relationships, freeing the lead advisor’s time to focus on the more complex needs of larger clients.

Ultimately, the key point is that a proactive approach to seek hands-on experience can position associate advisors for a successful transition into the role of a lead advisor. Becoming more involved in client relationships can demonstrate their dedication to the firm while gaining the valuable experience they need to advance in their careers. And by clarifying and communicating their goals for professional growth, associate advisors can also assess how the firm will support their growth aspirations or whether considering opportunities elsewhere might make more sense… helping them to create a better, more fulfilling career as a financial advisor!

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The 2017 Tax Cuts & Jobs Act introduced a $10,000 limit on the State And Local Tax (SALT) deduction that was previously available for taxpayers who itemized their deductions. In response to the new deduction limit, many states enacted laws creating a new Pass-Through Entity Tax (PTET) designed to help owners of pass-through businesses (partnerships, LLCs, and S corporations) avoid the limitation and preserve the deductibility of their state tax payments. With IRS giving its blessing to this approach through Notice 2020-75, 33 states now have some sort of PTET available and, as a result, owners of pass-through businesses who live (or do business) in those states may be considering whether to make a PTET election.

At a high level, PTETs work by allowing business owners to elect to pay state taxes on their business income – which are traditionally paid on their individual tax returns – from the business itself. This shifts the business owner’s state tax payments from being a personal expense (and subject to the $10,000 SALT deduction limit for Federal tax purposes) to being a business expense that is fully deductible from Federal income. Finally, the business owner gets a state tax credit against their individual tax liability to partially or completely offset their share of the tax paid by the business.

But while the simple description of PTETs might make the decision to elect one seem like a no-brainer, in reality there are myriad considerations at play that mean a detailed analysis is generally required before deciding to make an election or not. First, PTETs often result in paying higher state taxes; while some states tax pass-through entities at a higher rate than individuals, others may not provide a 100% tax credit for taxpayers to fully offset their share of the business’s PTET paid (meaning that a portion of that income is effectively double-taxed). However, even though the PTET can result in higher state taxes, the savings in Federal taxes that can result from being able to deduct the PTET as a business expense (including not just income tax but potentially self-employment taxes, net investment income tax, and additional Medicare taxes as well) might still make the election worth it overall.

Another set of considerations involves owners of businesses that operate in multiple states, which can compound the complexity of electing a PTET. With multiple, often conflicting state laws at play for business owners, deciding whether or not to elect the PTET in any given state involves weighing not only the impact of the state’s PTET on any potential Federal tax savings, but also additional factors involved in electing a PTET across state lines. Some of these can include whether there are additional filing requirements (e.g., a business owner who previously wasn’t required to file a nonresident return in a state where they do business may be required to do so if the business elects that state’s PTET) and whether the taxpayer’s home state will give them credit on their individual tax return for entity-level taxes paid to another state (which might result in the business income being taxed by 2 states at once if the credit isn’t allowed).

Ultimately, for a subset of taxpayers – namely high-income owners of pass-through businesses in high-tax states, who preferably only do business in 1 or a small number of states to reduce the overall complexity – PTETs can provide an opportunity for significant Federal tax savings. Advisors who can help their clients with tax planning strategies to take advantage of PTETs – starting with determining when it’s really worthwhile to do so – can provide significant value given the complexity of the decision. And with the SALT deduction limit currently set to expire after 2025, there’s no time like the present to start delivering that value!

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Welcome back to the 335th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Tim Wyman. Tim is a Managing Partner for the Center for Financial Planning, a hybrid advisory firm based in Southfield, Michigan, that oversees $1.5 billion in assets under management for 1,000 client households. What's unique about Tim,Read More...

The post #FA Success Ep 335: Systematizing Succession And New Partner Transitions In A $1.5B Ensemble Enterprise, With Timothy Wyman first appeared on Kitces.com.

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When a financial advisor starts their own firm, they face many important choices. One of the key decisions is determining the type of clients they want to serve. Some advisors may choose to take a generalist approach that leaves the door open to working with the broadest possible pool of prospective clients. But with hundreds of thousands of financial advisors competing for the same prospects, it can be challenging to build a generalist advisory business from scratch. Alternatively, many advisors select a client niche to serve and specialize in these individuals’ specific needs, which not only helps clients feel understood but also helps the advisor improve the efficiency of their practice.

In this guest post, Ryan Townsley, founder of Town Capital, an independent RIA, explains how he made the transition from nuclear power plant employee to financial advisor and the process he went through starting out as a generalist who transitioned into a niche where he now works with clients from his former profession.

When Ryan first opened his firm after 15 years in the nuclear power industry, and only a few months working as an advisor, he marketed himself to the broadest range of potential clients possible, using generic marketing and content creation. But after experiencing tepid business growth, he soon realized that he did not stand out in the sea of generalist advisors. So he decided to pivot and serve a niche with which he had significant experience: the nuclear power industry. As a former nuclear engineer, Ryan’s access to specialized knowledge – from understanding how workers in the industry think, to the challenges of their careers, and the financial considerations that come with employment in the industry – helped him decide that this was a niche market he could serve very well.

Ryan’s first step was to redesign his website. He replaced his generic graphics with themes that would be relevant to nuclear power plant employees and made it clear that he would be the go-to planner for those in the industry. His next step was to systematize his planning process to help him work more efficiently as a solo firm owner. And because nuclear power is a process-driven industry, the use of standard workflows was familiar ground for many of his prospective clients. He also built redundancies into his planning process (e.g., using two different risk tolerance assessments), which resonated with his target clients accustomed to built-in redundancies as a key part of operating nuclear power plants. Finally, Ryan created a private Facebook group exclusively for nuclear power workers, where he posts webinars that demonstrate his expertise in addressing the group members’ specific financial needs. And while many members view the free content for their own educational purposes, nearly 20% of the group’s members have become clients!

Ultimately, the key point is that serving a niche has allowed Ryan to build a growing solo practice that allows him to have a solid work-life balance. His experience demonstrates the benefits of using specialized knowledge to create a planning experience that resonates with a firm owner’s target market and creates a more efficient and enjoyable practice!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that while banks have been able to attract a younger and more diverse set of financial advisors compared to the rest of the industry, thanks in part to their built-in referral stream, a relative lack of independence and dated technology could lead some of their advisors to explore options with independent RIAs.

Also in industry news this week:

How consumer concerns about the stability of the banking industry could present independent advisors with an opportunity to add value by managing client cash
Why an advisor’s fiduciary duty can sometimes come into conflict with the best insurance options for their clients

From there, we have several articles on marketing:

While many firms have grown in the past several years thanks to market performance and M&A, a recent study shows that the average RIA had negative organic growth during the past 5 years
How firm owners can develop a “business development culture” throughout their firms
The differences between client referrals and word-of-mouth marketing and how advisors can use each to attract prospective clients

We also have a number of articles on retirement:

How retirees (and their advisors) can use “mastermind” groups to learn from and build a community with their peers
A survey of what people tend to care about less as they age, from trying to impress others to prioritizing their career over other interests
How the choice of where to live in retirement can impact a retiree’s longevity

We wrap up with 3 final articles, all about creativity:

How the most effective companies encourage innovative ideas among their employees
Why better sleep might be the ultimate ‘hack’ for achieving better productivity and creativity
Why persistence can be the key to turning a good idea into a great one

Enjoy the ‘light’ reading!

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Screening calls are a common part of the prospecting process for financial advisory firms, particularly those that receive a large number of inquiries, and can help determine whether a prospective client might be a good fit. At the same time, these calls can be awkward for both the prospect and the advisor, as the prospect might be asked to discuss personal information about their finances with someone they have never met before, and the advisor has to ask potentially thorny questions, such as whether the prospect meets the firm’s minimum asset requirements. And so, given the high stakes of screening calls (as not only do they serve as a first step for a prospect to become a client, but they also help the advisor save time by screening out unqualified prospects), preparing a prospect and asking thoughtful screening call questions during the interaction can make the process more productive and less awkward.

One way to help alleviate the potential anxiety associated with a screening call is to prepare prospects in advance. For example, advisors using online software tools to schedule screening calls could provide prospects in advance with a more detailed description of the meeting (including a list of questions that will be asked) and could explicitly note the firm’s asset and/or fee minimums (which could allow prospects to screen themselves out before scheduling a meeting rather than finding out they are unqualified during the call itself). In this way, the prospect will be less likely to be surprised by any questions during the meeting, and the advisor can confirm that the prospect meets their minimums rather than bring up the issue without warning. In addition, providing questions in advance (giving the prospect time to think about their answers) can help keep the screening call on track, which is particularly important because they are designed to be short, often scheduled for only 15-20 minutes.

Some questions an advisor might ask the prospect during a screening call are how they think the firm could be helpful for their needs (to help the advisor ensure that the prospect really wants financial planning services and fits the firm’s ideal target client profile if it has one); whether they have ever worked with a financial professional before (to gauge whether they’ve worked with an advisor in the past and to help get a sense of the prospect’s expectations for the relationship); if they have any questions about the advisor’s onboarding and planning processes and confirming that the firm’s asset and/or fee minimums work for the prospect (to get a sense of the prospect’s readiness and desired timeline to get started with a planning relationship).

Ultimately, the key point is that screening questions can be useful tools not only for financial advisors but also for prospects – because knowing whether the relationship will be a good fit without having to spend an hour or more is helpful for both parties involved. And while screening calls may be uncomfortable and awkward, letting prospects know what to expect can help ease these feelings by promising respect, directness, and information. Which could help get what could become a long-term relationship off on the right foot!

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Welcome back to the 334th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Meg Bartelt. Meg is the Founder and Lead Financial Planner for Flow Financial Planning, a virtual RIA serving mid-career women in tech that oversees almost $60 million in assets under management for 60 client households.

What's unique about Meg, though, is how, over the span of 7 years since launching her firm, she has evolved the business by repeatedly adapting her niche focus, iterating on different fee models, experimenting with various client meeting cadences, and both increasing and decreasing her staff headcount with various support team structures, all in the journey of honing in on the ‘right’ type of practice that Meg will enjoy running, and serving clients with, on an ongoing basis.

In this episode, we talk in-depth about how, when Meg launched her firm, she began with a $150 per month minimum fee but quickly realized that it was not enough to sustain the business she wanted to build and began to raise her fee minimums to what ultimately became $10,000 per year minimum (after her business coach helped her realize that is what her financial planning is really worth to her clients), why Meg evolved her niche focus from working mothers in tech to early to mid-career women in tech with a specialization in pre-IPO and IPO planning as she realized by being more specific, she could create better efficiencies in her own practice by simplifying what she did (and didn’t) need to focus on for her clients, and how, after a year of experimenting with surge meetings, Meg decided to go back to annual review meetings because she found the structure didn’t allow enough flexibility for the unique complexity of her clientele… and created challenges in finding the ‘right’ time to take on new clients.

We also talk about why Meg chose her niche focus of women in tech because she believes that what makes a niche market really powerful is finding clients with a shared identity (as that makes it easier to find where they gather to reach them), why Meg feels strongly about setting fees in explicit dollar amounts and actually locks her clients’ annual AUM fees at a fixed dollar amount that resets once each year, and why Meg views evolving her firm over time as a comfort, not a frustration, because it allows her to keep finding better ways to serve her clients while also creating more space for herself and a better experience in managing her practice.

And be certain to listen to the end, where Meg shares how she sought advice from her business coach, therapist, and colleagues to come to terms with having to let a staff member go to relieve some of the economic constraints her practice was experiencing after a year of market volatility and changes in the tech industry in 2022, why Meg feels comfortable with evolving her fee model, service model, and other aspects of her business because she feels that as long as she holds true to being there for her clients when they need her, she is continually building a successful business despite any ongoing changes, and why Meg feels that she is now transitioning to a second stage of her life where she prioritizes less on maximizing the income of the business and more on creating more space and freedom in her business to foster deeper relationships with her clients, those around her, and especially, her 2 daughters.

So, whether you’re interested in learning about how Meg adjusted to changing family dynamics when she became a business owner, how Meg handled the unfortunate situation of having to let a staff member go which was not due to performance issues, or why, as a business owner, Meg feels it’s sometimes better to experience when something doesn’t work to better understand why, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Meg Bartelt.

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Traditionally, financial planning internship programs have offered students who are aspiring financial planners a way to prepare for entering the workforce by gaining real-world experience in advisory firm settings (as well as a way to get their foot in the door with prospective employers). But when the COVID-19 pandemic arrived in 2020, many firms shut their offices and went fully remote, which forced them to either rapidly reconfigure their internship programs or – as was more commonly the case – to suspend their internships or end them entirely.

Recognizing the potential impact that a lack of internships for a generation of planners could have on the industry, in 2020 the Financial Planning Association (FPA) launched "The Externship", a virtual program that provided participants with access to mentorships with financial planning practitioners, technology commonly used in financial planning, and the opportunity to apply hours from the program towards the experience requirement for CFP certification. And while the original vision for The Externship was to provide a 1-year stopgap solution for a few hundred attendees, ultimately over a thousand students signed up in 2020 – because as it turned out, the virtual structure of The Externship opened up opportunities to participate not only for students whose internship opportunities had been disrupted by the pandemic, but also for those who (due to working, caretaking, and other commitments) would have never had the ability to participate in a traditional internship in the first place!

In this Guest Post, Hannah Moore, the creator of The Externship, offers her perspective on how lessons learned from The Externship (which is now entering its 4th year) can inform advisory firm leaders on how they structure and implement their own internship programs to create potentially better outcomes for interns, employees, the firms themselves, and the industry as a whole.

In the wake of the pandemic, many advisory firms have adopted a ‘new normal’ of either hybrid or fully-remote work, providing an opportunity for them to rethink how they conduct their internship programs. While adopting a ‘business-as-usual’ mindset towards internships makes little sense when business as usual has changed so dramatically since 2020, the success and growing popularity of The Externship has suggested that even before the pandemic, the traditional internship model wasn’t working as well as it could have, either for interns or the firms they worked for.

For interns, a good internship can increase the chances of getting a job offer, from either the firm that they interned with or other firms who value the experience that the intern received from the program. But firms benefit as well, with the opportunity to thoroughly vet and observe potential employees and to showcase themselves to prospective talent. And there are even advantages for the firm’s existing employees who mentor the interns: the opportunity to train, teach, and manage interns can provide valuable leadership experience to benefit their own career development.

Ultimately, the key point is that today’s interns – whether they participate in industrywide programs like The Externship or in internships at the individual firm level – represent future generations of leaders in the financial planning industry. The ways that firms implement their financial planning internship programs not only influence the financial planning philosophies and practices that interns develop throughout their careers, but can also impact how diverse and equitable the profession will be in the future. Which means that internships play an instrumental role in moving the profession forward, and by creating internships that are better, more intentional, and more accessible, firms can make for a more productive outlook not just for the benefit of their own businesses and employees, but also for students and the industry at large!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news of a recent survey indicating that investors overwhelmingly believe that Artificial Intelligence (AI) will help financial advisors better serve their clients and would like to work with an advisor who leverages AI tools. And despite some industry observers’ concerns that AI tools could eventually replace human advisors, a strong majority of those surveyed said they do not expect AI to replace advice from humans. And amid this backdrop, several AdvisorTech tools have added AI capabilities that could further streamline advisory firms’ middle- and back-office tasks and processes.

Also in industry news this week:

CFP Board adopted a set of revised procedural rules, including establishing the ability to conduct “informal inquiries” in response to complaints to better identify potential wrongdoing
A patent that allowed Vanguard to launch ETFs as share classes of its existing mutual funds expired this week, but it is unclear whether other asset managers will take advantage of the new opportunity

From there, we have several articles on practice management:

What actions advisory firm owners can take when they find they have too much work on their plate
How advisors can explore different paths for their firms once they have been in a robust client pipeline
How one advisory firm owner made changes to ensure her business serves her rather than the other way around

We also have a number of articles on cash flow and wealth:

One potential framework to describe levels of wealth, from not stressing about debt to not worrying how much is spent on a vacation
Why having “FU” money is not necessarily the key to freedom and happiness
While it has long been assumed that buying ‘experiences’ typically make individuals happier than purchasing ‘things’, recent research suggests a more nuanced view might be warranted

We wrap up with 3 final articles, all about gender and money:

Why men and women often have different views of what retirement means to them
Why telling women to act more confidently is unlikely to improve the gender pay gap, and what employers can do to even the playing field
While prior research has found that women report poorer mental health than men, a new study suggests the reality might be more nuanced

Enjoy the ‘light’ reading!

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As a solo advisory firm owner grows their practice, they may reach capacity constraints that prompt them to hire an additional employee. While this can be a logical step in scaling their firm, some advisory firm owners may not anticipate the managerial challenges that come with hiring additional staff. And even though some firm owners may have originally thought they were ready to expand and take on an employee, they may later determine that they actually prefer operating on their own as a solo without support… leading to the inevitable task of letting go of the person they hired in the first place.

In our 112th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss best practices for gracefully letting an employee go when the advisory firm owner decides they no longer want to grow into a business but would rather revert to being a solo advisor instead.

Letting go of an employee, especially when the reasons are not related to performance issues, can be an uncomfortable experience for all parties involved. While the firm owner may feel guilty and worry about how much the decision will impact the employee and their family, it is important for the owner to put aside their own feelings and instead focus on approaching the situation with objectivity, directness, grace, and compassion. Being clear and direct will help the firm owner communicate why they are terminating the associate advisor, and instead of trying to express remorse or regret (which can lead to confusion, anger, and/or resentment, making the situation more difficult for everyone), the advisor can instead act with compassion by making an offer of severance pay (depending on how long the employee served the firm), providing a recommendation letter or serving as a reference, or even making a referral to other advisory firms that may be looking to hire additional staff.

While contemplating the decision to terminate an associate advisor, an important consideration to make includes the past growth of the firm’s client base, especially since hiring the associate advisor. Because once they are no longer supporting the firm owner, capacity constraints will change, which means the owner may also have to downsize the number of clients to maintain a sustainable practice. And if downsizing clients offers a beneficial capacity lift for the owner, the owner might also consider offering the associate advisor an opportunity to buy the book of clients they no longer wish to serve, possibly helping them either launch their own firm or ease their transition so they can bring revenue with them to their next firm position.

Ultimately, the key point is that it is generally in everyone’s best interest for the firm owner to be clear and direct when the decision has been made to let someone go. And while the discussion will probably be difficult and uncomfortable, delivering the information with clarity, directness, and grace will make the news easier for the employee to understand and accept, and can also relieve the firm owner from the burden of having the sensitive conversation more quickly. And offering transitional tools like severance pay, a recommendation, and/or a referral to another firm can add compassion to the process, ultimately leading to an easier process of moving on for both the employee and the owner!

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Amid a tight job market and low unemployment rates, a significant amount of the U.S. ‘talent gap’ is filled by foreign-born workers on employment visas like the H-1B. These visas allow foreign workers to live and work in the country temporarily while they are employed – although in practice, this can mean that individuals can spend years or decades (or even their entire career) working in the U.S. on a ‘temporary’ visa.

Like native-born workers, foreign workers need to think about saving for retirement, planning for their children’s college, managing healthcare costs, and all manner of other financial goals. However, the system in the U.S. that incentivizes saving for these goals for American citizens – namely with tax-advantaged accounts such as 401(k) plans, IRAs, 529 college savings plans, and Health Savings Accounts (HSAs) – can impose hurdles on foreign nationals who rely on them for their own savings needs.

For example, the tax benefits of certain accounts can sometimes work in the other direction if a non-U.S.-born worker contributing to them eventually moves back to their home country. Roth IRAs, for instance, are taxed once upon contribution and can grow tax-free thereafter in the U.S., which can allow for a large accumulation of tax-free savings over time; however, because some countries don’t recognize the tax-free nature of Roth accounts, withdrawing from the IRA in another country later could cause it to be taxed a second time, eliminating the primary benefit of Roth savings.

Additionally, foreign workers often also face hurdles in opening and accessing some accounts. For example, some brokerage firms won’t even allow foreign nationals to open new accounts, and others may require the individual to close the account and move their assets out if they ever move away from the U.S. and in some cases, entire account types may be unavailable due to the worker’s foreign status, such as 529 plans, which require beneficiaries to have a U.S. Social Security Number (making them effectively off-limits to individuals with noncitizen dependents) and necessitate a different approach to college savings than is common for U.S. citizens.

Ultimately, navigating saving and investing for foreign-born workers requires a careful balance of understanding the considerations and potential pitfalls of different savings strategies, knowing the person’s goals and plans (including potential relocation overseas), and – perhaps most importantly, given the uncertainty that can come with staying in the U.S. on a work visa – maintaining enough flexibility to preserve their assets should those plans change. Advisors who can stay on top of changes to immigration and tax law and help with navigating these challenges can serve a valuable role for foreign national clients – a potential client base that is only poised to grow in an increasingly global workforce!

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Welcome back to the 333rd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Jim Dew. Jim is the Co-Founder and CEO of Dew Wealth Management, an independent RIA based in Scottsdale, AZ, that provides virtual-family-office-style financial planning on a monthly retainer basis for 150 small-business owner entrepreneurs.

What's unique about Jim, though, is how he has scaled his retainer-based boutique firm to more than $7 million in revenue, a $31 million enterprise valuation, and is growing organically at a 40% growth rate, by providing a high-touch comprehensive advice offering for his business owner niche clientele.

In this episode, we talk in-depth about how, despite not implementing an AUM model, Jim’s firm was independently valued at $31 million of enterprise value based on the strength and growth rate of their retainer-based pricing model, how Jim arrived at his retainer-based model that charges $4,000, $6,000, or $10,000 per month to cover the breadth of the ‘financial quarterback’ services he provides to his ideal target client (business owners with more than $1M of EBITDA per year), and why Jim and his firm not only provide a deep-dive financial planning assessment to prospects but have evolved it to the point of charging an upfront fee of $25,000 to prospects just to go through it, after learning the hard way in feedback from existing clients that giving away the assessment for free was actually undermining their perceived trustworthiness.

We also talk about how Jim has structured his virtual-family-office-style approach not by delivering tax, legal, and other services in-house but instead by continually building a list of external tax, legal, and other professionals that he and his firm don’t just refer out to but have actively sought out and vetted based on their credentials, education, experience, and personality and follow-through. Jim describes how he and his firm provide what he calls a 'time energy shield' for their busy business-owner clients by helping them find the right professionals they may need, managing the projects with their professionals, and even fielding the inevitable business pitches that come at their clients, and why Jim and his firm use Monday.com instead of a traditional CRM to both map out and manage workflows and tasks for clients but also to keep detailed information about their vetted professionals and COIs… while also creating a dashboard so that clients can track the progress of all of the services that the firm provides them.

And be certain to listen to the end, where Jim shares how, after a couple of years of struggling to hire the right candidates for his firm, he realized that the recruiters he was using were not delivering and decided to implement an ESOP to attract candidates as well as hiring a director of operations who executed a marketing-esque hiring funnel to bring in more advisor talent, why Jim feels strongly about developing a niche focus because he learned that by becoming an expert in a particular field, it is easier to market and clearly communicate services and helps the right clients find his premium services, and why, even though Jim has received offers in the past, he feels he won’t be selling his firm anytime soon despite its strong valuation multiple because he believes his unique business model contributed to the 10X growth of the firm in the past 8 years and wants to continue his legacy and impacting how financial planning is provided for business owners for the foreseeable future.

So, whether you’re interested in learning about why, because Jim is a business owner himself, he wanted to work with business owners to give them the support they need to be successful, how Jim’s wife Mimi develops and supports the firm’s team culture, or why Jim feels a retainer-based model is more suited for his clients because they enjoy knowing exactly how much they are paying each month and don’t have to worry about long-term contracts, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Jim Dew.

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The financial advisory industry has faced many purported technological ‘threats’ over the past several decades. From the introduction of computers to the rise of the internet to the emergence of ‘robo-advisors’, there has been no shortage of innovations that would allegedly reduce the need for consumers to work with (human) financial advisors. But in reality, none of these advances meant the end for the advice industry; rather, they often made financial advisors more productive by increasing their efficiency with back-office tasks from producing financial planning calculations more quickly and accurately to being able to serve more clients across the country. But despite this history of technological advances actually benefiting the financial advisory industry, the emergence of powerful Artificial Intelligence (AI) systems, such as ChatGPT, has raised fresh questions about the future of human-provided financial advice.

While the capabilities of modern AI technology are quite impressive, it is important to recognize that AI systems would have to overcome significant trust hurdles before they would be in any position to replace human advisors. For instance, despite the rise of self-driving cars in recent years, survey data suggests that humans are hesitant about riding in them (or sharing the road with them) for safety reasons. This ‘trust penalty’ implies that self-driving vehicles would have to prove that they are significantly safer than human-driven cars (across a range of challenging driving environments, such as in a snowstorm) to achieve mass adoption. And because offering financial advice, like driving through snowstorms, often involves high risk and complexity, actually trying to replace human advisors with AI technology would be a terribly difficult and impractical place to start.

While AI systems are unlikely to replace human advisors anytime soon, their functionality could still help advisors operate more efficiently. For example, ChatGPT’s AI can be thought of as a form of calculator that takes inputs (e.g., various information or data that it’s fed or that it has ‘ingested’ itself) and turns them into useful outputs (e.g., written responses that conform to how humans typically communicate). In this way, ChatGPT can be used as a tool to help human advisors convey important financial concepts to clients through writing faster and easier. From the human perspective, the reality is that it’s typically far faster to edit something that already exists than to create it from scratch.

For instance, a human advisor could prompt ChatGPT to write an email in response to a client who is concerned about the current state of the market and wants to sell all of their equity holdings. And while it’s unlikely that advisors would simply copy and paste ChatGPT-generated text into a client email without checking its output, prompting ChatGPT and editing its output for accuracy and personalization is still likely to be faster than composing an email response from scratch. Further, beyond producing client emails, advisors may also find ChatGPT useful for summarizing lengthy text (e.g., creating succinct notes from a full client meeting transcript) or drafting social media content to promote content the advisor has already created.

Ultimately, the key point is that, in the long run, the most likely legacy of ChatGPT and AI for financial planning is not to replace financial advisors, but to help them increase their productivity by streamlining more of the middle and back office tasks and processes. Which, in turn, will either enhance the profitability of firms or allow them to provide their services at a lower cost for the same profitability while increasing the market of consumers who can be served, further growing the reach of financial planning. Or stated more simply, ChatGPT will not necessarily end out as a threat to financial advisors; instead, it is probably more of a useful tool for advisors that will help to grow the market for financial planning advice services!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that a recent study found that clients of advisors providing comprehensive planning services are significantly more satisfied than those receiving a lower tier of service. The study also highlighted the importance of advisors taking the time to build trust with clients and to understand a client’s goals and needs, as this can not only differentiate an advisor from those providing purely transactional investment advice, but also could promote client retention, even in years of poor market performance.

Also in industry news this week:

Why industry groups representing investment advisers and others have blasted an SEC proposal that would significantly expand its Custody Rule
A new study suggests that organic client growth and profit margins are the key factors driving RIA valuations, with the firm’s affiliation model having little to no impact

From there, we have several articles on cash flow:

How the inflation-adjusted ‘net price’ that parents and students pay for college has remained largely unchanged in the past 15 years despite increases in ‘sticker prices’ that well exceed the broader inflation rate
Why high-net-worth clients might be interested not only in advice for how to make charitable contributions in the most tax-friendly manner, but also in finding appropriate charities to give to that meet their goals
How a recent study suggests a causal connection between married couples who use a joint bank account and increased relationship happiness

We also have a number of articles on practice management:

How 1 firm measures its client service standards to ensure it is providing a high-quality client experience
How owners of growing firms can increase the size of their client base without sacrificing service levels or working endless hours
Why adding strategic tax planning services could be the key to spurring client growth, and how firms can implement the new service offering

We wrap up with 3 final articles, all about health and wellness:

How the consumption of ultra-processed foods might lead to a variety of maladies
Why the United States trails peer countries in terms of life expectancy
Why taking a ‘mental health day’ might only be a temporary fix for broader issues related to burnout in the workplace and what employers can do to support their employees

Enjoy the ‘light’ reading!

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In meetings with current and prospective clients, asking follow-up questions can be a valuable tool for uncovering information about the client’s underlying values, goals, and motivations… and for deepening the personal connection that drives the advisor-client relationship. But while it’s one thing to know that it’s good to ask questions, it’s another thing to know which questions to ask to make the client feel comfortable enough to open up and discuss the personal topics of money and finance.

Some coaches and experts are proponents of Root Cause Analysis, an approach centered around the question “Why?”: By starting with a basic question such as, “Why does money matter to you?”, then continuing to follow up with more “Why?” questions, the thinking goes that the advisor can drill further and further down until they get to the true root cause of the client’s values or motivations. But although this approach is appealing in its simplicity (since it only requires the advisor to supply the initial question, with all of the subsequent follow-up questions being variations of “Why”?), it isn’t always the most effective approach to drawing out information or building trust. Because while some clients may appreciate its directness in certain situations, in other cases, being asked “Why?” repeatedly can feel like an invasive and impersonal interrogation – or like being peppered with questions by an overly inquisitive toddler – and can result in an aversion to or annoyance with the advisor’s line of questioning.

An alternative approach that can be softer than the directness of “Why?” is to instead ask, “What else?”. Although both approaches have the goal of drawing out more information from the client and drilling deeper into their responses, the brain often interprets the 2 questions differently. Whereas “Why” can feel as though it presupposes a right or wrong answer – which can put the brain in an anxious state in trying to search for the most appropriate response – “What else?” can make the client feel more in charge of their response and less likely to feel judged on it, which can also put them more at ease and open the door to a more free-flowing conversation.

At a high level, asking “What else?” is about keeping the spotlight on the client and keeping them talking as they spin out the details of what’s on their mind. As they put their thoughts and ideas into language, they may encounter new realizations about their own goals or motivations that had never occurred to them before, and because there’s no pressure to supply a ‘correct’ answer, they’re encouraged to keep sharing and processing their thoughts out loud as they gradually get to what really matters to them. And at the end of a meeting, “What else?” can be a great way to wrap up and identify issues to follow up on or discuss at the next meeting!

The key point is that “What else?” is a means to achieve the same ends as a “Why?”-based line of questioning while sidestepping the potential issues that “Why?” can create. When meeting with prospects or clients in the early stages of the relationship – when the client may still be getting used to the idea of having an advisor and sensitive towards being judged for their financial behavior – “What else?” can create an open and comfortable environment for the client to explore their goals and values, which ultimately can make it easier for the advisor to focus their advice on what’s truly meaningful for the client.

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Traditionally, financial advice and tax preparation have existed as 2 related, but separate, services. Besides the fact that many financial advisors don’t hold the necessary credentials (e.g., CPA, EA, or JD) to prepare tax returns and represent clients before the IRS, there has also been the impression that there is simply not enough time for one person to do both. This means that, while many advisory firms have in-house tax preparers (and vice versa), it is relatively uncommon for financial advisors to be the ones doing tax preparation themselves.

For solo advisory firm owners, however, who are largely able to decide for themselves how to provide value for their clients, offering tax preparation can be a way to provide a service that is in demand from many clients (particularly at a time when there is an acute shortage of available tax preparers on the market), while adding to the year-round value the advisor is providing and deepening the client-advisor relationship.

In this post, Kitces.com Senior Financial Planning Nerd Ben Henry-Moreland writes about how he went from being hesitant to offer tax preparation at his solo RIA (given how common it is for tax preparers to work long hours throughout tax season) to embracing it as a core part of the business’ service offering.

One of the keys to this shift in thinking was the realization that, rather than preparing taxes on top of and alongside the ongoing advisory schedule of financial planning updates and client meetings, it could instead occupy its own slot on the ongoing client service calendar. In other words, by clearing space during tax season to focus full-time on tax preparation, it was possible for Ben to contain tax prep work to a reasonable number of hours. Furthermore, similarly structuring the client service calendar for the remainder of the year to focus on specific topics at set times (e.g., investment reviews in the summer, retirement projection updates in the fall, and year-end tax planning in the winter) created enough efficiency through systematizing the ongoing financial planning process that allowed him to fit in tax preparation without reducing any of his other service offerings!

Although it can take as long as a year to get fully set up to prepare tax returns – from obtaining a designation such as the EA to deciding on pricing and software, to developing processes and workflows to streamline tax season as much as possible – advisors may find that many of the tools they use for their advisory business (such as CRM, data gathering, and electronic signature software) can also be used for tax preparation, and that the advisor’s existing knowledge of their clients’ financial and tax situations makes it possible to streamline the process even further (e.g., by tailoring client data-gathering worksheets to focus on the information that is relevant to a client’s tax situation).

The key point is that, offering tax preparation can be seen as a way for solo advisors to use their existing tools and expertise to enhance the year-round value they provide. Which ultimately means that it can be well worth the investment in time and resources given how valuable of a service tax preparation is to many clients!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week’s edition kicks off with the news that the House Financial Services Committee unanimously passed a bill that would direct the SEC to conduct a study and carry out a rulemaking on the definition of a "small entity" to reduce the compliance burden on small businesses, presumably including RIAs.

Also in industry news this week:

Legislation working its way through Congress would allow for electronic delivery of documents to clients of advisors and other financial services firms by default, though it has been met with some opposition
While RIAs have outpaced wirehouses in terms of client asset growth and headcount, industry consolidation has led to a decline in the number of RIAs, according to a study from Cerulli Associates

From there, we have several articles on practice management:

Why serving 'non-ideal' clients is seen as the top productivity challenge for advisors, according to one survey
How putting in the extra time to practice ahead of client meetings or seminars can pay off for advisors
Why stressed-out firm owners might consider downsizing their client base rather than selling their firm

We also have a number of articles on investments:

While tax-adjusting a client’s portfolio can be a valuable service, doing so accurately can be challenging
The potential benefits and risks of investing in funds that engage in securities lending
Why holding on to stocks, rather than moving to cash, could be a smart move, even if a recession is expected to occur

We wrap up with 3 final articles, all about technology:

Why LinkedIn could be a valuable 'one-stop shop' for social media users
How ChatGPT and other AI tools have come under fire for using published content on the Internet to train their models
How 'passkey' technology introduced by Google and other web services could lead to the end of passwords

Enjoy the 'light' reading!

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One of the biggest challenges faced by solo financial advisory firm owners as their firms grow and encounter capacity issues is deciding whether (and when) to hire an employee. While hiring staff members can offer a helpful lift in reducing capacity constraints for the firm owner, it also comes with its own burdens such as managing, training, and supervising employees, which many firm owners may have never considered when first launching their firms. Furthermore, determining the right time to hire an employee and which role to hire first can also be challenging decisions for solo firm owners.

In our 111th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how getting clarity on the reasons why hiring someone is necessary for the firm can help advisory firm owners determine what role to fill first, which business metrics to examine to understand when to hire, and which attributes to look for in a candidate.

Before making the commitment to hire a staff member, it’s important for advisory firm owners to understand if doing so is really necessary in the first place. By listing out what the advisor does on a daily basis and sorting the list in order of what the advisor enjoys most, the advisor can decide if the tasks they don’t enjoy can be eliminated to relieve capacity constraints (e.g., getting rid of multi-step tasks, rightsizing clients, or slowing growth by saying "no" to prospects), or if they are tasks that can be delegated. If there are enough delegable tasks to justify hiring an employee, it may be a signal that hiring additional support makes sense.

Once the reasons for hiring a new employee are clear, the next step is determining if doing so is affordable for the firm (for many advisory firms, hiring the first staff member tends to occur between $150,000–$250,000 of revenue and 40–50 clients). If revenue can support a new hire, the firm owner can then refer back to their least enjoyable tasks as a starting point to create a job description. This will help the advisor be more specific in defining the role they need to fill. By seeking candidates with complementary (not necessarily similar) working styles to the advisor, well-rounded teams can be established that are more likely to excel at problem-solving and developing functional processes.

Ultimately, the key point is that hiring, when done thoughtfully, can benefit advisory firms and their future growth. And by understanding the reasons for hiring someone and how they can support the firm before beginning the hiring process, firm owners can create job descriptions that will keep the search for a candidate much more focused on what will actually benefit the firm the most. And finding the right candidate who enjoys their role helping with the tasks that firm owner least enjoys will inevitably create a better work environment for both the employee and the owner – providing a sustainable role for the employee and a more enjoyable task list for the firm owner!

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While interruptions within conversations occur frequently, the type of interruption can affect the content and flow of the dialogue that follows. For instance, if an interlocutor interrupts a speaker with a totally unrelated question or line of thought, the interruption not only has the potential to frustrate the speaker but can also cause them to lose their train of thought. Interestingly, different people have been found to have unique conversational 'intensity levels', where a 'high-intensity' speaker perceives interruptions in the form of simultaneous talking as a natural way of showing interest in what the speaker has to say, and a 'low-intensity' speaker might find such an interruption rude and distracting, even if it wasn't the interrupter’s intention to disrupt the conversation. Further, these dynamics can be even more challenging when speaking in a virtual environment, as it can be harder to tell when one person is finished speaking. And by understanding these varying levels of conversational 'intensity', advisors can hold more productive client conversations by taking measures to reduce or mitigate the impact of interruptions during client meetings.

In financial planning relationships, interruptions by an advisor can be exponentially more impactful due to the fact that prospects and clients tend to be uncomfortable with jargon and feelings of being judged. When a person is interrupted, even when the interruption is made with no ill intent (e.g., because a client’s comment sparks a potential planning opportunity in the advisor's mind), the conversation can come to a sudden end. Notably, this can work the other way as well, as an advisor might be interrupted by a curious client who is a high-intensity speaker seeking clarification (and not trying to be a jerk!).

One way for advisors to minimize unnecessarily interrupting prospects or clients during meetings is to take notes while their interlocutor is speaking. Using this tactic, the advisor can ensure they remember key facts and potential follow-up questions without interrupting the speaker (another helpful practice is to first ask the client's permission to take notes before doing so, which can enhance the client's confidence by giving them some degree of power and control over the meeting). Yet interruptions are sometimes inevitable – whether they are deliberate or not. For inadvertent interruptions, advisors can 'recover' simply by apologizing and letting the client know they want them to continue speaking (which also potentially reduces the chances that the advisor comes off as rude to the client). For interruptions that need to be made (e.g., to correct a wrong assumption), advisors can phrase their interjection using "Yes, and…" thinking, which conveys acceptance and agreement instead of contradiction and judgment. Alternatively, simply asking for permission or using body language cues can also buffer the impact of interruptions.

Ultimately, the key point is that given the sensitive and personal nature of conversations related to financial planning, advisors can help prospects and clients feel more understood by avoiding and mitigating interruptions during meetings. And by taking measures to reduce the number of interruptions and conveying they didn't mean to be rude when interruptions do happen, advisors not only foster more productive conversations but also make their prospects and clients feel more empowered in the process!

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Welcome back to the 331st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Jake Northrup. Jake is the Founder of Experience Your Wealth, an independent RIA based in Bristol, Rhode Island, that advises 78 client households with a 3-person team supporting nearly $700,000 of ongoing revenue.

What's unique about Jake, though, is how he's been able to grow to $700,000 of revenue in just 4 years since launching from scratch, and how he realized that because of how his rapid growth was going to impact future capacity and time constraints, he would need to hire employees sooner rather than later… and decided to hire an associate advisor in the 2nd year after launching his firm before he even had $200,000 of annual revenue.

In this episode, we talk in-depth about why Jake decided to hire an associate and then a lead advisor within the first few years of what was originally intended to be a solo practice because he felt his practice was too completely dependent on him, how Jake and his team implement a 4-meeting financial planning process that includes creating a life planning timeline, using MindMeister to develop a mind map to visualize a client’s goals, and creating a client dashboard in MeisterTask where clients can track their progress as well as mark off tasks that need to be completed to move them along their financial journey. We also talk about why despite being a CFA charterholder Jake outsources investment management to First Ascent – for which clients pay an entirely separate additional fee – because it both allows him to simplify compliance to not manage investments in-house, and takes away the cost pressure of having to hire a separate employee to just manage clients' investment portfolios.

We discuss how Jake attributes much of his fast-growth success to launching with an $8,000 website that focuses on his values-based niche of "travel-loving young families that don’t buy into the traditional '9-5, work-until-you-are-65' concept" and then leveraging on Google reviews to enhance his SEO, the way Jake stuck to and didn't compromise his niche from the very start when he launched but was more flexible about the financial criteria early on and only started setting higher fee minimums after his 1st year in the business. We also discuss why Jake and his team not only create long-term financial plans for their clients, but also focus on a 10-year vision to help his younger, travel-loving clientele start achieving more of their immediate goals so they're more likely to retain as clients by feeling like they're making near-term financial planning progress.

And be certain to listen to the end, where Jake shares how he's struggled over the years with perfectionism, control, and a fear of failure that led him to remain a solo advisor, yet realized that by focusing on those issues, he was potentially missing out on more, how Jake invested heavily to get his CFA early in his career and in retrospect wishes he spent more time learning about life planning and money scripts. He also shares why he feels fulfilled in how he consciously built and staffed his practice because it allows him to have more flexibility and time to spend with his wife and start a family, while also creating an environment for his employees to thrive and be present for their families, lives, and helps his clients enjoy their money and pursue their passions now instead of waiting for retirement.

So, whether you're interested in learning about the business metrics Jake relied upon to know when to hire, why Jake charges a flat annual a fee so clients don't have to deal with constant fee changes, or why Jake decided to niche-focus from the launch of his firm, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Jake Northrup.

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Welcome to the May 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that robo-advisor Betterment entered into a $9M settlement with the SEC for misrepresenting its tax-loss harvesting practices in its client agreements and marketing materials compared with its actual practices (e.g., 'only' checking client portfolios for tax-loss harvesting every other day, after having advertised daily checks) – a first for the SEC in scrutinizing an RIA not for failing to execute its investment promises to clients, but for failing to execute tax-loss harvesting promises instead. Which may raise questions for other RIAs (including smaller firms) who promote their tax-loss harvesting practices as part of a 'tax-efficient' investing strategy about whether their own practices (and the technology they use to implement it) really align with what they claim to provide.

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

Altruist has announced a $112 million Series D fundraising round to expand its capabilities to meet the needs of larger advisory firms, the latest in a series of high-profile moves (including becoming a fully self-clearing broker-dealer and acquiring its rival custodian SSG) positioning Altruist to compete directly with the likes of Schwab and Fidelity for established RIAs.
GeoWealth has acquired its fellow TAMP First Ascent Asset Management, marrying GeoWealth’s tech-forward, open-architecture investment management platform with First Ascent’s 'concierge'-style investment and service-oriented solution (and its flat-fee TAMP business model).
T. Rowe Price has acquired Retiree Income, the parent company of popular retirement income planning software SSAnalyzer and Income Solver, to put its resources behind developing and distributing the company’s planning tools (albeit perhaps more to its retail and employee retirement plan clients than to advisors?).

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

Business support software provider Benjamin shuts down its operations, which may say less about the demand for workflow support tools (which appears to remain strong) and more about Benjamin's positioning itself as an "AI-driven digital assistant" in an environment where advisors may not trust AI technology enough to pay for it as a solution.
A look back at the evolution of advisor technology as we come up on the 5-year anniversary of our Financial AdvisorTech Solutions Map, which reflects not only the increasingly crowded landscape with a proliferating number of solutions on the market, but also how shifting technology needs of advisors themselves are eliminating whole categories of advisor technology… and spawning new ones as well.

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of "Weekend Reading For Financial Planners" — this week’s edition kicks off with the news that following previous guidance regarding obligations under Regulation Best Interest (Reg BI) regarding account recommendations and conflicts of interest, the SEC released a new bulletin this week focusing on the duty to care. The guidance highlights the importance of brokers considering investment alternatives for their customers as well as taking costs into account when making recommendations that are in their best interests, and the need to do so proactively rather than as a 'box-checking' exercise after making a recommendation — a message from the regulator that could be significant for fiduciary investment advisers as well.

Also in industry news this week:

A U.S. House of Representatives committee this week approved legislation that would expand the pool of individuals who would qualify as accredited investors able to access certain private offerings
Proposed bipartisan legislation would allow individuals to use funds in 529 plans for expenses associated with acquiring or maintaining postsecondary credentials, which would include the CFP certification

From there, we have several articles on advisor marketing:

How advisors can use Google reviews to maximize their search engine optimization and increase their visibility online
The key features to include on an advisory firm's website to demonstrate 'social proof' to prospective clients
How advisors can use ChatGPT to spend less time on content marketing

We also have a number of articles on retirement planning:

Statistics on where American retirees currently stand, from their average net worth to how they spend each hour of the day
Why 1 FIRE pioneer who retired in his 30s is planning to return to the workforce
How many business owners report that they never plan to retire, and the planning opportunities for advisors working with these clients

We wrap up with 3 final articles, all about achieving goals:

Why 'showing up' is often the most important part of achieving a goal
5 key factors that can increase the chances that a goal will be completed
Why giving up on a goal can sometimes be a good choice, and how to objectively make the decision to do so

Enjoy the 'light' reading!

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One of the most intimidating aspects of launching a solo advisory firm is the question of how to manage compliance. Advisors coming from a background of working as an employee at a larger firm may be familiar with some of the rules for complying with state or Federal securities regulations from the perspective of an individual advisor, but handling compliance for an entire firm – even when there is just 1 employee – entails a whole additional set of responsibilities to be aware of. Creating a compliance calendar for a solo RIA can help to systematize and manage compliance tasks, requirements and deadlines.

The North American Securities Adminstrators Association (NASAA) publishes Model Rules for investment advisers, which many states base their own requirements on and can give an overall sense of the types of tasks RIAs can build into annual compliance calendar (with the caveat that specific compliance requirements for RIAs vary at the state level, at which where most solo advisors are registered).

The 1st category of tasks that advisory firms must handle involves renewing their registration with the applicable state(s) in which they do business each year, which typically involves submitting select documents (e.g., accounting reports, client contract templates, and a surety bond) and filing an annual renewal fee near the end of the year. After year-end, firms typically have until March 31 to submit an annual amendment to their Form ADV Part 1 and Part 2A/2B, and until April 30 to offer a copy of their updated Form ADV to their clients.

Second, firms are generally required to adopt and implement a set of written policies and procedures governing the firm's actions in areas including proxy voting, cybersecurity, personal trading of the firm's employees, material nonpublic information, and the firm's business continuity plan. Firm policies and procedures in each of these areas need to be reviewed and updated on an annual basis; however, given how wide-ranging each of these topics can be, solo advisors might want to consider tackling each topic separately at a different time each year (for example, addressing 1 major area each quarter).

Third, regulators require RIAs to maintain an extensive set of books and records of the firm's business and advisory practices, including business and financial records (like bank statements and invoices), client-related documents (like written client communications, client agreements, and written information forming the basis of any recommendation made by the advisor), advertisements (including newsletters, blogs, and social media posts), and written copies of the firm's policies and procedures (including records of holdings and trades in the advisor's own personal accounts).

Putting all of this information together, it's possible to create a compliance calendar for solo advisors that accounts for each task required, its frequency, and the due date for each. Because even though most compliance tasks (save for annual registration renewal and annual ADV updates) don't have specific due dates during the year, setting a date for each task to be done – and blocking out specific time in the advisor’s calendar to do so – can ensure that it gets done.

Ultimately, a compliance calendar helps to systematize the process of managing compliance for a solo RIA in order to stay on top of all of the firm's requirements, even when there are other matters like client-facing work that can seem more urgent at any given time. By blocking time for compliance tasks – approximately 1 hour for monthly tasks, 4 hours for quarterly tasks, and 8 hours for annual tasks – solo advisors can keep their compliance house in order while still having the time to serve their clients effectively!

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Welcome back to the 330th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Ari Weisbard. Ari is Managing Partner of Values Added Financial, an independent RIA based in Washington, D.C., that oversees $143 million in assets under management (AUM) for nearly 75 client households.

What's unique about Ari, though, is how he and his partner, Zach, not only initiated fee minimums to ensure that they could profitably serve their clients, but subsequently have intentionally raised, and then lowered, their fees and minimums to slow down and then increase their growth pace during different stages of their business based on their firm's advisor capacity, and at least simply to create space for themselves to sustain their own healthy work-life balance.

In this episode, we talk in-depth about why Ari and his partner implemented a minimum fee for new clients as the business grew, raised the minimum as high as $15,000 during the pandemic, and have since cut their minimum fee back down to $6,000 even as the firm has added more advisors and overhead, how Ari and his partner got comfortable positioning their firm as one that serves clients with progressive political values (which they ultimately felt would ensure clients were aligned with their own personal values, and in turn could both help them better serve their clients, and alleviated the concern of whether their political advocacy outside of their firm could alienate clients with differing political views). We also talk about why Ari and his firm have leaned into values-based investing to further differentiate with their unique clientele not by utilizing ESG funds, but instead choosing ETFs that are more proactive with their proxy voting, and implementing Ethic Investing to offer clients a 'Personalized Indexing' approach while also capitalizing on the tax benefits of tax loss harvesting.

We discuss about why Ari and his partner sought to bring more diversity to their hiring process not by trying to seek diverse candidates, but instead by removing industry-specific certification requirements and offering paid parental leave so that they can attract more diverse candidates who have the essential communication and client empathy skills that they can train internally to get up to speed on the technical knowledge. We moved to how Ari recognized that he suffered from anxiety and imposter syndrome early in his career and decided to seek help through both personal therapy and George Kinder's life planning training so that he could let go of some of the fear that he had in growing and scaling the business beyond Zach and himself, and get comfortable with not having control of every aspect of the business as it grows, and why, as the firm raised and lowered fees, Ari was not afraid of losing opportunities to find more clients because he felt that clearly defining their values and how it aligns to their business will always give them an opportunity to find the right types of clients when the firm is ready to grow more (while also ensuring they are growing the business based on the values that matter to them and not just purely from an economic standpoint).

And be certain to listen to the end, where Ari shares why he feels that though he made more of an intellectual impact in his former profession as a lawyer, he feels more fulfilled now as a financial advisor as he can feel more of an emotional impact as he helps his clients feel more satisfied in their own lives, why Ari believes that younger, newer advisors would benefit from demonstrating their listening skills rather than having the answer to every client question (as he has found that's what really provides more value to clients). We conclude with why Ari feels grateful that the advisory business model is so successful, as it takes away the pressure to focus on the business economics and instead gives him more opportunities to connect with the human aspect of financial planning and create deep and meaningful relationships with the people around him and in his life.

So, whether you're interested in learning about why Ari and his partner raised fees during the pandemic to slow growth and give them more space to focus on their families and their own well-being, why Ari and his partner lowered fees later on because they wanted to be more inclusive to the types of clients they served, or why Ari and his partner feel their values-based planning helps their progressive clientele make more of an impact on the world with their money, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Ari Weisbard.

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Financial advisors will sometimes talk about ‘bad’ clients who don’t act on the advice being provided. But the reality is that they may not necessarily be ‘bad’ clients; rather, their behaviors are a sign that they are not fully engaged in the planning process because other aspects of their life take precedence over managing the tasks needed to accomplish their financial planning goals, they lack the knowledge to make an informed decision, or they are procrastinating for any number of reasons. But by focusing on advice engagement strategies and encouraging clients to become more engaged in the planning process, advisors can help clients become more motivated to take action, which will ultimately serve to improve their planning outcomes.

Advice Engagement is a framework that can help advisors address the challenge of motivating clients. As an emerging concept, Advice Engagement is designed to improve the delivery of advice and encourage clients to become more active in the financial planning process, with the ultimate goal of improving the likelihood that the client will accept and follow the advice.

Client engagement in the financial planning process is not a clear-cut binary characteristic; rather, it can fall onto a dynamic spectrum of engagement levels. While understanding the variability of clients can help to uncover who the advisor’s disengaged clients may be, it can also help advisors identify the root causes of the disengagement so that they can take the right approach to address the disengagement. For instance, clients will show different levels of ‘capability variability’, or the range of financial acumen they bring to the table. While less capable clients will likely show little interest in financial planning concepts and can be encouraged to engage in the process through educational content that helps them better understand the potential outcomes of their plans, a more highly capable client might question or even challenge the advisor’s recommendations. For this client, a general outline of their plan’s intended outcomes may not be as engaging as hypothetical illustrations and a stimulating debate about the efficacy of their plan’s detailed mechanics.

To help clients advance to higher levels on the engagement spectrum, advisors can apply Advice Engagement strategies to 4 key areas: fact finding (e.g., by breaking the data-gathering process into stages to collect information incrementally); advice delivery (e.g., by ensuring that clients receive information in a way that is useful for them); education (e.g., by keeping a variety of materials on hand that advisors can use to educate clients with different learning styles); and ongoing service (e.g., by using client portals or email throughout the year to keep clients focused on the steps they need to take to complete their action items). Notably, advisors do not necessarily need to create these systems and content on their own, as a wide range of Advice Engagement software tools are available that support advisors in all 4 of the above areas.

Ultimately, the key point is that Advice Engagement can serve as a vital framework to help advisors focus on understanding their clients’ needs and improving their outcomes. Through internal processes developed by the advisor with the Advice Engagement framework in mind and with the support of Advisor Fintech tools to address the needs of clients at all engagement levels, advisors can provide value through fact finding, advice delivery, education, and ongoing services that keep clients engaged throughout the financial planning process, all while scaling for growth at the same time!
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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that in a settlement with the SEC, robo-advisor platform Betterment agreed to pay a $9 million penalty for allegedly misstating the frequency that its automated tax-loss harvesting system was scanning some client accounts between 2016 and 2019, highlighting the importance of ensuring that marketing messages and services provided match, not only for robo-advisors, but for human advisors as well. And that the SEC is now scrutinizing not just whether clients are invested in a manner consistent with their Investment Policy Statement, but also that if the advisory firm promises various 'tax-smart' management tactics (such as tax-loss harvesting), that the SEC will be examining whether the firm really followed through accurately, for every client, on those commitments as well.

Also in industry news this week:

The SEC approved a new FINRA rule intended to make it tougher for brokers to have client disputes expunged from their record
A Morningstar survey suggests that clients are more likely to fire their advisor for service or relationship reasons rather than because of fees or lackluster investment returns

From there, we have several articles on cash flow and spending:

Why I Bonds might be losing some of their luster amid a declining inflation rate
How many consumers are moving their banking activities to their brokerage firm
Why advisory firm clients might want to consider personal cyber insurance

We also have a number of articles on advisor marketing:

Why it can be valuable to first consider what makes an advisory firm marketable before selecting specific marketing tactics
The potential benefits for advisory firms of hiring a fractional marketer
Why spending money to produce valuable content, rather than on advertising, can pay off for a firm and their broader community

We wrap up with 3 final articles, all about managing time:

How advisory firm owners can prepare themselves and their firms for time away from the office
Why having new experiences might be the key to making it feel like time is passing more slowly
The gradual process that led 1 advisor to realize the current size of his firm was 'enough'

Enjoy the 'light' reading!

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In any business profession, establishing credibility and trust are important to attracting clients and building a reputation amongst colleagues. A key method to do so is through appropriate business attire. Traditionally, business attire for financial advisors meant wearing the typical suit and tie in all instances of client-facing activities. Because psychologically, a suit and tie has been recognized for many years as a symbol of trust and credibility. But as business interactions have evolved (virtual meetings, younger clientele, serving a particular niche, etc.), many advisors tend to feel overdressed wearing a suit and tie and may opt to wear more business-casual attire. However, business interactions have varied greatly in recent years, making it difficult to always understand when it is appropriate to dress more formally, especially for younger, newer advisors who have yet to establish a reputation.

In our 110th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how appropriate business attire can build trust and credibility, understanding what appropriate attire looks like, and ways to determine when to wear certain attire.

Choosing the appropriate business attire begins with understanding the particular business setting. For some advisors, the type of clientele they serve may not be concerned about what the advisor wears, while others who work in large corporate settings or with clients who have expectations that their advisors will adhere to a certain dress code will be compelled to dress more formally. Many advisors, however, may not know what business situation to expect until they meet with their client (prospective or otherwise).

A good rule of thumb for advisors unsure about what to wear is to dress at the same level or 1 step above the client (i.e., if a client is wearing just a dress shirt, the advisor may do the same or may opt to wear a dress shirt – with a tie, for men – or even a full suit). And because it can be difficult to tell what the situation will call for, it is a good idea to always be prepared with full business attire. That way, the advisor can dress up or down without appearing unprepared or inappropriately dressed. Though this may be a sound approach for younger, newer advisors, more established advisors may opt to wear a full suit no matter the business situation and others may that feel anything more than a dress shirt is uncomfortable for them and their clients.

Ultimately, the key point is that even though the ways business is conducted in the financial services industry have evolved, dressing appropriately and building trust and credibility comes down to how comfortable and confident an advisor feels. There will always be advisors and clients who feel full business attire is the only acceptable form of dress, but advisors often have more flexibility when working with clients who feel comfortable with more casual dress. And if their attire helps them feel more confident and comfortable, they will be even more likely to attract the types of clients that are best suited for them!

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When an RIA reaches the threshold of $100 million in Regulatory Assets Under Management (RAUM), it must generally switch from being registered at the state level to registering with the SEC. But while $100 million may be the general rule, in practice it isn’t always a hard line. The reality is that volatile markets and shifting client bases can often cause an RIA’s RAUM to flutter above and below the $100 million line. And because of this, the SEC includes several wrinkles in its registration rules that allow RIAs some leeway in deciding when to become SEC-registered.

For state-registered RIAs, it’s helpful to know when it’s possible (and when it’s required) to register with the SEC, particularly for firms near the $100 million threshold for SEC registration. Conversely, for RIAs who are already SEC-registered but whose RAUM is close to crossing below the $100 million threshold, it’s useful to know when it would be necessary to switch back to state registration.

The first important guideline in knowing when to register with the SEC is understanding that the registration requirements are generally triggered by the RIA’s year-end RAUM as reported on Form ADV, Part 1A. Firms that cross the threshold midyear may register if they choose to do so, but only after their Form ADV update is filed does the switch become required. Additionally, there is a ‘buffer zone’ for state-registered firms with RAUM between $100 million and $110 million at the end of the year in which they may (but aren’t required to) register with the SEC – meaning that state-registered firms aren’t truly required to become SEC-registered until they have at least $110 million at year-end!

Similarly, there is a buffer zone of RAUM between $90 million and $100 million for SEC-registered firms where they need not deregister (and revert to state registration) until they’ve crossed below $90 million of RAUM at year-end. Notably, however, if RAUM crosses back above $90 million at any time during the 180-day period following the end of the RIA’s fiscal year, it can opt against deregistering and remain as an SEC-registered firm (at least until the end of the year, where it could face the same situation if RAUM again crosses below $90 million).

Ultimately, what’s important for investment advisers to remember is that they may have options in deciding when to register (or deregister) with the SEC, and that the best strategy might be determined by how they expect their assets to change and, most crucially, what will keep them from needing to go through the opposite process in the near future. Because even though investment advisers only need to contemplate registering or deregistering once per year, once that decision is triggered it becomes a complex process requiring a lot of paperwork and careful timeline management to avoid a gap in registration – which few firms would want to go through more than once!

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Welcome back to the 329th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Charesse Spiller. Charesse is Founder and Principal Consultant for Level Best, an operations and process strategy consulting firm based in Houston, Texas.

What's unique about Charesse though, is how she has founded a consulting firm that doesn’t just try to teach financial advisors how to systematize and automate, and instead actually works as an outsourced provider to build and implement those systems… with a goal of working themselves out of a job over 6 to 12 months so the advisory firm can once again run on its own (but now, in a far more streamlined and efficient process).

In this episode, we talk in-depth about how Charesse developed her approach of not only evaluating an advisory firm’s technology, but also their processes and systems, and incorporates the importance of training the firms’ teams to implement best practices within their existing system, how Charesse defines her three pillars of operations including streamlining (which is all about creating an efficient repeatable process), automation (which is about leveraging technology to not just streamline a task but make automate it away altogether), and delegation (for that subset of tasks that can’t feasibly be automated, but could still be trained and handed off to another team member to free up the advisor’s time), and how Charesse developed her own three tiers of service from consulting with advisors about the tech they could be using, to working with advisors to build their workflows and process maps within the firm, to helping firms actually implement their new workflows and processes in their technology (and train their teams to actually use the tech and follow the new processes!).

We also talk about how Charesse discovered that for larger RIAs the real blocking point in scaling is often not whether the firm has developed systems and processes but a lack of clear accountability about which team member is responsible for each step of the process as the firm grows, why Charesse decided to create an educational resource and community called FinOps Co-op to further educate operations professionals on how they can optimize their systems and processes on an ongoing basis, and how Charesse realized that even though she was helping others optimize their time and businesses, she needed to help herself as a founder of a consulting firm and hired a financial coach to get her more centered and steer away from possible burnout.

And be certain to listen to the end, where Charesse shares how she’s lived first-hand the challenge that all service firms face as they begin to scale up with staff and have to revisit and increase their pricing to be able to afford to scale up, how she decided to go from an employee in an advisory firm to a freelancer supporting advisory firms to an all-in founder of a consulting firm for advisors, and how Charesse has combined reading business books, leveraging local mentoring programs, and forming 2 Mastermind groups for herself to level up her own marketing, sales, and leadership skills as she and her business grew.

So, whether you’re interested in learning about how Charesse helps advisory firms create better processes and follow through on implementation, how Charesse is helping to further educate operations professionals on best practices through her FinOps Co-op, or why Charesse offers additional consulting services to advisory firms as they scale so that their processes evolve as the firm evolves, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Charesse Spiller.

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New client growth is the lifeblood of financial planning firms and there are myriad strategies for attracting qualified prospects, but many of these come with a hard-dollar or time cost for the firm. Which is why many advisors seek to leverage client referrals, where their clients refer family members, friends, or colleagues to the advisor. At the same time, asking clients to make referrals (and having the referred individual actually reach out to the advisor) can be challenging. With this in mind, advisors can use several ways to ask for referrals and tactics to increase the chances that their clients will make more successful ones.

Giving and receiving referrals can be thought of as a pro-social, virtuous loop, where both the giver and receiver of the referral receive benefits from the exchange, where giving a referral can help someone who needs it and at the same time feels good to provide help. This suggests that in addition to the advisor receiving referrals, clients, too, can benefit from the positive feedback of giving referrals and the emotional satisfaction of helping their friends and family (as research has found that financial planning clients most commonly refer friends or family members who either asked for a recommendation for an advisor or told them about a financial challenge they were having, leading the client to suggest their advisor might be able to help).

Importantly, asking a client for referrals won't guarantee that the referral will actually contact the advisor. For instance, research has found that while 25% to 35% of financial planning clients make referrals, advisors only meet referrals from 3% to 5% of their client base. This may be because the recipient didn't request a referral in the first place or because the client provided an advisor's contact information without explaining how they may have benefited from working with the advisor or why the advisor might be able to help the recipient.

One way an advisor can improve the outcomes of client referrals is to ask their clients 'referral story' questions, which can help clients articulate to potential referral recipients their own personal connection to financial planning, their experience with their advisor, and the benefits of their work together. By asking clients to identify a specific issue they worked on with the advisor, the steps they took to address the issue, and the greatest impact they got from solving it, clients can start crafting their own referral stories that can provide more context to the recipients of their referrals. Advisors can also improve their referral outcomes by asking for feedback – even framing it as asking for advice – from their clients (e.g., asking for advice on how they might go about meeting and working with others like them). And by doing some research on their referrals, advisors can ask for introductions to only those who they believe would make good clients.

Ultimately, the key point is that while client referrals can be one of the most cost-effective methods for attracting prospective clients, successful referrals do not necessarily come automatically. But by helping clients craft their own referral story and enlisting their support in generating referrals, advisors can increase the chances of getting more referrals – and introductions to the best referrals – going forward!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that on the heels of introducing its own self-clearing platform and acquiring fellow RIA custodian Shareholder Services Group, Altruist announced that it raised $112 million in a series D funding round, bringing its total funding to more than $290 million. The company said the bulk of the funds will go toward research and platform development as it attempts the challenging task of getting more mid-sized RIAs to move over to Altruist from their current custodian.

Also in industry news this week:

The Foundation For Financial Planning has gotten a boost toward its goal of connecting 10,000 CFP professionals with pro bono work thanks to increased funding from Orion Advisor Solutions
FINRA has resubmitted a proposal, now with tighter rules, that would allow a broker working remotely to supervise other brokers, without the broker's home being designated as a branch office

From there, we have several articles on practice management:

How delegating tasks that they don't enjoy can not only save an advisor time, but also empower their staff
Why technical experts can be more successful in leadership roles than 'professional managers'
Why one large RIA focuses on filtering prospective clients and employees to promote the long-run sustainability of its company culture

We also have a number of articles on Social Security:

Why news stories about possible future reductions in Social Security benefits are likely leading some individuals to claim early, and what advisors could do to assuage these fears
How advisors can help clients reduce the amount of their Social Security benefits (and overall income) subject to taxation
A proposed strategy within defined contribution retirement plan investments that could encourage more individuals to delay claiming Social Security benefits

We wrap up with 3 final articles, all about managing distractions:

Why focusing on what one can control can be more productive than 'doomscrolling' through the news
The potential productivity and happiness benefits of doing an audit of one’s online activity
How concerns about distraction are not exclusive to the modern era, having been shared by medieval monks centuries ago

Enjoy the 'light' reading!

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When planning for retirement, it’s effectively impossible to precisely forecast the performance and timing of future investment returns, which in turn makes it challenging to accurately predict a plan’s success or failure. And while Monte Carlo simulations have made it possible for advisors to create retirement projections that seem to have a reasonable basis in math and data, there has been limited research as to whether Monte Carlo models really perform as advertised – in other words, whether the real-world results of retirees over time would have aligned with the Monte Carlo simulation’s predicted probability of success.

Given the importance of some of the recommendations that advisors may base on Monte Carlo simulations – such as when a client can retire and what kind of lifestyle they can afford to live – it seems important to pay attention to how Monte Carlo simulations perform in the real world, which can reveal ways that advisors may be able to adjust their retirement planning forecasts to optimize the recommendations they give. By conducting research assessing the performance of various Monte Carlo methodologies, Income Lab has suggested that, at a high level, Monte Carlo simulations experience significant error compared to real-world results. Additionally, certain types of Monte Carlo analyses were found to be more error-prone than others, including a Traditional Monte Carlo approach using a single set of Capital Markets Assumptions (CMAs) applied across the entire plan, and a Reduced-CMA Monte Carlo analysis, similar to the Traditional model but with CMAs reduced by 2%.

Notably, Historical and Regime-Based Monte Carlo models outperformed Traditional and Reduced-CMA models not only in general, but also throughout most of the individual time periods tested, as they had less error across many types of economic and market conditions. Furthermore, compared with the Traditional and Reduced-CMA Monte Carlo methods, the Regime-Based approach more consistently under-estimated probability of success, meaning that if a retiree did have a ‘surprise’ departure from their Monte Carlo results, it would be that they had ‘too much’ money left over at the end of their life – which most retirees would prefer over turning out to have not enough money!

Ultimately, although Historical and Regime-Based Monte Carlo models seemed to perform better than the Traditional and Reduced-CMA models, advisors are generally limited to whichever methods are used by their financial planning software (most of which currently use the Traditional model). However, as software providers update their models, it may be possible to choose alternative, less error-prone types of Monte Carlo simulations – and given the near-certainty of error with whichever model is used, it’s almost always best for advisors to revisit the results continually and make adjustments in order to take advantage of the best data available at the time!

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Welcome back to the 328th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Thomas West. Thomas is a Senior Partner for Signature Estate & Investment Advisors, an independent RIA based in Los Angeles, California, that oversees nearly $16 billion in assets under management, with $570 million of those assets being managed by Thomas' practice that serves more than 250 client households.

What's unique about Thomas, though, is how he has leveraged providing advice to seniors looking for appropriate housing and health care as they deal with medical and cognitive issues in their later years, into a standalone offering he calls the "Lifecare Affordability Plan", which was so successful as a value-add to his clients and their elder parents that he was able to spin it out to a separate DBA under his firm and begin charging for it as a standalone service.

In this episode, we talk in-depth about how, in the early stages of his career selling long-term care insurance, Thomas realized that so-called 'one-legger' senior couples – where one spouse is healthy but the other is not, such that if something happened to the healthy spouse, they’d both be in trouble – face unique challenges as a couple because their decisions about health care have significant financial ramifications but are usually decided with the family (not the financial advisor), how Thomas leveraged the guidance he was providing to senior couples that needed help navigating health and especially cognitive decline into creating a DBA to his firm that offers his trademarked "Lifecare Affordability Plan" so that he could get paid for the in-depth advice he was providing, and why Thomas feels his planning is so important as it he saw personally how his father-in-law struggled with managing his financial planning during the financial crisis in 2008 while facing medical issues of his own shortly after his mother-in-law died of cancer.

We also talk about why despite the rising industry trend towards centralized model portfolios managed on a discretionary basis, over 90% of the assets that Thomas and his firm manage are held on a non-discretionary basis, how Thomas has found because he mostly manages non-discretionary assets and has to call clients about every investment recommendation it has actually increased the frequency of client communication and portfolio customization and allowed him to more deeply engage with clients, and why Thomas' firm doesn’t charge more for the additional service of trading assets for clients on a discretionary basis and instead charges less for clients who are willing to let him manage with discretion (yet in practice, has been able to differentiate and grow primarily with the firm’s higher-priced non-discretionary offering instead).

And be certain to listen to the end, where Thomas shares why he believes that newer advisors have an opportunity to provide value for their clients by being proactive in having conversations about planning for medical crises before they arise, and by doing so, they can create deeper, longer-lasting relationships with their own clients, how Thomas has become more comfortable with easing into his big ideas and understanding that they won’t all succeed (as he admits that he would dive headfirst into ideas and take failure personally in the past), and how Thomas' own definition of success has shifted through his career from one that focused on being competitive about his production in the early years, to the greater good impact that he feels his elder planning work brings now, which has kept him working far harder now than he ever expected when he first launched his advisory business years ago.

So, whether you’re interested in learning about how providing a standalone Lifecare plan has helped Thomas create more longer-lasting relationships with his clients, why Thomas feels managing non-discretionary assets for his clients gives them more agency in their financial planning, or how Thomas plans to expand his financial planning vision beyond his practice, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Thomas West.

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The 2023 Technology Tools for Today (T3) Advisor Conference, held last month in Tampa, Florida, featured a large gathering of financial advisors and representatives across the fintech industry attending the 2½-day conference. Hosted by Joel Bruckenstein and his team from T3 Consulting, the conference covered everything from how technology providers are continuing to expand their features and integration capabilities to how advisors can manage their own expanding tech stacks to the ever-present question of how AI tools like ChatGPT will impact the advisory industry.

In this guest post, Craig Iskowitz – CEO and founder of Ezra Group, a financial technology consulting firm – summarizes this year’s conference highlights with his signature Twitter-driven recap, kicking off with presentation highlights from financial planning software platform MoneyGuide, which announced its own version of the increasingly popular “one-page financial plan”, reflecting the greater demand from advisors to streamline printed plan materials. Additionally, MoneyGuide rolled out a new "Plan Pulse" dashboard allowing advisory firms to look across all of their clients’ plans and identify those who have fallen behind.

Another ongoing theme of the conference, which has persisted for several years, is the continuing effort to expand software integration capabilities to cover all parts of a client’s plan with no gaps caused by the failure of one tool to talk to another, and the different approaches that firms take to achieve better integration – whether they work to increase their integration with different third-party software tools (like MoneyGuide), offer a variety of products and services that can be purchased separately but integrate seamlessly with one another (like Morningstar), or combine virtually every type of technology tool into a single “growth platform” (like Riskalyze) that seeks to serve as virtually the advisor’s entire tech stack in one product!

Other major highlights from the T3 Advisor Technology Conference included:

Several speakers talked about how their firms are using AI technology, including Orion Advisor Technology President Brian McLaughlin, who discussed how advisors add value in ways that can’t be co-opted by AI and whose firm recently integrated ChatGPT into its RedTail CRM software.
The resources that advisory firms invest in new technology can be wasted if employees don’t know how (or why) to use it. As Sequoia Financial’s Chief Technology Officer Trevor Chuna discussed, a software adoption plan goes beyond just initial training and includes updates on new features, ongoing training, and regular communication to get ongoing results.
An update from Fidelity provided data suggesting that clients increasingly want support in areas beyond investment management from their financial advisors – which in turn has led advisors to invest heavily in specialized planning software to go deeper into more areas as robo-advisor technology has drastically reduced the cost of providing investment management.
An update from Schwab, amidst the final stages of its integration with TD Ameritrade (scheduled for completion before next year’s T3 conference), confirmed that TDA’s Veo advisor platform (which allows for integration with many third-party platforms), as well as its thinkpipes and iRebal trading and rebalancing tools, are expected to be retained and migrated over to Schwab.
RIA owners who sell their firms to large RIA aggregators based on overall price alone – without fully understanding the terms of the deal – can find themselves regretting their decision, according to Dynasty Financial Partners founder Shirl Penney.

Finally, the annual T3/Inside Information Software Survey, which assesses the software programs used by financial advisors, found that almost every software category has seen greater adoption among advisors – as while advisors are increasingly offering comprehensive advice and expanding how they provide value to their clients, their tech stacks are also expanding in kind – which only reinforces the challenges of navigating and maximizing the value of numerous software tools via enhanced integration capabilities in the software platforms themselves.

Ultimately, the 2023 T3 Advisor Conference brought together vendors, industry thought leaders, financial advisors, and students to gain insight into the fast-paced growth and change of the financial planning industry and the new technology tools available to help financial planning businesses flourish. And with the expansive array of new and upcoming technology solutions, there was an increased focus – which will no doubt continue as a theme in future conferences –not just on the tools themselves but also on how to use an entire suite of technology solutions while still creating a seamless planning experience for clients!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that the T3/Inside Information Software Survey is available, providing insights into which technology tools advisors use and their level of satisfaction with them, which highlighted the continued rise of specialized financial planning software tools for topics like taxes and Social Security as advisors continue to seek tools tobroaden and deepen their planning capabilities.

Also in industry news this week:

FINRA has announced that, on the heels of its first enforcement action under the Reg BI rules, it will be ramping up its examinations of broker-dealers for potential violations (after a long period of relative leniency when firms were still determining how best to comply with the rule)
A recent study from Ameriprise found that a growing number of Millennials are ready to listen to financial advisors, and that those who do have a financial advisor feel greater confidence in their financial situation

From there, we have several articles on practice management:

How growth in the advisory industry can be a double-edged sword, allowing for more scale and ability to attract talent but also introducing greater complexity and reducing the control that firm leaders have over their business
A 4-step framework for advisors to audit their processes and make changes when a process isn't fulfilling the function it was intended to do
How transparent organizational goals – translated into clear objectives and reinforced regularly firmwide – can help create a shared sense of purpose that keeps everyone working toward the same goal

We also have a number of articles on client communication:

Why different parts of the client journey present opportunities to ask different types of questions (and which questions to start with when deepening one's question-asking skills)
The best practice for administering personality assessments to ensure clients respond honestly (and not with what they think is the 'best' answer)
Why digging into clients' past history with money – rather than discussing future goals – can be the key to understanding what really motivates them

We wrap up with 3 final articles, all about finding balance:

Why people are reluctant to change their beliefs, even in the face of evidence to the contrary, and why it's important to have the mental flexibility to update or abandon beliefs
How the concept of 'work ethic' can result in more material wealth but less happiness, and why paying more attention to 'life ethic' can help prioritize enjoying one’s life
Why the idea of 'work-life balance' misses the fact that people fulfill different psychological needs from multiple areas of life, and how to craft a life structure that satisfies those needs

Enjoy the 'light' reading!

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One of the benefits of owning a financial planning business is an advisor’s ability to control their work schedule. While some advisors might want to go full throttle, perhaps working well over 40 hours per week and taking few days off, others might prefer a more relaxed schedule, perhaps taking every Friday off or going on vacation for multiple weeks each year. But some advisors who choose to take more time off from their schedules might be concerned that prospects and clients will consider them to be less committed to serving their planning needs than other advisors.

In our 109th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can approach decisions regarding work flexibility and tactics they can use to communicate these choices with prospects and clients.

Notably, the choice of work schedule can affect the type of client with whom an advisor might want to work. For instance, while landing an ultra-high-net-worth client is likely to bring significant revenue into the firm, such clients could prove demanding on the advisor’s time. While this might work well for some advisors willing to put in the requisite hours, it could strain other advisors seeking more flexibility. On the other hand, some prospects might prefer to engage with an advisor who works a limited number of hours to serve as a mentor, if that is their own goal for their business or career as well (in which case the advisor’s flexible schedule could actually attract more clients!).

An advisor’s desired work schedule can also play a role in how they choose to develop their client base as they build their firm. For instance, an advisor might purposefully limit the number of clients they service in order to have the flexibility of only working a certain number of hours each week (e.g., take on no more than 25 clients to maintain their 20-hour workweek). While a prospect might be concerned that their needs will not be met by an advisor working less than full time, the advisor can explain that they deliberately manage a smaller client base than other ‘fulltime’ advisors, which lets them devote their full attention to each client despite their shorter workweek.

Further, by being transparent about their flexible schedules, advisors bring the conversation into the open not only for their clients, but for other advisors as well. As while some advisors might think they are alone in considering ‘alternative’ work schedules, discussing these issues more openly can show that there are many others in the same boat. And receiving constructive feedback from supportive peers, mentors, and coaches who understand and share similar issues can help advisors decide how to meet their own needs while continuing to provide high-quality service to their clients.

Ultimately, the key point is that even though the decision to adopt a more flexible work schedule (and choosing how to communicate this choice to clients) can be difficult, advisors may find that creating the working conditions that optimally support their own work-life balance can help them not only attract new clients who appreciate the advisor’s talents (and who may even look up to them as role models and mentors helping them to implement similarly balanced lifestyles), but also to provide their clients with the support they need to achieve their financial planning goals!

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In recent years, the Internal Revenue Code (IRC) has endured some drastic changes resulting from legislative action that have altered the strategies estate planning professionals have recommended to clients. And while the near-constant drumbeat of proposed legislative actions that would further alter the estate planning landscape has led some planners to try to 'get ahead' of those changes by suggesting action in anticipation of those bills becoming laws, doing so can come with risks… especially when those proposals never come to fruition. To account for the multitude of legislative proposals that arise from a constantly changing political environment, advisors can ensure that clients' estate plans contain flexible provisions to avoid potentially disastrous and costly results, while still preparing them for possible changes that might impact their estate plans.

Given how frequently the tax code changes, advisors can add value for clients by ensuring their estate plans are aligned with current law to meet the clients’ objectives, and not with past rules that may no longer apply to them. For instance, prior to the 2017 Tax Cuts and Jobs Act (TCJA),

A/B trusts had become ubiquitous for spousal estate tax planning. However, the passage of TCJA resulted in the estate gift tax exemption nearly doubling (from $5.6M to $11.2M for individuals), which changed the perspective of estate planners on A/B trusts as they became less relevant for those whose net worth did not warrant such planning strategies, especially when accounting for the portability of the estate tax exemption between spouses. Instead, "Disclaimer Trusts" suddenly made more sense for many clients as they gave surviving spouses the flexibility to choose how much to fund their credit shelter trusts. And now, with the TCJA’s pending sunset provisions expected in 2026, gifting strategies are especially appealing for some individuals with large estates, looking to take advantage of the high exemption while they can.

Contrary to what their name might suggest, flexibility can even be built into irrevocable trusts. For instance, in some states, naming a "Trust Protector" is an option that allows a third party to oversee the trust’s activities, resolve disputes, or amend trust provisions if the beneficiaries’ circumstances or legislative changes make the trust run in contrast to the grantor’s original intent. This role offers a potential ‘do-over’ option for trusts that were validly created but rendered obsolete due to unforeseen legislative or personal circumstances. Some states also allow decanting provisions as another method of providing some flexibility in an irrevocable trust, which permits assets to be 'poured' into a new irrevocable trust if the original is no longer suitable.

Ultimately, the key point is that the effectiveness and suitability of any potential estate planning solution will depend on the unique circumstances of the client and their individual planning goals and needs. Even more important than the specific potential solutions, though, is a mindset that focuses on flexibility to adapt to a constantly changing political landscape. Which means that advisors can add significant value for clients by ensuring that their estate plans meet their current needs but are also designed to withstand unexpected changes – both to ever-changing estate tax laws and to the clients' own personal circumstances!
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Welcome to the 327th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Marc Horner. Marc is the Founder of Fairhaven Wealth Management, an independent RIA based in Wheaton, Illinois, that oversees more than $1 billion in assets under management for 450 client households.

What's unique about Marc, though, is the way he's been able to market and differentiate his firm by drawing upon his years of wirehouse experience to create a distinctly un-wirehouse brand… going so far as to create a series of parody commercials that portray stereotypical 'big-firm' sales-oriented advisors who may not have their clients' best interests at heart as a way to distinguish and contrast not only his firm's fiduciary approach but their 'willing-to-be-different' culture to prospective clients.

In this episode, we talk in-depth about how Marc developed and implemented his unique marketing strategy of writing parody commercials that feature a satirical sales-centric advisory firm, Bear Brothers Financial, and how he got mentally comfortable taking such a non-traditional approach to trying to stand out in his marketing, how Marc has sought to grow his team through a split of one-third organic hiring, one-third of recruiting existing advisors with clients, and one-third of hires made through acquisitions, and how, while Marc was in the early stages of planning to leave the wirehouse world and go independent, he made cold calls to other advisory firm owners asking for advice on making the transition… which also grew relationships with them, to the point that 4 out of the 5 firms he has now acquired were a result of those initial cold calls.

We also talk about how, after 14 years in the wirehouse world, Marc decided to break away and go independent by himself, and managed to grow quickly from $80 million in AUM to over $1 billion and 22 employees in under 8 years, how Marc created what he calls a Protective Put to find new opportunities to acquire other advisory firms, where Marc signs an agreement that if something were to happen to the advisor, Fairhaven would take over the advisor's clients and give their families an agreed percentage of revenue over a period of time so the monetary value isn't lost, and how, in addition to his website and parody commercials, Marc self-publishes a bi-annual print magazine (that features financial topics with lots of photos and employs local college students to write the copy) so that he can stay in front of prospects (and even other advisory firms he might someday acquire) in a more tangible way.

And be certain to listen to the end, where Marc shares how he balances the mentality of taking the work they do for clients very seriously but 'not taking ourselves so seriously' in the way he markets, why Marc feels that aspiring advisors would benefit from beginning their careers not by pursuing financial advisor jobs but getting into the commercial banking industry right of college, where there's less pressure to prospect and sell and more opportunity to learn the mechanics of finance and get familiar with the needs and challenges of small business owners looking to borrow from a bank's commercial lending team, and how Marc was able to balance the rapid growth of his firm over the past 8 years with still being present for his family (including driving 5 hours to be present for his oldest daughter's college volleyball games) by setting his family as a hard priority on his calendar just like any other client or work commitment!

So, whether you're interested in learning about how Marc's unique marketing strategy is received by current and prospective clients, how Marc handles the rapid growth and scaling of his firm, or the way Marc structures his firm and compensates his advisors, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Marc Horner.

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Welcome to the April 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that RIA custodial platform Altruist has built its own full self-clearing capabilities, while nearly simultaneously buying competing (not-self-clearing) custodian Shareholder Services Group (SSG) – which given the heavy costs of being in business as a self-clearing custodian, suggests that Altruist has reached a tipping point in terms of growth and scale (and intends to push that growth further, given its acquisition of SSG) as it seeks to grow its market share as an alternative to the "Big 3" (or part of the new "Big 4") custodians of Schwab/TDAmeritrade, Fidelity, and Pershing.

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

BlackRock has closed the retail arm of its FutureAdvisor robo-advisor and shifted its clients to RItholz Wealth Management, in another sign of how direct-to-consumer robo-advisors have struggled to gain traction given the high costs of client acquisition
Absolute Engagement has launched its Engagement Engine tool to provide opportunities for advisors to inject client input opportunities into advisor workflows and ensure that clients feel heard, understood, and engaged with on the issues that matter to them
Advice delivery and engagement platform Lumiant has raised $3.5 million in seed funding to support its growth as it builds out its "end-to-end" financial planning and advice engagement platform (but will it be able to replace, rather than augment, advisors' existing financial planning software?)

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

FP Alpha unbundles its Estate Planning Lab solution for automatically reading and summarizing clients' estate planning documents available as a stand-alone option, and rolls out a new P&C Insurance Snapshot tool, as demand for AI-driven document analysis grows but different advisors focus on different documents
Sora Finance has raised $3.9 million as it seeks to gain traction with its debt (re-)financing tool that allows advisors to take a more active role with their clients' "liabilities under management" via executing on refinancing opportunities along with shopping for new loans at the most favorable rates

And be certain to read to the end, where we have provided an update to our popular "Financial AdvisorTech Solutions Map" (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that, according to a recent survey, RIAs are considering metrics for growth other than assets under management, from the number of clients to diversifying the services they offer. And given that growth can create additional time burdens for advisors, many advisors are looking to automation as a way to gain efficiencies as they scale.

Also in industry news this week:

How RIAs appear to be increasingly pushing back against proposed rules and enforcement actions from the SEC
How one broker-dealer reminded its advisors that they do not necessarily have full independence when it comes to selling their firm

From there, we have several articles on spending:

Why now could be a good time to buy a house despite elevated mortgage rates
Why some of the most valuable 'luxury goods' money can buy do not have brand names
How advisors can help clients transition from savings mode during their working years to spending down their portfolio in retirement

We also have a number of articles on management:

7 books that can help new managers lead effective teams
How to create an employee onboarding process that can improve retention
How advisory firm leaders can take advantage of the trend of 'boomerang employees'

We wrap up with 3 final articles, all about personal growth:

Why taking a massive leap in personal growth can be rewarding, despite the risks
Why self-compassion is more effective than self-criticism when it comes to overcoming mistakes
A step-by-step process for finding and developing your passion without having to spend 10,000 hours working on it

Enjoy the 'light' reading!

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Financial advisors often approach discovery meetings with prospects as an opportunity to ‘sell’ the value of the financial planning services they provide. This is often done by having the advisor learn about the prospect’s needs and show the prospect how the advisor can help them achieve their financial goals, ideally motivating the prospect to sign up for the advisor’s services. But for some prospects, the value they will get from an advisor is not just in the dollars and cents of planning, but also in making changes to their behavior. Which means that advisors can help prospects get on the path to change (often starting with actually signing up for the advisor’s services!) by using financial psychology and behavior change principles with effective discovery meeting questions.

The Transtheoretical Model (TTM) of change offers a framework that can help financial advisors motivate clients who might be resistant to or struggling with change. TTM involves a 6-step process, where each step is designed to help individuals progress through change. Notably, the TTM process intersects with the financial planning process and the common challenges that arise in financial planning meetings can often be aligned with and explained by the different stages of TTM. For instance, new prospects might still be in the pre-contemplation stage of TTM, when they aren’t clearly aware of the problems they should solve, or they may be in the contemplation stage of TTM, when they are aware of a problem but aren’t yet ready to take action on it. In these cases, deciding whether there is value in engaging with an advisor at all and whether they will be able to follow through on what the advisor will ask them to do are often the key challenges for prospects that the advisor can address in the discovery meeting.

With this in mind, crafting the right questions to help prospects absolve themselves of the doubts they may have about an advisor’s value and their own ability to take on the responsibility of following their financial plan can serve both the prospect and the advisor well – because building up a prospect’s confidence in the advisor’s value and in their own capability to follow their plan (with their advisor’s support, of course!) will increase their own chance of success as well as the likelihood that they will sign on as a client.

Accordingly, there are 3 questions advisors can ask to address doubt by understanding what makes their prospects feel dissatisfied. These include asking about the prospect’s (dis)satisfaction with their net worth, with their financial decision making and self-confidence, as well as with their financial relationships. Together, these questions can help the advisor discover specific challenges that the prospect faces and start a conversation about how working with the advisor could help address these issues.

There are also 3 questions that explore the forces leading prospects to delay and procrastinate. These include exploring how prospects value action, talking about next steps, and asking the prospect to get started working with the advisor. These questions and the resulting discussion can help spur prospects to take action by officially becoming a client.

Ultimately, the key point is that while asking these 6 questions all together might not necessarily result in more prospect discovery meetings or better conversion rates, advisors might find that new clients are more likely to comply with their plans and take action on their tasks when this approach is used from the start of the relationship. Because at the end of the day, the more advisors are able to support the process of behavior change in their client relationships, the easier and more impactful their client work will become!

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Welcome back to the 326th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Erica Pauly. Erica is the Founder and Owner of Track That Advisor, a consulting and coaching firm based in Gilbert, Arizona, that helps advisory firms track, and then improve upon, their marketing results.

What's unique about Erica, though, is how she built a series of spreadsheet tools to measure the details of each step of her advisory firm’s marketing funnel, from lead generation to each meeting in the sales process to client onboarding and getting initial revenue for the firm… and then turned it into a series of tools that any advisory firm can use to evaluate how their marketing is performing, where it needs to improve, and how they compare to the average advisory firm as a benchmark.

In this episode, we talk in-depth about how, through a series of Google Sheets, Erica helps advisory firms begin to track each of the steps in their marketing funnel, analyze how successful those steps are in turning a lead into client, and develop strategies to help improve those metrics, why Erica focuses on 5 key marketing metrics of stick rate, close rate, average client size, pending days, and cost per client, to quickly gain an overall picture of an advisory firm or individual advisor’s marketing process (and compare those numbers to her benchmarking data to identify where improvements should be made first), and why Erica ultimately built an additional tool on top of her spreadsheets that she calls the ‘Tracker Genie’ that helps advisory firms quickly spot gaps in their data and fix them (because in the end, it’s not just about tracking marketing data, but helping advisory firms to actually do what it takes to input and maintain their data in the first place!).

We also talk about how, while working in a marketing role at an advisory practice, Erica began to track data on their individual advisors’ marketing efforts because she realized that she didn’t have the data to support her suggestions for the firm’s strategic planning and decided to start measuring how the firm was performing at each step along the way so that she could prove that her recommendations were based on actual evidence, how, after moving to another state because of a job opportunity for her husband, Erica was contacted by the firm that she tracked data for asking her to continue her work for them, helping her realize there is a demand for her specific type of work and gave her inspiration to found Track That Advisor, and why Erica still deliberately chooses to use Google Sheets to track data (instead of a standalone software application), as it allows her to customize layouts for individual advisory firms and make it easier for support staff to navigate (instead of asking them to learn a whole new software platform).

And be certain to listen to the end, where Erica shares how, as a self-proclaimed introvert and people pleaser, she has learned to become more comfortable with having difficult conversations with advisors about their strategies and how they are performing, why Erica hasn’t taken the role of CEO in her own firm and has instead given that role to one of her trusted employees (because she recognizes that her strengths lie in analyzing data and coaching others, but she still needed someone in the role that has the drive and ability to help the firm continue to grow), and how Erica learned the hard way the importance of not only finding employees that are the right fit, but having detailed processes and workflows so that as the firm grows, she can ensure that she is maintaining firm culture and business execution and ensure that the firm can continue to grow into her long-term vision and beyond.

So, whether you’re interested in learning about how Erica and her team track advisor data and keep advisory firms accountable, how using Google Sheets allows Erica more flexibility in creating customizable data sheets for the advisory firms she helps, or how Erica has evolved Track That Advisor and her plans for the future of the business, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Erica Pauly.

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When consumers shop around before buying a good or service, many factors can play a role in their final decision, from previous experiences to the recommendations of friends and even to the companies’ branding. And when it comes to how a consumer perceives a brand, there are three critical components that come into play: brand awareness (simply knowing that the brand exists), recognition (recognizing a brand for its unique components and features), and brand equity (the value associated with a specific brand). These factors, especially brand recognition and equity, are often used to help fill in knowledge gaps when contemplating the purchase of a product or service, especially when the consumer isn’t clear about the actual value of what they’re considering.

In the context of financial advisors, surveys have shown that CFP certification serves as an important branding signal for consumers seeking the services of a qualified advisor. For instance, a 2015 study found that consumers had higher brand awareness of the CFP marks, even more than the well-known ChFC, CFA, CLU, and PFS designations. In addition to having better brand awareness, research has also suggested that the CFP marks tend to have better brand recognition, and that consumers were just as likely to associate the CFP marks and CPA designation with professionals who offered financial advice, with an increasing inclination toward using a CFP professional for financial planning.

Further, the benefits of how the CFP marks are perceived as a valuable brand appear to have a meaningful impact not only on how advisors spend their time, but also on their revenue growth as well. According to the 2022 Kitces Research study, “How Financial Planners Actually Market Their Services”, advisors without the CFP marks typically spend more of their time on marketing activities relative to CFP practitioners (allowing them to spend more time on higher-value tasks). Similarly, CFP practitioners were found to have a lower practice-wide Client Acquisition Cost (CAC) and greater revenue growth in 2021!

Accordingly, promoting the brand of the CFP marks to the public can be a good way for advisors to boost their own personal brands in the minds of consumers, and at the same time serve to promote recognition of CFP certification more broadly as a sign of high-quality financial advice (and supporting CFP Board’s own publicity efforts). Some strategies to do so can include simply talking about their own experiences as CFP professionals more intentionally (e.g., in meetings with both prospects and centers of influence, such as accountants and lawyers, who might provide referrals), and promoting the marks in their social media posts and other marketing strategies (e.g., SEO tactics, drip marketing campaigns, and online advertisements).

Ultimately, the key point is that CFP certification not only provides advisors with the technical knowledge they need to provide high-quality service to their clients, but also is a valuable signal that can influence a consumer’s decision on who to look to for financial advice. And by promoting the marks to the public, advisors can further build brand recognition and equity for the marks, elevating all CFP professionals in the process!

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Enjoy the current installment of "Weekend Reading For Financial Planners" - this week’s edition kicks off with the news that the CFP Board of Standards launched its 1st ad campaign, dubbed "It’s Gotta Be A CFP", following its transition to a 501(c)(6) organization. In a change from previous campaigns, the first ad directly recommends that consumers seek out a CFP professional for financial advice, and future ads could more directly explain the benefits of earning the CFP marks.

Also in industry news this week:

Top Democratic Senators are urging the Treasury Department to crack down on a range of estate planning strategies for high-net-worth individuals, including GRATs and IDGTs
Amid fallout from recent bank failures, both Republicans and Democrats are considering whether current FDIC insurance limits should be increased

From there, we have several articles on retirement planning:

Why contributions to Roth accounts can sometimes have greater uncertainty than traditional contributions in terms of their after-tax accumulation despite not being affected by future tax rate changes
How the 'funded ratio' metric can help advisors create effective retirement spending recommendations
A comparison of a range of variable spending strategies in retirement, from a 'floor-and-ceiling' approach to a 'ratcheting rule'

We also have a number of articles on advisor marketing:

How to optimize the 5 most important pages on an advisory firm website
4 tools advisors can use to improve their website’s search visibility
How advisors can create and deploy effective keywords to help consumers find their websites when searching online

We wrap up with 3 final articles, all about changes to professional credentials:

The CFA Institute has unveiled a slate of changes to its certification process, from incorporating practical skills modules to new job-focused pathways in private wealth and private markets
Why some states are considering reducing the higher education requirements to become a CPA
CFP Board has announced the members of its new standards commission, which will review and evaluate its competency requirements for Education, Examination, Experience, and CE to earn and maintain the CFP marks

Enjoy the 'light' reading!
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Offering financial advice can mean many things for different financial advisors, and there are many reasons that advisors choose to join the planning profession. But for many advisors, the process of articulating their philosophies about financial advice and what it is the advisor stands for can be much more challenging than learning the technical aspects of financial planning. Clarifying these ideas and developing a mission statement, or ‘manifesto’, can be a rewarding exercise that resonates with prospects and clients and can also be useful to create impactful marketing collateral – not only to express how and why advisors believe financial advice should be provided on a broader level but also to support their business growth by attracting the right types of prospects and clients.

In our 108th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can communicate and market their own philosophies on financial planning and how the process of crafting a ‘manifesto’ can help advisors clarify and realize their most fulfilling vision of what it means to be a financial advisor.

Advisors who are looking for ways to articulate what it is they stand for can start by identifying who their ideal clients are and what they enjoy most about helping them. Having frank conversations with clients and prospects and asking them about how they have been served well (or not so well) by other financial professionals in the past, their most important successes, and the common mistakes they most often see others make can help advisors clarify their clients’ specific priorities, unique needs, and commonly experienced pain points. Furthermore, by connecting how their financial advice addresses their clients’ most common concerns, advisors can better understand the key elements that can serve as the foundation for a meaningful and relevant manifesto.

While there is no set rule on how long or short a manifesto used for marketing purposes needs to be, it is generally useful to provide it in a format that can be easily read and distributed. A small pamphlet or booklet can serve as a tangible deliverable for prospects, just as a website page can be easily accessible and can communicate the advisor’s beliefs just as clearly. Regardless of the format, a well-written, earnest manifesto can help advisors market their services to prospects while communicating their sincere beliefs about financial planning.

Ultimately, the key point is that by understanding and articulating what they stand for, advisors can more easily connect to prospective clients who will benefit the most from their services. Furthermore, doing so through a manifesto used as a marketing tool can also support the organic growth of the advisor’s business, and connecting with more of the right prospects upfront means the advisor will have more opportunities to establish and sustain more rewarding client relationships in the long run!

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Traditionally, when a person applies for individual life insurance, they would need to go through an extensive underwriting process that lasts several weeks (or months) and may include personal and family health questionnaires, interviews, and/or physical examinations. Though this process was time-consuming and intrusive from the perspective of the person applying for insurance, it was considered a 'necessary evil' in order for the insurance company to feel comfortable issuing the policy on the person’s life. In more recent years, however, insurance carriers have increasingly offered “instant-issue” term life insurance policies, where a decision is made whether or not to issue a policy for a person within minutes of their submitting an application, with no additional underwriting.

Although these policies make it possible to fast-track the insurance application process for some individuals (who might otherwise be stymied by the traditional underwriting process), they aren’t necessarily right for everyone. For instance, because instant-issue policies require insurers to arrive at a decision without knowing the full details of an applicant’s current health or medical situation, they are generally only offered to the healthiest individuals – while those with pre-existing health conditions (who might still be eligible for insurance through the traditional underwriting process) might be declined after applying for an instant-issue policy. Which frustratingly can make it more difficult (or expensive) to subsequently be insured through traditional underwriting, since the fact of having been declined – albeit for an instant-issue policy with higher health standards than traditional underwriting – can create a ‘black mark’ on the individual’s health history.

Consequently, despite the convenience of instant-issue policies, it’s important not to automatically assume that they will always be the right choice for a person looking to apply for life insurance. Instead, it can be better to weigh the potential benefits of instant-issue (which, beyond the speed and convenience of obtaining coverage, can also avoid the scenario of a previously unknown medical issue coming up during underwriting and jeopardizing the person’s ability to obtain coverage) against the potential costs (which can include higher premiums than traditional underwriting, limits on the amount of death benefit available, and inability to convert to permanent insurance).

Financial advisors can play a key role in helping their clients weigh these factors against their own needs, and – in situations where the client just needs to get at least some coverage in place – guiding them towards a decision that will lead to action. Because ultimately, one of the greatest benefits of instant-issue life insurance is that it can make it much more convenient for healthier individuals to obtain life insurance – which could make it well worth the potential higher costs and other risks involved if the convenience of instant-issue is what catalyzes the client to actually get coverage to begin with!

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Welcome back to the 325th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Brenda Hiscock. Brenda is a financial planner with Objective Financial Partners, an advice-only advisory firm based in Ontario, Canada, that works with clients on project-based financial plans, and also offers outsourced paraplanning to other Canadian advisory firms.

What's unique about Brenda, though, is how she not only came to the financial services industry without any financial background, but did so despite a very financially challenging upbringing, and while navigating challenges of homelessness, bankruptcy, and alcoholism in her 20s, through which she not only persevered and rose through the ranks as a financial advisor, but has been able to leverage those real-world experiences and challenges to provide an even deeper more meaningful level of engagement with her current clients and how their financial pasts can impact their financial behaviors in the present and future, too.

In this episode, we talk in-depth about how, while Brenda was still in high school, her mother died suddenly and she was left with the responsibility of caring for her younger sibling which created a large financial burden that Brenda couldn’t handle despite working 2 jobs and eventually led to her becoming homeless and beginning a cycle of alcohol addiction as a coping mechanism, how Brenda learned after her early struggle with alcoholism and 2 failed stints in rehab before finally getting sober 19 years ago that being able to work from home with a flexible schedule wasn’t just a nice-to-have for work/life balance but essential for her to have the space she needed for her mental health, and how Brenda’s perspectives on financial planning and especially the benefits of insurance were so deeply shaped by both her financial struggles as a teenager after her mother died without life insurance, and her financial stability after disability insurance kept her from falling back into homelessness when she was diagnosed with cancer just 1 year after getting sober and had to take a year off from work to get the care she needed.

We also talk about how, when Brenda realized she would have to take care of her younger sibling, she asked for help and her high school placed her in a cooperative education program that got her a job as a teller at a credit union which began her career in the financial services industry, how, later in her career, Brenda began a job in insurance (because she knew how important having insurance can be) but ultimately found that her first-hand experiences in the benefit of insurance didn’t make it any easier to sell insurance and prospect for new clients, and how Brenda’s effort to find the right position for her in the financial services industry ultimately led her to financial planning where she realized that she could have a greater impact in the lives of clients as she could use her personal experiences and life lessons to educate them on how to properly handle their finances and break through their emotional issues with money.

And be certain to listen to the end, where Brenda shares how she always thought she wasn’t good with numbers but found she enjoys financial planning because she can combine her intuitive math skills with her love of working with people, educating, and having deep conversations that can impact the future of clients’ lives, how Brenda is continually working on making peace with the struggles she has endured through her life but feels that they were necessary to get her where she is today and to become a living life lesson to others in the importance of having insurance, support from others, and a good financial plan of your own, and why Brenda believes it is important for younger, newer advisors to not only find mentors but be ready to proactively ask their mentors for help in achieving their career goals to ensure they get the support and wisdom they want and need.

So, whether you’re interested in learning about why Brenda feels it is vital and beneficial to have life and medical insurance, how Brenda overcame her addiction and cancer diagnosis, or how Brenda helps her clients get past their emotional connections with money, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Brenda Hiscock.

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When a prospect is looking for a financial advisor, understanding how much they will need to pay can often be a tricky proposition. In part, this is due to the many commission-based advisors whose compensation depends on the sale of insurance or investment products, where the price that a client pays is baked into the price of the product or is included in (often opaque) fees associated with buying, selling, and/or holding the investment. But even as fee-only financial planning has gained in popularity and advisory firm websites have become ubiquitous, it can still sometimes be hard for prospective clients to determine how much they would pay for advice before actually reaching out to the firm. But by listing fees on the firms' websites in a transparent manner (no matter their fee model) and linking their fees to the value they offer, advisors can provide prospects with a better idea of whether the firm is a good fit, potentially leading to a higher conversion rate of prospects into clients.

Financial advisory firms have a wide range of options when it comes to displaying their fees on their website. For instance, firms charging on an Assets Under Management (AUM) basis can provide a chart (or even a calculator!) that connects a prospect’s assets with the percentage fee they would pay as a client. A firm with a retainer fee model might show what a prospect’s expected fee would be based on their individual circumstances and the criteria the firm uses to determine its fee (e.g., the complexity of the prospect’s financial situation). And firms that charge on an hourly basis can provide their hourly fee(s) and the estimated number of hours it will take to work with a client based on their particular circumstances.

Given that comprehensive financial planning is not a commodity service where consumers might make a choice on price alone, advisors also have the opportunity to use their website to demonstrate the unique value they provide to clients. And by showing prospects in advance of the initial discovery call how their specific financial planning needs will be met, advisors enable them to come to the call with a better understanding of the firm and what it offers, allowing them to prepare more specific and relevant questions about the planning process. This can be accomplished in a variety of graphical means, from a table comparing the firm’s service offerings with those of other types of advisors to a client service calendar that shows prospects the work the firm will be doing on their behalf once they become clients.

Ultimately, the key point is that because an advisor’s website often serves as the first touchpoint for prospective clients, it is an important tool to help explain the types of clients with whom the firm works and the value the firm provides. And by using the website to clearly communicate the information needed to help visitors understand the value the advisor provides as well as the fees charged, advisors can attract prospects who would be ideal clients for their firm!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that just weeks after introducing its own self-clearing platform, RIA custodian Altruist announced this week that it is acquiring fellow custodial platform Shareholder Services Group (SSG), a move that will make the combined RIA custodial platform the third-largest in terms of RIAs served. This is significant, as most ‘upstart’ RIA custodians have struggled to gain material traction in a hyper-competitive RIA custodial landscape, but Altruist appears to be winning small-to-mid-sized firms in particular by cutting down on their outside technology costs with its unique ‘all-in-one’ that has the core portfolio management and performance reporting components built in directly to the platform.

Also in industry news this week:

How the collapse of Silicon Valley Bank could impact Federal Reserve policy and market performance going forward
Why advisors could soon be an important access point for consumers looking to add private investments to their portfolio

From there, we have several articles on the collapse of Silicon Valley Bank (SVB):

A play-by-play of how SVB went from a rapidly growing regional bank to a failed one in mere months
How banking practices could change for consumers in the wake of the SVB collapse
How government officials have attempted to balance the stability of the banking system while avoiding ‘moral hazard’

We also have a number of articles on cash flow and spending:

How advisors can help clients create a cash management plan that keeps their bank deposits within FDIC limits and earns them a relatively strong return
Why being ‘rich’ goes well beyond where one stands in the national income distribution
A new study suggests that while happiness increases with income on the whole, unhappy people are less likely to see happiness gains once they reach higher income levels

We wrap up with 3 final articles, all about living a healthy lifestyle:

Recent research upends previous assumptions about how one’s metabolism changes over time
Why walking can bring many of the health benefits of more strenuous exercise routines
How short bursts of exercise throughout the day can lead to significant health benefits

Enjoy the ‘light’ reading!

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Risk management is a key part of many financial advisors’ value propositions. For instance, ensuring clients maintain the proper insurance coverage based on their needs is an important part of the financial planning process. At the same time, clients face another class of risks that advisors often do not consider: cyber.

In this article, guest authors Mark Hurley, Carmin Cicalese, Bryce Washum, and Douglas Garbutt discuss how financial advisory clients face a range of cyber risks, including cybertheft (i.e., stealing a client’s financial assets that are accessible online), identity theft (i.e., using a client’s personal information for financial gain or other purposes), reputational risk (i.e., the release of potentially embarrassing personal information), and physical danger (e.g., when tagged online pictures can be used to identify an individual’s location). Notably, taking steps to protect from these threats not only benefits the client, but can also benefit the advisor as well. Equally important, it is relatively easy and inexpensive to do so. Moreover, given the closeness of advisor-client relationships and the financial implications of many cyber threats, clients often look to their advisors to help them recover from a cyberattack (whether or not the advisor is prepared!); therefore, advisors who help their clients take preventive steps can save both the clients and the advisors themselves significant amounts of time and cost.

While advisory clients are potentially exposed to a variety of cyberthreats, operating online with basic cyber hygiene can reduce and manage them by making the client a more hardened – and therefore, a less attractive – target and preparing them to identify breaches, enabling them to quickly respond and mitigate the damage. Basic cyber hygiene comprises 2 general categories – creating a layered digital security structure (e.g., a combination of technology and series of steps) and overseeing risk management on an ongoing basis (e.g., monitoring the dark web and corporate data breaches, reviewing credit reports annually, and regularly updating protection).

Given the higher financial stakes of cyberthreats, many family offices and advisors working with UHNW clients already offer these and other cybersecurity services to their clients. But when taking into account the ubiquity of cyberthreats and the recognition by clients of potential cyber risks, offering these services to advisory clients further down the wealth spectrum can be an important value-add for advisors to implement. Of course, advisors themselves do not have to be experts in cybersecurity or in implementing a cyber-hygiene program; instead, many advisors will likely choose to work with outside vendors that provide cybersecurity services commensurate with their clients’ needs.

Ultimately, the key point is that even though cyberthreats are more prevalent than ever, cyber-risk management for clients still remains off the radar screens of many financial advisory firms. Which means that many firms have growing opportunities to provide services to their clients that can protect their assets and personal information and, at the same time, potentially improve client growth and retention in the process!

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Welcome back to the 324th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Nancy Knous. Nancy is the CEO and Founder for Benchmark Wealth Management, an independent RIA affiliated with LPL Financial based in Memphis, Tennessee, that oversees nearly $340 million in assets under management for almost 1000 client households.

What's unique about Nancy, though, is how, after reaching a moment of business crisis during the market volatility of the 2008-2009 Financial Crisis, the market decline and associated decline in her AUM fees led to a cash flow squeeze and resulted in Nancy having to ask her assistant and best friend for a loan just to make payroll for her staff… which, fortunately, led to substantive changes in how Nancy now manages the profit margins of the firm, allowing her to scale up the business to more than 20 team members and not having any business cash flow problems during the 1,pandemic.

In this episode, we talk in-depth about how, during the Great Recession, Nancy (like many other advisory firm owners at the time) were facing the challenges of a 30-40% market drop and its subsequent effect on her firm’s revenue but because she took for granted that she was a CFP professional with a ‘good’ income she didn’t need to monitor it that closely (until the month she discovered she was coming up $5,000 short on her staff payroll obligations!), how, after struggling with her firm’s and her own personal finances, Nancy asked her business partner for help and he suggested she read Dave Ramsey’s “Total Money Makeover” which helped her transform her own money habits, pay off her accumulated debt over 7 years, and inspired her to become a SmartVestor Pro and even use the book to help her clients engage in deeper conversations about their money habits and savings, and how Nancy has been able leverage Ramsey’s SmartVestor lead generation program to grow her firm to 5 referrals per week (where 2-3 of those referrals became clients), and over a couple of years, gain more than 100 new clients per year.

We also talk about how Nancy and a few other advisors from her previous firm decided to follow one of their well-respected advisor colleagues to start an independent firm with LPL, but it wasn’t until later that she suddenly realized that she had now become not just an advisor but an advisory firm business owner as an independent but that becoming a business owner also meant she now had an opportunity to manage her business and treat her employees the way she felt was best (and steer away from some of the negative experiences she had previously as employee), how, as her firm has grown, Nancy has begun stepping away from client-facing duties and transitioning her clients to another advisor in her firm so that she can focus more on becoming the firm’s visionary and leading it forward to the next stage of growth, and how Nancy realized through trial and error the importance of having employees that are not like her and the need to find the types of employees that complement her strengths and weaknesses which has led to her now using personality tests (like Working Genius by Patrick Lencioni) and developing a 4-8 week hiring process that includes several meetings with team members and even a group dinner comprising of the candidate and their spouse along with firm members and their spouses to really ensure a good fit for the firm.

And be certain to listen to the end, where Nancy shares how she coped with failing her Series 7 exam 5 times in the span of a year before she realized she may have a learning disability and then after consulting with her doctor, she was able to find the right medication for her that improved her focus so much, that years later she got the highest grade in her class on her Series 24 exam, how Nancy spent the better part of 30 years of her career feeling inadequate about her abilities as an advisor because she feared she wasn’t as technical or analytical as other advisors but through supportive friends and colleagues realized that she can have great confidence in the success she’s created through her strength in relating to clients, and why Nancy has recently become a certified Dream Manager to develop her team and inspire them to go beyond traditional goal-setting as she feels that dreams have a deeper financial planning meaning than mere ‘goals’ and hopes to one day translate her training into workshops for her clients so that they create better connections with their dreams… and as a result, achieve more of their financial objectives.

So, whether you’re interested in learning about how Nancy overcame her debt challenges to help her firm scale and grow, why Nancy employs a stringent hiring process and personality tests to find the right employees, or how Nancy uses the lessons she learned to help her clients avoid financial pitfalls, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Nancy Knous.

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For the past several decades, platforms for advisors have differentiated with the quality of their technology. The focus on ‘tech’ was a natural evolution for advisor platforms away from their roots – which was originally to differentiate by the quality of their proprietary product shelf, the primary means that brokerage firms and insurance companies attracted advisors to them in the 1960s, 70s, and 80s. As product shelves became increasingly open architecture in the 1990s and 2000s, what mattered wasn’t the particular products made available to advisors (because the answer increasingly was “anything you’d want is already there”), but the technology that the advisor platform made available to implement those products and help the advisor better run their business.

However, the reality is that it’s very expensive to build and maintain technology, especially when considering the full range of CRM, portfolio management, financial planning, and more than a dozen other sub-categories of technology that financial advisors use in their firms. Consequently, the technology that most of today’s advisor platforms (e.g., broker-dealers, RIA aggregators, TAMPs, etc.) are touting is not actually their own proprietary technology… it’s a selection of third-party technology tools they’ve woven together to become the ‘tech stack’ they offer to their advisors. Which is usually one from a list of just 3 leading providers in any particular category. Such that, in the end, advisor platforms are increasingly all offering the exact same technology tools… and signaling an end to differentiating advisor platforms with technology altogether!

So what’s the alternative for advisor platforms to differentiate in the future? In a word: Services. Because advisory firms still – and will always – continue to need team members to provide service and handle the tasks that go beyond what technology alone can automate.

In practice, support services from advisor platforms might include a wide range of consulting services – from compliance to an advanced planning team, operations to technology – that advisors could engage for a fee as needed. Though arguably the even bigger opportunity is for advisor platforms that provide ongoing staff support services in the key areas where advisory firms need ongoing support – from (virtual) assistants for administrative tasks to ongoing compliance support, bookkeeping, and financial reporting to paraplanning, trading and investment research, and more. Staffing needs that already consume 15% or more of the typical advisory firm’s revenue today… as compared to the barely 4% of revenue that the typical advisory firm spends on technology. Which means that providing services is actually far more of an economic opportunity to serve advisors than it is to ‘just’ solve their technology needs!

In the long run, the growth of advisor platforms as service providers – not ‘tech’ platforms – will also create more opportunities for differentiation, as some will inevitably be better at delivering services than others and/or will be better at the needed services for particular types of advisors with whom they can specialize. Which also gives the most successful service-providing advisor platforms more pricing power in what has become an increasingly commoditized payout-centric competitive environment. As well as the opportunity to drive greater margins for themselves by reinvesting into technology – not for their advisors, per se, but for themselves – to better deliver their services to advisors as ‘tech-enabled service providers’.

The key point, though, is simply to recognize that advisor platforms are not large enough to build all of their own technology from scratch, and cannot sustainably differentiate themselves by offering the same suite of technology solutions that more and more other advisor platforms are offering as well. The opportunity comes in the gaps between technology – the service work that humans must still accomplish – that drive most of the costs of advisory firms as service businesses in the first place. Which means the most successful advisor platforms in the future will be those that best deliver services that allow advisors to run the human parts of their businesses more efficiently!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that President Biden released his latest budget proposal this week, which calls for a range of tax increases on higher-income and wealthier taxpayers to fund deficit reduction and the president’s spending priorities. While the budget almost certainly will face stiff resistance in a divided Congress, proposals that could affect financial advisors and their clients include increasing the top income and capital gains tax rates, raising the Net Investment Income Tax rate and applying it to pass-through income, and increasing the amount of the child tax credit.

Also in industry news this week:

Altruist’s self-clearing custodial platform has gone live, offering RIAs of all sizes an alternative to larger, legacy custodians
While the SEC is planning to increase the number of on-site examinations it conducts, the odds that a firm will experience an exam in a given year appear to be remaining steady

From there, we have several articles on tax planning:

How advisors can add value to clients by helping them maximize the benefits of their Health Savings Accounts
How the IRS could be preparing to finalize regulations that would require some beneficiaries with inherited IRAs to take RMDs this year
Why higher interest rates affect the utility of a range of trusts used for estate and tax planning, from GRATs to QPRTs

We also have a number of articles on practice management:

How competitive pressures and growth challenges could drive RIA M&A activity in the coming year
A process that can help advisory firm owners craft a succession plan that matches their goals for their firm and for their own retirement
The major role that emotions play in an advisor’s decision to sell their firm and how to prevent them from scuttling a deal

We wrap up with three final articles, all about the uses of Artificial Intelligence (AI)-enabled tools for advisors:

How a new tool embedded in Microsoft Word can help advisors craft and edit content
How advisors can use AI-enabled tools to more efficiently generate content ideas, proofread text, and create marketing videos
Why ChatGPT could be a valuable tool to support advisor marketing, from creating ad copy to drafting prospect emails

Enjoy the ‘light’ reading!

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For many financial advisors, annual strategic planning is an essential process that establishes clear and specific business goals for the year, along with the steps necessary to achieve those goals. Additionally, it helps advisors make informed decisions about the future direction of their business. As important as strategic planning is to the evolution of the business, coming up with new ideas to implement as part of the strategic plan can be difficult, and choosing which ideas to develop and implement can be even more challenging.

In our 107th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss ways for advisors to find new ideas, the process of narrowing down their options and choosing the best ones, and how advisors can vet and test the viability of their ideas before implementing them on a larger scale.

Generating new ideas is essential for individuals looking to innovate and grow their businesses, but the reality is that good ideas don’t always come easily or quickly. A good way for advisors to stimulate the ideation process is to increase their exposure to new information – whether it be through reading books, engaging in more conversation, attending conferences, or joining study or mastermind groups, experiencing new perspectives can give advisors a fresh outlook and help them come up with their own new ideas. And as a collective of new ideas is gathered, identifying the 2 or 3 ideas that resonate the most with the advisor can help them narrow down their options to those that will most likely help them progress toward their goals.

Once the advisor has chosen 2 or 3 of their best ideas, vetting the ideas with trusted – and unbiased! – mentors, coaches, colleagues, and/or friends can help the advisor gain useful feedback and insight, which can help them develop a better sense of whether they have a sensible, fully formed idea worth pursuing. Next, analyzing the required steps to implement each idea and the potential outcomes can help narrow down their options further, determining which of the ideas is best to pursue on a long-term basis. While making a long-term commitment to an untested idea can feel scary, figuring out how to break the idea into smaller, testable steps can make the process easier and less risky.

Ultimately, the key point is that implementing new ideas is an important and exciting part of strategic planning, and while finding the right ideas to implement can be challenging, it can be facilitated by following a systematic idea-gathering framework. Such a process can involve multiple steps that focus on information gathering, brainstorming and gut-checking, asking for feedback from various sources, and devising ways to test drive ideas on a smaller scale to evaluate their viability and to save time, money, and resources. This process allows advisors to pivot and course correct when necessary, relieving the pressure of having the ‘right’ idea right away and avoiding ideas with less chance of success, which, in the end, creates opportunities for the advisor to investigate and pursue even more worthwhile ideas!

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In the early days of investing, stocks were often evaluated in a vacuum: Investors assessed the plusses and minuses of each company’s stock based on its own merits, with little consideration of the relationship between one stock’s performance and that of the market as a whole. Then, in the 1960s, with the advent of the Capital Asset Pricing Model (CAPM), investors began to look at stocks (and by extension, pooled investments like mutual funds as well as entire portfolios) through the lens of a stock’s risk compared to the entire market (and concurrently, the expected return that investors demanded to compensate for that risk). A stock’s ‘beta’ – generally speaking, its riskiness compared to the overall market – was considered a key driver of its future performance.

In the early 1990s, however, the release of a landmark study by Eugene Fama and Kenneth French introduced the concept of “factors” beyond beta that could influence a stock’s performance. Though Fama and French’s study focused on 2 factors (size and value), investment research in the subsequent 30 years has identified hundreds of additional factors that investors can use to adjust their return opportunities and expectations in constructing diversified portfolios.

Although the rise of factor-based investing has created many possibilities for advisors to add value by optimizing the risk and return profiles of their clients’ portfolios, the explosion in the number of potential factors creates its own new challenge for investors, from determining how to evaluate the factors themselves to deciding which ones are really useful in making investment decisions. As it turns out, when filtering the “zoo of factors” down to only those that have had explanatory power to predict above-market returns (as well as that meet a series of tests for persistence, pervasiveness, robustness, investability, and the logic of how they operate), there are really only a handful of factors that are truly worthy of investment (including size, value, momentum, quality, profitability, and quality for equity; as well as term and credit quality for fixed income), which make it much more manageable for investors to implement a factor-investing strategy.

Furthermore, focusing on just the most salient factors can allow investors to avoid some of the criticisms of factor investing raised over the years, including that factors are overly risky compared to the market, that factor investing is prone to failing at inopportune times, and that factors have become irrelevant (or perhaps too well-known and ‘overcrowded’ to produce excess return) for investors going forward. In reality, the body of evidence that supports factor-based investing has only grown larger with time – as long as one focuses on just the factors that have actually proven to be effective.

The key point is that while investment risk is impossible to eliminate, factor-based investment strategies have been shown by a wide body of data to create excess returns without adding to a portfolio’s overall risk. While factor investing isn’t a panacea and can itself be prone to long periods of underperformance, the evidence has shown that it can reward investors who are willing to stick with it. Ultimately, factor investing can be almost as much about behavioral factors as economic ones: The fact that so many investors aren’t willing to endure the risk of underperformance creates potential rewards for the ones who are!

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Welcome back to the 323rd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Yonhee Choi Gordon. Yonhee is a Principal and the Chief Operating Officer of JMG Financial Group, an independent RIA based in Chicago, Illinois, that oversees nearly $5 billion in assets under management for close to 1,500 client households.

What's unique about Yonhee, though, is how, through her nearly 4 decades with JMG Financial Group, Yonhee has been a part of not only the firm’s succession plan to its second generation of owners but now to its third generation of leaders… and along the way, has personally recruited, trained, and retained the majority of the firm’s employees, by implementing stringent assessments in her hiring process to ensure that new employees are in alignment with the firm’s expectations and values to be able to succeed and grow with the firm for the long run.

In this episode, we talk in-depth about how during Yonhee’s 36 years with JMG, she has not only seen the evolution of the firm and its three generations of ownership and leadership, but has been integral in building the hiring, training, and development systems that has allowed the firm to transition to its current generation of partners and owners (most of whom have been with the company for over 20 years, after first being hired and trained by Yonhee herself), why Yonhee creates and implements a unique kind of work sample assessment for all prospective employees based on the actual duties of the position she’s hiring for so that she can evaluate how the candidates think, process information, and approach problem-solving with the actual tasks of the job, and how JMG structures its leadership roles, where Yonhee not only oversees the training and development of newer advisors, but also coordinates and supervises the Accounting, Operations, Human Resources, and IT departments as well as working with the firm’s Chief Talent Officer.

We also talk about how JMG developed their own proprietary CRM internally more than 25 years ago because they realized they would need better capabilities to input tax preparation data than CRM systems had at the time, and in the years since have been able to further customize the software to their precise needs as the firm grew, why JMG implements strict criteria for who can own shares of the firm, including a limit on ownership size with a cap of 20% of shares, and a rule that requires owners over the age of 70 to sell back their shares to keep ownership fresh and more closely connected to the current state of the firm, and why JMG implements a client capacity of 50-80 clients per advisor and how it keeps detailed track of the time it takes for employees to complete clients tasks to both avoid burnout and continually develop better and more efficient processes.

And be certain to listen to the end, where Yonhee shares why she believes that a portion of the industry’s rising level of M&A deals is really a result of inconsistent definitions of advisor titles and insufficient career paths that are failing to nurture newer advisors into the next generation of owners, why Yonhee advises younger, newer advisors to first understand the culture and values they feel are most important to them personally, and then use those standards to find their ideal role at a firm (to ensure it’s a firm that will take the time to support them and help them grow), and why Yonhee’s own definition of success has changed over time, where at this stage it's less about her personal career growth and more about the impact and value she can provide in the lives of the employees that she leads and the pride she feels knowing she is developing the next generation of leaders in the financial services industry.

So, whether you’re interested in learning about how Yonhee and her firm have remained successful through 3 generations of leaders, the unique way Yonhee thinks about finding the right employees and training them for success, or how Yonhee navigated being a Korean women in a male-dominated field and rose into a partnership role, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Yonhee Choi Gordon.

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Welcome to the March 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that Conquest, a Canadian financial planning software provider (founded by the prior founder of NaviPlan) has raised $24M (CAD) of private equity capital in preparation for expanding its reach into the US – for which it hopes its technology-aided ability to analyze a client’s plan and suggest “next-best decision” strategies for advisors to recommend to their clients will allow them to break into the crowded US market. Which at best will still be a substantial uphill battle, given the hassle of switching from one financial planning platform to another (and the fact that most advisors are generally satisfied with their current financial planning software in the first place!).

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

Asset-Map has raised $6M in Series B funding as it scales up its financial visualization tool for enterprise use amid growing demand for advice engagement tools
Wells Fargo Advisors debuts LifeSync, an app-based tool combining features of goal-based planning and monitoring of financial “vitals” as the megafirm moves further into its own advice engagement at scale
Orion launches BeFi20, a behavioral finance assessment to support client conversations around money psychology (and identify how financially “aligned” couples are in their money attitudes)

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

Merrill Lynch has rolled out a new turnkey video creation platform allowing its advisors to record short videos with a quick compliance sign-off (and more impressively, has apparently solved for the challenge of centralized compliance approval of individualized advisor content at scale)
The popularity of ChatGPT has opened up a discussion about the potential role of artificial intelligence in the advisory world – and while some predict it may replace advisors entirely, the evidence of past technological advances suggests it will prove to be one more tool to automate repeatable back- and middle-office tasks and allow advisors to focus on more planning at a higher level!

And be certain to read to the end, where we have provided an update to our popular “Financial AdvisorTech Solutions Map” (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that amid economic and market headwinds, the pace of RIA M&A activity was slower in January and February compared to the same period last year. If this trend continues, 2023 would be the first year in more than a decade to see fewer transactions than the year before, though some industry observers continue to see significant appetite for deals.

Also in industry news this week:

A recent FINRA arbitration ruling reaffirmed the ability of brokers operating in the independent broker-dealer model to take their clients with them when they change firms
A bipartisan group of U.S. Senators is considering potential ways to shore up Social Security, from raising the retirement age to 70 to creating a sovereign wealth fund

From there, we have several articles on practice management:

How advisory firms can leverage their CRM software to run a more efficient practice
Best practices for firms to consider when choosing training programs
Why getting back to basics, particularly when it comes to decision making, can help firms overcome challenging market conditions

We also have a number of articles on wealth:

What being ‘upper-middle class’ actually means in dollar terms
Why many consumers overestimate the size of the nest egg they will need to have a comfortable retirement
How advisors and clients might change their expectations for fixed-income investments as interest rates and yields have risen

We wrap up with three final articles, all about taking action:

Why trying to live a life with ‘no regrets’ can hinder self-improvement
Why it is important to not let major ‘events’ distract from the overall ‘journey’, whether it is an interpersonal relationship or a client’s retirement
How a willingness to take imperfect actions can help drive advisory firm growth

Enjoy the ‘light’ reading!

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When holding discovery meetings with a prospective client, financial advisors often ask the prospect about their goals. The hope is that these conversations will help the prospect ease into a positive frame of mind (by thinking about a vacation, retirement, or another future aspiration) and, at the same time, present the advisor with an opportunity to show how their services can help the prospect achieve their goals. However, the reality is that asking about goals has the potential to set prospects up for disappointment or dissatisfaction down the line, especially when achieving the goal is not financially attainable based on the prospect’s current situation, in which case the advisor might be seen as a ‘dream killer’. Even when a goal is achieved, it might not feel as good as the prospect imagined (e.g., feeling a lack of purpose after retirement). Consequently, finding meaningful ways to frame discovery-meeting conversations that don’t focus on the prospect’s future goals can sometimes be a better way to engage and motivate new clients.

By identifying a prospect’s current concerns and pain points and exploring strategies to address the issues that the prospect is facing now – instead of on future dreams that may still be far off into the future (and that are much vaguer to the client than the current situations faced today) – advisors can discover powerful motivators that can help the prospect to act more decisively (in fact, a particular problem the prospect has been struggling with might have been the reason they scheduled the discovery meeting in the first place!). Of course, diving right into a conversation to learn about a prospect’s particular pain points could make for an awkward discovery meeting. However, there are several ways to broach the subject indirectly, which can help advisors ease into the conversation more naturally. One approach is to ask the prospect about current concerns instead of pain points and explore what they would like to see as an outcome of working with the advisor (which could reveal pain points without framing the question in those terms). Another option for financial advisors is to solicit the client’s “anti-goals”, which are the things a person wants to avoid (e.g., financial regrets), as these can serve as powerful incentives for the prospect to take action (perhaps by becoming a client of the advisor!).

The first step to structuring discovery meetings that don’t address goals is to make a list of questions (e.g., “What do you want to ensure you won’t regret?”) that can be used to unearth a prospect’s pain points, anti-goals, current concerns, and aspirations. Lists can be important because asking non-goal questions can take some practice before asking them feels natural. In addition, advisors can consider sending some of the questions to the prospect in advance as part of an agenda for the discovery meeting (or perhaps adding a few questions to the meeting invitation itself) to help them be better prepared to respond. Further, in addition to the core questions the advisor wants to raise, asking appropriate follow-up questions during the meeting can also play a vital role in discovering what’s most important for the prospect to act on right now.

Ultimately, the key point is that while asking prospects about their financial goals might seem like a logical strategy for a discovery meeting, an alternative approach that indirectly brings out the prospect’s pain points can be more effective at motivating them to action. And for advisors, this method not only can help them identify what really matters to the prospect but also can potentially increase the chances that they will become a client!

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Welcome back to the 322nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kent Skornia. Kent is the Founder of Krilogy, an Independent RIA based in St. Louis, Missouri, that oversees nearly $2 billion in assets under management for 1,800 client households.

What's unique about Kent, though, is how, to grow advisors within Krilogy, he created an internal training system that focuses on mentorship, education, and especially the core activities that newer advisors need to learn to gain deeper knowledge of financial planning and to get started in growing their own book of business over time.

In this episode, we talk in-depth about how Kent developed the Krilogy Advisor Development System (or KADS for short), a proprietary training system that pairs newer Krilogy advisors with senior advisor mentors to support the senior advisor’s client base while training on and practicing the activities it takes for them to grow their own book of business (to eventually become senior advisors themselves), how Kent and his firm implement a ‘Zero to One FA’ activity tracking sheet (based on a combination of concepts from the book “Zero to One” by Peter Thiel and the ’75 HARD Challenge’) which compiles a list of fundamental activities that newer advisors in the KADS program should focus on with the intent that, much like building muscles, the scheduling and repetition of the activities will build their business development muscles, and how to help train and grow newer advisors further, Kent and his firm have created Krilogy University, a once-per-week training session open to all advisors of the firm that highlights financial planning concepts (with the curriculum designed by an internal wealth intelligence committee that also teach as in-house experts).

We also talk about how senior advisors at Krilogy can take advantage of the KADS program to gain support for their own books of business and eventually to find a successor for their practices when they want to retire, how Krilogy has established two Director of Advisor Development roles to oversee the training and advancement of newer advisors in the KADS so that senior advisors can mentor their newer advisors in financial planning and relationship building with clients but don’t have to be responsible for managing the associate advisor, and how Krilogy offers liquidity options for its senior advisors to sell a portion or all of their book of business to Krilogy while still remaining as an advisor under Krilogy and continue to serve their clients while taking some chips off the table.

And be certain to listen to the end, where Kent shares how Krilogy sought to instill a values-based approach in the firm that focuses on dedication, abundance, leadership, and respect to create alignment with all employees of the firm, provide excellent service to their clients, and retain their employee talent, why Kent believes a good way for newer advisors to find the right firm for them is to interview other newer advisors at the firm they seek employment to understand if the firm is really a good choice and truly cares about advisor growth and development, and why Kent feels that even though a successful firm is dependent on growth and achieving goals, success for him is building relationships with clients, employees, and those around him, and seeing how those relationships impact the lives of so many as they grow and find success of their own.

So, whether you’re interested in learning about why Kent decided to create an internal advisor training program to grow his advisors within the firm, how the costs of hiring advisors is covered by Krilogy and the ways advisors are compensated, or how Krilogy implements optional succession plans for senior advisors that transitions the retiring advisor over a two-year period, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Kent Skornia.

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Financial advisors are generally required to abide by ethical standards, such as the duty to act in a client’s best interests when giving financial advice. Advisors who attain the CFP marks are held to even higher standards, though, with all CFP certificants required to adopt CFP Board’s own more-stringent Code of Ethics and Standards of Conduct. It would stand to reason, then, that advisors who are CFP certificants would be less likely to engage in professional misconduct than their non-CFP counterparts, since they voluntarily adopt this higher standard of ethical conduct in order to use the CFP mark.

A forthcoming study by Jeff Camarda et al. in Journal of Financial Regulation, however, concludes the opposite. The paper’s authors state that based on their review of publicly available data, CFP certificants had higher levels of advisor-related misconduct than non-CFPs. Which, if true, would be a surprising and concerning revelation, particularly for CFP certificant advisors (as well as for CFP Board itself) who view the CFP marks as the ‘gold standard’ of financial planning – in large part because of the higher standards of conduct required – because of the risk to their reputation should those marks instead be associated with a higher likelihood of misconduct.

But a closer look at the data used in the study reveals issues with the authors’ conclusions. The paper examines advisory-related misconduct data for more than 625,000 FINRA-registered individuals (specifically those who have filed Form U4) and compares the rates of misconduct between CFP and non-CFP certificants. The issue, however, is that not everyone who files Form U4 is an advisor – many assistants, executives, researchers, traders, and other types of professionals are also required to register with FINRA. In fact, according to industry research, there were only about 292,000 financial advisors in total as of 2020, meaning it’s possible that less than half of the individuals used in the study were actually financial advisors. Meanwhile, the vast majority of CFP certificants are financial advisors – meaning it's hardly surprising that CFP certificants were found to be more likely to have histories of advisory-related misconduct than other U4 filers, simply because they were much more likely to be financial advisors in the first place!

Previous research by Derek Tharp et al. attempted to identify actual financial advisors and control for other non-certification-related factors, and found (among a smaller sample size) that CFP certificants were actually less likely to have engaged in advisory-related misconduct than non-CFP professionals. Which highlights a key issue in misconduct-related research, which is that researchers’ conclusions are only as trustworthy as the data that goes into the study. Because when similar research attempts to explore rates of misconduct using other variables – such as firm size, fee models, client types, etc. – without being careful to search for unrelated factors in the data that could inadvertently skew the outcome, it can result in similarly ‘surprising’ conclusions that are really just a reflection of spurious relationships based on poor data quality rather than reality.

The key point is that even – or especially – when looking at research based on big data, it’s still important to rely on logic when interpreting the results. Sound research may certainly produce conclusions that go against intuition, but when such surprising results do occur – such as finding that CFP certificants commit misconduct at higher rates despite voluntarily adopting a higher standard of conduct than non-CFPs – it’s often the case (after a closer look at the data) that the more logical conclusion is the correct one.

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Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with the news that the SEC’s proposed “Safeguarding Rule” would significantly increase the number of investment advisers deemed to have custody of client assets and increase paperwork requirements for advisers and qualified custodians, though the contours of a final regulation remain uncertain.

Also in industry news this week:

Why the behavior of some TAMPs and investment advisers might have led the SEC to propose its new (and potentially burdensome) ‘outsourcing rule’
Why independent broker-dealers could become major players in RIA M&A in the coming year

From there, we have several articles on advisor marketing:

How to craft engaging calls to action on an advisory firm website
Steps advisors can take to grow and manage an effective marketing email list
5 features that can make an advisor’s website a more valuable marketing tool

We also have a number of articles on tax planning:

How advisors can help their clients avoid an IRS audit this tax season
How major life changes, such as a move or a new job, can affect a client’s tax returns
A review of the best tax preparation software tools for a variety of tax situations

We wrap up with three final articles, all about personal development:

Why showing poise, the combination of style and substance, is often at the heart of a successful career
Why it can be valuable to have “permission to suck” when it comes to trying new things
Why a little bit of self-doubt can help individuals make better decisions

Enjoy the ‘light’ reading!

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The increasing popularity of financial planning has led to a growing awareness of how important managing finances and planning for the future can be. Despite its growing popularity, though, financial planning remains a relatively mysterious concept for many people who don’t understand how financial advisors actually provide value. For most financial advisors today, a website is a critical tool that allows them to market their services and communicate their fees to potential clients. However, for prospects who are unfamiliar with financial planning and what financial planners actually do for their clients, a description of services and fees may not be enough to decide whether to conduct business with a financial planner.

In our 106th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can better connect with prospective clients by showcasing examples of their financial planning work on their websites, and how they can use simple ways to demonstrate what their financial planning process actually looks like.

As a starting point, it’s important to recognize that a website is often where a prospective client gains their first impression of a financial advisor and what they do for their clients. Though a menu of services and fees on a website can be informative, adding examples of work can be a better way to help convey to prospects the advisor’s skills, abilities, expertise, and work style. These work examples could highlight the include samples of actual deliverables, a calendar of events including meeting cadences and financial plan reviews, and even short videos demonstrating the advisor’s expertise and financial planning process (using appropriately anonymized client scenarios).

A different angle that some advisors may prefer is to share client experiences that financial planning has helped them to enjoy, whether it be taking a long-term sabbatical from work, experiencing once-in-a-lifetime destination vacations, or purchasing a dream home. Whatever approach financial advisors choose, showing examples of the financial planning experience for clients can help make the planning process more tangible and understandable, while building trust and credibility with potential clients before even meeting with them.

Ultimately, the key point is that sharing work examples that reflect how an advisor feels they offer the most value to clients not only shows prospects what the financial planning process would look like, but also makes the process easier to understand and more accessible to potential clients. This can help prospects decide whether the working relationship would be a good fit for them and give them greater confidence in the value of hiring the advisor. And by helping potential clients understand the true value of the relationship, advisors can create better opportunities to find more of their ideal clients and create longer-lasting relationships!

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As a document required to be filed by all registered investment advisers, Form ADV is (at least in theory) a standardized description of each RIA’s services, fees, and business practices, presented in a series of four forms (Part 1, Part 2A, Part 2B, and Part 3) each comprised of a set of underlying sections. As the thinking goes, requiring each firm to file Form ADV with the SEC and/or state regulators (and making it available to the general public) gives investors a way to compare different RIAs in choosing with whom to entrust their savings.

Yet, there is no particular ‘standard’ way to complete some parts of Form ADV, which on the one hand allows RIAs to customize their Form ADV to their own specific firms’ practices, but on the other creates a significant amount of leeway for advisers to fill out each section, potentially resulting in the form being filled out incorrectly or in omitting important information. And although the SEC provides instructions and some guidance for RIAs in drafting their Form ADVs, the instructions allow for a wide latitude of interpretation that can make it difficult for advisers to know exactly how their firm’s information should be presented.

For advisers drafting their Form ADV, then, it can be valuable to understand where regulators expect specific interpretations of their terminology, and where there is more leeway. For example, in certain contexts, the terms “you” and “your” can refer solely to the advisory firm itself, while in others, the terms can encompass any of the firm’s related persons (e.g., directors and officers, partners, and employees of the firm). The answers to some of the questions on Form ADV can hinge on which interpretation of the terms is used.

Additionally, the ‘correct’ answer for some sections on Form ADV may depend to some degree on personal interpretation of questions that have not changed with evolving business practices. For example, the reduction (and often elimination) of trading commissions over time meant that the ‘soft dollar’ benefits of research, technology, and other products or services historically provided by broker-dealers to RIAs in exchange for directing clients to their platforms have become less of an explicit quid-pro-quo arrangement than they were in the past (since advisers now are more likely to merely recommend a client to use a specific broker-dealer or custodian, rather than selecting it for them). But because many broker-dealers continue to provide technology and other benefits to RIAs that use their custodial platforms, some might argue that this does constitute a form of soft-dollar benefit requiring a disclosure on Form ADV, even though it reflects a practice that is now far removed than the one that the soft-dollar disclosure requirement was created to address.

Ultimately, because of the many ways of interpreting the requirements of the parts and subparts of Form ADV, it can be hard to know where to begin. However, by addressing some of the key areas that commonly trip up advisers, it’s possible to avoid many unintentional misstatements or omissions that could trigger a deficiency from the SEC or state regulators, reducing the likelihood of additional time-consuming tasks that would otherwise divert the adviser from their more valuable (and likely more enjoyable) work of serving clients!

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Welcome back to the 321st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Danqin Fang. Danqin is a Lead Advisor for Austin Asset, an independent RIA based in Austin, Texas that oversees more than $1.3 billion in assets under management for nearly 400 client households.

What's unique about Danqin, though, is how she planned and executed a very intentional career path in the financial services industry that involved her leaving her homeland China, embracing a new language and culture in the United States while achieving her Master’s degree in Financial Planning, and proactively creating opportunities for herself by getting involved with industry associations and networking to advance in her career.

In this episode, we talk in-depth about how after a few mentors in China suggested that Danqin look into private banking and wealth management (as they felt it better suited her than her initial accounting major), she began Googling potential career paths in China but instead came across the CFP Board website and immediately connected with the description of a CFP professional, how Danqin realized that to get her CFP marks, she would need to leave China and pursue her education at an accredited institution in the U.S. but saw it as an opportunity to satisfy her desire to explore other cities and different cultures, and to follow a clearer career path (as in China, career paths in finance are much more ambiguous), and how Danqin ultimately navigated the complexities of relocating to another country and acclimating to a new culture and language so that she could take advantage of better opportunities to marry together her love of math and talking to people to become a financial planner.

We also talk about how, to maximize her time and the number of opportunities she could gain in her education and career in the US, Danqin created a plan that worked backwards from her ultimate goal of becoming a lead financial advisor and was intentional about everything from the school she selected to the internships she took to eventually achieve that goal, how Danqin proactively looked for opportunities to network, attend industry conferences, and be involved in local chapters of industry organizations, so that she could increase her probability of making connections with the right people in the industry to find better jobs (and those that would be willing to sponsor her work visa), and how, even though Danqin was already somewhat familiar with the English language, she took advantage of every chance to immerse herself in American culture and better her English with the intention that she could improve her relatability and communication, giving her greater success with future clients.

And be certain to listen to the end, where Danqin shares how she was surprised that despite feeling like she needed to blend into American culture, it was in embracing her authentic self that allowed her to truly connect and cross-cultural barriers with her clients, why, even though Danqin admits that she would have benefitted from more confidence earlier in her career journey, she is appreciative for the experiences she gained as without them, she would not have attained the knowledge she has and gotten to where she is in life and her career, and why Danqin feels it’s important for younger, newer advisors to get clear on their vision of where they see themselves in the future… so that they can figure out what they can control between here and there and work backwards to find the next step forward.

So, whether you’re interested in learning about why Danqin was so adamant about becoming a financial advisor that she uprooted her life to move to a foreign country, how being intentional about what steps to take in her career helped Danqin achieve her goal of becoming a financial advisor, or how, through professional and social groups, Danqin found a sense of community and never truly felt like an outsider, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Danqin Fang.

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One of the most important parts of a financial advisor’s value proposition is time spent meeting with their clients. These meetings allow advisors to listen to their clients’ concerns, make planning recommendations, and chart a course for the coming months. And while advisors recognize the importance of holding regular client meetings, there is no consensus about the ‘best’ cadence for them. For instance, some firms spread these meetings out throughout the year while others bunch them into a limited number of months, or even weeks.

This latter approach, sometimes called Surge meetings, has gained increasing popularity among advisory firms in the past few years. Advisors who have implemented a Surge meeting approach have cited a range of benefits from doing so, including boosted productivity, a more systematic client experience, increased efficiency of client reviews and onboarding, and an overall smoother financial planning process for advisors and clients. At the same time, implementing a Surge approach can come with a range of challenges, such as the high level of endurance required of advisors to hold several client meetings every day for prolonged periods, the scheduling logistics needed to accommodate both the advisor’s agenda as well as the items on a client’s mind, and the capacity to preserve a meaningful and personal client experience throughout the process.

In this guest post, Meg Bartelt, Founder and Lead Planner at Flow Financial Planning, discusses how her firm implemented a Surge meeting schedule, and ultimately decided to use a different approach for their client meetings after 3 Surge seasons.

There were several issues with implementing Surge seasons for the firm, including challenges around many of their clients needing to reschedule meetings (resulting in a need to extend Surge seasons). Advisors often had insufficient time during the meetings to cover items on both the firm’s proposed agenda as well as those that the clients brought up, and there was an overall level of exhaustion from holding a concentrated set of meetings while maintaining the high level of personal connection and quick turnaround that the firm’s clients expect (and that the advisors enjoy providing!). Even after making some adjustments (from lengthening the time of meetings to 75 minutes to reducing the scope of technical work on the agenda), the need to meet with clients throughout the year to address high-stakes life changes as they arose (a common theme for many of the firm’s clients), and the desire to go deeper and broader with clients in a more freely structured format led the firm to transition away from the surge approach.

Now, the firm holds 2-hour Annual Renewal Meetings with clients while scheduling additional meetings as needed during the year. Though notably, non-emergency meetings are limited to certain days of the week and weeks of the month, and there are certain months of the year when no meetings are formally scheduled. The firm has also implemented a limited client service calendar, supporting clients on key issues when they occur during the year (e.g., tax letters in January and open enrollment period support in the Fall).

Ultimately, the key point is that just as no single planning strategy is applicable for every client, no single practice management technique is appropriate for every financial planning firm. And regardless of how successfully advisors may claim their particular meeting approach has worked for them, it’s far more important for advisors to experiment with what works best for their firm and how they choose to do business. As while all firms have unique needs and unique clients, finding the right balance between the desire for flexibility to focus holistically on each client and the need to streamline processes and procedures can be the key to identifying the best approach for the firm!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the SEC is proposing to expand the adviser custody rule beyond securities and funds to cover all assets in a client’s portfolio, including private securities, real estate, derivatives, and cryptoassets. Further, an investment adviser who can make trades on behalf of a client would be deemed to have custody of the client’s assets, which could substantively shift a very sizable portion of the wealth management RIA community under the custody rule, though it remains to be seen whether or what exact custody rule compliance requirements would be introduced for advisers who have custody through discretion but are still otherwise using third-party qualified custodians.

Also in industry news this week:

A court ruling this week vacated Department of Labor guidance that a one-time rollover recommendation from a company plan to an IRA would trigger fiduciary duty requirements under ERISA
Vanguard’s CEO this week indicated the firm plans to invest heavily in direct indexing amid the growing use cases for the strategy

From there, we have several articles on practice management:

The tactics the most successful RIAs are using to attract and retain talent in the current tight labor market
The practice management techniques that can help firms improve their long-term health rather than just short-term profits
Recent advisor surveys suggest that while AUM remains the most commonly used advisor fee structure, an increasing number of firms are offering more than one fee model

We also have a number of articles on retirement planning:

Survey data indicates that retirees are willing to be flexible with their spending, creating implications for retirement income planning
How advisors can add value for clients by helping them make better Medicare decisions
Why an advisor decided to buy an indexed universal life insurance policy for himself

We wrap up with three final articles, all about daily living:

Why practicing gratitude can help one from overlooking some of the key influences of a happy life
At a time when optimizing every minute of the day is in vogue, why focusing on just having “one good day” can be a more successful path
How advisors can help clients avoid falling into a “deferred life plan” and make the most of their lives today

Enjoy the ‘light’ reading!

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Health Savings Accounts (HSAs) feature useful tax advantages that make them a popular savings vehicle. In addition to allowing for tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses (the so-called ‘triple tax benefit’), HSA funds can be invested and allowed to grow for the long term – which has led many people to treat their HSA as a de facto retirement account by saving and investing the funds to be used for healthcare costs in retirement.

One possible outcome of ‘superfunding’ an HSA, however, is that the account owner may not actually use up all of their HSA funds over their lifetime, which can have significant tax consequences. Namely, if the HSA's beneficiary is anyone other than the owner’s spouse, the account loses its HSA status and the entire account value becomes taxable income to the beneficiary in the year of the original owner’s death.

For advisors who recommend HSA-maximizing strategies, then, it’s important to consider the risks of the account owner being unable to use up their funds and to plan for potential ways to quickly draw down the account in the event the HSA owner will not outlive their HSA funds.

One such strategy is to advise clients to keep track of any qualified medical expenses they incur after establishing the HSA – even those that are paid for from funds outside the HSA. Because if the owner ever needs to quickly withdraw funds from the HSA, they will be able to do so tax-free to the extent that they have any previously unreimbursed medical expenses from any point after the HSA was established – which could allow the HSA owner to make a tax-free ‘deathbed drawdown’ of a large amount (or even all) of their account, which would otherwise become taxable income if inherited by the account beneficiary. It’s also important for other parties involved in the owner’s estate plan to be aware of their roles, and to ensure that any funds withdrawn from the HSA are still distributed according to the HSA owner’s wishes.

The key point is that the more that advisors (and their clients) can plan in advance for the contingency of needing to quickly withdraw HSA funds, the more likely they will actually be able to do so. Because although it (hopefully) isn’t likely that any one person will need to do a deathbed HSA drawdown, as more people establish HSAs and accumulate large balances, the odds are that the need to quickly withdraw those funds will become increasingly common – making it all the more valuable for advisors (particularly those recommending HSA maximization strategies) to have tools for doing so while still maximizing the tax advantage of the HSA!

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Welcome back to the 320th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Jim Dickson. Jim is the CEO and Founder of Sanctuary Wealth, an RIA platform with 80 partner firms in 29 states that collectively oversee nearly $25 billion in assets under management.

What's unique about Jim, though, is how he has built an RIA platform approaching $25B in AUM in just 5 years, and the way he’s managed everything from hiring and staffing to raising outside investor capital in order to make the investments necessary to achieve scale as a middle and back-office support platform for independent advisors.

In this episode, we talk in-depth about how Jim built Sanctuary’s “Partnered Independence” platform for advisors who want to run their own practices serving HNW clients while leveraging Sanctuary Wealth’s support system that offers technology, compliance, practice management and training groups, digital marketing, and even ultra-HNW family office support, how Jim created Sanctuary’s unique partnership structure where the advisor practices are their own LLCs but are also IARs under the corporate RIA of Sanctuary Wealth so that the practices can maintain their independence for ownership and tax efficiency but rely on Sanctuary for their compliance needs, and how, because many wirehouse advisors were used to having access to all their data and systems from 1 centralized workstation, Jim and Sanctuary built their own centralized data warehouse called Haven and then layered a third-party business intelligence tool called Domo on top so each advisor could get their own level of business intelligence and benchmark how their practices are doing.

We also talk about why, after 25 years, Jim left the wirehouse world and, due to a non-compete and non-solicit agreement, took a yearlong trip around the world and along the way had the realization of the Sanctuary opportunity to launch his own advisor platform to offer the independence and partnership he thought wirehouse advisors really wanted and needed, why Sanctuary owns a stake in some of the firms they partner with as Jim found there were some advisors who wanted to take at least a few chips off the table or were interested in an “equity swap” so they could grow with a small piece of a much-larger pie instead of being solely dependent on growing their own, and how, now that Sanctuary Wealth has transformed into a nationwide partnership, Jim is working through the challenges of rapid growth when an advisor platform has to hire dozens of people every year and needs to ensure the teams are not only diverse with experience but have the right people to move the company forward at its current stage of growth and evolution.

And be certain to listen to the end, where Jim shares how, despite working in the wirehouse world for over 2 decades, he was surprised by how large the demand for independence is from advisors as more and more are seeking the autonomy to control their client, investment, and platform experience, and most importantly, their own destinies, why Jim credits his highly structured daily schedule as the way he stays disciplined in conducting daily calls with partners, staying in touch with what is happening within the platform, and reaching out to advisors who potentially could join Sanctuary’s network… while still making the time to be present in his kids’ lives and never missing one of their events, and why Jim feels the key to success is the relationships he has built on the Sanctuary platform as it is one thing to build a large firm, but it is another to build it with people you like and trust who all enjoy what they do and truly care about the people the business was built to serve.

So, whether you’re interested in learning about how Sanctuary differs from other advisor platforms and creates ‘partnered independence’ for its advisors, how Jim has handled rapid growth and scaling in the past 5 years, or how Sanctuary structures platform fees and advisor compensation, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Jim Dickson.

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While it can be easy for financial advisors to recognize the wide range of ways they add value for clients throughout the year, clients themselves might not be aware of what their advisors do for them behind the scenes outside of their annual meetings (e.g., rebalancing their investment accounts or reviewing their insurance policies). Without knowledge of this ‘shadow work’, clients might not recognize the full breadth of responsibilities their advisor (and the firm’s back-office staff) are handling on their behalf to justify their fee.

One of the ways advisory firms can help solve this dilemma is to implement a client service calendar, which outlines key services being provided to clients during each month of the year. This not only gives clients a better idea of the actual work involved in financial planning that goes on outside of meetings but also helps them understand when the work happens during the year. Additionally, client service calendars can help manage client expectations while allowing advisors to adhere to their preferred service cadence (recognizing that some client issues will likely need to be handled on an ad hoc basis). Furthermore, by outlining the actual scope of work the advisor performs for clients, client service calendars can be helpful when it comes to dealing with regulators, who may need to assess the specific services provided by advisors to ensure that these services justify client fees.

When creating a client service calendar, advisory firms have many styles to choose from to meet their specific needs. For example, firms can opt for a monthly, bi-monthly, or even daily calendar, depending on what they want to display for their clients. And client service calendars can be implemented in a variety of ways, from a single-page calendar that serves as a useful handout during prospect and client meetings to a daily calendar with important dates that clients actually want to hang on their refrigerators and reminds them of the value their advisor is providing!

Once an advisory firm identifies what they want its service calendar to do (e.g., demonstrate ongoing value and serve as a client engagement tool) and chooses an appropriate style that supports its calendar’s function, it can then consider how to actually create its client service calendar by deciding what to include in the calendar and which tools they want to use to produce the calendar. These decisions will depend on several factors, from the type of calendar and the amount of detail included, to whether the calendar is meant to be used as an in-meeting resource or to be kept by the client for their regular reference. And with a variety of technology tools and outsourced solutions available to help them create and implement their client service calendar, advisory firms can easily select the option that best meets their needs.

Ultimately, the key point is that client service calendars not only can allow firms to better organize and display their service offerings but can also show clients (and regulators) the full range of services being provided throughout the year. And by clarifying when planning services will be offered and when events relevant to clients will take place, advisory firm owners make the financial planning experience more tangible and create structure in their processes, all while giving advisors time to go deeper in serving their clients!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that according to CFP Board leaders, “everything is on the table” when it comes to the organization’s announced competency standards review. Among others, one notable item that could be reviewed is the current certification requirement that a candidate must have attained at least a bachelor’s degree, which some observers have suggested limits the pool of potential CFP professionals at a time of high demand for advisor talent.

Also in industry news this week:

The SEC this week released its 2023 examination priorities, which include its new marketing rule, Reg BI, and complicated investments
The House of Representatives is considering legislation that would broaden the definition of who qualifies as an accredited investor and is potentially eyeing a role for financial advisors to help guide clients interested in private investments

From there, we have several articles on practice management:

A structured approach firms can use to design a forward-looking org chart
Why outsourcing certain operational tasks still requires ongoing work from firm employees
How firms can get employee buy-in when making major business changes

We also have a number of articles on retirement planning:

A study has found that retirement can lead to cognitive impairment, possibly as the result of reduced social engagement
Why professionals might consider taking several mini-retirements throughout their careers
A simple rule that can help individuals choose the best place to live

We wrap up with three final articles, all about meetings:

Why internal meetings can be bad for both productivity and employee wellbeing, and how firms can make them better
How one company benefited from canceling all meetings for an entire week
Tactics firms can use to reduce the burden of meetings, from sending asynchronous videos to implementing ‘No-meeting Wednesdays’

Enjoy the ‘light’ reading!

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For many financial advisors, setting asset minimums helps ensure that their firm can generate enough revenue to maintain business costs and compensate the advisor appropriately. While finding prospective clients who are a good fit for the firm can be challenging, what can be even more challenging is letting a prospect who doesn’t meet the firm’s asset minimum requirements know that they wouldn’t be a good fit for the firm. The topic of assets and net worth can be a very sensitive topic; some prospects may take it very personally when they’re told they don’t have enough to be taken on as a client, and at the same time, many advisors feel awkward when they have to turn prospective clients away.

In our 105th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards discuss some of the reasons that conversations about asset minimums with prospective clients can be so difficult, and offer a few ways to gracefully inform a prospect they do not meet the firm’s asset minimum while still providing value for them even if the relationship isn’t going to continue.

As a starting point, it’s important to recognize that many prospective clients may not know what an asset minimum is, why some advisors have them, and whether they would qualify to work with a particular advisor because of their minimum requirements. A simple way for advisors to educate prospects about asset minimums is to include the information on their firm’s website. This would help prospects searching for an advisor online to self-select themselves out from firms whose asset minimums may not apply to them. This could also help prevent them from scheduling unnecessary meetings in the first place, saving both the advisor and the prospect time and potential awkwardness.

Additionally, advisors can spend time in the initial discovery meeting explaining who the firm’s clients generally are when meeting with new prospects, reviewing typical asset management ranges and any particular niches served. This can help prospective clients who don’t see (or comprehend) the information on the firm’s website understand why working with the advisor might not make the most sense for them, which can help to avoid any hard feelings and make it easier for the prospect to accept why the advisor may decline the engagement. Importantly, even though a working relationship may not make sense, advisors can still offer to help the prospect move forward with their financial planning needs. For example, the advisor can offer a list of vetted advisors with lower (or no) asset minimums who would potentially be a better fit for the prospect , and they can even compile a brief list of some simple action items for the prospect to tackle on their own, so that they can begin addressing some of their most immediate financial planning needs.

Ultimately, the key point is that even though asset minimum conversations can be awkward, being honest and upfront can keep advisors from feeling pressured to engage with a client who can’t generate enough revenue to justify the relationship. And by communicating with honesty, clarity, and empathy, advisors can help mitigate any of the prospect’s disheartened feelings of rejection while still providing valuable guidance on what they can do on their own and who can help them, letting the prospect go with their dignity intact.

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Seasoned financial advisors have likely worked with clients with a wide variety of workplace retirement accounts, which can vary in terms of their investment offerings, fees, and other characteristics. But given that the U.S. government is the largest employer in the country, it can be especially helpful for advisors to be familiar with the ins and outs of (and recent changes to) the Federal government’s own defined contribution plan: the Thrift Savings Plan (TSP).

The TSP is available to both civilian Federal government employees as well as military servicemembers, and those who have left service can choose to maintain their TSP accounts (though they can no longer make contributions). While many features of the TSP (e.g., Roth contribution options and employer matches) are common to other workplace-defined contribution plans, the TSP has certain unique attributes, including lower fees than many private-sector plans and a fixed-income investment option exclusive to the plan.

In 2022, the TSP underwent a series of changes impacting its many account holders. These include the opening of a “Mutual Fund Window” to supplement the limited offering of investment funds previously available to plan participants (though the associated expenses make it prohibitively expensive for many participants). In addition, the TSP updated its website and introduced a smartphone app, which required participants to create new credentials and verify their personal information. Notably, advisors can support clients in navigating these new changes by helping them decide if investing through the Mutual Fund Window makes sense, walking them through the registration process for the new site (if they have not already), and ensuring that their information (including beneficiary information) transferred over correctly.

Advisors can also add value for clients who are TSP participants by understanding how the TSP fits within the Federal employee and military retirement systems, which combine the defined contribution TSP feature with a defined benefit pension (though because the value of this pension has been reduced, TSP management has increased in importance). Further, advisors can support these clients by helping them manage the retirement savings choices that come with career transitions; for example, because many military members have ‘encore’ careers (as they are often eligible to retire well before ‘traditional’ retirement age), balancing their cash flow and retirement savings needs is crucial during their transition period.

Advisors working with clients who have been deployed to combat zones can also add value by being aware of the related TSP considerations. For instance, because income earned while deployed in a combat zone is tax-free, any pre-tax TSP contributions can result in a commingling of tax-free combat pay and taxable earnings (though this can be prevented by making Roth contributions during periods where income is untaxed). In addition, the annual deferral limit increases significantly during the year of a combat deployment, providing an opportunity to contribute even more money to the TSP (if doing so fits within the client’s cash flow plan).

Ultimately, the key point is that while the TSP is similar to many other workplace retirement plans, advisors who understand its unique attributes and stay up to date with its ongoing changes can better serve the Federal employees and military servicemembers who participate in the plan. And given that there are about 6.2 million TSP account holders, these individuals represent a large potential pool of clients!

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Welcome back to the 319th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Jim Niedzinski. Jim is a Co-Founder of Motive Wealth Advisors, an independent RIA based in the suburbs of Detroit, Michigan, that oversees $250 million in assets under management for nearly 50 families.

What's unique about Jim, though, is how he and his partner have successfully built a 'small’ boutique firm that effectively competes with big wirehouses to attract and retain ultra-high-net-worth families and have differentiated themselves by developing and implementing a client task management system that goes beyond traditional CRM to really ensure that the advice they are giving actually gets implemented by their clients.

In this episode, we talk in-depth about how Jim and his partner felt they could differentiate themselves from bigger firms by trying to maximize how many of their financial planning recommendations actually get implemented by clients, and decided to build their firm around Asana – a task and project management tool – instead of a traditional CRM system, to ensure that the advice they give is set in motion, how Jim leverages relationships he built with accountants, attorneys, and other professionals through cold calls early on in his career to now be able to gain a steady flow of referrals of very HNW clients, and how, through referrals only, Jim and his partner have grown their firm from $0 in AUM to $250 million in less than 3 years since breaking out on their own.

We also talk about how Jim and his partner leverage back-end support from Tru Independence so that they can have more time and capacity to help their clients with their complex financial issues, how Jim has found in his move ‘upmarket’ to more affluent clients that there is actually less fee sensitivity that’s led him to increase his fee schedule after the first few years, and why Jim and his partner are intentional about serving no more than 25 clients each as they want to have enough capacity to serve their clients well and continue to do so for the foreseeable future.

And be certain to listen to the end, where Jim shares why, even though he didn’t initially set out to own his own firm when he started his career, he is happy that he pursued entrepreneurship as he felt validated with the amount of support he received when he launched (and the amount of clients that followed him), why Jim believes that younger, newer advisors making decisions about where to work should focus on finding a firm based on the character and quality of people they could work with (rather than a fancy website) and where they could gain a mentor that would allow them to absorb as much information as possible, and how Jim’s perspective on building a client base was impacted by Greg McKeown’s “Essentialism” that you can be more present and effective in client relationships by being more focused… which has only reinforced his focus on keeping a small and focused client base with whom he can be maximally effective as a financial advisor.

So, whether you’re interested in learning about how Jim utilizes Asana instead of a CRM to track and manage client tasks, how leveraging back-office support helps Jim and his partner gain more time to provide even more value for their clients, or why Jim places importance on truly, deeply caring for clients and their needs, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Jim Niedzinski.

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Welcome to the February 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that the “financial monitoring software” platform Elements has raised $5 million in a seed-extension funding round as it seeks to establish a foothold in the rapidly growing AdvisorTech category of “advice engagement” tools designed to draw clients further into the ongoing (not just upfront) financial planning process. Because as the focus of financial advice shifts from “The Plan” that is created initially and then only periodically updated every few years, to a year-round process of ongoing “planning”, the demand has grown for more tools that help advisors connect and engage with their clients more frequently (while also giving them actionable information to actually engage about). For which Elements has positioned itself as an early leader that is now gaining momentum.

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

TradingFront, the white-label “robo advisor for advisors” is shutting down amid broader struggles among B2B robo advisor platforms to convince advisors to pay for better digital onboarding that they expect their custodians to provide (and improve upon) for ‘free’
Zoe Financial launches a new TAMP for advisors in its lead-generation network to make it easier to onboard and serve the smaller (below-traditional-minimums) clients that Zoe is bringing to them
Advisor360° buys onboarding software platform Agreement Express to deepen its own middle- and back-office automation capabilities and expand its opportunities with enterprise (insurance broker-dealer) clients

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

BridgeFT launches a new custodial data warehousing and integration solution called WealthTech API, to give larger advisory firms (and even other AdvisorTech providers) more ability to build their own custom software without having to download, reconcile, and store the data themselves
Kwanti unveils a new fund Screener feature to its investment analytics platform, making it easier for advisors to find the next new addition or improvement to their existing model portfolios.

And be certain to read to the end, where we have provided an update to our popular “Financial AdvisorTech Solutions Map” (and also added the changes to our AdvisorTech Directory) as well!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to TechNews@kitces.com!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the SEC has issued a risk alert outlining Reg BI-related deficiencies discovered during recent examinations of broker-dealers, from dual-registered advisors not clearly communicating whether they were acting as a commission-based broker or a fee-based investment adviser to firms failing to update their training and compliance systems to meet the requirements of Reg BI.

Also in industry news this week:

Annuity sales hit record levels in 2022, possibly spurred on by volatile markets and rising interest rates
A recent survey suggests that an overwhelming percentage of both employers sponsoring retirement plans and their employees are interested in receiving advice from financial advisors

From there, we have several articles on advisor marketing:

How advisors can get more clients by devoting just two hours per month to marketing
5 research-backed tactics advisors can use to improve their marketing ROI
How finding a ‘patient zero’ can help new firms market to their chosen niche

We also have a number of articles on investing:

Why falling interest rates were not necessarily the key driver of investment returns during the past 25 years
Why there might not be a rush among investors to fixed income investments, even as yields reach levels not seen in years
While Indexed Universal Life policies have been insurance companies’ hottest products in recent years, economic headwinds and concerns about their utility could slow their growth

We wrap up with three final articles, all about Artificial Intelligence (AI):

How AI could revolutionize a wide range of professions, from education to medicine
How ChatGPT and other large language models can be used by investment professionals now and in the future
How AI systems could both create greater efficiencies for human financial advisors and challenge current advisory business models in the years ahead

Enjoy the ‘light’ reading!

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Financial advisors who pay third parties to solicit or refer prospective clients to generate new business have historically been subject to the SEC’s Cash Solicitation Rule. However, that rule was drafted in an era where most paid referral relationships were between individuals, such as a financial advisor who paid a third-party accountant to refer clients their way. In recent years, though, the growing use of lead-generation services, advisor networks, and ‘advisor-matching’ tools, referred to as “operators” in the Marketing Rule’s Adopting Release, has given rise to third-party solicitation activity that often looks more like advertising directly to prospective clients. Which, in fact, often meets the definition of an ‘endorsement’, subjecting many third-party relationships to the Marketing Rule’s compliance regulations.

In response to this shifting landscape, the SEC has scrapped its old Cash Solicitation Rule and folded the regulations for third-party solicitation into its new Marketing Rule, which had a mandatory compliance deadline for SEC-registered advisers of November 4, 2022. In the new rule and subsequent Adopting Release, solicitors have been redesignated as “promoters”, referring to anyone who provides a testimonial or endorsement for an investment adviser, whether or not any compensation was paid. And when an advisor provides compensation for a testimonial or endorsement, the testimonial or endorsement is considered an advertisement under the SEC Marketing Rule. Which means that third-party solicitors providing such advertisements will require a greater investment into due diligence and oversight going forward than under the previous rule.

The upshot is that any paid solicitation agreements between advisers and third parties are now required to comply with the SEC Marketing Rule’s advertising regulations for testimonials and endorsements. These requirements include ensuring that promoters are eligible to receive compensation for testimonials or endorsements (i.e., they are not disqualified by the SEC from acting in any capacity under Federal securities law), entering a written agreement between the adviser and promoter (unless a de minimis compensation threshold, generally $1,000 during the preceding 12 months, is not met), making specific disclosures to prospective clients about the terms of the solicitation agreement and any material conflicts of interest, and, for the adviser, taking reasonable steps to ensure that promoters themselves are complying with the Marketing Rule’s requirements. Additionally, investment advisers should ensure they disclose the promoter relationship in their Form ADV Part 1 and Form ADV Part 2A.

The key point is that all paid solicitation agreements – including both existing and new relationships between advisers and promoters – are generally considered to involve advertisements and will be subject to the Marketing Rule, so for all SEC-registered advisers who are in (or are considering) such relationships, it’s crucial to review all aspects of the relationship in order to ensure compliance. And given the fact that advisers are ultimately responsible for ensuring the compliance of the promoters they utilize – including advisor networks and advisor-matching services that have gained popularity in recent years – using third-party solicitors might require a greater investment into due diligence and oversight going forward than under the previous rule, which could have long-term implications for the cost versus benefits of using such arrangements in the future!

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Welcome back to the 318th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Ali Swart. Ali is a Partner and the Managing Director for Waldron Private Wealth, a multi-family office based in Bridgeville, Pennsylvania that oversees nearly $3 billion in assets under management for 280 ultra-high-net-worth family households.

What's unique about Ali, though, is how she transitioned from a retail brokerage firm where she served nearly 400 clients (and was still responsible for business development to get more of them), to a multi-family office serving clients through specialized client relationship teams that keep advisor capacity to no more than 10 clients per advisor at any given time.

In this episode, we talk in-depth about how Ali and her firm serve their ultra-high-net-worth families with client relationship teams of wealth planning, investing, and client service, to delve into the full depth of their financial complexities while delivering a ‘white glove’ service, how Waldron instituted an in-depth upfront financial plan offering for prospects that can take 3 weeks to 6 months to develop and deliver (with the intention of building their relationship so well during that time that when it's time to decide whether the firm will be hired to implement the recommendations, a prospective client would feel like they are already so involved that they would be firing Waldron if they were to say no), and how Waldron implements four potential career tracks internally for their advisor team that focuses separately on people development, client relationships, business development, and technical expertise, so that employees can choose the path that is right for them, allowing them to hone their natural skills and grow their income doing what they do best.

We also talk about how Ali didn’t fully realize until after leaving her position at Fidelity the great opportunity she was afforded there to learn from and be surrounded by strong female leaders who were supportive of her, how, while Ali was pregnant with her first child, she started to contemplate her career path and the future of her family, and even though she was happy working for her previous firm, she realized she did not enjoy business development, and decided to take a chance with a recruiter who ultimately connected her with Waldron Private Wealth, and how, before accepting an offer to work with Waldron, Ali made them aware that she intended to continue to grow her family and negotiated that they implement a formal maternity leave policy as a contingency for her to accept their offer.

And be certain to listen to the end, where Ali shares how she struggled with the uncertainty that laid ahead after she decided to leave her former firm to work for Waldron (as she recognized that by taking a non-business-development role she would have to accept an initial reduction in salary), but ultimately decided to view it as an opportunity to take one step back in order to take two steps forward and gave herself a goal to become partner by the age of 40 (which she ended up achieving 4 years ahead of goal!), why Ali feels that it is important for newer, younger advisors to define their personal ‘mission’ to advance within the financial services industry (with the recognition that it will evolve over time just as people and professionals do) and keep that mission as a center of motivation and decision-making with confidence that success will follow, and why Ali believes the key to success for her is keeping her three core values of family, finance, and fitness in alignment… where she is present with her family at every opportunity, continues to advance in her career and support her firm in its growth, and maintains a healthy lifestyle to remain to be able to stay present for her family and her firm.

So, whether you’re interested in learning about how Ali handled transitioning from so many clients to so few, how Ali provides white glove service to her ultra-high-net-worth clients, or how Ali negotiated a maternity leave policy be implemented before she was officially hired at Waldron, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Ali Swart.

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From the sudden changes to everyday life brought on by the pandemic to navigating the new world of hybrid or remote work, employees have endured a challenging few years. At the same time, this shock to the system has led many individuals to reflect on where they are in their careers today and where they want to go in the future. But thinking about career goals is not necessarily enough; instead, employees need to take ownership of their careers to achieve the career goals they seek.

In this guest post, Stacey McKinnon, Chief Operating Officer (COO) of Morton Wealth, discusses her career path and the steps employees can take to build their own desired careers.

The first step to career advancement is to understand your current mindset. For instance, an individual with a sense of curiosity or open-mindedness will likely be better prepared to take ownership of their circumstances than one who is merely trying to protect their current position. In addition to understanding mindset, it is vital to understand your personal ‘why’ or purpose. Defining your personal ‘why’ helps give meaning to your work, serves as a North Star that offers direction when making big decisions, and provides motivation to keep pursuing your goals during tough times.

The next step is to discuss career intentions with personal stakeholders, including friends and family. For example, if your spouse knows your ‘why’ and understands what you are trying to achieve in your career – and how that will impact your family life – they are more likely to accept when you have to stay late at work or spend extra hours studying for a designation. But when personal stakeholders in your life do not understand what you are trying to achieve, it can become much harder to grow a career because of the increased likelihood of conflict and disagreements.

Building a professional community is another important step in advancing your desired career path. Such a community could include a sponsor (a leader who has direct influence over your career and will give you advice that leads to advancement), a mentor (a person who has been where you want to go and will be a safe space for you to seek guidance), and a confidant (someone unrelated to your company that will be there to help you work through issues and solve problems). These people will make up your team of coaches and provide you with specific advice that will lead to better decision-making around your career.

Also, because companies typically look for people who will go above and beyond to improve the company, seeking ways to add value can help you advance within the firm. This could include creating a proposal to enhance the firm’s growth, resiliency, profitability, or client experience and sharing ideas with your direct manager before moving it up the leadership chain to understand better how upper management might respond to the idea. You can also be proactive about gaining expertise by pursuing relevant designations or training in soft skills like leadership.

Ultimately, the key point is that successful careers rarely just ‘happen’ to individuals; instead, the most meaningful careers typically result when people take the initiative regarding their professional development. From finding ways to add value to your firm to building your expertise and network, there are many ways to claim ownership of your career and move toward your goals in the coming year!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that CFP Board announced this week that it is splitting into two separate organizations with the same leadership but different nonprofit statuses. By switching to 501(c)(6) nonprofit status, the new CFP Board of Standards will have expanded abilities to advance the planning profession through lobbying and more targeted advertising messages to grow the ranks of CFP professionals.

Also in industry news this week:

Why cash management strategies could become increasingly important parts of an advisor’s value proposition in a higher-interest-rate environment
Why improved returns on cash products could be a double-edged sword for some advisory clients following last year’s market volatility

From there, we have several articles on practice management:

Why advisors could be the big winners when it comes to competition among custodians and the entry of software providers into the space
Why rising interest rates might not be a major hindrance to RIA M&A activity in the year ahead
How consumer behavior research can help advisors pick the best strategy for raising their fees

We also have a number of articles on cash flow and budgeting:

Why spouses can benefit from having different views on money and how advisors can help foster positive communication between partners on financial issues
How advisors can help clients shift the spending paradigm from ‘wants versus needs’ to considering the best strategies for achieving their spending priorities
How advisors can help clients (and their children) understand the potential risks of using ‘buy now pay later’ services

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

Why trying to optimize downtime can lead to burnout
A strategy for ensuring that relationships don’t fall by the wayside
How remote workers can shake up their work from home routines

Enjoy the ‘light’ reading!

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For many financial advisory firm owners, growth is often the primary goal in the early years of launching a business. However, at a certain point, initial business growth goals will have been met, leaving the business owner at a crossroads of deciding where to take the business next – should they maintain the firm’s current size or continue the growth trajectory and adapt to the firm’s growing needs to bring on more clients? Even though the business may be doing well, deciding to grow past a certain point can bring on a whole new set of challenges, as with an expanding business, the capacity for advisors and other employees becomes more limited and can strain the firm’s resources. Some advisors, though, may choose not to continue growing the business further, and this choice will inevitably involve the challenging task of saying “no” to future growth opportunities.

In our 104th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how financial advisors can recognize and define what ‘enough’ growth looks like for their firm and how to create limits to help them say “no” to future opportunities that may create unwanted strain on the business.

Advisory firm owners can start by assessing how growth would impact themselves, their employees, and the firm. Typically, growing a firm involves adding more responsibilities, which can create more procedures and processes and requires time, staff capacity, and resources across the firm. To handle these additional responsibilities and projects, firm owners often have to decide whether to delegate tasks, automate them, save them for later, or refuse them altogether. And for many advisors who choose to keep their teams smaller and are not interested in hiring and training more employees, determining when to reject new opportunities and how to communicate their choice can be key to finding and maintaining their desired balance. This is because some advisors may not want to take on new clients and additional projects that may overload staff and take away time that could otherwise be spent on keeping current clients happy. Whatever the constraints may be, understanding when – and why – to stop growing can help advisors learn how to say no to unnecessary opportunities that may cause unwanted growth and strain on the firm, staff, and resources.

Ultimately, the key point is that while saying no to growth can feel scary (because we sometimes tend to fear that not continuously striving for growth and staying busy will somehow lead to inevitable failure), protecting the time, capacity, and resources of the firm by turning down unnecessary opportunities can be the best thing for the firm whose goals don’t involve growth. And by defining – and honoring! – the firm’s constraints, the process of intentionally declining these opportunities can become easier and more efficient (e.g., through automated processes and templates to respond to such opportunities). Over time, respecting the constraints of the firm can help the firm owner and the team make better choices and even open up new opportunities that are more relevant to the firm’s future direction, offering a positive impact on the overall goals of the business!

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With the U.S. economy predicted by many experts to slow down in the near future, many people’s thoughts have turned to the prospect of a recession. And along with those expectations may come concerns for those still in the workforce about the possibility of layoffs, and needing to get by without income for an unknown period of time. Such periods can be fraught with anxiety, since beyond 'just' the fear of losing one’s livelihood is the realization that there is little way to control whether or when one is laid off. This uncertainty makes it difficult to prepare for the possibility of a layoff, since there is often little real knowledge of what to prepare for.

Financial advisors with clients who are worried about being laid off can play a role in alleviating those worries by helping the client regain a sense of control over their future. And while there are many things to consider when planning for a layoff, these considerations can be grouped into two distinct types of conversations.

First, the advisor can help the client take stock of their current situation to assess their current preparedness for a layoff. This can include inventorying the client’s ‘safety net’ (i.e., the asset and debt options they have available to use if they aren’t employed), listing their essential expenses, and using those figures to estimate how long of a layoff they could potentially sustain. Additionally, there are some actions that may be best to get done before the client loses their employee benefits, such as getting medical work done, using FSA funds, and obtaining individual life and/or disability insurance.

Next, the advisor and client can make a ‘game plan’ which would take effect if the client is actually laid off. These actions can go in order from most to least urgent: starting with immediate concerns (like setting up sources of liquidity, finding new health insurance, and reducing expenses), moving to less-urgent but still time-sensitive tasks (like exercising employee stock options), and finally taking advantage of potential tactical planning opportunities (like making Roth conversions to take advantage of a low-income year or rolling over assets from an undesirable 401(k) plan).

The key point is that although advisors can’t reduce the probability of a layoff themselves, they can reduce some of the feeling of stress and anxiety felt by clients who fear a layoff is coming. Because, even though the game plan for being laid off will ideally never be used because the client is never laid off to begin with, there is peace of mind in having a strategy for when things go wrong. And if the worst case does happen, having a plan already set up to ensure the client's financial security can help ensure they can focus on finding their next opportunity!

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Welcome back to the 317th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Jennifer Climo. Jennifer is the CEO and a Senior Advisor for Milestone Financial Planning, an independent RIA based in Bedford, New Hampshire, that oversees $360 million in assets under management for 225 client households.

What's unique about Jennifer, though, is how, after more than a decade of building her own successful solo practice, she intentionally decided to merge her practice with another solo practitioner when an unusual crisis opportunity presented itself, and handle the more complex business management dynamics that followed, so that she could fulfill her goals of scaling and growing her practice beyond her and building an enterprise that would outlive her.

In this episode, we talk in-depth about how, after the sudden passing of a successor for a close friend and solo advisor that she met through a local study group of NAPFA advisors, Jennifer decided to merge their practices so that she could not only help her advisor friend and the clients she served, but create a positive opportunity for Jennifer’s own practice to scale up, how, during the first year after the merger, Jennifer realized her new partner still needed a needed a succession plan, and created a unique buyout structure that offers a 40% down payment and retirement payments of 15%-of-profits for life (which also helped to entice future partners who only needed to cover 40% of the purchase price buy-in themselves), and how Jennifer’s unique succession structure has now attracted another of her NAPFA study group partners who was also looking to retire, which prompted a second merger and has allowed her to grow and scale her business even further.

We also talk about how, in addition to her unique succession structure, Jennifer created an operating agreement for her firm (based on the teachings of Philip Palaveev and Mark Tibergien) when she added a partner, that outlines the financial management of their P&L as targeting 40% advisor compensation, 35% overhead expenses, and 25% in profit margins, how, though the merging of the practices created several pain points for Jennifer and her partners (as they all used different advisor technology and had differing fee schedules), she leveraged these issues as opportunities to find the right technology for the blended practice to develop better, easier, and more efficient processes, and eventually was able to incrementally raise fees and increase the firm’s overall profitability as they served clients more effectively, and how, even though Jennifer’s initial intention to join her NAPFA study group was to glean insight on practice management techniques and processes from other advisors, her continued connections with those advisors over the years created a close-knit and trusted community that has proven to give Jennifer even greater opportunities for her business in the long run.

And be certain to listen to the end, where Jennifer shares how she was surprised at how far she has come in her career and business as though she admits she put in the hard work and dedication, she never realized it would lead to her running a multi-million-revenue practice and doing so as a female business owner, how, after discovering a valued, long-time employee was unhappy and struggling, Jennifer learned the hard way the importance of dedicating time to not only teach and train employees, but to also listen and communicate properly so that she can create a better work environment and happier employees to aid retention, and why Jennifer feels it’s important for newer, younger advisors to not be deterred by naysayers in life and in the financial services industry, and instead, should focus on the skills they do have and how they can use those skills to advance in their own careers.

So, whether you’re interested in learning about how Jennifer handled the logistics of merging two practices in just 7 years, how Jennifer structured ownership agreements and profit splitting, or how Jennifer plans to continue to scale and grow her business, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Jennifer Climo.

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An important truism about marketing is that to be effective, the marketer’s message needs to connect with the audience it intends to reach. Traditional forms of marketing used by financial advisors – including networking with one’s friends and family members, cold-calling, and paid advertising – have been effective at reaching a ‘typical’ client base of older, wealthy retirees. However, for advisors looking to reach a different type of client – such as those in younger generations like Millennials, who often have an aversion to such straightforward sales tactics – finding a message that resonates often requires a more tailored approach that speaks to the specific audience and what they are going through.

One way to provide such a message is to create educational content, in the form of a blog, podcast, or social media posts (or a combination of the three), on topics that are relevant to the financial lives of the types of clients the advisor is trying to reach.

In this guest post, Thomas Kopelman, financial planner and co-founder of AllStreet Wealth, writes about the keys to becoming an effective content marketer, including building skills at creating multiple forms of content, repurposing content to use in multiple ways, and tracking progress to gauge the performance of content over time.

While good educational content can be a powerful way to generate interest from potential clients, it comes with its own challenges. Because not only does the advisor need to keep up a steady stream of content to engage with their audience, but the content also needs to be good – that is, to be relevant and interesting enough for the audience to want to come back for more. Furthermore, with the sheer number of available outlets for content marketing, it can also be easy for advisors starting out with content marketing to try producing content in too many places at once, ultimately spreading their resources too thin and failing to hone their skills with any one form of content.

A better approach may be to introduce each form of content one at a time – in other words, to initially focus solely on one form of content long enough to build up skill and confidence in that medium, then add another form and learn to do that one well, and so on. Not only does this approach help advisors ensure they have a solid grasp of each form of content before moving on to the next one, but it can also build up a sizeable foundation of content that can be repurposed in the future (e.g., reposted or reshared on social media). This can maximize the potential return on the time and effort it takes to create each blog post, podcast, or newsletter.

Ultimately, what’s important to remember is that it often takes time for the effects of quality content marketing to come to fruition, meaning the most important lesson is to stick with it. A good piece of content, whatever its form, might not immediately convince someone to become a client... but what it can do is cause the advisor’s name (and expertise) to stick in their head so that when they do come to a pain point that requires an advisor’s expertise, they know who to reach out to.

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Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with the news that several states are considering a series of tax hikes targeting higher-income and ultra-high-net-worth residents after similar proposals failed to pass at the Federal level. While it remains to be seen whether the measures will actually be enacted, proposed measures include raising income and capital gains tax rates, instituting wealth taxes, and reducing the state estate tax exemption, potentially creating future planning opportunities for advisors with clients in those states.

Also in industry news this week:

While the number of RIA M&A deals increased in 2022, the size of these deals declined, perhaps reflecting challenging market and economic headwinds
A recent survey suggests that nearly half of financial advisory clients have changed advisors or have considered doing so since the start of the pandemic and that portfolio performance has become a primary consideration in their decision-making process

From there, we have several articles on practice management:

Why advisory firms might first consider whether they are using their current tech stack optimally before looking to new software solutions
How advisory firms can better organize and track their data to avoid drowning in a sea of numbers
Why firm culture and opportunities for career advancement could be more important than starting salary for many financial planning job candidates

We also have a number of articles on cash flow and spending:

A review of several key psychological factors that drive clients’ spending decisions
How consumers are potentially losing money by keeping significant cash in savings accounts at major banks, and the opportunity for advisors to create cash management strategies for clients
How advisors can support clients whose children suffer from ‘failure to launch syndrome’

We wrap up with three final articles, all about the financial advice industry:

Why the competition for talent, a pullback in private equity funding, and firms balancing efficiency with effectiveness could be key trends within the financial advice industry in the coming year
How consumers could benefit from fee-only advice within the insurance industry
The benefits of taking on leadership positions within financial planning industry associations

Enjoy the ‘light’ reading!

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Many investors are familiar with private equity as an alternative asset class, which is popular with certain high-net-worth and institutional investors as a vehicle for diversification and a source of potentially higher risk-adjusted returns than what is available on the public market. However, less well-known is the related but distinct asset class of private debt, which, like private equity, focuses on opportunities outside of what is traded on the public market but deploys its capital in the form of credit rather than taking equity stakes in companies. And in the midst of a rough market for publicly traded debt, high-net-worth individuals (and their advisors) who might be seeking alternatives for the fixed-income portions of their portfolio may be curious about what private debt might have to offer.

While public market and private equity asset classes are much more thoroughly researched, research on private debt providing reliable data on returns, volatility, fees, and other characteristics has been relatively scarce. However, a recent paper by Pascal Böni and Sophie Manigart in the Financial Analysts Journal sheds new light on how private debt has performed over time and provides insight into what factors advisors and their clients should focus on when considering private debt for their portfolios.

One of the paper’s key takeaways is that although private debt as an asset class has delivered higher risk-adjusted returns compared to traditional fixed-income investments, there is a wide range of outcomes between individual private debt funds, with a relatively small cluster of top-performing funds delivering much of the asset class’s overall outperformance. And while the maxim “past performance does not indicate future results” holds true for traditional asset classes, the reverse has proven at least somewhat true for private debt: Among private debt funds and the General Partner who manages them, prior performance was a significant indicator of future performance, with funds having a good performance history being the most likely to outperform in the future. Funds with GPs who had no history of prior private debt fund management had some of the worst performance, suggesting that not only do past returns but also the skills and experience of General Partners have much to do with which private debt funds are likely to have the best returns.

For advisors, examining the management and culture of a private debt fund can be an important way to provide value to clients through a thorough due diligence process. This can include assessing the experience and performance history of the fund’s GP and how the fund has achieved its returns (e.g., by making concentrated bets or through a more diversified approach). And while the choice of a fund may be the most significant decision regarding private debt, advisors can add value in other ways as well, such as by incorporating private debt into a client’s existing asset allocation strategy, optimizing the asset location of a private debt fund, and analyzing the fund’s fee structure.

Ultimately, what’s most important is that clients have a solid understanding of the risks involved with investing in private debt versus remaining in the public markets. Namely, the illiquidity of private funds (which can keep clients’ funds locked up for 10 years or more) makes them most appropriate for clients with a long-term investing horizon and with other liquid funds for short-term and unexpected needs. Advisors who can help their clients navigate these important considerations, and keep the client’s focus on the long term, can be an invaluable aid in ensuring those clients can realize the potential advantages that private debt can make possible!

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Welcome back to the 316th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Matt Sonnen. Matt is the founder & CEO of PFI Advisors, a consulting firm based out of Redondo Beach, California, that assists wirehouse advisors with the operational transition support they need to break away, and trains and consults with the COOs – the Chief Operating Officers – of independent RIAs to better build their own infrastructures, processes, and culture to scale up their advisory businesses.

What's unique about Matt, though, is how he and his wife have translated the years of hands-on support they’ve provided to independent advisory firms to improve their operations, tech stack, and overall scalability, into creating an entire community for the industry’s Chief Operating Officers – aptly dubbed as PFI’s “COO Society”.

In this episode, we talk in-depth about how Matt and his team first learned what it really takes to stand up an established independent advisory firm ‘from scratch’ when it breaks away from a wirehouse and has to quickly implement an entire operational infrastructure from office space and phone systems to CRM, investment, and custodial technology, how Matt and his team adapted their stand-up-from-scratch breakaway experience to help RIA owners by implementing their own 10-page “Operational Diagnostic” questionnaire to fully understand each advisory firm’s operational strengths and gaps across a wide range of domains from better onboarding with the firm’s custodian to refining its systems to deliver financial planning to clients, and how Matt ultimately built his COO Society, an online coaching program and community for those Operations professionals within independent RIAs who are focused on those key technology, human resources, and business administration issues, to help them to navigate growth at their own RIAs… and become better more well-rounded COOs themselves.

We also talk about how Matt stumbled into his own advisory career in the late 1990s as a 22-year-old recent college graduate after a recruiter found him a job as an operations point person for an ultra-high-net-worth top-producing team of four brokers at the Beverly Hills branch of Merrill Lynch, how after admittedly making the mistake of leaving Merrill to sell insurance on his own, Matt was recruited back by his former Merrill team in 2008 to help them found and launch Luminous Capital, one of the very first breakaway independent RIAs which began with $1.7 billion of client assets, and how, after years of working closely with RIAs affiliated with Focus Financial to consult on their operational efficiencies, Matt was inspired (and with a little nudging from his very entrepreneurial wife) to launch PFI Advisors so that he could offer his wealth of operations knowledge to consult with a wider range of breakaway brokers and RIA owners… and gain the flexibility and control that independence provides to run his consulting business however he wished as he started his own family.

And be certain to listen to the end, where Matt shares how the unexpected illness (and subsequent tragic death) of his daughter Layla impacted Matt and his wife while they were still in the early stages of launching PFI Advisors, how Matt has learned through trial and error that as a consultant and business owner, gaining new business is more than just stating what your firm does for those it serves, and instead is about explaining how those service offerings can solve for the specific pain points they’re looking to solve, and how Matt stays motivated through the words of the successful basketball coach from his alma mater that success can’t be sustained by simply looking at whether you’re winning, and instead is ultimately about finding self-satisfaction in knowing that you’re pushing your own limits by truly doing the best that you’re personally capable of.

So, whether you’re interested in learning about how Matt and his team help advisors break away from wirehouses to stand up their own RIAs, and RIA owners develop more efficient, scalable processes, why Matt and his wife decided to launch their own consulting firm and subsequently, the COO Society, or how the COO Society has developed a community to foster grow and knowledge to make better COOs in the advisory industry, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Matt Sonnen.

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One of the most important aspects of emotional wellbeing is having a feeling of control over one’s time. Indeed, financial advisors often describe one of the benefits of financial planning as helping people take control of their time by giving them the financial freedom to do what they enjoy. And likewise, for advisors themselves, one of the ways to stay happy and thriving is to have the ability to spend time doing what one finds is most valuable or fulfilling.

The 2021 Kitces Research Report on What Actually Contributes To Advisor Wellbeing reinforced the idea that the happiest advisors feel in control over their time. Study data showed that ‘Thriving’ advisors – those who reported high levels of overall wellbeing – spent more time on ‘core’ client activities (such as client meetings and developing financial plans) and less time on other activities like administration and back-office tasks when compared to ‘Struggling’ advisors who reported lower wellbeing. Thriving advisors also worked fewer hours each week than their struggling counterparts, suggesting that they not only spent more time on fulfilling client work but also had more time to devote to fulfilling pursuits outside work.

But it wasn’t just the hours spent on each task that mattered for advisor wellbeing. The amount of autonomy that advisors felt over how they spent their working hours – that is, their ability to choose what tasks they worked on over the day – led to them being able to actually spend their time doing work they enjoyed. And while the ability to enjoy this autonomy might be dictated by some factors (like experience) that are out of the advisor’s control, there are methods that all advisors can use to optimize how they manage their schedule, which could make enough of a difference to see a meaningful improvement in wellbeing.

One strategy advisors can use is time blocking – i.e., blocking off stretches of time in one’s calendar for specific tasks or even for a single project. Creating this focused time not only helps eliminate distractions and inefficiencies caused by frequently bouncing between tasks; it can also make the advisor more efficient and effective at their tasks when they are immersed and engaged in their work without interruption.

There are several ways that advisors can implement time blocking in their work. ‘Theme Days’ give each day of the week a specific purpose, so tasks can automatically be sorted into the day they ‘belong’ to. Alternatively, the ‘Ideal Week’ method incorporates business and personal goals for advisors who want to work less than the traditional workweek. And ‘Surge Meeting’ schedules block off certain months or weeks of the year for advisors to get in all their client meetings, freeing up the rest of the year for other projects or even for time off.

Regardless of the method, time blocking works best when the advisor can remain undistracted by other tasks. This might require some creativity in finding ways to eliminate distractions and organize tasks to ensure they are dealt with at an appropriate time rather than buried in an inbox. Ultimately, though, it may require some fine-tuning (and practice!), time blocking can be the path to achieving greater autonomy – and better wellbeing! – in the year ahead.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Federal Trade Commission has proposed a nationwide ban on noncompete clauses in employee contracts, aiming to give employees more freedom to change jobs within the same industry. In the advisor world, where noncompete agreements are fairly common, a ban on the practice could incentivize firms to reassess their employee value proposition and to consider ways to establish their clients’ relationships with the firm, and not just with their advisors.

Also in industry news this week:

A study suggests that simplification is the top reason consumers combine their investment accounts, signaling that the onboarding process for new advisory client assets is a value-add in itself
FINRA has released its enforcement priorities for 2023, including a continued focus on compliance with Regulation Best Interest as well as several new priority topics, such as manipulative trading, fixed-income pricing, and trading in fractional shares

From there, we have several articles on retirement planning:

The latest rules for 2023 Required Minimum Distributions from inherited retirement accounts
How reviewing and adjusting capital market assumptions can help advisors refine their use of Monte Carlo simulations
Why relying on Treasury Inflation-Protected Securities (TIPS) to support the bulk of retirement income needs could be risky

We also have a number of articles on investment planning:

A recent study indicates that rebalancing a portfolio on an annual basis is superior to longer or shorter time horizons
How stocks and bonds tend to perform following their biggest down years
The long-term portfolio growth trajectory clients can expect when implementing a dollar-cost averaging strategy

We wrap up with three final articles, all about dealing with distractions:

The four types of attention and how individuals move between them throughout the day
How consolidating the wide range of ‘inboxes’, from email to workplace messaging, can help limit distractions throughout the day
How incorporating breaks to review notifications and social media during the workday can create more time for focused work

Enjoy the ‘light’ reading!

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As comprehensive financial planning has become more widely adopted, many financial advisors have felt pressure to find new ways to differentiate themselves by demonstrating their unique value to clients. And while providing fee-only advice or highlighting service as a fiduciary may have once been a fair differentiator, these services are now often considered table stakes, necessitating financial advisors to find more creative solutions that show current and prospective clients that they provide more value than other advisors. However, as more advisors continue to increase the services they offer to enhance their value propositions, the new challenge has become balancing the many services offered to clients (who sometimes don’t really need all of the services offered) with enough time and capacity to show up for clients who truly need help with a particular problem.

In our 103rd episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges of finding an optimal balance between proactively providing value and the consistency of simply being available to respond to clients when they come to their advisor for assistance.

Some advisors increase their value propositions by offering a ‘proactive sledgehammer’ of value by inundating clients with all the things they can do for them to emphasize that they not only have them top of mind, but also that they keep them top of mind all year round. Some advisors implement client service calendars that dedicate certain times of the year to tax planning, insurance reviews, or quarterly meetings, and fill the gaps with newsletters, client appreciation events, and regular firm updates. Others use frequent emails to stay in regular contact, sending reminders or helpful information relevant to their clients. Though these can be good approaches to increase touch points and create value for clients, balancing the frequency of these touch points (and the scope of what clients are offered) with the real value that clients actually need and expect is most important. Because while some clients may appreciate and need more frequent communication, others just want to know that the advisor is there when they need them. And while frequent communication may be important with many clients, it is often the most critical in the early stages of a client relationship, when advisors are just learning about their client’s needs and building trust with the client. However, as the relationship matures, clients may build enough trust in their advisor that they no longer expect (or want!) frequent communication, satisfied in knowing that if any financial issues arise, the advisor will be there to help them.

Ultimately, the key point is that while most clients will appreciate many of their advisor’s valuable services and proactive communication, finding the optimal balance between offering too much and simply being available when needed will depend on each unique client. This begins with understanding their needs (and communication preferences!) and gaining their trust. And building trust early on not only helps advisors develop more meaningful relationships with clients, but also helps them save time as they won’t need to spend as much time offering solutions that they know won’t really matter to the client. Which means the advisor will end out with more time to focus on providing better – and more relevant – service with the capacity to be available when a client truly needs it!

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Leading up to 2022, financial advisors and their clients had grown accustomed to a relatively low mortgage rate environment. In fact, until earlier this year, the average 30-year fixed mortgage rate had stayed below 5% since 2010 (and below 7% since 2001). But as the Federal Reserve has sought to raise interest rates this year to combat inflation, mortgage rates have reached higher levels not seen in more than 20 years, with 30-year fixed mortgages reaching an average of 6.9% in October 2022, twice the 3.45% average rate in January.

While the plight of today’s first-time homebuyers facing higher mortgage rates has attracted much media attention (deservedly so, as the monthly payment on a 30-year fixed mortgage for the median-priced home in the U.S. increased by nearly $1,000 in the past year), higher interest rates can affect financial planning calculations for current homeowners as well. For instance, higher interest rates have raised the borrowing costs for those looking to tap their home equity through a home equity loan or a Home Equity Line Of Credit (HELOC), and older homeowners considering a reverse mortgage will also be subject to higher interest rates.

At the same time, higher interest rates can present opportunities for some individuals. For example, those who are interested in making an intra-family loan could generate more income from the higher Applicable Federal Rates (while the loan recipient benefits from a rate significantly lower than standard mortgage rates). In addition, many current homeowners could have mortgages with rates lower than the ‘risk-free’ rate of return now available on U.S. government debt, which has risen alongside broader interest rates (perhaps changing the calculus of whether to pay down their mortgage early). And current homeowners with significant equity could consider downsizing and buying a smaller home in cash, potentially benefiting from a less-competitive housing market while not having to take out a mortgage at the current rates.

Ultimately, the key point is that a higher interest-rate environment affects not only homebuyers looking to purchase a home for the first time but also those who are current homeowners. Further, given that a home can be considered a consumption good (that often comes with emotional attachments) as well as an asset on the homeowner’s net worth statement, advisors can also add value by helping clients explore their home-related goals and assessing the financial tradeoffs of purchasing a more or less expensive home with a mortgage in a higher rate environment (or, if they have the means, whether buying a home in cash might be appropriate!). Regardless of whether a client is an aspiring first-time homebuyer or considering downsizing in retirement, advisors can add value by helping their clients navigate higher mortgage-rate environments!

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Welcome back to the 315th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Lisa Brown. Lisa is a Partner and Wealth Advisor for CI Brightworth, an RIA under the CI Financial umbrella with offices in Atlanta, Georgia, and Charlotte, North Carolina, that oversees nearly $5 billion in assets under management* for over 1,500 client households.

What's unique about Lisa, though, is how, by digging deeper into an existing firm niche focus of Coca-Cola employees and talking extensively with employees there about their common needs and issues that affected their financial goals, she began to write white papers for them, which was so successful in building her reputation and expertise – and client base – within the company that she gave up her own office space because she was spending so much time meeting with clients in their offices at Coca-Cola headquarters… which just led to even more referrals and growth by being so visible on-site at the company.

In this episode, we talk in-depth about how Lisa realized that by visiting Coca-Cola’s headquarters consistently and engaging employees in-person about their financial issues, she could become known as a familiar and trusted financial expert in the Coca-Cola community, how Lisa leveraged writing white papers about preparing for retirement and what to look for in severance packages in the event of a layoff specifically for the Coca-Cola employee niche as marketing tools to gain even more referrals within the company, and how, as a practice area leader for corporate professionals and executives as one of CI Brightworth’s four key practice areas (the others being business owners, dentists, and retiring clients), Lisa has begun to train and guide the next generation of advisors in the firm about how to become effective business developers by identifying and getting known in their area of specialization, too.

We also talk about how, in the early stages of Lisa’s career, she doubted her future in the financial services industry and decided to obtain an MBA as a fallback, but coincidentally during her first semester, the program began offering a Master's in financial planning that provided the same coursework required to take the CFP exam which ultimately led Lisa to obtain her CFP designation and find a successful career path in the industry, how Lisa credits preparing tax returns for clients during her formative years at Goldman Sachs Ayco as one of the ways she grew her confidence and expertise to feel more comfortable as an expert advisor, and how Lisa leveraged 4 pillars of professional networking, joining organizations and attending their networking events, public speaking, and creating content in the local media to build her personal brand and gain referrals.

And be certain to listen to the end, where Lisa shares how she hit a point where she realized working nights and weekends was taking away from the time she could have been spending with her husband and children, and had to force herself to get comfortable with prioritizing what was urgent versus really truly important to regain more of that family time, why Lisa feels it’s important for newer, younger advisors to surround themselves with experienced advisors and take every opportunity to absorb the knowledge and practices that they put forward to develop as a better advisor and create a successful career path for themselves early on, and why Lisa believes the key to success for her at this point in her career is how she can impart the wisdom she has gained and sponsor younger advisors to help them build the skills and confidence they need to become better advisors and find their own paths to success.

So, whether you’re interested in learning about why Lisa decided to work with corporate professionals and executives, how Lisa and her firm are working to replicate their success at Coca-Cola with other larger corporations and white papers, or how Lisa thinks about and develops processes to increase and improve business development, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Lisa Brown.

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While it may be easy to assume that having more money would make a person happier by opening consumption opportunities unavailable to those with less income, experienced advisors can likely identify many examples of high-income individuals who are unhappy with their lives. To provide a more holistic view, researchers have sought to assess whether increased income leads to greater happiness on two dimensions: emotional wellbeing (how an individual feels today) and evaluative wellbeing (how an individual feels about their life overall).

An oft-cited 2010 study by Daniel Kahneman and Angus Deaton found that while overall life evaluation was positively correlated with income (even at levels exceeding $120,000), emotional wellbeing only increased up to $75,000 of income, plateauing after that point. This suggested that, after a certain point, increased income would not necessarily increase an individual’s day-to-day happiness. However, a 2021 study by Matthew Killingsworth using a more granular measurement scale found that day-to-day wellbeing continues to increase even beyond income levels exceeding $75,000 (while also finding that overall life evaluation increases with higher income as well).

When it comes to financial advisors, in particular, Kitces Research found a similar positive correlation between income and happiness. For instance, our research found that not only is advisor take-home income positively correlated with overall life satisfaction, but also that, similar to Killingsworth’s findings, their income is positively correlated with positive feelings and negatively correlated with negative feelings, even as income exceeds $75,000.

Importantly, there are other factors that can mediate the relationship between income and happiness, which may explain why higher income doesn’t always lead to greater happiness. For instance, Killingsworth found that respondents increasingly reported that they did not have enough time to get things done as their income rose, serving as a small but significantly negative mediator of the association between income and experienced wellbeing. This concept of ‘time poverty’ also appears to apply to financial advisors, as Kitces Research has found that the number of hours an advisor works in a given week is inversely correlated with their wellbeing.

These findings suggest that advisors who choose to pursue increased income in the pursuit of greater experienced happiness may be more successful if they deliberately protect the time they have available for their other responsibilities and interests. A few ways that can help advisors do this include adding staff as their firm reaches certain revenue ‘pain points’ where they have too much work on their plate, and allocating more ‘hard dollars’ paid to outside vendors for marketing services as the firm grows, allowing firm owners to use their time for more valuable and/or enjoyable activities.

Ultimately, the key point is that as an advisor’s income increases, their wellbeing – in terms of both day-to-day happiness and overall life evaluation – can potentially increase as well. But if higher income comes with increased demands on the advisor’s time, particularly if they get to the point where they feel they don’t have time to finish everything they need to get done, the experienced ‘time poverty’ can have a negative effect on the advisor’s wellbeing. In the end, time is the ultimate scarce resource, and it is important for advisors to spend it wisely, particularly as their income increases!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Securities and Exchange Commission (SEC) has received significant pushback from investment adviser and financial industry trade groups to the regulator’s recent proposal that would establish formalized due diligence and monitoring obligations for investment advisers that outsource certain advisory functions. While the proposal received support from state regulators and consumer advocates, adviser industry groups argued that the measure would create unnecessary extra work for advisers and could be a particular burden on smaller firms.

Also in industry news this week:

Amid a robust regulatory agenda, the SEC is facing elevated employee attrition, particularly in its senior ranks
How planning specializations can help firms and their advisors stand out from the pack

From there, we have several articles on retirement planning:

Why an individual’s portfolio of relationships could be just as important as their investment portfolio when it comes to happiness in retirement
A recent study shows how delaying Social Security benefits typically leads to greater lifetime wealth than claiming benefits early in order to reduce portfolio withdrawals
Why ‘failure’ scenarios in Monte Carlo simulations are very different than plane crashes

We also have a number of articles on practice management:

Why the most successful firms in the coming years might be those who dominate individual market segments rather than those that are ‘overdiversified’
Four ways firms can attract next-generation advisor talent
Why being proactive can help firms overcome the challenges of hitting capacity ‘walls’

We wrap up with three final articles, all about New Year’s resolutions:

Why the most successful goals are often those that fit within one’s self-identity
How a ‘time audit’ can help an individual spend more time on their most important personal and professional activities
Why a single push-up could be the key to achieving a New Year’s resolution

Enjoy the ‘light’ reading!

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Financial advisors have a wide range of strategies at their disposal to create financial plans for their clients. And when it comes to retirement planning, one popular technique is the use of ‘guardrails’, which set an initial monthly withdrawal rate that can be later adjusted as the size of the client’s portfolio changes. This strategy is valuable because it generally allows for higher initial withdrawal rates than more static approaches that don’t accommodate clients willing to adjust their spending in retirement. However, given the technical nature of the guardrails approach, advisors can find it challenging to explain to prospective and current clients how it will work in practice.

To start, it is typically preferable to explain guardrails to prospects and clients in dollars rather than in percentage terms (e.g., telling the client they can safely withdraw $4,500 each month rather than saying they will have a 5.4% annual withdrawal rate). Further, given that a client’s monthly distributions will almost certainly change at some point when implementing a guardrails strategy, they must understand what this means in practical terms. To help them do so, advisors can explain that when market returns are strong, they can take larger distributions each month (in dollar terms), but when an inevitable bear market arrives, they may need to cut back on their monthly income until things get better. In addition to explaining withdrawals in dollar terms, advisors can also present a client’s asset allocation in dollar terms (instead of the more usual approach of explaining the allocation in percentages) by framing it as the number of years of income that would be protected from stock market fluctuations (e.g., setting aside a ‘war chest’ of cash and fixed income balances to provide 5 years’ worth of income).

While most clients will have no problem accepting a larger monthly income, tightening their belts will be more challenging. One way to prepare clients for a potential reduction of their monthly income is to give advance warning that a cut might be necessary if their portfolio declines further (and to encourage them to consider where they would cut back if needed). In the case of a market downturn, advisors can wait an agreed amount of time (e.g., 2 quarters) after the client’s portfolio balance falls below the lower guardrail before implementing an income reduction, as this can give the market time to recover and preclude the need to make any adjustment at all (and is still more conservative than the annual review prescribed in the initial guardrails research). If the portfolio balance declines due to excess distributions (e.g., a lump-sum withdrawal to buy a new car), advisors can advise clients on whether withdrawals will bring them closer to (or even dip below) the lower guardrail and the implications for their future monthly income.

Ultimately, the key point is that while a guardrails strategy can help clients maintain sustainable withdrawal rates throughout retirement, ensuring that clients understand how the strategy applies to them – in practical terms – is essential for success. Advisors can do this by explaining withdrawal rates, guardrails, and potential future changes in spending and income, all in dollar (rather than percentage) terms. Furthermore, by giving clients advance warning of potential changes, advisors can help clients feel confident about the guardrails strategy and, perhaps more importantly, in their advisor’s ability to implement it!

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Welcome back to the 314th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Sue Chesney. Sue is the owner of Delegated Planning, which offers virtual outsourced financial planning support to 55 advisory firms, and the co-founder of Planning Zoo, an outsourced financial planning data entry business that helps current and recently graduated students from college CFP educational programs connect with advisory firms that need paraplanner support for data entry into financial planning software.

What's unique about Sue, though, is how through Delegated Planning and Planning Zoo, she’s pioneered one of the largest outsourced financial planning support firms in the country, and shares her first-hand experience of how advisory firms are scaling the delivery of comprehensive financial plans by increasingly separating the front-office work of delivering comprehensive financial plans to clients from the middle-office work of creating them (and how firms are increasingly leveraging outsourcing providers so they don’t have to be responsible for hiring and training those financial planning support employees, either).

In this episode, we talk in-depth about why Sue founded Delegated Planning so that she could bridge a gap between CFP professionals who simply wanted to work on financial plans (and not necessarily with their own clients) and advisors doing financial plans for clients who needed both paraplanning and virtual CFP support services but don’t have the time (or resources) to hire a full-time employee that they would also have to train and manage, how, in a similar vein of supporting advisors, Sue decided to launch Planning Zoo where she and her partners train and teach aspiring CFP professionals the skills to do data entry with financial planning software using real client cases so that they can gain industry experience before graduating (again while relieving the pressure from advisors that need additional trusted support but don’t want to hire and train it), and how Sue has seen that by charging by the hour (down to the minute) for Delegated Planning, the advisors who work with them have been able to better align their fees and their financial planning offering… now that they can see how much time it truly takes for their financial plans to be built for each client.

We also talk about how, while on the verge of taking over another advisor’s business, Sue realized she enjoyed planning work more than working with clients directly, and with the encouragement of a virtual assistant from her former firm and peers in her study group, she decided to offer her services as an outsourced CFP and launch Delegated Planning, how, by offering flexible schedules, Sue was able to tap into a unique talent pool of advisors who want to supplement their income while getting their own RIAs off the ground and planners who also enjoy the planning work but don’t want to work with clients directly, and the way that Sue navigates the cybersecurity and E&O risks of serving as an outsourced financial planning service provider by operating as a “co-fiduciary” with the advisors her firm works with to their end clients.

And be certain to listen to the end, where Sue shares how, as Delegated Planning has scaled over the years, she has dealt with the difficult task of shifting from being a manager of her growing team into more of a CEO mindset to help scale the business further, why, even though it may feel risky and scary, and requires a lot of preparation, Sue feels it is important for newer advisors to explore the opportunity of one day owning their own firms because of the freedom it brings and the rewarding feeling of helping clients and furthering the financial services industry, and why Sue feels that the key to her success has been enjoying what she does for a living, as in the end as a business owner the business is always on her mind… but she doesn’t mind that it’s so hard to stop thinking about work, because it’s work she enjoys and finds fulfillment in how she’s able to help other advisors.

So, whether you’re interested in learning about why Sue launched Delegated Planning and Planning Zoo to help advisors find planning and data entry support, how Sue helps newer planners gain real-world experience and learn a variety of planning software, or how Sue deals with the challenges of stepping into a CEO role and managing two businesses, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Sue Chesney.

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Welcome to the January 2023 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that Envestnet has decided to enter the RIA custodial business through a partnership with Australian bank FNZ to white-label what was once the State Street RIA custodial platform of many years ago – providing Envestnet an opportunity to even more deeply integrate its front-end advisor platform to the back-end of custody for a more seamless end-to-end experience (and, potentially, a more competitive bundled pricing arrangement for a unified technology-plus-custody offering).

Notably, though, with so much of Envestnet’s existing base of advisors in the independent broker-dealer channel, it seems less likely that the company will be competing with the ‘traditional’ RIA custodians of Schwab and Fidelity for independent RIAs and wirehouse breakaways, and more against the likes of LPL and Pershing for broker-dealers that are adding and expanding RIA offerings to their increasingly hybrid platforms (and might welcome the opportunity to save on Envestnet’s software costs by adopting its RIA custodial platform in the future?). Which positions Envestnet well to grow with a unique segment of ‘emerging’ RIAs… while providing relatively little competitive pressure to the existing RIA custodial ecosystem.

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

Docupace launches an ‘RIA Productivity Toolkit’ as it increasingly expands beyond its document management roots in a bid to become more of the back-office workflow engine of small-to-mid-sized advisor enterprises
Raymond James launches ‘Opportunities’ as the latest competitor to facilitate ‘Next Best Conversation’ insights to help their advisors engage with the right clients at the right time for the most meaningful conversations
FMG partners with Catchlight to integrate its marketing insights about the prospects on an advisor’s email list to better target content that can turn them into clients

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

AdvisorFinder launches a new expertise-based lead generation portal that matches prospects based not on their zip code or advisor compensation preferences, but on the advisor’s specialization or typical (i.e., niche) clientele
Modern Life raises $15M and rolls out a digitally-based life insurance brokerage solution for advisors who want to continue to offer life, disability, and long-term care insurance but with a more ‘modern’ technology platform to facilitate applications, underwriting, and in-service support

In the meantime, we’re excited to announce several new updates to our new Kitces AdvisorTech Directory, including Advisor Satisfaction scores from our Kitces AdvisorTech Research, and the inclusion of WealthTech Integration scores from the Ezra Group!

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 TechNews@kitces.com!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the passage of “SECURE Act 2.0” has brought a wide range of changes to the world of retirement planning. And given the variety of planning opportunities created by the legislation – from the raising of the beginning age for RMDs to the ability to transfer funds from 529 plans to Roth IRAs – advisors have a significant opportunity to demonstrate value for their clients!

Also in industry news this week:

Why many clients of robo-advisors are seeking out human advisors in the current market climate
A new study shows that there is a wide gap between firms leveraging technology to enhance the client experience and those that do not treat their tech stack as a priority

From there, we have several articles on advisor technology:

A recent survey shows that many advisors at large firms are unhappy with their firm’s current tech stack and that client growth has suffered because of it
Why it is important for advisory firms to conduct an audit of their tech stack and the steps they can take to conduct the exercise
Why advisors might consider looking past some of the big names in advisor technology to find tools that can provide a better experience for themselves and their clients

We also have a number of articles on investments:

Fixed-income ETFs saw inflows this year, while their mutual fund counterparts experienced significant outflows, suggesting that the dominance of bond mutual funds could be eroding
How advisors are increasingly purchasing individual bonds rather than bond funds in client accounts
Why a higher interest rate environment could represent a ‘sea change’ for investors in the years ahead

We wrap up with three final articles, all about self-improvement:

Why working to change their mindsets might be the activity that provides the greatest return-on-investment for advisors
How to set better health goals for 2023 and actually follow through on them
Why the ability to achieve big goals starts with seemingly small habits

Enjoy the ‘light’ reading!

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For many seasoned financial advisors, the road toward building a career and a business can be challenging and rewarding. And even though most advisors would agree that the road to success involves many years of hard work and sacrifice, each advisor’s path to ultimate success can consist of massively different experiences.

In our 102nd episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges they have each faced in their decades-long careers, the ways they developed opportunities for themselves to advance in their professional and personal lives, the importance of self-awareness, creating balance, and how reflecting on a career in retrospect can often provide insightful perspectives and appreciation for the present and even the future.

While newer advisors are faced with infinite pathways in the financial services industry, it can often be easy to focus solely on getting ahead professionally while putting aside personal interests and self-care. But by deliberately managing a lifestyle that focuses on work, play, and rest, younger professionals can establish a healthy work-life balance that can benefit their well-being throughout their entire lives.

One critical question for advisors to ask themselves, regardless of where they may be in their careers, is whether they are doing things today to set the stage for the kind of life that they ultimately want in the future. And while there will always be unplanned surprises, maintaining a vision based on the advisor’s values and priorities will help them make the best decisions possible to support their path.

Ultimately, the key point is that while newer advisors can learn from more experienced advisors, there is no one right path to take in an advisory career. Certain strategies for paving career paths and balancing work-life priorities will work for some but not others. However, by learning from past mistakes and staying focused on their values and priorities, advisors can ensure that they make the best possible choices for their own lives and careers. And by sharing their knowledge and experience, advisors can enrich the financial planning community by providing support and insight to others who may be facing similar challenges and victories along their own paths to success!

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The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in December 2019, brought a wide range of changes to the retirement planning landscape, from the death of the ‘stretch’ IRA to raising the age for Required Minimum Distributions (RMDs) to 72. And nearly 3 years to the day after its predecessor was passed, the U.S. House of Representatives on December 23, 2022, passed the Consolidated Appropriations Act of 2023, an omnibus spending bill that includes the much-anticipated and long-awaited retirement bill known as SECURE Act 2.0.

One of the major headline changes from the original SECURE Act was raising the age for RMDs from 70 ½ to 72, and SECURE 2.0 pushes this out further to age 73 for individuals born between 1951 and 1959 and age 75 for those born in 1960 or later. In addition, the bill decreases the penalty for missed RMDs (or distributing too little) from 50% to 25% of the shortfall, and if the mistake is corrected in a timely manner, the penalty is reduced to 10%.

In addition, SECURE 2.0 includes a significant number of Roth-related changes (both involving Roth IRAs as well as Roth accounts in employer retirement plans), though notably, the legislation does not include any provisions that restrict or eliminate existing Roth strategies (e.g., backdoor Roth conversions). These changes include aligning the rules for employer-retirement-plan-based Roth accounts (e.g., Roth 401(k)s and Roth 403(b)s) with those for individual Roth IRAs by eliminating RMDs, creating a Roth-style version of SEP and SIMPLE IRA accounts, allowing employers to make matching contributions and non-elective contributions to the Roth side of the retirement plan instead of just the pre-tax portion (though participants will be subject to income tax on such contributions), and allowing for transfers from 529 plans to Roth IRAs (with significant restrictions).

SECURE 2.0 also includes several measures meant to encourage increased retirement saving. These include making IRA ‘catch-up’ contributions subject to COLAs beginning in 2024 (so that they will increase with inflation from the current $1,000 limit), while also increasing 401(k) and similar plan catch-up contributions; creating a new “Starter 401(k)” plan (aimed at small businesses that do not currently offer retirement plans; such plans would include default auto-enrollment and contribution limits equal to the IRA contribution limits, among other features); and treating student loan payments as 'elective deferrals' for employer matching purposes in workplace retirement accounts, which would allow student loan borrowers to benefit from an employer match even if they can't afford to contribute to their own retirement plan.

Ultimately, the key point is that while no single change in SECURE 2.0 will require the same level of urgency to consider before year-end changes to clients’ plans as did the original SECURE Act, nor will it have the same level of impact across so many clients’ plans as the elimination of the stretch, there are far more provisions in SECURE 2.0 that may have a significant impact for some clients than there were in the original version, making it a more challenging bill for financial advisors and other professionals to contend with!

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Welcome back to the 313th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is John Stokes. John is the founder and CEO of John Stokes Financial, a hybrid advisory firm based in Irvine, California that oversees more than $400 million in assets under management*, for 1,800 client households.

What's unique about John, though, is how he has built an expertise in layoff transitions and leveraged corporate layoff workshops – that large firms hire him to come in and deliver to their soon-to-be-laid-off employees – to build a niche focus in helping employees go through their layoff transition… and capture the inevitable rollover and other financial planning opportunities that arise along the way.

In this episode, we talk in-depth about how, as an expert in layoff transitions, John has leveraged relationships with a number of large companies in California (that are required to meet a California state law mandate to notify and prepare employees for a layoff 60 days in advance) to create a niche focus counseling employees through layoffs, how John established and built his relationships with large companies by pitching the importance of understanding the rules for navigating unemployment insurance (not focusing on employee 401(k) rollovers directly) so that he could offer a truly needed value for the companies seeking to make their layoff transitions go as smoothly as possible, and how despite what is traditionally a cyclicality to layoffs the reality is that there are so many large companies in the US going through change and competition that that layoffs are inevitable… which has allowed John to achieve a steady stream of over 100 in-person workshops a year and a steady flow of new clients in both bull and bear markets.

We also talk about how during the early years of John’s career at a broker-dealer, he was inspired to work solely with those going through various stages of layoffs after he realized that he could entirely avoid cold-calling and consistently meet with hundreds of people at a time during workshops to generate a high referral rate, why John insists on not being compensated for his workshops as he feels it is his duty to provide goodwill and help people through trying times and uncertainty (knowing that, inevitably, some of the people he helps will want to engage him further), and why John takes the time to ensure he hires advisors that are motivated by their willingness to help people and greeting clients with deep empathy in order to maintain firm culture and the skillset necessary to help clients through their difficult and stressful layoff transitions.

And be certain to listen to the end, where John shares how witnessing his father go through a layoff in New Zealand after a multi-decade career at a single company, and experiencing two layoffs himself early in his career, helped John see the value in focusing on people going through layoffs because he could connect more deeply with his clients based on his own personal experiences, why the effects of the pandemic on John’s in-person meeting cadence gave him time to realize that he had an opportunity to further deepen his client relationships by providing financial planning as a value add at no additional cost (as prior to the pandemic, his client relationships had been more transactional), and why John feels it’s important for advisors entering the financial services industry to find their inner passion as soon as possible as it not only helps to develop a more specialized focus (which John feels is invaluable to surviving in the industry), but it also creates better opportunities for advisors to use their knowledge and skills for the betterment of society… and themselves.

So, whether you’re interested in learning about how John has grown and scaled his firm through a niche focus of layoff transitions, how John has leveraged virtual workshops to engage with even more companies across the U.S., or how the limiting of in-person workshops during the pandemic has inspired John to offer financial planning and has increased opportunities for his firm to grow and scale even further, then we hope you enjoy this episode of the Financial Advisor Success podcast, with John Stokes.

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As 2022 comes to a close, I am once again so thankful to all of you, the ever-growing number of readers who continue to regularly visit this Nerd’s Eye View Blog (and share the content with your friends and colleagues, which we greatly appreciate!). This year has been challenging for many financial advisors as they help their clients (and their own firms!) navigate a volatile market environment (in both stocks and bonds – oof!) and inflation levels not seen in several decades. Personally, it has been a big year of change as well, with the Kitces.com platform adding new team members, rolling out a new IAR CE offering and our latest Estate Planning course, and introducing the AdvisorTech Directory, among other additions, to fulfill our own mission of “Making Financial Advicers Better and More Successful”.

We recognize (and appreciate!) that this blog – its articles and podcasts – is a regular habit for tens of thousands of advisors, but that not everyone has the time or opportunity to read every blog post or listen to every podcast that is released from Nerd’s Eye View throughout the year. As many of you noted in response to our Reader Surveys, most choose which content to read or listen to based on headlines and topics that are of interest (and skip the rest). Yet in practice, this means that an article once missed is often never seen again, ‘overwritten’ (or at least bumped out of your Inbox!) by the next day’s, week’s, and month’s worth of content that comes along.

Accordingly, just as I did last year, and in 2020, 2019, 2018, 2017, 2016, 2015, and 2014, I've compiled for you this Highlights List of our top 20 articles in 2022 that you might have missed, along with a few of our most popular episodes of ‘Kitces & Carl’ and the ‘Financial Advisor Success’ podcasts. So whether you’re new to the blog and #FASuccess (and Kitces & Carl) podcasts and haven’t searched through the Archives yet, or simply haven’t had the time to keep up with everything, I hope that some of these will (still) be useful for you! And as always, I hope you’ll take a moment to share podcast episodes and articles of interest with your friends and colleagues as well!

Don’t miss our Annual Guides as well – including our list of the “9 'Best' Financial Advisor Conferences (For Scaling Up) In 2023”, the ever-popular annual “2022 Reading List of Best Books For Financial Advisors”, and our increasingly popular Financial Advisor “FinTech” Solutions Map and AdvisorTech Directory!

In the meantime, I hope you're having a safe and happy holiday season. Thanks again for the opportunity to serve you in 2022, and I’m excited to share more soon about some new initiatives we’re planning to do to support the Financial Advicer community even more in 2023 and beyond!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that Congress appears poised to pass “SECURE Act 2.0”, a series of measures that will have significant impacts on the world of retirement planning. From gradually raising the RMD age to 75 to expanding opportunities to make Roth-style contributions, to increasing the annual limit for Qualified Charitable Distributions, this legislation will likely impact nearly all financial planning clients!

Also in industry news this week:

How a recent survey shows that financial advisors are increasingly attracted to independent affiliation models, with greater autonomy, higher potential pay, and the ability to build value in a business cited as key factors driving this preference
While RIA M&A activity has been red hot during the past couple of years, a survey suggests that advisors are expecting lower valuations in 2023

From there, we have several articles on advisor marketing:

Five tactics advisors can use to make the most of the online referrals they receive
How advisors can structure introductory prospect meetings to build trust and increase the chances of moving the relationship forward
Why advisors crafting their marketing message might first want to consider whether their target client needs a ‘life raft’ or a ‘sailboat’

We also have a number of articles on spending and budgeting:

Why advisors might want to consider using a client service calendar to organize the wide range of services they provide for clients throughout the year
A review of financial planning actions, from tax-loss harvesting to charitable giving, that have a December 31 deadline
How the holiday season presents an opportunity to have important money-related conversations with family members

We wrap up with three final articles, all about gift giving:

The do’s and don’ts of holiday gift giving in the workplace
How ‘regifting’ can help save money and reduce waste
Why being present during gatherings with friends and family members can be the best gift of all during the holiday season

Enjoy the ‘light’ reading!

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Monte Carlo simulations have become the dominant method for conducting financial planning analyses for clients and are a feature of most comprehensive financial planning software programs. By distilling hundreds of pieces of information into a single number that purports to show the percentage chance that a portfolio will not be depleted over the course of a client’s life, advisors often use this data point as the centerpiece when they present a financial plan. However, a Monte Carlo simulation entails major statistical and philosophical nuances, many of which might be underappreciated by advisors and their clients.

One key nuance to the use of Monte Carlo simulations is whether they are being used as part of a one-time plan versus an ongoing planning process. For example, a Monte Carlo simulation resulting in a 90% probability of success will mean very different things depending on whether a client will take fixed portfolio withdrawals throughout retirement based on the initial probability of success or whether they plan to run additional simulations over time and are willing to adjust their spending based on market performance. For the former client, because a 90% probability of success means that there is a 10% chance they will deplete their portfolio (though the magnitude of the failure is unknown), they might choose to aim for an even higher probability of success to decrease the likelihood that they will run out of money in retirement. But for the latter client, to suggest they have a 10% chance of depleting their portfolio is overstating the risk, as they are willing to adjust their spending in response to future simulations that show a reduced probability of success.

An alternative way to use Monte Carlo simulations for clients who are willing to be flexible with their spending is to consider how spending would change when using a fixed probability of success. For instance, Monte Carlo simulations show that, for any selected fixed probability of success, the maximum and minimum annual spending for a client during the course of their lifetime is remarkably similar. While initial spending levels will be different depending on the target probability of success (as a higher selected probability of success will call for a reduced initial spending amount), adjusted spending levels will track each other closely no matter the initial probability of success chosen. What is different is that those who use a higher constant probability of success will likely have a larger portfolio balance at their death than do clients who choose a lower probability of success at the start of retirement.

This suggests that, in contrast to the view that probability-of-success levels are indicative of the risk of depleting a portfolio, the probability-of-success level used when adjustment is planned for in advance is essentially akin to putting your thumb on the scale to slightly favor either maintaining current income (lower probability of success) or preserving estate balance (higher probability of success). In other words, if an advisor is going to use Monte Carlo on an ongoing basis, then the probability of success threshold targeted is more akin to a slider that adjusts the degree of preference for current income or legacy rather than a meaningful measure of the likelihood of depleting a portfolio.

Ultimately, the key point is that because the results of Monte Carlo simulations contain a significant amount of nuance, particularly if being utilized as part of an ongoing planning relationship, advisors can consider using them as an internal analytical tool but communicating the results through the use of risk-based guardrails or as a tradeoff between current income or legacy interests to help clients better understand what the results actually mean for their financial plan!

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Welcome back to the 312th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Emily Rassam. Emily is the Senior Financial Planner for Archer Investment Management, a virtual Independent RIA based in Austin, Texas, that oversees $170 million of assets under management for nearly 170 families.

What's unique about Emily, though, is how after struggling for years at a position where responsibilities and pressure kept building (and kept deterring her from being present in her family life), she realized that she had built enough expertise that she didn’t need to settle anymore, and made it a priority to find her ideal position that not only appreciated her expertise… but would also help her build a better work/life balance.

In this episode, we talk in-depth about how, as Emily progressed in her career from working on 401(k) plans to focusing on financial planning, she faced challenges and eventual burnout while building a successful financial planning offering in a firm that was still primarily focused on 401(k) plans first and foremost and didn’t want to allocate resources away from its core 401(k) business, how, by what Emily describes as a stroke of luck in the midst of her burnout struggles, she took a chance in applying for a financial advisor position that she found at 3 a.m., which led her to her current role that pleasantly surprised her as their work culture and work/life balance priorities perfectly aligned with what she was seeking and desperately needed, and how exactly Emily determined that the firm would have such a positive work/life balance – when it didn’t advertise itself that way – by asking key questions of the firm owner during her interview process to understand their systems and processes and how invested the firm really was in its financial planning offering .

We also talk about how, in the very early stages of her career and immediately after finishing an internship for an insurance agency, Emily realized that even though the agency was already creating flyers and literature promoting her as a “financial advisor”, she was too young and inexperienced to truly take on that role, and decided to find a different more service-oriented job where she could gain more financial planning knowledge and expertise at a pace that was comfortable for her, the way that Emily eventually overcame her career-long struggles with imposter syndrome by getting better perspective on the expertise that she had built for 15 years in managing and educating 401(k) plan participants, and how Emily ultimately was able to shed the perceived notion she gleaned early in her career that advisors needed to be cold and calculated in selling their services, and realized that by focusing on the human aspects of financial planning, she could be successful and fulfill her own passion and purpose.

And be certain to listen to the end, where Emily shares how she admittedly struggled for years with saying “no” to clients and “yes” to too many opportunities and found that by advocating for herself and finding the right position that could support her (and help her set limitations for herself), she could finally create a space where she could not only thrive in her career, but at home as a wife and mother as well, why Emily believes it’s important for newer advisors to understand from the beginning of their careers that bringing value to clients does not have to be predicated on doing an overwhelming amount of work and instead can be focused on building more targeted expertise and knowledge that offers true value to their specific clientele, and how, even though Emily went through many years of struggling to find the right work/life balance, she feels it was important for her to have had those experiences because without them, she could not have the knowledge she gained and the appreciation for where she is today.

So, whether you’re interested in learning about how Emily eventually learned how to say ‘no’ to more work and ‘yes’ to a better work/life balance, how Emily leveraged 401(k) educational seminars and webinars to gain rollover opportunities, or how, by finally advocating for herself, Emily found the ideal position for her, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Emily Rassam.

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This summer, the Financial Planning Association (FPA) announced a new multi-year advocacy goal to pursue legal recognition for the title of "Financial Planner", as a means for bona fide financial planners to distinguish themselves and their services from others (who may use the title but don't actually do financial planning), to help consumers understand who is qualified to provide financial planning advice, and to raise standards for the financial planning profession by tying competency and ethics standards directly to the determination of who can hold out to the public using the title in the first place.

Yet the irony of FPA's new initiative for Title Protection is that "Financial Planner" actually did have protected status as a title all the way back in 2005, when the SEC issued a rule that would allow broker-dealers to offer fee-based brokerage accounts without being required to register as investment advisers and be a fiduciary… and as a part of the rule, stipulated that anyone who held out to the public as a financial planner, delivered a financial plan to a client, or represented that they were providing financial planning advice, would still have to be an RIA fiduciary. But a lawsuit to block the rule ultimately led to it (and the associated Title Protection for "financial planner") being vacated… by the FPA.

In fact, the reality is that in the 15 years since this Title Protection was struck down in the FPA's lawsuit, the organization has actively pursued the opposite strategy of advocating for a uniform fiduciary standard – one that would not separate "financial planners" from others who don't meet the standards to use the title, but instead would simply subject all RIAs and broker-dealers to a single standard. Except in practice, there are many important functions that broker-dealers fulfill that truly are not fiduciary or advice-oriented, such that a uniform standard just isn't feasible. Which has led to both the Department of Labor and Massachusetts implementing uniform fiduciary standards that were both ultimately struck down in court, and the SEC simply refusing to implement a uniform standard at all. Making the FPA's shift to now suddenly advocate for Title Protection a logical – albeit head-spinning – about-face from its position for the past two decades.

At the same time, questions abound as to how the FPA realistically plans to pursue Title Protection, and its noticeable abstention from mentioning the CFP marks anywhere in its discussion of its new advocacy agency, despite the fact that the FPA is the membership association for CFP professionals. The organization's own Bylaws even state that its messaging to the public and the industry should be that "when seeking the advice of a financial planner, the planner should be a CFP professional", and that "anyone holding themselves out as a financial planner should seek the attainment of the CFP mark." Raising the question of whether the FPA is also considering an about-face on its CFP-centricity, too... even as the CFP Board has announced its own Competency Standards Commission to raise their own standards regarding who can use the Certified Financial Planner title?

Ultimately, the FPA has stated that it intentionally has only set a high-level strategic advocacy goal to pursue Title Protection, and that it will spend the next 12-18 months engaging with stakeholders to determine a specific course of action, with no expectation of any legislative efforts earlier than 2024. Which means there is still ample time for the FPA to clarify its intentions and any further swings in its advocacy views. Yet at the same time, the organization's withdrawal from the Financial Planning Coalition, its noticeable exclusion of the CFP marks from its initial positioning statement on Title Protection, its unwillingness to support XY Planning Network's 2021 petition for Title Protection (ironically to reinstate the Title Protection rule that FPA vacated), and its declaration that it intends to enact Title Protection without licensing or regulation (raising the question of how the title could be protected, if no regulator or licensing agency is granted the authority to protect the title?), all suggest that the FPA may already have some plans in place… that it just isn't ready to share yet?

In the end, Title Protection is clearly a laudable goal – one that has been pursued by many industry organizations for years, even if the FPA has only recently arrived at a similar conclusion – and the FPA's willingness to take up the issue is a positive sign, serving as a potential fulfillment of P. Kemp Fain, Jr.'s famous "One Profession, One Designation" call to action. Still, though, the question remains: What exactly is the FPA's plan to pursue Title Protection, will it be able to effectively engage with stakeholders and other organizations that already have established efforts and a vested interest in the outcome, and will it be able to maintain the effort through to fruition in the midst of making 1 and perhaps 2 major about-faces in its advocacy approach?

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that CFP Board is forming a Competency Standards Commission in 2023 to review and evaluate its competency requirements for Education, Examination, Experience, and CE, which represents an opportunity for CFP Board to adjust its requirements, in alignment with the desires of the CFP community itself, to build confidence among the public that those with the CFP marks really will provide them with a consistently high level of financial planning advice!

Also in industry news this week:

While the FPA is going full steam ahead on its federal and state lobbying efforts to regulate the title “financial planner”, CFP Board is more focused on increasing recognition of the CFP marks
A recent survey suggests that Americans who use a financial advisor are less stressed than those who do not, but that the perceived price of advice is a deterrent to many (even those with significant assets)

From there, we have several articles on practice management:

Why it is important for advisors charging on a fee-for-service basis to regularly reassess their pricing, and best practices for letting current clients know about a fee increase
How advisors can benefit from reviewing their list of clients and letting go those who are no longer good fits for the firm
How firms can best leverage their internal data to improve the number of client referrals they receive

We also have a number of articles on retirement planning:

While weak stock and bond market performance has challenged advisors and their clients this year, these trends have likely increased the ‘safe’ withdrawal rate for new retirees
How the tontine, a centuries-old financial product has made a comeback this year as a way to mediate longevity risk
A recent survey indicates that Americans broadly feel like they are behind on their retirement saving, with those closest to retirement age most likely to think they need to catch up

We wrap up with three final articles, all about personal growth:

The lessons entrepreneurs and investors can take from the life and career of Warren Buffett
How individuals can best harness their willpower to achieve their biggest goals
While financial advisors regularly give advice to clients, more care is needed when giving unsolicited advice to friends and family

Enjoy the ‘light’ reading!

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For the better part of a decade, the financial services industry has anticipated the coming of fee compression, mainly due to the rise of robo-advisors offering low-cost automated wealth management services. Yet even though fee compression has not been fully realized to the extent the industry has generally expected, lower cost robo-advisor services have still compelled financial advisors to maintain relatively low fees. But when advisors continually add services as a means to differentiate themselves from other advisors, keeping fees low can prevent those advisors from maintaining high-quality talent and services, not to mention being able to reinvest in the business to grow and scale.

In our 101st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the challenges advisors face in setting fees commensurate to their service offerings and the importance of charging sustainable fees to help businesses flourish.

As a starting point, it’s important to understand that staying competitive doesn’t necessarily mean advisors need to have the lowest fees. Many advisors have focused on obtaining deeper levels of expertise in broader areas and offering more in-house planning services in those areas (e.g., tax and estate planning) to differentiate themselves. Yet, in order to sustain these value-added services, advisors need to be able to offer competitive salaries to retain the talent responsible for providing them! Which is important, as salaries have become more transparent, enabling employees to find positions that will offer them the salary compensation they feel they deserve. However, advisors who feel obligated to keep their fees low but who also feel the need to continually add services to justify their fees often risk losing employees (especially the ones that are most talented!) and create more challenges for themselves to maintain ongoing success.

Importantly, reflecting on the quality and types of services they offer can help advisors identify the right (i.e., accurately comparable) industry benchmarks to compare themselves with, so that the fees they charge for the services they provide are in alignment with what they are actually worth. And advisors who offer premium services can justifiably ask for premium fees, which means it can be completely appropriate for firms that go above and beyond to adjust fees higher than what they may have been originally charging!

Ultimately, the key point is that advisors who offer above-average services should be compensated accordingly, which may require charging above-average fees. And while raising fees may feel scary for advisors who fear they may be asking for unreasonable prices, it can be worthwhile to consider that a small step increase of just 10% (e.g., asking for 1.1% AUM instead of 1.0%) can still yield a significant rise in revenue that would provide capacity for better services, talent, and tools. Many advisors join the industry to help clients achieve their financial goals, and by charging the right fees that are commensurate with their expertise and value, they not only position themselves to remain competitive, but they also ensure that they have the means to sustainably grow their businesses!

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Change is difficult, and when faced with the prospect of a change, many people opt to stick with the status quo. This is even true in the case of positive changes, such as a new job opportunity or relationship: Even though it might be very likely to make the person’s life better, it represents a departure from life as usual, and there is always the risk that the change won’t work out the way it was expected to. As a result, people are often reluctant to make decisions when doing so would result in a significant change; this can result in ambivalence about taking action to make improvements in one’s life – including the types of financial decisions that advisors work with their clients to make.

Advisors encounter this ‘status quo bias’ with clients who resist taking action on recommendations. Even though the client may agree with the advisor on the action they should take and understand the steps they need to follow, they might still hesitate to follow through on the strategy. And while it can be tempting to chalk this up to forgetfulness, disorganization, or a failure of the client to be fully convinced that the strategy is right for them, the client’s hesitation to act is often the result of their ambivalence and fear around change.

What’s often challenging for advisors in helping a client overcome their ambivalence is that the client is often already aware that their feelings may be irrational, so simply trying to convince them via numbers and logic might be counterproductive: the client doesn’t need to be persuaded that the strategy might be in their best interests; rather, it’s helping them come to terms with the emotional aspect of the decision. And so spurring the client to take action often requires the advisor to focus on helping the client work through their emotional response to the prospect of change.

While discussions around emotional topics can be difficult because of the likelihood of triggering a strong emotional reaction, one method that advisors can use to help their clients overcome their resistance is to ask them what their ‘future self’ would think about the decision. This reframing invites the client to imagine themselves after they have already made the change under consideration – effectively shifting the ‘status quo’ from the client’s current state to their hypothetical future self. And once the client is in that future frame of mind, they can view the decision as if it were in hindsight rather than as a change yet to come – allowing them to temporarily bypass the emotions tied to the change and helping them focus more objectively on the features of their life that are truly meaningful to them!

The key point is that, when entertaining and planning for a new idea or opportunity (e.g., a new job, house, or phase of life), it is common to just keep doing what we are already doing – and when what we are currently doing is working well enough, the emotional ‘cost’ of change often outweighs the potential benefits, even if the new opportunity is truly better. Asking the client what their future self would think can bring in a new perspective, helping to overcome emotional ambivalence in a non-invasive way.

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Welcome back to the 311th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Terry Parham Jr. Terry is the CFO and Co-Founder of Innovative Wealth Building, an independent RIA based in California, Maryland that oversees nearly $330 million in assets under management for almost 900 client households.

What's unique about Terry, though, is how, after nearly ‘failing’ out of the business because he was struggling to get new enough clients in his first 2 years, he changed his approach to asking for referrals by asking prospects upfront to commit to making a referral only after he showed them real financial planning value… and within 18 months his new approach had turned around his entire career to become one of the fastest-growing advisors at his entire company.

In this episode, we talk in-depth about Terry’s approach to gaining more referrals (and minimizing any need for other prospecting efforts) by asking clients to commit in their initial introductory meeting that they would provide him a referral in the future if they found his financial planning recommendations to be valuable… and then followed up after the financial plan was delivered, and the value was provided, with the referral request for them to follow through on their part. We also talk about how, after leaving a former firm (and his referral sources), Terry decided to rebuild his practice through hosting dinner seminars on Social Security and Medicare with a third-party marketing solution that would send out the mailers, provided the presentation materials, and was able to consistently get $3M to $5M of new AUM from each event at a net marketing cost of less than $2,000 per event, and why Terry took a lot of time to confer with colleagues and conduct research on what makes an advisory business successful before ultimately going independent to create the value he really wanted to be able to provide to his clients.

We also talk about how, early on in his career and on the verge of being fired, Terry realized he suffered from a lack of confidence and found that drawing for clients on a white board not only enhanced his ability to relay information and connect with his clients but also built his own confidence, why, despite winning multiple awards as a top producer, Terry decided to part ways with his former firm on principle and start over again because he didn’t like some of their corporate policies, and why Terry equates his transition to independence to the experience gained through dating, as by working for multiple firms over the first decade of his career he was able to learn what he liked and didn’t like, and was eventually able to realize when it was time for the next level of commitment (like moving from dating to marriage).

And be certain to listen to the end, where Terry shares the tension he felt when working at a large firm where he was expected to recommend “good enough” products and strategies when he really wanted to be in a position where he could truly say he was performing due diligence across all products to find the best solutions for his clients, why Terry believes that even though the financial services industry can be intimidating for newer advisors, it’s important to not focus on what others are doing and instead, leverage resources and put in the hard work necessary to earn your experience and learn what works for you, and why Terry believes that simply being a founder of an advisory business doesn’t mean he’s successful, as like raising a child, it is in continual hard work, mentorship, and improvement (even if it’s just incremental) that helps the business grow up to its full potential that really defines its success.

So, whether you’re interested in learning about why Terry never settled at his previous firms and eventually decided to launch his own firm, how Terry presented his value to prospective clients to gain referral commitments, or how Terry leveraged dinner seminars and third-party marketing teams to help him connect with more of the right types of clients, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Terry Parham Jr.

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Financial advisors have had to navigate many challenges in 2022, from an inflationary environment, the likes of which we have not experienced in decades, to weak stock and bond market performance. Here at Kitces.com, we have sought to provide advisors with the insights and education they need to help their clients (and their firms) navigate these uncertain conditions, from blog posts and podcasts on these trending topics to the continued expansion of our Kitces Courses and our popular monthly Office Hours and webinars.

Earlier this year, we introduced our own Investment Adviser Representative (IAR) CE programs that allow those in the growing number of states that have adopted the NASAA Model Rule to meet their 12 hours/year CE requirement. Combined with the continued availability of CE credit for CFP certification, CPA and EA licenses, and various Investment & Wealth Institute (IWI) and American College designations, Kitces Premier Members have a wide variety of opportunities to fulfill their CE requirements.

To keep pace with the current inflationary environment (which also comes with a new CFP Board fee for CE credits and rising staff costs), the Kitces Members Section will be implementing a concomitant $20/year increase in its annual membership fee for Premier Members in 2023, from $149/year to $169/year (the first increase in 3 years!). In addition, Kitces.com will be required to collect a new $36/year “IAR CE Reporting Fee” from advisers who choose to earn IAR CE with Kitces.com to cover the new mandatory reporting costs being imposed on CE providers reporting CE credits completed by IARs.

Notably, as part of the pricing change, we will be making significant investments into the back end of the Kitces platform on behalf of members as well, including hiring a new Senior Director of Platform and Product, who will lead our 2 full-time developers in a significant overhaul of the underlying architecture of the site, to make it faster and easier to navigate in the year(s) to come! We will also be hiring a new Director of Advisor Education, Instructional DesigNerd, and Director of Advisor research soon to support our efforts to provide the best educational content for Advicers. Advisors can also look forward to the release of our newest Kitces Course, “How To Review Insurance Documents To Ensure Clients Understand Their Risk And Address Gaps In Their Coverage” in early 2023, and can take a look at new investments in our AdvisorTech Directory, including the addition of AdvisorTech Satisfaction scores and Integration scores.

In 2023, Kitces Premier Members will also get to experience new formats for our monthly Office Hours sessions, which will include “Software Showcases” to help advisors select between tools in key AdvisorTech categories, as well as “Advisor Makeover” sessions, where industry consultants and I will give advisors real-time feedback on their websites, pricing, firm finances, compensation structures and more!

Ultimately, though, we are still just getting going with the ongoing growth of the Kitces platform as we continue to execute on providing Advicers with relevant content across our 4 strategic pillars: Navigation, Education, Research, and Development (and yes, our organizational strategy really does spell out N-E-R-D!). All in pursuit of our mission: Making Financial Advicers Better, And More Successful. I hope you’ll continue the journey along with us in 2023 and beyond!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that amid concern that retail investors are paying ‘hidden’ fees in the form of suboptimal execution of their trades, the SEC is preparing to propose a “Regulation Best Execution” rule that would, among other measures, establish a best execution standard for brokers. Though given that potentially conflicted practices such as ‘payment for order flow’ are a source of revenue for brokers, such regulation could portend a shift back to explicit transaction fees as they seek to maintain their top line.

Also in industry news this week:

A recent survey indicates that retirement plan sponsors currently using financial advisors to support their plan are overwhelmingly satisfied with the service they receive, which also leads to improved retirement savings for their employees
Recruitment has become the top concern for RIAs, according to a Charles Schwab survey, outpacing client acquisition through referrals and other priorities for the first time in the history of the study

From there, we have several articles on practice management:

Why creating a defined employee value proposition could be the key for RIAs to attract and retain talent in the current tight labor market
The key questions aspiring partners can ask themselves to determine whether becoming a partner in their firm is the right course for them
Why firm owners looking to sell might find fewer potential buyers and receive less favorable deal terms in the current interest rate environment

We also have a number of articles on cashflow management:

How advisors can help couples navigate the decision of whether to combine their finances or keep them separate
A four-step process that advisors can use to help clients who tend to overspend
Strategies parents can use to encourage their children to have a healthy relationship with money

We wrap up with three final articles, all about career and personal management:

How to make tough decisions when facing a career crossroads
Five research-derived strategies for getting promoted
Why going on a “self-date” can provide a sense of solitude and relaxation for those with hectic lives

Enjoy the ‘light’ reading!

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For investment advisers looking to attract prospective clients, advertising the performance of their investment strategies would be a logical way to market their services (at least if they had strong historical returns!). But for many years, advisers looking for guidance from the Securities and Exchange Commission (SEC) regarding what kind of performance advertising was permissible had to rely on fairly general guidelines and SEC staff statements in the form of “no-action” letters. But now, as part of its recently overhauled Marketing Rule (which also clarifies the rules surrounding investment adviser testimonials and endorsements), the SEC has codified its previous guidance regarding performance advertising into a single, fairly prescriptive rule.

To start, while the Marketing Rule contains seven general prohibitions applicable to all investment adviser advertising activities (including testimonials, endorsements, and third-party ratings, covered in a previous Nerd’s Eye View post), there are seven additional prohibitions applicable specifically to performance advertising. The first rule prohibits advisers from presenting gross performance without also presenting net performance with at least equal prominence, so that investors can assess returns that are actually received, net of fees and expenses paid in connection with the adviser’s services, and helping prospective clients better compare returns across different advisers.

The Marketing Rule also requires performance results to be presented consistently over 1-, 5-, and 10-year time periods (or the time period the portfolio has existed, if shorter than a particular prescribed period) preventing advisers from cherry-picking time periods that would make their returns appear more favorable. Furthermore, investment advisers may generally reference the performance results of related portfolios only if all related portfolios are included in the advertisement. Further, an investment adviser is prohibited from advertising performance results of a subset of investments extracted from a portfolio unless the advertisement provides, or offers to provide promptly, the performance results of the total portfolio from which the performance was extracted.

The SEC has heavily scrutinized the use of hypothetical performance in advertising for many years, and its restrictive stance is codified in the updated Marketing Rule. What actually constitutes hypothetical performance is quite broad and essentially includes any performance result that was not actually achieved by a portfolio of the investment adviser, and its distribution is limited to investors who are considered capable of independently analyzing the information and understanding the associated risks and limitations. Two final prohibitions under the Marketing Rule include restrictions on the use of predecessor performance (e.g., performance by an investment adviser before it was spun out from another adviser or by its personnel while they were employed elsewhere), as well as advertising that explicitly states or implies that that the calculation or presentation of performance results has been approved or reviewed by the SEC.

Ultimately, the key point is that the SEC’s recently overhauled Marketing Rule provides a consolidated set of guidelines for advisers to understand how RIAs are permitted to use advertising. Though, given the potential for future SEC guidance clarifying the new rule, or even possible Risk Alerts summarizing common deficiencies and best practices it observes during the course of its upcoming examinations, advisers looking to use performance advertising will want to pay close attention to how it is enforced in practice!

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Welcome back to the 310th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Natalie Taylor. Natalie is the owner of Natalie Taylor Consulting Services, an independent virtual RIA, and is also the Head of Financial Advice for Monarch Money, a personal financial management tool that helps consumers track their spending and net worth over time.

What's unique about Natalie, though, is how, during her years of working for a FinTech company, she realized that providing valuable financial advice that is more affordable for the masses ultimately requires collecting only the data, and delivering only the advice, that will provide the greatest amount of impact and value to the client… and filtering out the rest that just isn’t cost-effective advice for the end consumer.

In this episode, we talk in-depth about how, while working for LearnVest, Natalie realized that their financial advisors were much more limited by the constraints of data, time, and fees, than the traditional advisor, which inspired her to develop a framework that focuses on providing only the most impactful financial advice to help clients move forward right now, how while also working at LearnVest, Natalie developed a ‘brand voice guide’ to help all of their advisors communicate advice to clients more consistently, that revolved around 5 principles for advisors to implement during the advice delivery process (including “be the Coach”, “be the Expert”, “be the Cheerleader”, “wide lens/narrow lens”, and “listen and direct”), and how the acquisition of LearnVest by a large financial services company, and the repurposing of its technology tools, ultimately led to Natalie leaving and having to dismantle the advice offering she originally helped build and develop.

We also talk about how, in the early stages of Natalie’s career, she felt that as a young advisor she was not prepared to give advice at the level of an expert and instead switched firms to work with a mentor who recognized her talents and gave her more opportunities to work with higher caliber clients (and really build her confidence with them), how, after leaving LearnVest, Natalie focused on speaking engagements and consulting but reached a crossroads as she recognized she missed the type of direct impact she had for clients in her previous roles that doesn’t come from consulting alone, and how Natalie realized that she did not have to choose between her desire to provide a breadth of impact through a FinTech or a depth of impact with personal financial planning and instead chose to do both, by splitting her time between the launch of her own independent RIA while simultaneously joining a personal financial management tool company, Monarch Money, as the head of financial advice where she could help them systematize advice for the masses.

And be certain to listen to the end, where Natalie shares how working in FinTech and at an RIA helped her understand how important it is to balance between advice that is exact and solutions that may not be as ideal but helps the client actually move forward and take the next positive step, why Natalie believes it is important for newer, younger advisors to not get discouraged by the uncertainty of career paths and instead concentrate on getting clear on what values are important to them and using those values as a filter to find the next steps on their paths, and why Natalie believes the key to her success stems from developing her own personal list of 6 core values that she and her husband use to filter their major family and career decisions… and review each year to ensure the ongoing decisions they are making are still in alignment with what is really most important to them, and can keep propelling them forward in their careers and their lives.

So, whether you’re interested in learning about how Natalie dealt with having to dismantle the FinTech she helped develop, why Natalie ultimately decided to work simultaneously for a FinTech company and her own RIA, or why Natalie focuses her work on the meaningful impact she can provide in her clients’ lives, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Natalie Taylor.

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Welcome to the December 2022 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors!

This month's edition kicks off with the news that Savvy Wealth has raised an $11M Series A round to compete in the new category of ‘tech-enabled RIA’ – where the firm will use the bulk of its capital to develop its own in-house fully-integrated advisor tech stack, in the hopes that a better technology experience will both attract advisors to work for the firm, attract consumers to want to be clients of the firm, and enable their advisors to service more clients (and be more productive) with the firm.

Notably, though, the reality is that while few would argue that today’s ‘best-of-breed’ approach of cobbling together independent advisor technology solutions is perfect, advisory firms on average have continued to run remarkably healthy 25% - 30% profit margins, suggesting that while the technology may not be perfect, it’s not that broken, either. With a select number of ‘all-in-one’ solutions that form a consistent hub (around which the rest of the advisor tech stack is at least reasonably integrated), and a subset of tasks that can be solved with just a little extra administrative support, it’s not clear whether firms like Savvy can build technology that really materially alters the productivity and profit margins of a tech-enabled RIA. Not to mention that for most firms, the biggest inhibitor to expanding reach and growing faster is not its back-office technology efficiencies, but the cost of attracting new clients in the first place… which raises the question of whether Savvy is bringing (or raising capital to fund) an operational solution to what is still first and foremost a marketing problem?

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

DPL Partners launches a new advisor-matching solution to solve for the inbound demand of consumers increasingly seeking out a new crop of no-commission annuity products
InvestCloud launches a new Advisor Connect solution that will allow larger advisor enterprises to embed an advisor-matching system into their own websites (presuming that the enterprise has a steady supply of prospects to go through the matching process!?)
IncomeLab’s LifeHub wins the ‘Best-In-Show’ award from the XYPN AdvisorTech Expo with an interface that consolidates the client’s entire financial life down to a single screen (that clients can then engage with to drill deeper)

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

eMoney Advisor launches a new Explore feature that helps clients move past just planning for their goals and instead have the opportunity to see what other goals might even be possible in the first place
BlackCloak offers a new ‘concierge cybersecurity’ solution for the most affluent clients of financial advisors who may want to spend a little more to protect themselves as potential ‘high-value’ highly-visible targets for hackers.

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 TechNews@kitces.com!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with a research study suggesting that the market volatility experienced in 2022 could increase demand for financial planning services. This increased demand could be particularly acute among younger investors (who might be experiencing an inflationary environment and sustained marketRead More...

The post Weekend Reading For Financial Planners (Dec 3-4) first appeared on Kitces.com.

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As financial planning has evolved over the years, better tools have become available to help advisors maximize their impact with more clients by increasing their efficiency. Financial planning technology, in particular, has allowed advisors to automate time-intensive back-office tasks and delegate routine analyses to support staff, freeing up their time to engage more personally withRead More...

The post Kitces & Carl Ep 100: Is Advisor Technology Really About Making Planning Faster… Or Better? first appeared on Kitces.com.

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Taxes are a central component of financial planning. Almost every financial planning issue – whether it is retirement, investments, cash flow, insurance, or estate planning – has tax considerations, and advisors provide a great deal of value in helping clients minimize their overall tax burden. And yet, despite the prominent role of taxes in financialRead More...

The post Tax Advice Restrictions For Financial Advisors: How To Offer Tax Planning And Remain In Compliance first appeared on Kitces.com.

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Welcome back to the 309th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Anh Tran. Anh is the Founder and Managing Partner for SageMint Wealth, a corporate LPL-affiliated RIA based in Orange, California, that oversees nearly $325 million for 195 client households. What's unique about Anh, though, is how, asRead More...

The post #FA Success Ep 309: Leveraging Structured Notes To Differentiate A Highly-Leveraged $300M Solo Practice, With Anh Tran first appeared on Kitces.com.

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Traditionally, investment planning has been at the forefront of how financial advisors add value for their clients. From advisors who earn commissions from the sales of financial products to fee-only investment advisors who charge based on client assets under management, the value advisors provide to their clients has often been centered on investment management. But,Read More...

The post 101 Things That Advisors Actually DO To Add Value (Beyond Just Allocating A Portfolio) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Biden administration’s Department of Labor (DoL) is planning to propose its own ‘fiduciary rule’ that seeks to create higher standards than the rule put in place by the Trump administration (though perhaps not asRead More...

The post Weekend Reading For Financial Planners (Nov 26-27) first appeared on Kitces.com.

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Among the several different types of retirement plans that are available to self-employed workers, solo 401(k) plans can offer the most flexibility and the ability to contribute the highest amount of tax-advantaged savings. But alongside those advantages, there are some specific rules and regulations that are unique to solo 401(k) plans, which can add toRead More...

The post Establishing Solo 401(k) Plans For Self-Employed Workers: Options, Contribution Limits, Deadlines, And More! first appeared on Kitces.com.

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Welcome back to the 308th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Matthew Blocki. Matthew is the CEO of Equilibrium Wealth Advisors, an independent RIA based in Pittsburgh, Pennsylvania, that oversees more than $275 million in assets under management for 330 client households. What's unique about Matthew, though, isRead More...

The post #FA Success Ep 308: Accelerating Growth From Referrals By Building Checklists For Every Meeting Detail, With Matthew Blocki first appeared on Kitces.com.

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A common service model for many financial advisory firms is to schedule annual client meetings throughout the year where the advisor meets with each client in the month they started working with the firm, and conducts a comprehensive review of all planning topics for the client. Which means that on any given workday, advisors mightRead More...

The post Increasing Financial Planning Efficiency With A Systematized Annual Process first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that AdvisorTech giant Envestnet has announced a partnership with New Zealand-based FNZ that will allow Envestnet to offer custodial services to advisors beginning in the second half of 2023. At a time of significant change inRead More...

The post Weekend Reading For Financial Planners (Nov 19-20) first appeared on Kitces.com.

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For many financial advisors, improving business development strategies can be a challenging task to address. With the myriad tools available to advisors that help them analyze the potential outcomes of their ideas and strategies, collecting the data to do so has become easier than ever. At the same time, though, over-analyzing strategies prior to implementingRead More...

The post Kitces & Carl Ep 99: What Does It Take For You To Find The Confidence To Take Action? first appeared on Kitces.com.

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With inflation running hot, a potential recession looming, and both stock and bond markets seeing significant drops so far this year, there is no shortage of potential stressors for financial planning clients. And as crises arise and stress builds up, some clients may reach a tipping point where they seek out their advisor looking forRead More...

The post Discussing Inflation And Market Turmoil Using Questions To Navigate Difficult Client Conversations first appeared on Kitces.com.

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Welcome back to the 307th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Stacey Hyde. Stacey is the President of Envision Financial Planning, an independent RIA based in Memphis, Tennessee, that oversees nearly $200 million in assets under management for 206 client households. What's unique about Stacey, though, is how,Read More...

The post #FA Success Ep 307: Dropping Your Broker-Dealer License Without Dropping The Broker-Dealer Platform, With Stacey Hyde first appeared on Kitces.com.

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In the not-so-distant past, the typical career path toward becoming a financial advisor was to build up a book of business on one’s own, often by either tapping into one’s own personal networks or cold-calling prospective clients in bulk to generate enough business to gain a foothold. But the obvious flaw with this ‘eat-what-you-kill’ modelRead More...

The post Hiring Next-Gen Associate Advisors: A Guide To Recruiting, Training, And Retaining For Your RIA first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that as enforcement of the SEC’s new marketing rule began on November 4, advisory firms are taking a variety of approaches. While some are looking to gain a first-mover advantage by leveraging client testimonials and third-partyRead More...

The post Weekend Reading For Financial Planners (Nov 12-13) first appeared on Kitces.com.

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The passage of the Affordable Care Act in 2014 introduced many changes to the healthcare landscape in the United States. One of these changes was the ability for children to remain on their parents’ health insurance plan until they reach age 26. In addition to having access to health insurance at a lower cost thanRead More...

The post Maximizing Health Savings Accounts (HSAs) Tax Benefits With Adult Children Under Age 26 first appeared on Kitces.com.

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Welcome back to the 306th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Cean Kenefick-Rogers. Cean is the CEO and co-founder of Ironwood Wealth Management, an independent RIA based in Chandler, Arizona that oversees just under $550 million of assets under management, for nearly 500 households. What's unique about Cean,Read More...

The post #FA Success Ep 306: Restructuring Partner Compensation And Roles To Align For The Next Stage Of Growth, With Cean Kenefick-Rogers first appeared on Kitces.com.

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Welcome to the November 2022 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors! This month's edition kicks off with the news that a new RIA custodian – Entrustody –Read More...

The post The Latest In Financial #AdvisorTech (November 2022) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that as part of the ongoing integration between the merged companies, Charles Schwab plans to transition advisors currently on the TD Ameritrade custodial platform to Schwab’s platform over Labor Day weekend 2023. And while Schwab executivesRead More...

The post Weekend Reading For Financial Planners (Nov 5-6) first appeared on Kitces.com.

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For many financial advisors, prospecting efforts have traditionally been based on a perspective of scarcity, where the aim was to focus on connecting with and closing as many prospects as possible, regardless of their actual needs. However, in order to accommodate a wide range of clients with wildly diverse needs, firms often need to provideRead More...

The post Kitces & Carl Ep 98: Fee Schedule Complexity And Managing The Fear Of Leaving Opportunities On The Table first appeared on Kitces.com.

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In the United States, Registered Investment Advisers (RIAs) are required to register in one of 2 ways: with the Federal government (namely the SEC) or with one (or more) state securities regulatory agencies. While SEC-registered RIAs are governed by the Investment Advisers Act of 1940 (and its associated regulations), state-registered RIAs are subject to theRead More...

The post Upfront And Ongoing RIA Compliance Obligations Of State Vs SEC-Registered Investment Advisers first appeared on Kitces.com.

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Welcome back to the 305th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Mindy Crary. Mindy is the owner of Creative Money, an independent RIA based in Seattle, Washington, that offers a unique 12-month financial planning engagement – or as Mindy puts it on her homepage, “financial planning that doesn’tRead More...

The post #FA Success Ep 305: Accelerating Growth Of (Fee-Only) Clients By Making It Clear You Have Nothing To Sell, With Mindy Crary first appeared on Kitces.com.

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While many financial advisors may have focused primarily on portfolio management at one time, the evolution of the financial planning profession has opened up an ever-growing number of services that advisors now offer to their clients on a regular basis. While this shift has allowed advisors to charge a premium fee for high-quality service, itRead More...

The post Building A (Modern) Client Service System Model To Deliver Value More Efficiently, Profitably, And Enjoyably first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the SEC has proposed a rule that would require RIAs to conduct enhanced due diligence and recordkeeping when using certain outsourced investment management services and other third-party service providers. While the rule is currently inRead More...

The post Weekend Reading For Financial Planners (Oct 29-30) first appeared on Kitces.com.

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Roth conversions are, in essence, a way to pay income taxes on pre-tax retirement funds in exchange for future tax-free growth and withdrawals. The decision of whether or not to convert pre-tax assets to Roth is, on its surface, a simple one: If the assets in question would be taxed at a lower rate byRead More...

The post Why The Value Of A Roth Conversion Is Calculated Using (True) Marginal Tax Rates first appeared on Kitces.com.

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Welcome back to the 304th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Chad Chubb. Chad is the founder of WealthKeel, an independent virtual RIA based in Tampa, Florida, that advises on over $100 million of assets for 110 client households. What's unique about Chad, though, is how he hasRead More...

The post #FA Success Ep 304: Leveraging Surge Meetings To Find Efficiency With Client Reviews And New Client Onboarding, With Chad Chubb first appeared on Kitces.com.

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The choice of an advisory firm’s custodial affiliation is easily one of its most important business decisions. The advisory firm is the front end of the client relationship, but it entrusts client assets, and key aspects of their service, to a custodian that safeguards the money and provides the underlying platform. And given the logisticalRead More...

The post Comparing Alternative RIA Custodians: The List To Consider Beyond The Big 2 first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that Congress appears poised to pass a series of changes affecting retirement planning, dubbed “SECURE ACT 2.0”, by the end of the year. Provisions in the proposed legislation include gradually increasing the age for RMDs fromRead More...

The post Weekend Reading For Financial Planners (Oct 22-23) first appeared on Kitces.com.

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In recent years, politically charged topics have become the forefront of news and media, and with the rise of access to digitally distributed media, it has become commonplace for clients to have concerns about the possible impact of political events on their portfolios. These concerns have compelled many clients to reach out to their advisors,Read More...

The post Kitces & Carl Ep 97: Talking Clients Down From Making Politically Motivated Portfolio Changes first appeared on Kitces.com.

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In the United States, Registered Investment Advisers (RIAs) are required to register in one of 2 ways: with the Federal government (namely the SEC) or with one or more state securities regulatory agencies. While SEC-registered RIAs are governed by the Investment Advisers Act of 1940 (and its associated regulations), state-registered RIAs are subject to theRead More...

The post How To Register Your RIA: State Vs SEC Registration And When Notice Filing Is Required first appeared on Kitces.com.

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Welcome back to the 303rd episode of the Financial Advisor Success Podcast! My guest on today's podcast is Louis van der Merwe. Louis is the Director of WealthUp, an independent advice practice based in Cape Town, South Africa, that oversees the U.S. equivalent of nearly $60 million in assets under management for 115 client households.Read More...

The post #FA Success 303: Pivoting From ‘Robo’ Investment Management To Financial Planning In South Africa, With Louis van der Merwe first appeared on Kitces.com.

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After more than 2 years of ongoing disruptions, from the original COVID-19 outbreak, to wave after wave of variants as the pandemic rolled on, 2022 proved to be the year that advisor conferences were “back”, as events ceased canceling or rescheduling in response to new variants and powered forward… often with virtual options for thoseRead More...

The post The 9 ‘Best’ Financial Advisor Conferences (For Scaling Up) In 2023 first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Cost Of Living Adjustment (COLA) for Social Security beneficiaries will be 8.7% for 2023, the largest COLA since 1981. While this will help seniors keep pace with rising prices, it also creates tax planningRead More...

The post Weekend Reading For Financial Planners (Oct 15-16) first appeared on Kitces.com.

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Prospective clients often approach a financial advisor because they have a problem. Perhaps they are approaching retirement and do not know whether their current path is financially sustainable, or maybe they have a complicated equity compensation problem to sort through. But after this initial problem is solved, long-term goals are discussed, and a financial planRead More...

The post Add Value To Client Relationships And Uncover New Goals By Asking: “What’s Possible Now?” first appeared on Kitces.com.

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Welcome back to the 302nd episode of the Financial Advisor Success Podcast! My guest on today's podcast is Libby Greiwe. Libby is the owner of The Efficient Advisor, a financial advisor coaching and consulting business based out of Loveland, Ohio, that’s focused on helping advisors create systems and processes for themselves so that they canRead More...

The post #FA Success Ep 302: Structuring Your Ideal Week To Become A Highly-Leveraged Individual Advisor, With Libby Greiwe first appeared on Kitces.com.

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Communicating ongoing value to clients and prospects can be a challenge for financial advisors. Although there are many ways to articulate how an advisor can create value for a client, there is no guarantee that any one particular method will resonate with every potential client. An expression of value that works for one prospect mightRead More...

The post Communicating Client Value By Articulating Your Solution To Their ‘Job To Be Done’ first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that amid the current bear market, usage of robo-advisors and other digital advice tools has plummeted, according to a recent study. This suggests that some consumers will be looking to human advisors to better understand theirRead More...

The post Weekend Reading For Financial Planners (Oct 8-9) first appeared on Kitces.com.

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When it comes to politically charged discussions, financial advisors generally try to stay neutral and focus on providing clients with objective financial advice. Yet, while they seek to remain apolitical in their financial advice, the shifting political environment has made it increasingly common for more clients to express their political concerns and feelings with theirRead More...

The post Kitces & Carl Ep 96: Handling Politically Charged Clients Who Make It Uncomfortable To Be Their Advisor first appeared on Kitces.com.

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In recent years, numerous software solutions have sprung up that aim to automate the process of tax-loss harvesting. Both retail-focused robo-advisors and advisor-focused TAMPs have begun to offer automated tax-loss harvesting, which – by systematically checking for losses to harvest, typically on a daily basis – purports to increase investors’ after-tax returns by 1% orRead More...

The post Automated Tax-Loss Harvesting Technology: Is The Value Overstated? first appeared on Kitces.com.

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Welcome back to the 301st episode of the Financial Advisor Success Podcast! My guest on today's podcast is Ramit Sethi. Ramit is the author of the New York Times’s bestselling book, I Will Teach You To Be Rich, and the owner of the online platform of the same name that offers financial education content andRead More...

The post #FA Success Ep 301: Guiding Clients To Design Their Rich Life With A Focus On Spending Dials Not Goals, With Ramit Sethi first appeared on Kitces.com.

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Welcome to the October 2022 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors! This month's edition kicks off with the news that DPL Financial Partners has raised $20M ofRead More...

The post The Latest In Financial #AdvisorTech (October 2022) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that a former Department of Labor official expects that it will take until next year for the agency to release new rules that would likely expand the number of financial professionals who must provide a fiduciaryRead More...

The post Weekend Reading For Financial Planners (Oct 1-2) first appeared on Kitces.com.

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As an individual begins planning for retirement, one of the factors often considered is whether (and where) they might relocate to enjoy their retirement. When evaluating their potential options across the U.S., a state’s income tax rules can have a significant impact on where they might choose to live. The perception of a state asRead More...

The post The Most Tax-Friendly States For Retirees: How To Compare State Income Tax Options For Retiring Clients first appeared on Kitces.com.

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Welcome back to the 300th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Joe Duran. Joe is a Partner and Co-Head of Goldman Sachs Personal Financial Management Group, a national wealth management firm within Goldman Sachs which oversees more than $100 billion in assets under advisement for tens of thousandsRead More...

The post #FA Success Ep 300: The Evolution Of The Advice Business At Scale And The True Power Of Brand, With Joe Duran first appeared on Kitces.com.

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In a now-famous 1970 paper, economist George Akerlof used the market for used cars to demonstrate the negative effects that can occur when there are significant information asymmetries between buyers and sellers of a good or service. He highlighted the market for used cars at the time, where, because consumers could not be sure ofRead More...

The post The Market For “Lemons” In Financial Advice: How Higher Standards Can Lower Costs And Increase Access To Advice first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the SEC has issued a risk alert putting advisors on notice that examiners will be conducting a number of reviews to evaluate how firms are complying with the Commission’s new marketing rule, which it willRead More...

The post Weekend Reading For Financial Planners (Sept 24-25) first appeared on Kitces.com.

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As the world becomes increasingly digital, the barrier to get one’s ideas out and in front of others becomes lower and lower. In the financial sector, in particular, this has led to an open floodgate of financial tips and advice. Many financial advisors have found that sharing their own expertise and marketing their intellectual propertyRead More...

The post Kitces & Carl Ep 95: Building Your Advisor Marketing Content By Packaging Your Client Wisdom first appeared on Kitces.com.

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There are many financial advisors who take issue with the financial advice offered by popular personal finance personalities such as Dave Ramsey. Some disagree on technical details like the plausibility (or purported lack thereof) of his assumptions for future investment returns, while others criticize broader elements of his approach (like his reliance on rules ofRead More...

The post Why Checklist-Style Financial Planning Works: What Advisors Can Learn From Dave Ramsey’s Baby Steps first appeared on Kitces.com.

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Welcome to the September 2022 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors! This month's edition kicks off with the news that VRGL (pronounced “Virgil”) has raised a $15MRead More...

The post The Latest In Financial #AdvisorTech (September 2022) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that, in its newly released draft strategic plan for 2022-2026, the SEC has indicated that the enforcement of Regulation Best Interest’s requirement that brokers act in their clients’ best interests when making an investment recommendation willRead More...

The post Weekend Reading For Financial Planners (Sept 3-4) first appeared on Kitces.com.

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The Biden administration’s long-anticipated Student Loan Debt Relief plan was finally announced on August 24, 2022, and with it came a flurry of attention on the proposal’s centerpiece of providing $10,000 of student loan forgiveness for Federal student loan borrowers (and $20,000 for borrowers who received a Pell Grant for college) with income levels underRead More...

The post Biden’s Student Debt Relief Plan: Eligibility, Income Limits, Payment Freeze Extension, And More For Advisors! first appeared on Kitces.com.

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Welcome back to the 296th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Ed Coambs. Ed is the founder of Healthy Love & Money, a financial therapy practice in Charlotte, North Carolina that helps couples and families uncover and understand the roots of their underlying financial conflicts. What's unique aboutRead More...

The post #FA Success Ep 296: Unblocking Clients Who Keep Not Implementing By Exploring Their Financial Psychology, With Ed Coambs first appeared on Kitces.com.

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For most advisory firms, 2022 has been a year of relative stability, market volatility notwithstanding. After 2 years of the pandemic forcing massive changes to most firms’ systems and processes, from client meetings to internal management to marketing and business development, advisory firms are increasingly ‘finding their groove’ in this new post-pandemic (or at least,Read More...

The post Your Input Requested – Reader Survey For Nerd’s Eye View (2022) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Biden Administration has released a series of long-anticipated Federal student loan relief measures. And while the announced $10,000 of debt forgiveness for some borrowers made the most headlines, advisors will also want to beRead More...

The post Weekend Reading For Financial Planners (Aug 27-28) first appeared on Kitces.com.

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Historically, the career path for newer financial advisors has followed a commission-based model that was focused on sales and business development first and learning the technical aspects of financial planning along the way. As the financial advisory industry has evolved, though, it has shifted to a business model that focuses more on teaching new advisorsRead More...

The post Kitces & Carl Ep 93: Getting An ROI From Your New Associate Advisor (In Less Than 6 Years) first appeared on Kitces.com.

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Advisory agreements for Registered Investment Advisers (RIAs) contain many sections that are important both for the purposes of complying with SEC and state securities regulations, and for constituting a valid agreement between the RIA and the client. In his latest article for the Nerd’s Eye View blog, Chris Stanley, investment management attorney and Founding PrincipalRead More...

The post Drafting RIA Advisory Agreements: Best Practices And Essential Elements To Include first appeared on Kitces.com.

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Welcome back to the 295th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Shari Greco Reiches. Shari is the Co-Founder and Chief Visionary Officer of Rappaport Reiches Capital Management, an independent RIA based in Skokie, Illinois, that oversees more than $800 million in assets under management, for 350 client households.Read More...

The post #FA Success Ep 295: Systematizing A Planning Process To Maximize The Return On Life For Clients, With Shari Greco Reiches first appeared on Kitces.com.

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Cash tends to exist at the forefront of individuals' day-to-day lives for many reasons: as a stable savings vehicle for near-term goals, a safety net for unforeseen emergency expenses, and, of course, to pay for daily living expenses, just to name a few. And this nearness to daily life means that cash - and howRead More...

The post Client Cash Management: Why It’s Important, And The Next Generation Of Technology To Make It Better first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the FPA is planning to leave the Financial Planning Coalition (which also includes the CFP Board and NAPFA) at the end of the year. This follows the FPA’s announcement that it plans to pursue titleRead More...

The post Weekend Reading For Financial Planners (Aug 20-21) first appeared on Kitces.com.

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Registered Investment Advisers (RIAs) are generally required to enter into an advisory agreement with their clients prior to being hired for advisory services. And while there is no standard ‘template’ language applicable to all advisory agreements, there are a number of best practices that RIAs can follow in drafting and reviewing their agreements to ensureRead More...

The post Advisory Agreement Statutory Requirements: What Advisors Need To Know To Stay Compliant first appeared on Kitces.com.

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Welcome back to the 294th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Neel Shah. Neel is the Founder of Shah Total Planning, which itself is a combination of Beacon Wealth Solutions (an independent RIA) and Shah & Associates (a law firm) in Monroe Township, New Jersey, and oversees $57Read More...

The post #FA Success Ep 294: Developing COI Referrals With Attorneys From An Attorney-Turned-Advisor, With Neel Shah first appeared on Kitces.com.

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Working as a financial advisor can be both financially rewarding and emotionally satisfying. By helping clients develop financial goals, creating a financial plan, and supporting the implementation and monitoring of the plan, advisors help clients live their best lives. But while new fee models have allowed fee-only advisors to reach an expanding range of potentialRead More...

The post Serving Pro Bono Clients As A Busy Advisor: How Advisers Give Back Makes Volunteering Easy first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the U.S. Senate has passed the Inflation Reduction Act, which while being light on individual tax changes, nevertheless includes some important financial planning provisions such as prescription drug price relief for Medicare enrollees, continuation ofRead More...

The post Weekend Reading For Financial Planners (Aug 13-14) first appeared on Kitces.com.

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Many clients seek financial advisors for their expertise and their abilities to guide them through financial decisions. However, for some clients, the ambiguity that inevitably arises from uncertain outcomes can be very distressing, especially when it comes to investments during volatile times. While these clients may have general concerns about their financial future, their concernsRead More...

The post Kitces & Carl Ep 92: When Clients Want Certainty You Just Can’t Give Them first appeared on Kitces.com.

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When financial planning clients think about their future, they might imagine a relaxing retirement, world travel, or other pleasant experiences. What they’re probably not considering is their own death, even though everyone’s time remaining on Earth is finite (even if the number of years they have left is unknowable). And using this perspective, advisors canRead More...

The post How To Manage Strong Emotions When Asking Clients Kinder Life Planning Questions first appeared on Kitces.com.

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Welcome back to the 293rd episode of the Financial Advisor Success Podcast! My guest on today's podcast is Anna N’Jie-Konte. Anna is the founder of Dare to Dream Financial Planning, an independent RIA based in New York City that has grown to more than $400,000 of annual revenue in barely 3 years by building aRead More...

The post #FA Success Ep 293: Jumpstarting Growth By Showing Up Differently Where Prospects Are (Digitally) Concentrated, With Anna N’Jie-Konte first appeared on Kitces.com.

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Good marketing based on using impactful messages for consumers is a foundational element for many types of businesses that allows companies to define and convey their unique value. For financial advisors, effective messaging often tells the story of how their advisory practice serves clients, with the intent to resonate with the audience and inspire themRead More...

The post Creating Powerful Firm Messaging That Targets Prospects In Your Niche first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the SEC has issued a new bulletin clarifying the responsibilities of brokers under Regulation Best Interest (Reg BI). The guidance indicates that, despite early fears that Reg BI was ‘overly accommodating’ to the brokerage industry,Read More...

The post Weekend Reading For Financial Planners (Aug 6-7) first appeared on Kitces.com.

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For financial advisors, dealing with issues concerning clients’ children, from education costs to legacy goals, is a common part of the planning process. But a growing number of individuals are going through life without ever having children. And no matter the reason, clients without children have unique planning needs that are important for advisors toRead More...

The post Why Childfree People Require A Unique Financial Planning Process first appeared on Kitces.com.

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Welcome back to the 292nd episode of the Financial Advisor Success Podcast! My guest on today's podcast is Matthew Topley. Matthew is the Founder and CIO of Lansing Street Advisors, an independent RIA based in Ambler, Pennsylvania that oversees $160 million in assets under management for 60 client households. What’s unique about Matthew, though, isRead More...

The post #FA Success Ep 292: Syndicating Private Real Estate Opportunities To Differentiate With HNW Clients, With Matthew Topley first appeared on Kitces.com.

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Welcome to the August 2022 issue of the Latest News in Financial #AdvisorTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors! This month's edition kicks off with the news that Envestnet has acquired Redi2, one of theRead More...

The post The Latest In Financial #AdvisorTech (August 2022) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with a survey indicating that while about 70% of advisors overall feel successful, those who charge fees (and enjoy the stability that recurring fees provide) tend to feel more successful than those who rely on less-stable commissions, with theRead More...

The post Weekend Reading For Financial Planners (July 30-31) first appeared on Kitces.com.

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Financial advisors are often innately inclined to set long-term goals and stay on the course to help their clients achieve their goals, as the advisor understands the bigger picture of having a financial roadmap and its benefits. However, when long-term goals in a financial plan are too rigid, many clients may not be naturally inclinedRead More...

The post Kitces & Carl Ep 91: Is It Better To Have Clear Goals Or ‘Just’ A Strong Sense Of Direction? first appeared on Kitces.com.

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Financial planning is both an art and a science. While an advisor needs technical financial planning knowledge to create and implement plans for clients, soft skills that involve effective communication and relationship building are also crucial to both relate to prospects and clients and to understand their needs. Further, one of the most important qualitativeRead More...

The post How To Use George Kinder’s 3 Life Planning Questions With Financial Planning Clients first appeared on Kitces.com.

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Welcome back to the 291st episode of the Financial Advisor Success Podcast! My guest on today's podcast is Amy Irvine. Amy is the owner of Rooted Planning Group, an independent RIA based in Corning, New York that oversees $67 million in assets under management for 175 client households. What's unique about Amy, though, is howRead More...

The post #FA Success 291: Managing Fast Growth And Slow Growth Of A Planning-Centric Advice Firm, With Amy Irvine first appeared on Kitces.com.

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2022 was a year that began with high hopes as households were slowly re-emerging from pandemic shutdowns, markets were reaching new highs, and most advisory firms had growing momentum. Within just a few months, though, Omicron had led to another wave of at least partial shutdowns, inflation began to rear its ugly head in aRead More...

The post Announcing IAR CE From Kitces And The Mid-Year State Of The Blog first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Financial Planning Association has announced a major new advocacy initiative: to pursue legal recognition of the term “financial planner” through title protection (such that those who don’t meet the competency and ethical standards ofRead More...

The post Weekend Reading For Financial Planners (July 23-24) first appeared on Kitces.com.

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For many workers, a typical career entails a series of successive jobs over several decades, with the end goal of retiring and finally being able to ‘relax’. And while most breaks from work on the traditional path are limited to short vacations, there is a growing movement of individuals who want to take extended timeRead More...

The post Sabbatical Financial Planning: Taking Extended Time Off Without Derailing The Career Or Retirement first appeared on Kitces.com.

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Welcome back to the 290th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Andrew Komarow. Andrew is the founder of Tenpath Financial Group and Planning Across the Spectrum, a hybrid firm based in Farmington, Connecticut that oversees $100 million in assets under management for 100 client households. What's unique aboutRead More...

The post #FA Success Ep 290: Serving Neurodivergent Clients As A Financial Advisor With Autism, With Andrew Komarow first appeared on Kitces.com.

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Amid estimates that nearly 40% of all financial advisors are likely to retire in the next 10 years, the need for a new generation of advisor talent is clear. To meet this challenge, CFP Board’s Center For Financial Planning has engaged in fundraising for several years to fuel campaigns that have focused on building theRead More...

The post CFP Board’s Fee Increase For Workforce Development: More Advisors Or Just More Sales Churn? first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that investors this year have filed 37 arbitration cases with FINRA related to alleged violations of Regulation Best Interest (Reg BI). These come on the heels of the SEC’s first enforcement action related to Reg BI,Read More...

The post Weekend Reading For Financial Planners (July 16-17) first appeared on Kitces.com.

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In recent years, many financial advisors have turned to social media as a marketing tool to connect with prospective clients. Its ease of use and potential to reach large audiences have made it a very attractive channel to generate potential leads. But as a highly competitive venue with an excess of information, personal finance personalities,Read More...

The post Kitces & Carl Ep 90: Standing Out On Social Media By Finding The ‘Minimum Viable Audience’ first appeared on Kitces.com.

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During market downturns, tax-loss harvesting is often considered a ‘silver lining’ to an otherwise undesirable situation. In theory, the strategy allows investors to convert their capital losses into a tax deduction while staying invested so they can benefit when markets recover – ostensibly a win-win for the investor and, consequently, a popular strategy for advisorsRead More...

The post Why Tax-Loss Harvesting During Down Markets Isn’t Always A Good Idea first appeared on Kitces.com.

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Welcome back to the 289th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Kamila Elliott. Kamila is the CEO and Founder of Collective Wealth Partners, an independent RIA based in Atlanta, Georgia, that oversees nearly $25 million in assets under management for almost 175 client households. What's unique about Kamila,Read More...

The post #FA Success Ep 289: Coming Together As A Partnership To Serve Your Collective Community, With Kamila Elliott first appeared on Kitces.com.

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Financial advisors are often responsible for working with a wide range of individuals, both among their client base and coworkers, who each have their own personality, beliefs, and style of communication. While it can be rewarding to build a large breadth of relationships, it can also be challenging to appeal to and feel accepted byRead More...

The post 3 Aspects Of Identity Covering And How It Impacts Advisors’ Happiness At Work first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with a recent study indicating that 15% of employee advisors at wirehouse firms and 7% of independent advisors affiliated with a broker-dealer are considering leaving their firm in the next one to two years. Of those most likely toRead More...

The post Weekend Reading For Financial Planners (July 9-10) first appeared on Kitces.com.

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Advisors occasionally encounter situations where their recommendations conflict with a prospect’s or a client’s opinions or beliefs. When encountering this resistance, the advisor has a choice to make: either to alter their recommendation to make it more acceptable to the client’s way of thinking, or to dig in and attempt to change the client’s mindRead More...

The post Minimizing Advisor-Client Value Conflicts Using The Principles Of Aikido first appeared on Kitces.com.

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Financial advisors often use Monte Carlo simulation in their financial planning process, which (as is commonly found in major financial planning software packages) traditionally presents the results of the projection in terms of probability of success or failure (with ‘success’ being defined as an iteration of the plan where the client doesn’t run out ofRead More...

The post Reframing Monte Carlo Results To Increase Trust In Dynamic Retirement Spending first appeared on Kitces.com.

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Welcome back to the 287th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Jennifer Murray. Jennifer is the owner and founder of Stonebridge Financial Advisors, an independent RIA based in Morristown, New Jersey, that oversees $100 million of assets under management for 50 client households. What's unique about Jennifer, though,Read More...

The post #FA Success Ep 287: Finding Solo Efficiency To Serve 50 Great Clients With $100M AUM, With Jennifer Murray first appeared on Kitces.com.

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Taking time away from the office can have many benefits for advisors, from the personal (e.g., spending time with family and exploring new places) to the professional (e.g., resting and recharging to help prevent burnout). At the same time, being away from work (whether it is working fewer hours during the week or taking fullRead More...

The post How To Take More Vacation: An Advisor’s Guide To Balancing Work And Time Off first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Senate has passed companion bills to the House’s “SECURE 2.0” proposals that would represent the most noteworthy changes to retirement savings since the original SECURE Act was passed in 2019. While changes could beRead More...

The post Weekend Reading For Financial Planners (June 25-26) first appeared on Kitces.com.

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Bear markets can be stressful for both financial advisors and their clients – particularly for those clients who are near retirement or have recently retired and are therefore especially susceptible to sequence-of-return risk, as a market downturn in the first decade of retirement can negatively impact a retiree’s sustainable spending rates. At the same time,Read More...

The post When Roth Conversions Go ‘On Sale’: Discounted Roth Conversions During A Bear Market Decline first appeared on Kitces.com.

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Welcome back to the 286th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Matt Cosgriff. Matt is the Director of Wealth Management for BerganKDV, an independent RIA that operates as a division of a regional accounting firm based in Bloomington, Minnesota, and oversees more than $2 billion in assets forRead More...

The post #FA Success Ep 286: Pursuing Intrapreneurship As A Path To Growth Within A Larger Firm, With Matt Cosgriff first appeared on Kitces.com.

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The first half of 2022 has not played out as most expected; the good news is that for most parts of the country, businesses and offices are re-opening (at least those that decided to return to in-person at all!), and by whatever means we’ve figured out how to ingrain the pandemic into our normal dailyRead More...

The post Summer Reading List Of “Best Books” For Financial Advisors – 2022 Edition first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that Charles Schwab has agreed to pay $187 million to settle allegations that it misled users of its Schwab Intelligent Portfolios robo-advisor platform by falsely claiming that the cash allocations in its model portfolios (which wereRead More...

The post Weekend Reading For Financial Planners (June 18-19) first appeared on Kitces.com.

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When financial advisors seek new clients, their outreach efforts can often lead to prospective clients approaching them because of a specific issue on their mind that they would like the advisor to address. In these instances, the advisor may start the discussion simply with the intention of better understanding the client’s problem. But sometimes, whenRead More...

The post Kitces & Carl Ep 88: Showing Your Value To Prospects When Everything Is Already Going Well first appeared on Kitces.com.

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As of February 1, 2022, financial advisors who give advice to clients about whether to roll over 401(k) plan assets into an IRA are subject to a new set of regulations from the U.S. Department of Labor (DOL). Specifically, advisors who would receive increased compensation as a result of recommending a rollover (such as aRead More...

The post Complying With PTE 2020-02 Under DoL’s New IRA Rollover Requirements first appeared on Kitces.com.

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Welcome back to the 285th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Ryan Townsley. Ryan is the founder of Town Capital, an independent RIA based in Bel Air, Maryland, that oversees nearly $50 million in AUM for 65 client households. What's unique about Ryan, though, is how he spentRead More...

The post #FA Success Ep 285: Fast-Tracking Growth As A Career Changer With A High-Touch Service To Your Prior Profession, With Ryan Townsley first appeared on Kitces.com.

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Communication is one of the most important skills for a financial advisor. While technical expertise is necessary to formulate a financial plan, being able to clearly communicate the findings to a client can make all the difference between whether or not the client will understand and agree to implement the advisor’s recommendations. Many advisors areRead More...

The post Creating Visual Deliverables That Clearly Communicate Financial Planning Concepts first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that amid public interest in the potential conflicts of interest involved in ‘payment-for-order flow’ arrangements between brokerages and market-making firms, SEC Chair Gary Gensler has asked agency staff to explore various ways to make the U.S.Read More...

The post Weekend Reading For Financial Planners (June 11-12) first appeared on Kitces.com.

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Dealing with the grief of losing a spouse creates several challenges for recent widows and can change the dynamics of many of their relationships. For example, widows often note that they were previously ‘couple-friends’ with someone, but the relationship dynamics have changed such that it is now uncomfortable to spend time with them as aRead More...

The post The Re-Discovery Meeting: A Communication Strategy For Supporting And Retaining Newly Widowed Clients first appeared on Kitces.com.

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Welcome back to the 284th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Andy Schwartz. Andy is a partner of Bleakley Financial Group, a hybrid advisory firm based in Fairfield, New Jersey that broke away from a major insurance company and in just a few years nearly tripled its sizeRead More...

The post #FA Success Ep 284: Sharing Centralized Resources To Create More Capacity And Scale For Advisors To Grow, With Andy Schwartz first appeared on Kitces.com.

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Welcome to the June 2022 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 TIFIN has raised a new $109MRead More...

The post The Latest In Financial #AdvisorTech (June 2022) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with a recent FPA Trends In Investing study that suggests advisor interest in ESG investing might be at a crossroads. While a greater percentage of advisors compared to last year said they plan to increase their use of ESGRead More...

The post Weekend Reading For Financial Planners (June 4-5) first appeared on Kitces.com.

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Clients rely upon their financial advisors to provide expert advice that will optimize the possibility of achieving their financial goals. And naturally, advisors want to deliver a plan with the best possible outcomes for their clients. Yet, as advisors come to understand their client and their limitations, they may foresee that the optimal plan mayRead More...

The post Kitces & Carl Ep 87: Balancing Optimal Advice With Recommendations That Clients Will Actually Implement first appeared on Kitces.com.

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Those who pay attention to the news are regularly bombarded by a barrage of economic data – from unemployment figures to the inflation rate – as there is no shortage of data points available to assess the state of the economy. But for financial advisors, a key question is how this information may influence theRead More...

The post How To Use Economic Context In Retirement Income Decision-Making first appeared on Kitces.com.

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Welcome back to the 283rd episode of the Financial Advisor Success Podcast! My guest on today's podcast is Seth Streeter. Seth is the founder and CIO of Mission Wealth, an independent RIA based in Santa Barbara, California that oversees nearly $5 billion in assets under management for over 2,000 client households. What's unique about Seth,Read More...

The post #FA Success Ep 283: Using Mergers And Integrations As A Pathway For Talent (Not Just Client) Acquisition, With Seth Streeter first appeared on Kitces.com.

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Many aspiring and current financial advisors pursue the Certified Financial Planner (CFP) certification for its career-enhancing benefits and the credibility it provides to prospects and clients. Because the CFP mark demonstrates to consumers that an advisor has a baseline of competence and ethical behavior, obtaining CFP certification entails a rigorous process to help ensure thatRead More...

The post Choosing The ‘Best’ Path To Meet The Experience Requirement For CFP Certification first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that an advisory firm owner has filed a lawsuit against his former employer (RIA giant Creative Planning), alleging that the firm coordinated with several of the largest RIA custodians to limit his access to their custodialRead More...

The post Weekend Reading For Financial Planners (May 28-29) first appeared on Kitces.com.

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Whether it is a free sample in the grocery store (where the store hopes the sample convinces the shopper to purchase the item), or ‘Freemium’ software (where the developer hopes that consumers using a more basic version of their software will lead them to purchase an enhanced version), consumers are used to being offered freeRead More...

The post How A Free Financial Plan Retains More Perceived Value Than An Average Priced One first appeared on Kitces.com.

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Welcome back to the 282nd episode of the Financial Advisor Success Podcast! My guest on today's podcast is Allison Felix. Allison is a managing partner and COO for Cassaday & Company, a hybrid advisory firm based in McLean, Virginia, that oversees more than $4 billion in assets for nearly 2,500 client households. What's unique aboutRead More...

The post #FA Success Ep 282: From Executive Assistant To COO Scaling A $4B Advisory Firm, With Allison Felix first appeared on Kitces.com.

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The arrival of robo-advisors into the financial technology landscape more than a decade ago led many to believe that the combination of (relatively) low fees and digital presence offered by robos would entice many consumers to eschew human advisors and turn to these automated tools. However, since the introduction of robo-advisor technology, client behavior hasRead More...

The post The 3 Domains Of Financial Advisor Value: Why Human Advisors Continue To Thrive Amid Competition From Robos first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that a court ruling has called into question the Securities and Exchange Commission’s use of its own judges for adjudicating enforcement actions. The court order could pave the way for those advisers ever accused of violatingRead More...

The post Weekend Reading For Financial Planners (May 21-22) first appeared on Kitces.com.

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One of the primary objectives for many financial advisors is to help their clients align their goals and priorities with their spending habits, time, and energy. And even though advisors have the unique advantage of being well-positioned to have these important conversations with clients, encouraging clients to define their financial goals and developing a deeperRead More...

The post Kitces & Carl Ep 86: Aligning Client Capital To Goals (Which Are Only Clarified Over Time) first appeared on Kitces.com.

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In recent years, Monte Carlo simulation has become a popular tool for financial advisors to motivate their clients to follow recommendations. By presenting a single probability-of-success percentage, Monte Carlo analyses give clients a simple, instantaneous metric on the state of their financial plan. And because many clients naturally like to challenge themselves to do betterRead More...

The post The Gamification Of Monte Carlo: How To Incentivize Proactive (Not Reactive) Retirement Spending Goals first appeared on Kitces.com.

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Welcome back to the 281st episode of the Financial Advisor Success Podcast! My guest on today's podcast is Duncan Kelm. Duncan is a managing partner for Arrow Point Wealth Management, a hybrid advisory firm based in Santa Rosa, California that oversees $163 million in assets under management for 142 client households. What's unique about Duncan,Read More...

The post #FA Success Ep 281: Leveraging Tax Planning To Create Unique Value For Small Business Owners, With Duncan Kelm first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the T3 Technology Conference was held last week after a two-year hiatus, drawing a record crowd to see the latest in advisor technology. The event highlighted the growing data management needs of advisors as wellRead More...

The post Weekend Reading For Financial Planners (May 14-15) first appeared on Kitces.com.

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Financial advisors often rely on software that uses Monte Carlo simulations to incorporate uncertainty into their retirement income analysis for clients. While Monte Carlo analysis can be a useful tool to examine multiple iterations of potential market returns to forecast how often a given plan may be expected to provide sufficient income for the clientRead More...

The post Evaluating Retirement Spending Risk: Monte Carlo Vs Historical Simulations first appeared on Kitces.com.

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Welcome back to the 280th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Brian Carney. Brian is a co-founder of RiversEdge Advisors, an independent RIA based in Wilmington, Delaware that oversees over $400 million in assets under management for nearly 300 client households. What's unique about Brian, though, is howRead More...

The post #FA Success Ep 280: Overcoming The Pain Of Scaling: When The Second 100 Clients Is Harder Than The First, With Brian Carney first appeared on Kitces.com.

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The COVID-19 pandemic has led many workers to consider changing careers, perhaps for greater pay or flexibility. For those with an interest in personal finance and helping others, a career change into the financial advice industry could be an attractive option, particularly given that financial advisors generally report having a strong sense of wellbeing andRead More...

The post A Career Changer’s Guide To Becoming A Financial Advisor: Career Paths, Preparation, Education, Costs, And More! first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that amid a wave of mergers, the number of broker-dealers has declined during the past few years, according to a report from FINRA. And while broker-dealers are also seeing a decline in the number of theirRead More...

The post Weekend Reading For Financial Planners (May 7-8) first appeared on Kitces.com.

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Traditionally, advisors have relied on client referrals and networking to attract potential clients, but with modern technology and an increase in publicity mediums available, advisors have many more options to build a brand to represent themselves. However, with more available methods to choose from, advisors are increasingly challenged to find the ones that are mostRead More...

The post Kitces & Carl Ep 85: Building Your (Local) Brand With PR That Actually Works first appeared on Kitces.com.

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Financial advisory clients are bound to experience stressful conditions that can impact their finances at some point during their relationship with their advisor. From market downturns to geopolitical shocks, there are many potential external factors that might make a client nervous about their financial situation. What’s more, the stories individuals tell themselves can lead toRead More...

The post Questions, Not Answers: Conversations For Advisors To Navigate Clients’ Anxiety Around Change first appeared on Kitces.com.

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Welcome back to the 279th episode of the Financial Advisor Success Podcast! My guest on today's podcast is Erika Karp. Erika is the Chief Impact Officer at Pathstone, an independent RIA based in Englewood, New Jersey that oversees $35 billion in assets under management for a few hundred ultra-high-net-worth households. What's unique about Erika, though,Read More...

The post #FA Success Ep 279: Expanding The Impact Of Sustainable Investing For Ultra-HNW Families, With Erika Karp first appeared on Kitces.com.

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Welcome to the May 2022 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 Orion Advisor Services is acquiring RedtailRead More...

The post The Latest In Financial #AdvisorTech (May 2022) first appeared on Kitces.com.

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Investment Advisers Association has become the latest industry organization to push back against the SEC’s guidance limiting the use of the term “fiduciary” on Form CRS, joining a growing number of voices attesting thatRead More...

The post Weekend Reading For Financial Planners (Apr 30-May 1) first appeared on Kitces.com.

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With inflation reaching its highest levels since the early 1980s, the topic of rising prices has been on the minds of many financial advisors and their clients. And though many hoped that the spike in inflation that began in autumn of 2021 would pass within a few months (once holiday season demand cooled and COVID-relatedRead More...

The post 8 Inflation Conversations For Financial Advisors To Have With Clients first appeared on Kitces.com.

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Welcome back to the 278th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Derek Gregoire. Derek is a co-owner of SHP Financial, an independent RIA based in Plymouth, Massachusetts, that oversees nearly $1.2 billion of total assets for over 1,200 clients.

What’s unique about Derek, though, is how he and his firm have centralized the execution of multiple marketing strategies to increase the amount of prospective client leads the firm provides to its advisors, so they in turn can concentrate more on developing client relationships (and not need to worry about chasing prospects).

In this episode, we talk in-depth about how Derek has built a combination of radio programming, short interview-style television ads, seminars, and digital marketing to bring in prospects, how Derek and his firm have developed a simplified three-meeting sales process that aims to avoid overwhelming prospects with choices and just focuses on whether they would like to work together, and how Derek’s decision to centralize marketing has ultimately freed up the budget to maintain a larger service staff to ensure a personal, high-touch experience for his clients.

We also talk about how Derek and his partners realized after getting close to burnout that it takes more than just advisors to scale and grow a successful advisory firm, why at one point Derek and his partners decided they had to spend a whole year doing less to get the firm back on track for long-term growth, and how Derek learned first-hand why having a good internal culture at his firm is what really helps advisors develop better and deeper client relationships.

And be certain to listen to the end, where Derek shares his philosophy of concentrating on the smaller details now to help with the bigger picture later, why Derek believes it is so important to be authentic and to have confidence in oneself (especially early in an advisory career), and how Derek’s long-term goal is not simply to have success but to achieve significance by pouring into others.

So whether you’re interested in learning about how Derek utilizes marketing funnels across a wide variety of mediums to drive prospects to action, how Derek’s firm culture changed for the better when he pivoted from employees who came for the paycheck to those who believed in the vision, or why he believes authenticity is the most important trait a young advisor can have, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Derek Gregoire.

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Launching an RIA firm can be a rewarding experience for advisors who desire the independence, flexibility, and control of owning an advisory practice. At the same time, the process of establishing a new business can be daunting, especially when the firm is ‘truly’ starting from scratch with zero clients, revenue, or infrastructure. These challenges, along with the sheer number of priorities that must be addressed (e.g., choosing fee structures, identifying target client profiles, and developing marketing and lead generation strategies) – and the fear and uncertainty of making the ‘wrong’ decision – can keep many potential new firm owners from making the leap to starting their own practice.

In this guest post, Jake Northrup, CFP, CFA, CSLP, founder of Experience Your Wealth, LLC, relays some of the lessons he learned himself during the first three years of building his own fee-only RIA firm from scratch, to help advisors who are thinking about launching their own firms understand how they can navigate the early pitfalls of owning an advisory practice.

Many of the key business decisions in an RIA’s early startup phase revolve around marketing and selling the firm’s services. For Jake, having limited business experience prior to launching his firm made these elements especially daunting as he sought to attract his first few clients. But significantly investing early on in marketing (notably, creating a custom-designed website to clearly communicate his firm’s values and story) and sales training made it much easier for Jake to find and ‘hire’ the kinds of clients he wanted to work with most. Likewise, many individual firm owners will be stronger in certain areas than others, so finding and investing time and resources in areas that may need extra attention early on can be crucial to achieving a sustainable business.

But launching an RIA is not only a business decision, it is also a personal decision that can reshape many aspects of an advisor’s life. While offering the potential rewards of choosing where and when to work – and, with virtual planning becoming a more popular option, giving firm owners flexibility over where to live, regardless of where their clients are located – starting an RIA also comes with potentially significant risks. This is especially true given that firm owners must often tap into their own personal savings to keep it running, at least until the firm generates enough revenue to cover both its own business expenses and the owner’s personal expenses. For aspiring firm owners, then, understanding why launching an RIA from scratch is worth the risks to them – whether that be on account of their personal values, lifestyle preferences, or hard-wired personality characteristics that make them especially suited for running an advisory firm – is a crucial step in creating a practice that supports the ideal life that the owner wants.

Ultimately, what’s important to remember for aspiring advisory firm owners is that virtually everything about the firm – from its fee structure to its target niche and even to the owner’s long-term vision – can change. For Jake, what started in 2019 as a vision for a solo advisory practice quickly expanded to include an associate advisor, and since then has integrated a plan to build out a five-person team… all because his vision for the firm evolved based on wanting to spend more time on high-value advisory activities (and less time on other tasks that could more easily be outsourced). And while it’s important for new firm owners to plan out how the business will look and operate in its first few years, perhaps even more vital is to build in flexibility to account for how the firm’s vision will change over that time, especially since the flexibility to make firm decisions itself is often one of the main reasons advisors choose to start their own practice in the first place!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the CFP Board increased its annual recertification fee by $100 (along with an additional surcharge of up to $19/year for CE credits). Representing the first annual fee increase since 2017, the additional funds will be put toward a range of initiatives, including public awareness, talent retention, diversity, and enforcement. But given the non-trivial nature of the increase, CFP certificants are likely to expect real outcomes from these initiatives!

Also in industry news this week:

Portfolio management giant Orion announced this week that it is acquiring leading advisor CRM provider Redtail in a deal that will bring Redtail’s large base of advisors into Orion’s orbit
Some industry observers think RIA valuations might have peaked, perhaps signaling a slowdown in M&A activity and increased viability of internal succession plans

From there, we have several articles on retirement planning:

Why the creator of the ‘4% Rule’ says retirees might want to reduce their spending given the current market and inflation environment
An analysis shows why the reduced benefits associated with annuity contracts with lower-fee Guaranteed Lifetime Withdrawal Benefit riders could make them inferior to their higher-fee predecessors (and why delaying Social Security could trump both in creating guaranteed retirement income)
Why it is important for advisors working with clients nearing and in retirement to go beyond retirement income and consider their clients’ social connections, health status, and plans for the various stages of retirement

We also have a number of articles on managing cash flow:

Why spending money on building friendships can pay dividends for one’s health and happiness
With statistics showing a significant number of individuals have engaged in financial deception with their partner or spouse, advisors can consider how to handle the financial and emotional impacts of these transgressions
Why clients in the wealth accumulation phase of their lives would be best served by finding ways to increase their income and putting money into the stock market as soon as it is available

We wrap up with three final articles, all about currencies and inflation:

Why cryptocurrencies might not have the inflation-prevention benefits touted by some of their proponents
Why a cryptocurrency skeptic argues that cryptocurrencies are primarily speculative assets rather than useful currencies and are unlikely to change the way we buy goods and services
How the ‘Cantillon Effect’ helps explain who wins and who loses from fiscal and monetary stimulus

Enjoy the ‘light’ reading!

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Financial advisors have often been trained to perfect their ‘elevator pitch’ as a way of generating business development opportunities, and leveraging any social situation (even casual ones like a barbeque or a cocktail party) to prospect for clients. This approach created a long-standing negative reputation that financial advisors are only in the business to sell their ‘advice’ that purely serves their interests (and not necessarily those of their clients), ultimately ending with pushing their firm’s commission-based products on a consumer who may not even want or need the product. In more recent years, though, the term ‘financial advisor’ has progressed to refer to those professionals who are in the business to provide financial guidance and advice – not just sales products – and who are held to a higher fiduciary standard. Though there have been significant strides in changing what being a financial advisor means, this lingering sales-centric reputation has often made it difficult for financial advisors to introduce themselves (especially in more casual settings) as there can be an expectation that the elevator pitch is impending.

In our 84th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how lingering negative connotations of the label ‘financial advisor’ can impact introductions in social settings, how to change approaches to introductions and the relationships that follow, and when it is okay to shift the focus from prospecting for clients to simply talking to other people.

As a starting point, it’s important to understand that not all social settings are appropriate to prospect for clients. Once they introduce themselves, many financial advisors may feel pressured to immediately talk about how they can help the person with their finances. Even though many financial advisors genuinely want to do what is best for their clients and hold themselves to higher standards in the ever-changing financial advisory industry (and their own standards), those who may not be as familiar with the financial advisory world may have a difficult time discerning when they can trust the advisor, especially in light of negative media exposure (e.g., Bernie Madoff) that has tainted the reputation of the financial advisory industry. While an advisor may want to connect with others and have a genuine conversation about the good they do for their clients, the people with whom they are getting to know can feel biased by their negative impressions of financial advisors and may not want to engage in the conversation.

Ultimately, the key point is that there is no magic phrase or term to relieve the pressure an advisor may feel is necessary to defend what they do when introducing themselves as a financial advisor. Experimenting with different terms and descriptions, along with getting more specific as to what one does as an advisor (and clarifying who they serve), can connect the listener to more of the positive things and steer them away from the negative misconceptions about what a financial advisor does. For some, the stigma that surrounds the label ‘financial advisor’ won’t be dissolved any time soon, but by engaging in real conversations, advisors can attempt to at least change the perspective of those they interact with by simply focusing on creating better relationships (regardless of whether the goal is to prospect for clients)!

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As average life expectancy has increased over time, so too has the importance for retirees to ensure that they have sufficient income to cover their needs throughout what could be a 30-year (or longer) retirement. While some advisors may rely on a single ‘favorite’ income strategy to recommend to clients, recognizing that retirees actually have a range of preferences on how to source their retirement income can help advisors better develop sensible strategies that clients may be more inclined to follow. And the starting point for understanding a client’s income preferences to help them choose the right retirement income strategy is to identify the client’s retirement income style.

In this guest post, Retirement Researcher CEO Alejandro Murguía and Founder Wade Pfau share their recent research examining different retirement income styles that can be determined by assessing an individual’s preferences for growing and using their retirement assets. Their study identifies the two strongest constructs that help to determine a client’s income preference style, consisting of Probability (depending on market returns) versus Safety (sources of income less reliant on market returns), and Optionality (having flexibility to respond to economic developments or changing personal situation) versus Commitment (being dedicated to one retirement income solution). Together, these constructs were used to create a framework that can be used to identify an individual’s Retirement Income Style Awareness (RISA) profile.

For advisors, the RISA framework can be used to determine a prospect’s or client’s preferences, which can then help them design an appropriate and practical retirement income strategy. For example, an individual who expresses a preference for Probability and Optionality would likely appreciate the potential upside from strong market returns and the option to change course as necessary that are offered by a Total Return income strategy. Those who prefer Safety and Commitment may align better with an Income Protection approach, which would involve building a lifetime income floor with simple income annuities. And for those favoring Probability and Commitment, a Risk Wrap strategy (i.e., building a lifetime income floor with deferred annuities offering lifetime withdrawal benefits) could be more appropriate. Finally, those with preferences rooted in Safety and Optionality would likely appreciate a Time Segmentation strategy (e.g., bucketing strategies that use less volatile assets for shorter-term expenses, and more volatile assets offering higher growth potential for future expenses).

Ultimately, the key point is that by having a structured process around assessing retirement income preferences (whether by using a standardized RISA Matrix assessment or informally assessing where a prospect or client will be on the Matrix), an advisor can begin to develop a retirement income strategy that will most likely appeal to a particular prospect or client. By doing so, advisors can not only add value to current clients by ensuring that the client’s retirement income strategy matches their preferences, but can also attract new clients by offering a more personalized approach to generating retirement income!

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Welcome back to the 277th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Lauren Oschman. Lauren is the CEO of Vestia Personal Wealth Advisors, an independent RIA based in Nashville, Tennessee, that oversees $600 million in assets for nearly 500 client households.

What's unique about Lauren, though, is how she and her firm not only serve a unique niche of physicians, but have also built practice groups within the firm that serve niches within the niche, including female physicians and orthopedic surgeons, and have developed hyper-specialized services for their unique clientele that allow them to truly differentiate.

In this episode, we talk in-depth about how Lauren and her partners built a firm dedicated to providing a high-touch, customizable client experience that still fits into the busy lifestyles of physicians, how Lauren’s firm developed services that help their physician clients with the unique challenges they face when it comes salary contract negotiations, and mortgages and disability insurance for doctors with highly variability income, and the way Lauren’s firm has further specialized in student loans and helping physicians understand when they may qualify for potentially six-figure Public Student Loan Forgiveness for their non-profit hospital work.

We also talk about how starting her career at a male-dominated advisory firm gave Lauren a better understanding of the importance of inclusivity and diversity for women advisors, how Lauren, immediately after having her first daughter, took a risk to leave the firm she outgrew and launch her own in order to pursue better leadership and ownership opportunities where she could have a much greater impact on change, and why Lauren believes learning to communicate and working on human connection as a financial advisor are equally as important as learning the technical skills in how to build a financial plan.

And be certain to listen to the end, where Lauren shares how she views the adversity she experienced in her career as learning opportunities and uses those moments as inspiration for her own future and for future generations in her firm, how building a team within her firm has helped Lauren feel more fulfilled by having more people around her that she can uplift and impact the lives of, and how, while Lauren is still striving to further improve the workplace that she has created, it’s looking back on how far you’ve come and how much you’ve achieved that really reflects the impact you’ve had on the world.

So whether you’re interested in learning about how Lauren integrates her “made for you” philosophy into her branding and marketing, how she simplified her fee structure to create scalability in problem-solving, and how Lauren fosters community and work/life balance with high demands on both sides, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Lauren Oschman.

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One of the largest hurdles for many financial advisors is not in developing the technical skills to be able to give good advice to clients, but in learning how to engage effective marketing strategies that are essential to growing and sustaining a successful advisory firm. Unfortunately, this struggle to attract a critical mass of prospective clients to actually pay for an advisor’s services has resulted in a very high attrition rate in the advisory industry (as high as 70% in the first three years). Accordingly, there has been a great deal of attention on identifying the ‘best’ marketing strategies for financial advisors to help them grow their businesses.

However, there have been surprisingly few studies exploring effective marketing practices in the financial advisor industry over the past years. Which is why we launched the first Kitces Research Survey on Advisor Marketing in 2019, to identify the marketing strategies financial advisors are really using that work (or not), what tools, technology, and systems advisors use, best practices in the most popular advisor marketing techniques, and what advisory firms really spend on marketing (including hard-dollar marketing costs, tools and technology, and staff support). Our study revealed that, while some of the most popular marketing strategies actually being used by advisors were those that required a large investment of time (such as establishing relationships with COIs, social media, and other forms of networking), many of these popular time-based marketing strategies turned out to be among the least effective at using the firm’s resources (i.e., time and money) to generate new clients. Conversely, strategies with comparatively modest investments of time and dollars (like SEO strategies and paid web listings) were far less common among the advisors surveyed in the study, yet ended out having the lowest Client Acquisition Costs!

Accordingly, pursuing more resource-intensive marketing channels – that potentially involve both time and money – can be a worthwhile effort in helping advisors attract more clients (for instance, cultivating relationships with COIs with affluent client bases, which potentially requires many hours of an advisor’s time, could yield more high-net-worth prospects than less resource-intensive marketing strategies) by generating enough new revenue that makes the time invested worth the effort, even if they may seem less ‘efficient’ in terms of the acquisition cost per client than those requiring fewer resources. These considerations become increasingly important as an advisory firm grows in terms of clients and revenue, because the larger a firm grows, the more difficult it is to scale time-intensive marketing channels (like COIs and networking) with that growth, since the advisor’s time gets both more valuable and more scarce. Ultimately, investing into more efficient – and scalable – marketing strategies can be a key component of sustainably growing an advisory firm as it becomes easier to spend the resources on dollar-based strategies than on time-based strategies.

To dive deeper into the costs and efficiency of various marketing strategies, we are excited to announce the 2022 Kitces Research Study on Advisor Marketing, which will examine how advisors’ marketing strategies have evolved over the course of the COVID-19 pandemic and explore further what the fastest-growing advisory firms are doing to market themselves at scale. All advisors are invited to participate and help the advisor community better understand “What Actually Works In Advisor Marketing”– and hopefully gain some insight into how they can improve their own marketing efforts as well!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that Vanguard is partnering with American Express to offer its Personal Advisor Services human CFP offering to AmEx cardholders, giving Vanguard access to a significant new base of potential clients (and combining low investment minimums with credit card perks to entice clients to hire Vanguard as their first – and perhaps only – financial advisor).

Also in industry news this week:

The SEC has issued guidance discouraging RIAs from using the term “fiduciary” to describe their standards of conduct on Form CRS, irking fiduciary advocates who believe RIAs should be allowed to highlight the differences between the standards that apply to them and those that apply to broker-dealers
The growth in RIA valuations may soon slow or even begin to decline, as Canadian financial conglomerate CI Financial is selling off 20% of its U.S. wealth management business in an initial public offering, which could raise newfound scrutiny of the prices they’ve been offering for RIA acquisitions and slow their demand.

From there, we have several articles on investments:

How I Bonds’ new interest rate will make them even more valuable for advisors and their clients in a world of high inflation
Why the rising interest rate environment is bringing a newfound focus on cash management for clients (from money market mutual funds to shopping banks for yield)
While bonds are often seen as a diversifier for equities in client portfolios, Treasuries have performed this function better than other types of bonds in recent years

We also have a number of articles on how advisors can communicate their value to prospective clients:

Why positioning financial advice as expert coaching to achieve a higher level of success – as a good athlete can use a good coach to reach an elite level – can help prospective clients better visualize the value of financial advice
Why justifying an advisor’s fees requires first understanding what a prospective client actually values in the first place, so the advisor can describe what they can do for the prospect in terms of what really matters to them
How advisors can create a brief and compelling value proposition that is consistent across multiple marketing channels (and can be expanded upon in conversations with prospects)

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

While instant messaging tools are often superior to email in the workplace, email can be a useful tool for personal correspondence and checking in with clients
How advisors can reduce the stress of dealing with emails that require complicated responses
Several methods advisors can use to spend less time dealing with email each day

Enjoy the ‘light’ reading!

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Retirement income planning is often one of the primary reasons prospective clients approach a financial advisor. In a world of increasing longevity and declining reliance on defined benefit retirement plans, being able to give clients an estimate of how much they can ‘safely’ spend each year, given their available assets, is a major part of an advisor’s value proposition. To do so, advisors often rely on Monte Carlo analyses, which provide the probability of a particular course of action being ‘successful’ (and, therefore, implying the corresponding probability of ‘failure’). However, the typical presentation of Monte Carlo results via a single probability-of-success outcome can make for a cumbersome process of guessing and checking plan results to get a sense of the range of plan outcomes for a client across different levels of spending.

A potential solution to ameliorate this problem and allow for easy comparison across various spending levels is to leverage technology to graphically display curves that relate a client’s spending levels with corresponding risk outcomes. These “Spending Risk Curves” can be far more insightful than a single probability-of-success result, and very useful for an advisor to gain a higher-level understanding of a client’s financial options by visually illustrating the trade-offs between a client’s spending choices and risk in retirement.

At their core, Spending Risk Curves show the trade-off between risk (framed in terms of probability of success or otherwise) and spending in retirement planning (i.e., as annual portfolio withdrawals increase, so does the spending risk level) based on a client’s particular circumstances (e.g., mixes of ages, longevity expectations, or Social Security benefits). In this way, Spending Risk Curves give advisors an idea not only of the full range of options for the initial risk/income levels, but, when combined with Spending Risk Curves at different portfolio levels, can also of the future adjustments to spending that might be needed (these could be to the upside or the downside, depending on portfolio performance) to keep the client at the desired risk level.

Ultimately, the key point is that Spending Risk Curves are highly versatile tools that can help advisors better conceptualize the range of outcomes associated with different spending levels for their clients, so that they can more easily design relevant and suitable financial plans. By understanding the full range of spending options at all levels of risk for a given client’s situation and being able to estimate future spending adjustments that might be needed to maintain a desired level of risk, advisors can not only give clients a more accurate view of their choices but also communicate what changes to spending might be needed down the line to keep their plan on track. In the end, this can lead clients not only to make better-informed decisions but also to have more confidence in their financial plan!

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Welcome back to the 276th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is John Hagensen. John is the founder of Keystone Wealth Partners, an independent RIA with offices in Arizona and North Dakota, that oversees $650 million of assets under management for nearly 1000 client households.

What's unique about John, though, is how he is one of the first non-lawyer financial advisors in the nation to build, own, and operate a law firm, which he then leverages, along with his own tax firm, to create a truly one-stop-shop wealth management experience of financial planning, tax, and estate, for his mass affluent clients.

In this episode, we talk in-depth about how the unrealized predictions of fee compression in the financial industry inspired John to concentrate on adding more measurable value for his clients with tax and estate services, how John has been able to leverage his all-in-one service offering to gain a faster pace of referrals, and how John has been able to grow to nearly 1,000 clients in barely more than a decade through a multi-prong education-based marketing strategy that utilizes informational webinars, in-person events, and making a big investment into a weekly radio show.

We also talk about how John transitioned from a career as an airline pilot but still incorporates the same systematized checklist-oriented mindset to build standard processes for his own businesses, how he has become comfortable with the idea of not being a right fit as an advisor for every prospective client, and how he found a sense of renewal after a trip to Ethiopia made him look internally and evaluate his purpose in life and the potential impact of his money.

And be certain to listen to the end, where John shares how the growth of his business led to a mindset shift to focus more on the collective team after realizing how dependent he had become on hiring the right people, how he believes in utilizing the talents and resources afforded to us to help uplift others rather than just himself, and how his plans for the future are centered on a potential merger to scale up even further to expand his all-in-one services across the country.

So whether you’re interested in learning about how John created a true one-stop-shop experience for his clients, how he uses slower, ‘older’ marketing techniques to attract prospects, or how he measures the success of new ventures and avenues explored, then we hope you enjoy this episode of the Financial Advisor Success podcast, with John Hagensen.

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Financial advisors have many ways to add value to clients’ investment portfolios, from selecting an appropriate asset allocation to rebalancing when appropriate. However, because the investor ultimately only gets to spend what they can keep after taxes, another important way advisors can add value to a portfolio is to improve its tax efficiency; after all, if the same returns can be generated in a more tax-efficient manner, in the end, investors will generate more spendable wealth (a form of ‘tax alpha’). And when it comes to individual investors and their typical mix of investment accounts and retirement accounts, one of the best ways to enhance portfolio tax efficiency is through strategic asset location, where the advisor places assets into taxable or tax-advantaged accounts depending on the assets’ specific characteristics.

Implementing an asset location strategy begins with identifying the yield, tax rate, and potential tax drag of each investment in an individual’s portfolio. The investments are then sorted into an asset location priority list based largely on tax efficiency, which can be used to help identify where to house each type of investment, with the least tax-efficient holdings being placed into the most tax-advantaged account. Which means a stock fund with a low yield (and low tax drag) might be placed in a taxable account, whereas a high-yield bond fund (with high tax drag) might be placed in a tax-deferred account, thereby reducing the amount of taxable investment income in the current year.

In addition to using asset location to strategically place investments, advisors can further enhance tax efficiency by replacing the use of broad-based index funds with a corresponding pair of funds – one low-yield tax-efficient fund and another higher-yield, tax-inefficient fund. This process, called “yield splitting”, emulates broad-based index funds in such a way that allows for their component (low- and high-yielding) parts to be invested into separate accounts by tax efficiency.

For example, with a yield-split asset location strategy, rather than investing in a single total-stock-market index fund, an advisor would instead invest in both a low-yield growth index fund and a higher-yield value index fund. The intent would be to maintain a similar return overall, but also to allow the advisor to invest the funds separately, placing the higher-yield value fund in a tax-advantaged account and the low-yield growth fund into a taxable account. Similarly, replacing a total-bond-market fund with a high-yield corporate bond fund invested in a tax-deferred or tax-exempt account and a lower-yielding Treasury bond fund invested in a taxable account would potentially reduce the tax drag while maintaining comparable expected returns.

Over time, asset location can reduce the ongoing tax drag of the portfolio by nearly 10 basis points per year (of hard-dollar tax savings!), and layering the yield split methodology on top can double the asset location tax alpha by another 10 basis points (to a total of 20 bps). Cumulatively, this can add up to a 6% increase in long-term wealth accumulation over an investor’s multi-decade time horizon, simply by restructuring (i.e., yield-splitting) their core index holdings into the component parts for better asset location.

Ultimately, the key point is that while asset location is already a beneficial strategy to create tax alpha, the tax efficiency of a portfolio can be further improved upon with a yield-splitting approach to allow for even more-finely-tuned asset location implementation… all while maintaining a substantively identical overall risk/return profile for the portfolio as a whole. This not only leads to potentially significant tax savings for clients – particularly those who have the capacity for both tax-advantaged and taxable account holdings, and who pay a high Federal tax rate (and/or who live in states with high tax rates) – but also provides a tangible way for the advisor to demonstrate their own value!

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Welcome back to the 274th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Maria King. Maria is the co-founder of Transcend PM, a practice management consulting and coaching firm based in Concord, Massachusetts.

What's unique about Maria, though, is how she not only helps advisors with hiring and compensation plans for next-generation advisors but goes even deeper into constructing legacy plans for advisors to outline not only a plan for succession, but to detail how their firms and clients should be handled if something happens to them along the way.

In this episode, we talk in-depth about how Maria helps advisors focus on their firm’s values from business culture and client experience, to investment philosophy and business strategy, to ensure they choose a well-aligned successor to purchase the business; how Maria utilizes four pillars of consulting, coaching, human resources design and development, and internal firm growth programs to create bespoke legacy plans for advisory firms; and how Maria helps advisors understand why it is important to recognize that their business succession decisions have such a ripple effect that impacts family, staff, colleagues, and clients.

We also talk about how Maria was drawn to working with advisors on succession planning issues after seeing first-hand that only about a third of advisors had a succession or continuity plan in place (not necessarily as a result of lack of planning, per se, but because of how connected succession is to the psychological hurdle of facing our own mortality), how Maria helps advisors distinguish between being in the business for themselves as opposed to just by themselves, and how, with the help of advisor friends, and her entrepreneurial husband and his complementary skills, Maria gained the confidence to start her own consulting business after working nearly 20 years for a large broker-dealer.

And be certain to listen to the end, where Maria shares how after leaving her former career, she entered a period of self-reflection to decide what was next and realized she still had the drive to continue to share her knowledge and expertise, why Maria believes it is so important to have self-awareness when mapping out the bigger picture in building an advisory career, and why Maria views work-life balance as truly a balance to be crafted, rather than as a binary concept where you’re just ‘working’ or not.

So whether you’re interested in learning about how Maria helps advisory firms establish and implement succession and continuity plans, why Maria concentrates on aligning values over a firm’s potential purchase price, or how, after decades in one career, Maria found faith in herself to start a new career path helping others, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Maria King.

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Industry benchmarking studies can be a valuable tool for advisory firm owners to make better business decisions. By compiling and publishing data on firms across the industry, the studies enable owners to compare their firms’ performance side-by-side against that of their peers, giving the owners an expectation for how their firms should perform and insight into where they might be outperforming or underperforming the competition.

But despite the potential benefits, many firm owners choose not to use benchmarking studies. For some, this may be because the firm owners’ financial data might not be organized in a way that is compatible with participating in the survey and comparing to the results. For others, the sheer amount of data a benchmarking study provides may make it difficult to determine exactly which data points are most effective to track. And for still others, the amount of time required – from aggregating and submitting the firm’s financial information, to reading the study and comparing the firm’s performance with its results – can represent an obstacle to using benchmarking studies.

All three of the above issues, however, can be resolved with a systematic approach towards participating in and using industry benchmarking studies. By organizing the firm’s financial data to efficiently compare them with data from major industry benchmarking studies, focusing on a few key metrics that are the most relevant to the firm’s goals (rather than trying to compare every individual data point the survey provides), and – perhaps most importantly – knowing what the comparison with the benchmarking data actually says about the firm’s productivity, efficiency, and profitability, a firm owner can effectively use benchmarking studies to make decisions on how to further strengthen their business.

Furthermore, technological tools are emerging that can help reduce some of the time and resource burden on firm owners to track and analyze their financial data. Two such tools – AdvisorClarity and Truelytics – automate different parts of the process, and (depending on which part of the process the firm owner prefers to automate) either tool allows the firm owner to glean insight from benchmarking comparisons with less of an investment in time and resources.

Ultimately, the point of using benchmarking data is to better understand how an owner can improve their business. Because, while most advisors want to make their firms better in one way or another, they may not always understand which areas are already strong, and which could benefit most from improvement. By having an ‘average’ to compare against, it is possible to quickly see where these improvements can be made – meaning that the initial time investment of using benchmarking studies could ultimately save the firm owner a lot of time and effort in making their firm more profitable!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with new research showing that average asset-based advisory fees increased from 2020 to 2021, suggesting that the phenomenon of “fee compression” from low-cost competition like robo-advisors not only is failing to play out, but may be entirely reversing itself as human advisors create even more value on top of their portfolio management services by offering more and deeper services (and justify charging the same or even higher fees).

Also in industry news this week:

Massachusetts Secretary of State William Galvin is pushing broker-dealers and RIA custodians to increase the interest rates paid on cash sweep accounts in response to the Federal Reserve’s recent rate hike
Despite the popularity of the idea of replacing twice-per-year time changes with a permanent daylight savings time, many sleep scientists believe that such a change could be even worse for our bodies than the current system

From there, we have several articles on retirement planning:

How part-time retirement programs from employers are increasingly available, and how advisors can support clients interested in a phased retirement
How Social Security claiming strategies are becoming more important amid a wave of pandemic-related retirements
Why a 401(k) ‘bridge’ could be a useful strategy for retirees to cover their expenses while delaying Social Security and allowing their benefits to grow

We also have a number of articles on advisor training:

How firms can design training programs that employees will actually implement in their daily work
What goes into effective advisory firm training programs for junior employees, and why consistency is one of the most important elements
How external training programs provide structure and fresh ideas that are more difficult to generate through internal firm training programs

We wrap up with three final articles, all about the way we set and perceive our expectations for the future:

How even the most optimistic predictions sometimes underestimate the eventual outcome of a situation (or vice versa in negative situations), since our tendency to think in linear terms undershoots exponential events
Why people often feel emptiness when they achieve a long-awaited goal, and how focusing on progress towards that goal (and when achieving a goal, setting a new one that can be progressed towards) can lead to greater happiness in the long run
Why setting reasonable expectations is key to maintaining happiness (especially when working toward ambitious goals with a low probability of success)

Enjoy the ‘light’ reading!

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When an advisor first opens their own firm, they are often eager to take on any willing client in order to generate enough revenue to ‘keep the lights on’. But after getting through the first few years of business, many find that the time they spend working with early clients hinders their ability to bring on new, more profitable, clients. This leaves the advisor with the option of hiring additional staff members to handle the growing client base (and perhaps taking on debt in the process) or of terminating the relationship with less profitable clients… both of which involve very difficult decisions for the advisor.

In our 82nd episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how advisors can ‘upgrade’ less profitable clients by referring them to other advisors, why they might need to overcome the scripts in their heads to achieve better growth, and how they can use different models to help underserved populations.

As a starting point, it’s important for advisors to recognize that, given the limited number of hours in the day, they cannot serve every potential client who might need help. While serving others is often one of the primary motivations of advisors, this must be balanced with the need to run a sustainable business (because if their firm goes out of business, the advisor wouldn’t be able to serve any clients!).

For advisors who want to continue serving at least some of their less profitable clients, one option is to set a fixed number of clients in this category. Another option is to set aside a certain number of hours each week to work with clients on a pro bono or low-cost basis. These strategies can help the advisor continue serving clients in need while also keeping enough time in their schedule to serve more profitable clients (and to keep themselves in business).

Clients who the advisor can no longer serve profitably can be ‘upgraded’ to a new advisor who can meet their needs profitably. While it can sometimes be difficult for advisors to move on from long-time clients (particularly those who were willing to work with the advisor when they were first starting out), it is important to recognize that these clients might actually get better service when referred out to a different advisor who specializes in their particular needs and who has the capacity to give them more attention.

Another option for advisors who want to grow their firm but have hit a capacity ‘wall’ is to consider hiring additional staff to help service their growing client base. In cases where the advisor’s current revenue might not initially support new hires, taking out a loan can be a viable option to cover the costs. And while taking on debt to pay employees could trigger an automatic script in the advisor’s mind that they are making a bad financial move, actually running the numbers can confirm whether this option (which would potentially allow the firm to bring in new and more-profitable clients) would result in greater overall profits in the long run!

Ultimately, the key point is that while the desire to help others is one of the primary motivating factors for many financial advisors, time constraints and the need to run a sustainable business often mean that advisors can’t always serve every potential client. But this doesn’t mean that advisors have to ‘fire’ every unprofitable client; instead, advisors can choose to continue serving some of these clients while referring others to advisors who might be a better fit, or else consider options that allow them to expand their capacity (such as hiring additional staff). Which can help advisors grow their firm profitably while at the same time ensuring that all of their clients receive the level of service they deserve!

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In recent years, financial advisors have increasingly recognized that making a personal connection with prospective clients early in the process (as soon as the very first introductory meeting) can make it more likely that the prospect will eventually become an engaged, motivated client. And so advisors often get personal with prospects early – in many cases asking them questions about their personal memories, attitudes, and psychology around money (e.g., “What is your earliest money memory?”) – with the aim of showing interest in the prospect as a person beyond the numbers on their balance sheet (which would theoretically serve to build an open, trusting relationship, and the kind of personal connection that the advisor wants to develop).

But in reality, asking such personal questions in an initial meeting (before any foundation of trust is built) can ironically have the opposite effect of what the advisor intended. Because diving into personal psychological profiles when the prospect may already feel anxious and vulnerable about meeting with an advisor could – from the prospect’s perspective – feel overly intrusive and ultimately put them off toward the advisor.

Furthermore, prospects also may have priorities on their minds going into the initial meeting other than their psychology around money. Often, there is a significant, concrete problem in their financial life that has pushed them to reach out to a financial advisor. And when solving this problem is foremost in a prospect’s mind, having the conversation shift to money psychology can feel to the prospect as though the advisor is not listening to what they have to say – the exact opposite of the feeling of open communication that most advisors hope to invoke in prospective clients.

In the initial prospect meeting, then, all that really matters is answering this question for the prospect: “Can – and how – will this advisor solve my problem?” The advisor can help the prospect answer this question by focusing on that problem for the entire meeting: first, by learning what caused the prospect to initially reach out and exploring that problem in depth; then by describing the advisor’s services and planning process as it relates to solving the problem. And by focusing solely on the prospect’s problem, advisors can hold an efficient initial prospect meeting – lasting around 30 minutes – that gets to what really matters for the prospect and gives both parties the information they need to decide how to move forward.

Ultimately, it’s important to remember that prospective clients often want to talk about the problem that has caused them to reach out – after all, that’s what pushed them to overcome any fears and schedule a meeting with a financial advisor in the first place! And keeping the conversation centered around that problem helps to keep the prospect talking, continually reinforcing that they have a problem that indeed needs to be addressed (and that the advisor can help them solve it!). Letting the prospect talk freely about what is important to them in that moment – with the advisor listening empathetically and reflecting that information back to them – can establish the strong personal connection that many advisors seek, creating a foundation of trust to build on, which can – at the right moment – include discussions of money psychology… but only after building up enough trust and preparing the client for having those conversations!

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Welcome back to the 273rd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Penny Phillips. Penny is the president and co-founder of Journey Strategic Wealth, an independent RIA platform for advisors that manages over $3 billion in assets through the firms that they work with to outsource their back-office compliance and operations management.

What's unique about Penny, though, is her expertise in helping advisors to scale their own time and productivity to work more effectively with clients, both as a consultant who has trained advisors to turn their planning approach into processes that other advisors in the firm can be trained on, and as an outsourcing provider to support advisors who don’t want to have to build the processes themselves and prefer to simply tuck-in to a larger enterprise so that they can focus on the client work they enjoy.

In this episode, we talk in-depth about how Penny spent years helping advisors build systems and processes to eventually institutionalize their vision of how clients should be served so that the advisor’s legacy can live on after they retire, why Penny decided to launch her own advisor platform to offer advisors a space to tuck-in and to plug-in to existing operational infrastructure without needing to be bound up by restrictive covenants, and how advisors can decide for themselves where they want to be on what Penny calls the RIA “spectrum”, from being totally independent and having everything on your shoulders, to being an employee of an RIA that uses but is bound by the firm's own systems, or any of the growing number of mid-points now available in the advisor landscape for those who want to balance between the two.

We also talk about Penny’s own journey through the advisor industry from how she accidentally began coaching and consulting advisors while running a pilot program for an insurance company to transition their agents into financial advisors, how working with transitioning advisors inspired Penny to start a firm of her own that would provide advisors the platform to make that transition from working at a product-centric company into building their own advice-centric business, and why Penny ultimately decided to take her own leap to start an advisor platform in the midst of a pandemic.

And be certain to listen to the end, where Penny shares how she was surprised by how despite technology advancements in the industry, it still remains remarkably challenging to build structure and centralize operations, how Penny came to realize that making tough decisions that aren’t always popular just comes with the territory of becoming an effective leader running a growing business, and why Penny believes it is important to not only do what you love but to also keep an open mind to opportunities that may come along in life.

So whether you’re interested in learning about how Penny helps advisors maintain their independence while tucking into an RIA and leveraging its services, how she went from an ‘accidental’ coach and consultant to owning and operating a multi-billion-dollar firm, or how she is fulfilled in her career by providing the tools and concepts to help other advisors succeed, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Penny Phillips.

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One of the most important aspects of the development of financial planning as a profession is the setting of standards, both for the practice of financial planning and for those who can call themselves a Certified Financial Planner (CFP) professional. But while CFP Board has created a universal set of practice standards, the experience requirement for CFP certification can be fulfilled in a variety of ways and does not require experience working directly with clients.

The range of accepted options available to fulfill the experience requirement leads to newly minted CFP professionals with varying skill levels to handle the client issues they will face as a financial planner. Which means that clients may not get a consistent level of quality and service from financial advisors, even though they may be CFP practitioners. However, by replacing the current options of broadly defined experience requirements with a comprehensive universal training program for all aspiring CFP certificants, the profession could potentially elevate what it means to have CFP certification, in addition to ensuring that clients of CFP professionals can be confident that they will receive consistent, high-quality financial planning consumer experiences.

Such a comprehensive universal training program could be modeled on the accredited experience requirements that prospective doctors must complete to achieve certification. Following medical school – which provides a mixture of didactic lectures, interactive training opportunities, and heavily supervised patient experiences – graduates generally engage in a 1-year internship and a 2- to 6-year residency program where they are given increasingly more responsibility under the supervision of higher-level residents and attending physicians. This model of accreditation emphasizes the resident reaching significant experience ‘milestones’ instead of just the amount of ‘time served’. The resident’s progress is tracked by monitoring education and achievements using real-time data.

A financial planning residency program that replicates this format, where an expansive body of knowledge is reinforced through relatively standardized educational experiences, would help to create a consistent curriculum providing CFP professionals with the right breadth and depth of training to prepare them for a wide range of client encounters. Over the course of 3 years, aspiring CFP professionals (who have already completed the education requirements for CFP certification) can gain the experience needed across the range of financial planning practice areas to become a successful CFP professional. At the same time, throughout the 3-year program, residents are immersed in aspects of practice management, including compliance, business planning, and understanding the firm’s financial status. In addition to assuring clients that the CFP professional they are working with has both the education and expertise to serve their needs, such a training program would also give new advisors the confidence that they have been prepared to handle client issues they will face in their work as a planner.

Ultimately, the key point is that by using the medical field as a guide to create standardized and valuable residency programs for financial advisors, the financial planning profession can develop an educational structure that will not only raise the image of the profession among consumers, but also provide new financial planners with the real-life experience they need to build confidence and serve clients on their own!

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Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with the news of the Federal Reserve’s long-anticipated interest rate hike – the first of what will likely be a series of increases to combat the current spike of inflation – and a look at the wide-ranging effects it may have for consumers and investors, including volatile markets and higher debt costs (in addition to the already-existing effects of inflation).

Also in industry news this week:

FINRA has issued a regulatory notice on the ability of retail investors to trade options and other “complex products” on brokerage platforms, which stops short of proposing new regulations but suggests that broker-dealers may need to do more to affirm the suitability of options trading for their retail customers
A new report from Cerulli suggests that firms should focus on a target niche (or more generally, the advisor’s “ideal” clients) to increase their efficiency (a finding that echoes previous Kitces research as well)

From there, we have several articles on ways advisors can help clients maximize their cash flow:

Why it is important for clients who are planning to leave their job to create a strategy to maximize the financial benefits from their employer before they go
How advisors can support clients in appealing a college’s financial aid offer
Why now is an opportune time to use airline miles and hotel points, and how advisors can support clients in earning and using travel rewards

We also have a number of articles on marketing:

How advisory firms can make the best first impression with their websites using a few best practices (like making it clear who the firm serves, what makes it different, and what visitors are expected to do next in the first five seconds of viewing the site)
How firms with limited resources to put towards their website can focus on their most-visited pages to maximize the return on their investment
How advisors (even those with limited web design knowledge) can improve the search engine optimization of their website content to draw in more visitors

We wrap up with three final articles, all about productivity systems:

How using a ‘productivity funnel’ can help advisors organize and execute on, but first and foremost select, the right projects
Why advisors might consider different productivity systems for projects with a set deliverable and timeline, versus those that are more intangible in timeline but still ‘need’ to be done
A look at a number of popular productivity systems that can help solve a range of challenges, from Getting Things Done to Zen To Done and more, supporting everything from tackling projects that require a consistent effort to organizing the firehose of information that advisors face each day

Enjoy the ‘light’ reading!

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When meeting with a prospective client for the first time, two of the advisor’s primary goals include making a positive impression on the prospect and determining whether the prospect will be a good fit. However, if the prospect feels nervous about the advisor potentially judging their previous financial decisions, they might become uncomfortable or defensive when asked direct questions about their financial situation. And without asking the prospect about their financial history, the advisor might be challenged to determine whether the prospect would be a good fit for their services. Given this delicate balance, one particularly helpful question for the advisor is to ask, “Have you ever worked with a financial professional before?”.

This versatile question, along with relevant follow-up questions based on the prospect’s answer, can help advisors understand not only what the prospect really wants, but also how much financial planning education the advisor will need to provide to help the prospect identify and attain their goals. For example, many consumers who have never worked with a financial planner before don’t understand what advisors actually do for their clients. Additionally, prospects don’t always understand what a financial plan consists of or how they can benefit from using one. And prospects who have worked with an advisor before might come with unrealistic expectations about what they want from an advisor.

For prospects who previously worked with an advisor, good follow-up questions include asking about the length of the relationship with the previous advisor (which may give insight into when the prospect decided to examine their financial goals); why the relationship with the previous advisor ended (to see whether the advisor did something that made the prospect unhappy); and what the prospect found was most beneficial from working with their previous advisor (which can show the values the prospect finds most important).

And for prospects who have not worked previously with an advisor, helpful follow-up questions include what led them to take action now (to see what motivates them and whether they recently experienced a major life change); with whom they currently talk about their finances (to learn about alternate sources of information for the prospect); and what questions they have about the client-advisor relationship (which can show why the client wants to work together in the first place).

Ultimately, the key point is that the question, “Have you ever worked with a financial professional?” can be a useful tool for advisors not only to illustrate their value to new prospects, but also to determine potential fit. It can help them understand how much the prospect knows about the financial planning process as well as their experiences with previous advisors. And by asking appropriate follow-up questions, the advisor can learn everything from the prospect’s motivations for approaching the advisor to their expectations for the relationship. In the end, this conversation can help both the advisor and the prospect decide if a working relationship together can be beneficial and – possibly even more important! – one that they will both enjoy!

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Welcome back to the 272nd episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kate Guillen. Kate is the founder of Simplicity Operations Management, a consulting firm based in San Diego, California, that specializes in helping advisory firms get the most out of their CRM systems and streamline their internal operations along the way.

What's unique about Kate, though, is the way she utilizes the advisor’s CRM system – not their broker-dealer or RIA custodial platform – as the central hub of their entire business, and then builds multi-system workflows from that base to ensure that everything gets done and nothing falls through the cracks.

In this episode, we talk in-depth about why Kate views the CRM system and its four core components of Calendaring, Task Management, Sales Pipeline, and Contact Management as the center around which all advisory firms should be built, why the key to building good workflows is about not just articulating the steps of a process but also the follow-up to demonstrate that good service to clients, and how firms can start the process of systematizing the key repeatable steps of the business in new client onboarding and ongoing client service.

We also talk about how working for an advisory firm herself and observing their operational systems (or lack thereof) encouraged Kate to first master Redtail and its intricacies, how Kate was inspired to launch her company after discovering how often advisory firms underestimate and underutilize their CRMs operational potential, and why Kate has found that it can take up to 6 months to really go through the process of overhauling an advisory firm’s operations to be more efficient.

And be certain to listen to the end, where Kate shares how her nervousness at launching a consulting business just as the pandemic first broke out (and how her fear subsided once it became clear that the pandemic was actually amplifying the need for advisory firms to better systematize their suddenly now-remote businesses), how Kate believes achieving goals begins with having confidence in one’s own abilities and not being so hard on yourself, and why Kate feels, while it is great to do what you love, she has had to learn to get better at saying “no” to find her own balance between growing the business and enjoying her time with family.

So whether you’re interested in learning about how Kate leveraged her organizational and CRM expertise to start her business, how Kate utilizes Redtail as her operational hub to build and incorporate systems, or why Kate feels it is more important to appreciate the journey in building a business than worrying about the destination, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Kate Guillen. Read More...

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When financial advisors help clients with issues related to ‘ownership’, most often it is in the context of the portion of company shares that the client may own, which gives them certain financial and voting rights. But the concept of ownership is not limited to its physical and legal aspects; there is also a psychological dimension as well. For example, individuals often enjoy the sense of ownership of things such as an organization, idea, brand, or object when certain conditions are in place, and even define their identities in relation to those things that they own. The phenomenon of psychological ownership gives rise to ideas about empowering employees to feel and act like owners – because when someone feels like they actually own a part of the business, they become more vested in taking care of the business and ensuring its success.

In order to develop psychological ownership among employees, Finnish management scientist Antti Talonen proposed a three-path framework that can be applied directly to an advisory firm. Under this framework, employees are more likely to feel like owners, particularly over the part of the business they control (e.g., an advisor might feel a sense of ownership for work on their particular clients) if one of three ‘pathways’ to psychological ownership applies to them: 1) they have controlled some part of the business for an extended period; 2) they have generated an intimate knowledge of the business; or 3) they have invested their personal resources or effort into the business. At the same time, the absence of these attributes can lead to a reduced sense of psychological ownership, even among those who might have legal ownership in the firm.

Accordingly, when it comes to advisory firm owners, creating a sense of psychological ownership can arise from having a sense of at least some level of control over the firm, being intimately familiar with and involved in the firm’s operations, or investing significant amounts of energy, time, and effort to the firm. Team members who meet at least one of these preconditions are likely to feel (and behave!) like owners, whether or not they have legal ownership in the firm as well.

While it might be tempting for firms to err on the side of inclusivity and broaden legal ownership in the firm, there are costs involved in doing so. For example, not only can extending ownership to employees increase the legal, administrative, and tax burdens for both the firm and its owners, but it can also raise the risk to employee morale, as high-performing employees may be disheartened if they feel they are being treated the same as those with poor performance. Accordingly, it is important to consider offering actual ownership to those with a strong sense of psychological ownership in the firm, as those employees are likely to be the top performers who deserve ownership the most.

Ultimately, the key point for advisors is that the concept of ownership is multifaceted and goes beyond legal ownership in a firm. Developing a sense of psychological ownership among employees can make them feel more vested in taking care of the business and ensuring its success, even in the absence of legal ownership of shares in the business. And given the costs of expanding legal ownership of a firm, firms that are contemplating doing so might first ensure that the prospective new shareholders demonstrate not just good performance, but also psychological ownership in the firm, that will make them valuable owners in the future!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news of President Biden’s executive order creating a “Whole-of-Government” policy on digital assets, which (despite its high ambitions for protecting investors, the financial system, and national security) contains few specifics other than setting high-level objectives and ordering over two dozen government agencies to collaborate on filling in the details…. Meaning that concrete regulation on cryptocurrency (and how financial advisors can incorporate it into their services) may be even farther off than hoped.

Also in industry news this week:

The SEC examined 16% of the approximately 15,000 SEC-registered RIAs last year, but it may have trouble continuing that pace as RIA firms continue to grow in number while the agency’s examination staffing levels remain flat
A new research study from Vanguard shows that over 90% of clients of human advisors would not consider switching to a robo-advisor (though there may be future advantages for advisors who integrate digital investment management with human advice)

From there, we have several articles on investments:

Why TIPS funds do not necessarily go up in value during periods of high inflation, and alternate inflation hedges advisors can consider for their clients
The tax implications of investing in cryptocurrencies, and how advisors can help ensure their clients’ gains and losses are reported correctly
How direct indexing has transitioned from a tool of the ultra-wealthy to a strategy available to a wider range of advisors and their clients

We also have a number of articles on practice management:

Why companies are finding new ways to show their appreciation to employees (and to customize that recognition in a way that will resonate best with each employee)
Why advisory firms should focus on encouraging and rewarding their ‘star’ performers in proportion to the value they bring to the company (and not necessarily try to treat every employee equally)
How moving talented employees to new areas or roles within an organization (rather than keeping them in one place) can help organizations better retain top performers as well as attract and breed new talent

We wrap up with three final articles, all about how to live a better life:

How a ‘reverse bucket list’ can help advisors and their clients discover what is most likely to lead to a lifetime of happiness
How advisors can help clients better relate to their ‘future selves’ in order to encourage better financial habits today
The seven books that changed one author’s life, and their lessons on how to become a better person

Enjoy the ‘light’ reading!

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Conventionally, meeting with a financial advisor meant meeting in-person, usually at the advisor’s office. With today’s technological advances, though, compounded by changes in social dynamics brought forth by the pandemic, meeting virtually (or mostly virtually) has become increasingly normalized, which has made it easier than ever before to accommodate more meeting time into busy schedules. But while the capacity to schedule more meetings has also given advisors the opportunity to spend time engaging more deeply with their clients, it has also meant that they may have less time to accommodate touch points with a broader range of their entire client base. One potential solution that can help advisors address this time crunch is to consider using asynchronous meeting strategies to help free up more of their time.

In our 81st episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss what it means to meet asynchronously, when it is appropriate to utilize, and how advisors can use asynchronous meetings to increase touch points for clients.

As a starting point, it’s important to recognize that while advisors may still need to devote more time to certain clients with complex financial circumstances who simply require more attention, newer clients often need frequent meetings only initially in the relationship. This is because in-person meetings early on provide a space for dialogue that lets new clients build trust and rapport with their advisor in the first place. But, once a certain level of trust is established, many clients often feel that frequent meetings are no longer necessary and may actually request fewer routine meetings; in fact, they may prefer communicating only on an as-needed basis to ensure that they stay on track with their financial plan.

Furthermore, while there may still be times when synchronous meetings are the most appropriate method of contact, they are not the only way to maintain the right level of touch points with a client. For instance, asynchronous meetings can sometimes be more suitable for situations between in-person meetings or video chat sessions, when a real-time connection is not entirely necessary (e.g., answering a question about how to find information on a platform). Using asynchronous meetings to quickly address lower-priority issues helps free up time for the advisor, as it generally takes less time to record a quick, informal video response than it does to write an email or to meet in person. Asynchronous meetings also don’t require the need to schedule or prepare for an in-person meeting, which can be time-consuming and simply unnecessary (especially when a 5-minute video clip can suffice).

Ultimately, the key point is that asynchronous meetings are not meant to replace all meetings; instead, they can be used to communicate more easily and quickly with clients when an actual meeting isn’t really necessary. While there will always be pressure to maintain a certain level of touch points with clients, advisors can rely on advances in technology that have made it easier and much more affordable for them to use asynchronous strategies (e.g., recording a quick video response) to respond to their clients’ needs without having to schedule meetings. And taking less time to schedule meetings means more time for the advisor to create more touch points and provide a better client experience. Because the more touch points an advisor can have with clients, the more opportunities there are to deepen and maintain long-term relationships with those clients!

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Sometimes there are situations where individuals need access to funds in their tax-deferred retirement accounts sooner than the rules say they can. In fact, except for a narrow range of ‘emergency’ situations, the only way most individuals can access these funds without incurring a 10% early withdrawal penalty tax is by setting up a “Series of Substantially Equal Payments”, otherwise known as 72(t) payments.

Until recently, however, the interest rates used to calculate the amounts of 72(t) payments have been so low that the payments themselves often weren’t enough to meet the needs of individuals who wanted to access their retirement funds. But, with the recent release of IRS Notice 2022-6, the potential amount of 72(t) payments many individuals can make has been substantially increased. Which means that 72(t) payments might now be a more realistic option for individuals who need early access to their retirement funds!

For those who wish to receive 72(t) payments, there are several rules which must be considered. First, those receiving 72(t) payments must take recurring annual distributions for either 5 years or until reaching age 59 ½ – whichever is longer. Second, taxpayers must use one of three methods established by the IRS to calculate their 72(t) payments: RMD, amortization, or annuitization. Regardless of which method is used to calculate payment, the price for altering or canceling a 72(t) payment is steep, usually resulting in a 10% penalty tax on all distributions previously taken – plus interest!

However, IRS Notice 2022-6 sets a new ‘floor’ interest rate of 5% for calculating 72(t) payments, representing a substantial increase over the previous maximum of 120% of the applicable Federal mid-term rate. Thus, for a 50-year-old with a $1 million retirement portfolio, this means the maximum annual 72(t) payment increases from about $37,000 to over $63,000! The scale of the change is significant enough that some individuals may now need to consider ways to reduce their 72(t) payments if they are more than they need to withdraw. For example, someone can consider splitting their retirement accounts into two separate accounts, such that 72(t) payments are only taken from one account, and accessing funds from the other (non-72(t)) account won’t risk creating a modification of their 72(t) payment schedule (and triggering the associated penalties and interest).

Likewise, for those using the annuitization or amortization methods and who may no longer need as much from their 72(t) payments (but who continue receiving them to avoid retroactive penalties and interest), the rules allow for a one-time change to the RMD method of calculation (which generally results in lower maximum payments than either the amortization or the annuitization method) without creating a modification to the schedule. Which can at least reduce taxable income (and the amount drawn from retirement funds) that an individual in these circumstances may not need.

Ultimately, the key point is that with the updates made by IRS Notice 2022-6, 72(t) payments may now be a more practical option for individuals who need early access to retirement funds. Which can give advisors and clients a reason to reconsider this strategy with fresh eyes – either to alter an existing schedule, or perhaps to establish one for the first time!

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Welcome back to the 271st episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Cady North. Cady is the founder of North Financial Advisors, a boutique fee-only financial planning firm focused on serving women business owners that is based in San Diego and Washington, D.C., and oversees more than $24 million of assets across 30 client households.

What's unique about Cady, though, is how she right-sized her practice from what was once a much larger number of clients, and now purposefully maintains a limited number of households she serves to create a business that has high earning potential while remaining personally sustainable for herself without the risk of burnout.

In this episode, we talk in depth about how Cady has built her firm to help a younger clientele of women entrepreneurs discover the best uses for their capital and ways to balance their own money goals, why Cady veers away from the traditional corporate full-time philosophy to ensure she has the time and capacity to meet the needs of her clients as well as herself, and how Cady has systematized and automated processes to avoid the pressure of always staying connected as a solo advisor.

We also talk about how Cady’s experience with burnout in her former career inspired her to take a 6-month sabbatical to step back and examine what was truly important to her in life, why Cady believes that being resilient means first recognizing for oneself what is good enough, and how Cady realized after a few years of building her firm that increasing the quality of clients she served was more important than just increasing the quantity.

And be certain to listen to the end, where Cady shares how reflecting on the highs and lows of professional experiences with a support group of peers helped her to learn and grow in her career, the rotating paraplanner program that Cady built to share her knowledge and mentor others to help them find their own paths to success, and how Cady came to let go of the urge to live a life of to-do lists and focus on feeling fulfilled financially and mentally instead.

So whether you’re interested in learning about how Cady helps her clients realize their short-term and long-term money goals, how she organizes her firm to keep a steady work-life balance, or why she enjoys being a guide for women entering the financial advice industry, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Cady North.

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Welcome to the March 2022 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 FeeX is going all-in on helping financial advisors (get paid to) manage held-away 401(k) plans, providing the ability to facilitate trading and rebalancing without transferring or liquidating the employer retirement plan… and in the process, has raised a whopping $80M of fresh capital and is rebranding away from its “FeeX” roots to a new name “Pontera” to signify how it is building a bridge to retirement plans (“pont” is the Latin root for "bridge"!).

From the advisor perspective, the growing demand for Pontera highlights the ongoing expansion of wealth management services from ‘just’ managing a client’s liquid investment account to providing more holistic advice on their entire household… for which advisors at the least are increasingly charging AUA (Assets Under Advisement) fees, but are increasingly interested in tools that allow the advisor to manage the held-away account and provide their full scope of services (and be able to charge their full scope of AUM fees).

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

Datalign launches a new lead generation service that will allow the advisory firms with the best processes for converting prospects to clients to outbid their competitors for the best leads
Fidelity Labs launches a new compliance solution, dubbed Saifr, to facilitate more rapid compliance reviews of marketing and other advertising materials in large advisor enterprises
Morningstar launches a new Wealth Management Solutions offering in an attempt to TAMP-ify its existing Morningstar Office and related portfolio management tools

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

AssetMark launches a new integration with RightCapital, less than a year after acquiring Voyant, and highlighting the ongoing advisor demand for best-of-breed (over all-in-one) solutions
The SEC proposes new cybersecurity rules that would require RIAs to disclose, to clients and (via Form ADV Part 2) to prospects any cyber incidents they’ve experienced (ostensibly in the hopes that the risk of being ‘cybershamed’ will encourage more advisory firms to invest more into their cybersecurity practices)
NaviPlan founder Mark Evans is preparing the launch of his new financial planning software – Conquest Planning – in the hopes that a ‘strategy-centric’ approach will become the Next Big Thing in financial planning software!

In the meantime, we’ve also launched a beta version of our new Kitces AdvisorTech Directory, to make it even easier for financial advisors to look through the available advisor technology options to choose what’s right for them!

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 TechNews@kitces.com!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that, in response to Russia’s invasion of Ukraine, the United States and the European Union are preparing sanctions on the Russian central bank, which could cause a severe financial shock to the Russian economy… and raises concerns about how the impact of sanctions could ripple back to US investors. But while the war in Ukraine has created a major geopolitical shock (and a humanitarian crisis), historical data show that similar events in the past have not necessarily caused a major decline in the U.S. stock market (at least, not for any sustained period of time).

Also in industry news this week:

Despite ‘SECURE Act 2.0’ stalling in Congress, another potential bill has emerged that would enhance consumer protections and options in workplace retirement plans
While the Biden administration will not halt the upcoming overhaul to the Department of Labor Fiduciary Rule, a pending proposal likely would increase the number of financial professionals who must provide a fiduciary standard of care when providing investment recommendations for 401(k), individual retirement accounts, and other plans

From there, we have several articles on financial advisory industry trends:

A recent study shows that the vast majority of advisors who outsource their investment management are happy with their decision
Why the uptake of model portfolios has stalled out among advisors who are still predominantly focused on making portfolio construction their own value proposition instead
How firms are increasingly trying to expand the number of services they offer to attract clients in a world where more and more advisors are converging on the assets-under-management model

We also have a number of articles on cash flow and budgeting:

How a new database that ranks colleges based on their return on investment can help advisors and their clients determine which college is likely to pay off financially for a given student
How saving on big items (e.g., cars and houses) is important, but spending prudently on the ‘small’ stuff still matters, or it can add up and undermine the big savings
The wide range of ways couples can organize their finances, from a shared household account and separate guilt-free side accounts for spending, to simply splitting every couple’s expenses down the middle to pay from their own assets

We wrap up with three final articles, all about when and how to say ‘no’:

Why the decision on whether to say ‘yes’ or ‘no’ to opportunities can depend on what stage of life an individual is experiencing (and how problems emerge when we start out saying ‘yes’ to everything and fail to realize when it’s time to start saying ‘no’ more often)
How saying ‘no’ to some prospective clients can actually increase a firm’s efficiency and profitability
How using a ‘positive no’ can make saying 'no' a better experience for both the individual saying 'no' and the person who made the offer

Enjoy the ‘light’ reading!

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When the SECURE Act was signed into law in December 2019, it ushered in some of the most significant changes to the rules for retirement accounts in well over a decade. At the same time, however, the statutory language included a number of provisions that were either ill-defined or left open to substantial IRS interpretation. To fill this gap, the IRS issued Proposed Regulations on February 23, 2022, to reflect the changes to the Internal Revenue Code made by the SECURE Act. The Proposed Regulations are likely to be amended at least somewhat before they are finalized, but they do provide the best window into the IRS’s current thinking on a variety of issues.

For many individuals, the most significant change made by the SECURE Act was the introduction of the 10-Year Rule, under which most non-spouse beneficiaries are required to distribute the entirety of their inherited retirement accounts by the end of the tenth year after the decedent’s death. But while the general consensus among practitioners was that such Non-Eligible Designated Beneficiaries would be allowed to distribute the entire account as a lump sum at the end of the 10th year instead of taking annual distributions to empty the account, the new Proposed Regulations seek to implement a system that would require Non-Eligible Designated Beneficiaries inheriting from retirement account owners who died on or after their Required Beginning Date to comply with the 10-year distribution requirement in addition to taking annual RMDs during that period.

The Proposed Regulations also clarify who can be considered an Eligible Designated Beneficiary (and who are able to use the previous ‘stretch’ RMD rules rather than the 10-Year Rule), including the decedent’s minor children, considered minors until they reach their 21st birthday regardless of the age of majority defined by state laws. Which means that minors would use the ‘stretch’ RMD rules until their 21st birthday, and then be subject to the 10-year rule and potential continued RMDs (if the decedent had reached their Required Beginning Date).

Furthermore, the Proposed Regulations provide significant new guidance on trust beneficiaries of retirement accounts, proposing that much of the existing trust-as-a-retirement-account-beneficiary structure be left in place, including the requirements for a trust to qualify as a “See-Through Trust” and the concepts of Conduit and Discretionary Trusts. In addition to continuing to allow remainder beneficiaries of a Conduit Trust to be disregarded when determining the post-death payout schedule of a See-Through Trust named as the beneficiary of a retirement account, the Proposed Regulations also outline other new types of Discretionary Trust beneficiaries that can be disregarded, including secondary beneficiaries who can only inherit trust assets contingent on the death of another secondary beneficiary, and beneficiaries who can only receive distributions of retirement assets from a trust that are first required to be fully distributed to a minor trust beneficiary before the end of the year in which they reach age 31 (provided that they survive to that age).

In a departure from IRS historical norms, the Proposed Regulations would prevent a general power of appointment from causing a trust to fail to meet the See-Through Trust requirement that beneficiaries of a trust be identifiable (given that certain requirements are met). Additionally, in the event that a trust is modified via a method provided for under state law, any trust beneficiaries removed via such a process by September 30th of the year following the year of death will not be considered when determining the trust’s post-death payout schedule.

Ultimately, the key point is that the IRS’s recent Proposed Regulations provide important insight and clarity on several aspects of the SECURE Act, of particular relevance to certain Non-Eligible Designated Beneficiaries and those with trusts. And while the Proposed Regulations can still be amended before they are finalized, taxpayers (and their advisors) can start preparing themselves now for how their individual situations might be affected!

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Welcome back to the 270th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Kyra Hollowell Morris. Kyra is the founder of Morris Financial Concepts, one of the oldest independent fee-only RIAs based in Charleston, South Carolina, that oversees $350 million of assets under management for 250 client households.

What's unique about Kyra, though, is how she has steadily scaled the growth of her firm by taking the time to find and retain top talent… and along the way, developed a willingness to quickly let go of any new hire who doesn’t meet the standards the firm is trying to achieve.

In this episode, we talk in depth about how Kyra consciously controls her firm’s growth by trying to grow fast enough to create new opportunities for her team but not so quickly that she can’t hire and develop the talent it takes to serve clients well, how Kyra concentrates on building the company’s culture by hiring employees who see financial planning as a calling and have a combination of competency and personality (rather than settling for those who may have one attribute but not the other), and why, though firing ‘B-team’ employees who are getting the job done can be tough, Kyra refuses to settle when there are so many other people who may be a better fit for the firm.

We also talk about how Kyra built her media presence to drive the growth of new clients in the early years, how that growth eventually squeezed her capacity and made her realize she needed to change how she trained and developed her team so that she can focus on meeting with clients (and be able to spend more time with her family), and how Kyra developed a system to communicate the firm’s expectations and standards effectively with her team while also holding them accountable.

And be certain to listen to the end, where Kyra shares how she draws upon her fourth-degree black belt, meditation, and running half marathons to cope with stress; how Kyra believes in sustaining a ‘life balance’ to ensure personal needs are being met before the needs of production; and how Kyra aims to give back and uplift her community by creating a mixed-use development where minority-run local businesses can thrive.

So whether you’re interested in learning about how Kyra systematized her hiring and on-boarding processes to ensure the retention of top talent, how she determines when and how to scale the growth of her firm, or how Kyra creates a 'life balance' in entrepreneurship, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Kyra Hollowell Morris. Read More...

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the release of the IRS’s long-awaited SECURE Act regulations, which clear up many questions advisors had about how the law’s provisions will apply to IRA beneficiaries after the original owner’s death in numerous scenarios (such as what to do when the original IRA owner was taking RMDs before their death, what options spouses of deceased IRA owners have for distributing the IRA’s assets, and which distribution rules apply to “See-Through” discretionary trusts).

Also in industry news this week:

The IRS has reversed course on its plan to require users of its Online Account feature to submit to facial recognition to verify their identities after blowback from numerous sources (though the agency has yet to announce what will replace the facial recognition process and is still processing facial recognition through its website even after the announcement)
A new report from McKinsey shows that the fastest-growing category of investors are “hybrids” (i.e., those who have self-directed brokerage accounts in addition to a traditional financial advisor), underscoring the opportunity for advisors who can provide financial planning for clients beyond their (increasingly self-managed) investment portfolio

From there, we have several articles on education planning:

How ‘merit aid’ is lowering the cost of college for many families… and increasing the importance of getting strong grades in high school
How to navigate the rules for determining whether a college student is eligible for in-state tuition benefits
How to ‘superfund’ a 529 plan, and when it might (or might not) be a useful strategy for financial planning clients

We also have a number of articles on practice management:

How advisory firm owners can use the “Entrepreneurial Operating System” to systematize organizational meetings, identify and solve issues, and stay focused on the firm’s long-term goals to overcome the challenges that come with being an “accidental business owner”
Why businesses are increasingly considering offering more frequent pay raise schedules in the face of a hot labor market
How realizing the potential of the remote work environment to give employees more flexibility and control over their lives (and make them happier and healthier in the long run) may depend on replacing constant “pings” and meetings with more asynchronous forms of communication like task boards that give employees information when they need it (but don’t interrupt them when they don’t)

We wrap up with three final articles, all about the benefits of learning to become a (better) writer:

How strong writing skills can help advisors refine their ideas, and better communicate with prospects and clients
Strategies for overcoming writer’s block, and how advisors can leverage their clients’ questions to generate content
How writing can turn ideas from raw building blocks into a well-reasoned and coherent discussion with clients and prospects

Enjoy the ‘light’ reading!

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In recent history, implementing a niche or specialization has given many financial advisors a competitive business and marketing edge over the growing number of advisors in the industry. For many, the challenge may not be so much about choosing a niche, but more about when to begin taking steps toward committing to a particular niche and how to let it evolve over time, because taking action toward any major business decision can feel scary and risky, especially when there is uncertainty as to where the business will be years down the line. Oftentimes, the fear of choosing and committing to a niche can be so overwhelming that it stalls the advisor from taking action and making progress, leading to lost business opportunities.

In our 80th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss the importance of flexibility when exploring a chosen niche, when to course correct the plan as the initially chosen niche evolves over time, and deciding how far in advance to start planning in the first place.

As a starting point, it’s important to remember that even the most well-laid, analytical plans consist only of best guesses for the future, and that there will be inevitable changes that must be considered. And while financial advisors are typically strategists that enjoy creating detailed master plans for what lies ahead, creating excessively rigid plans to implement a niche decades into the future with no potential flexibility may end out to be more detrimental than helpful. Instead, arranging plans recognizing that niches and specializations will shift and evolve (a lot like our lives and preferences!), can help advisors be more successful in a chosen niche than they could have imagined at the start.

While some advisors may have a general idea of what they want to pursue as a niche, it’s important to note that a niche worth pursuing may not always present itself until later down the road. Other advisors may choose to pursue multiple niches throughout their career and may not end with the niche they began with. But by approaching marketing strategies and niche exploration with the understanding that there is no way to know how things will end out, advisors can incorporate changes into the planning process to maintain momentum as they gather new information that will help them course correct along the way and get to the right spot in the end.

Ultimately, the key point is that advisors don’t necessarily have to choose – and commit to! – a niche at the start of their careers. Instead, as opportunities to select a niche are presented to the advisor, taking steps toward a shorter 3- to 5-year plan (instead of a longer-term 20- or 30-year plan) allows the advisor to explore the niche and decide if it is a good fit. Regardless of whether the initially chosen niche is the one the advisor will stay with, the time spent exploring a niche is an investment for advisors. Because, more often than not, the true value of the process is reflected by the actionable steps that are taken as a result of exploring a niche, which will ideally leave the advisor in a better place than where they started!

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For financial advisors, one of the main challenges of the initial meeting with a prospective client is demonstrating the value of financial advice – and showing the prospect how they would benefit from becoming a client. But it isn’t always easy for advisors to articulate this value in a way that resonates with the prospect. Because even though the advisor might be able to name several ways in which they could help the client – like professional investment of the client’s investments, behavioral coaching, and retirement planning – it’s possible that none of these will seem relevant to the prospect’s immediate problems.

Much of the research on quantifying the value of financial advice has revolved around the benefits to clients’ investment portfolios, but investment management is not always the highest priority for prospects (nor is it always the main component of an advisor’s services), so advisors often focus on other, less tangible benefits (like behavioral coaching) when explaining their value. However, even though clients of financial advisors often do value these intangible benefits – as research studies have shown – they ironically tend to recognize that value only after they become a client, meaning that many intangible benefits don’t actually tend to make great selling points with prospects either!

A better way for advisors to demonstrate their value might be to first ask the prospect what has caused them to reach out to hire a financial advisor at this particular moment during their first meeting. The “Why now?” approach identifies important nuances around the prospect’s specific pain points, which helps the advisor understand their deeper concerns beyond a generic need for financial advice. And having identified those concerns, the advisor can better understand what the prospect really values – and can subsequently tailor their own value proposition in a way that truly resonates with the prospect.

Another benefit of the “Why now?” approach is that it sets the stage for good follow-up questions. By inviting the prospect to go deeper into how they might be struggling with whatever prompted them to reach out, the advisor can let the prospect articulate – in their own words – why they need financial advice, and how the advisor can help them resolve their immediate pain points. Which means that, rather than the advisor having to guess at what the prospect might value, asking “Why now?” gives them the answer – while reinforcing to the prospect why reaching out was important to them to begin with!

Ultimately, it’s important to remember that every prospect has (at least) one reason for reaching out, and that there are unique ways they can benefit from the advisor’s services. By identifying those reasons, understanding how the prospect wants to be helped, and clarifying the urgency that prompted the prospect to make contact in the first place, the advisor can personalize their response by articulating their value in a way that will resonate with the prospect and that connects to solving their problems (all while affirming the prospect’s reason for being there in the first place)!Read More...

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Welcome back to the 269th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Michael Hartman. Michael is the founder of Hyperion Financial, an independent RIA based in Shillington, Pennsylvania, that oversees almost $60 million in assets under management for 75 client households.

What's unique about Michael, though, is how he fast-tracked his transition away from his insurance roots to become a fee-only RIA… by making the investment to acquire a commission-based book of clients and convert them to fee-only as well.

In this episode, we talk in depth about the way Michael built a financial planning fee model with a base financial planning fee and then offsets AUM fees against his ongoing planning fee if clients want him to manage assets after creating the comprehensive plan, how Michael and his team leverage a client service calendar and ‘surge’ meetings to more efficiently create a high-touch experience for their clients, and how Michael and his firm present clients with a one-page ‘financial snapshot’ at every meeting to remind clients of their financial goals and reassure them those goals are on track.

We also talk about how Michael’s discovery of the financial planning world through publications and podcasts inspired him to pursue a career change as a financial advisor; how, after being weighed down for years by the contractual obligations of the insurance companies he worked for, Michael realized he needed to acquire his CFP designation to take his career to the next level; and how Michael ultimately recognized he needed to become an independent firm owner to achieve the freedom to serve clients the way he craved and achieve his personal business aspirations.

And be certain to listen to the end, where Michael shares how he persevered through losing 3 out of 6 of his team members (including his wife) while trying to transition the insurance company he worked for into the financial planning space; how taking a personal “pause” with an 8-week road trip gave Michael the clarity to purchase a local insurance firm and convert it into an independent RIA; and how Michael has lived firsthand the challenge that, much like being a parent for the first time, research and preparation can only get you so far, and at some point, you just have to take the leap to make your business what you think it can become.

So whether you’re interested in learning about how Michael guided his newly purchased insurance brokerage firm through fee and model transitions, how Michael encourages other advisors to actively seek advice and resources from professionals outside of their immediate circles to expand their career opportunities, or how Michael believes the hardships and failures he encountered are part of the journey toward personal and professional growth, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Michael Hartman.

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The financial advisor marketplace is an incredibly fractured one, where even the largest mega-firms with 10,000–20,000 financial advisors have only single-digit market share, and tens of thousands of advisors operate on an entirely standalone basis as solo advisors. Which means it’s incredibly difficult for most advisor-technology solutions to grow and gain market adoption because of the challenges in just reaching advisors… one firm at a time. It also means that it’s very difficult to figure out which technology tools are ‘best’ and most popular amongst advisors.

To address this, the industry has produced a number of advisor technology studies, but most are conducted via ‘open-link’ surveys, which are subsequently distributed by the vendors themselves to their users, turning the surveys from objective measurements of adoption and satisfaction into a ‘voter turnout’ exercise for the vendors. Which is why last year, Kitces Research launched its own Independent Advisor Technology study, using a more robust sampling methodology to get a clearer perspective on what tools are really the most popular and most liked within the advisor community.

Overall, the results of the Kitces Independent AdvisorTech study show a remarkably tight link between the technology that advisors deem most important (which has the highest demand), and advisor satisfaction with those tools, signaling that, in most categories, the marketplace really is remarkably efficient at iterating on in-demand software to meet advisor needs.

However, the latest Kitces research also shows that a shift is underway, with a number of advisor software categories in the aggregate gaining far more advisor satisfaction than their current adoption reflects, signaling the potential for accelerated growth in key categories (including advice engagement, plan monitoring, specialized planning tools, and the billing and eSignature process of client onboarding). At the same time, a number of ‘traditional’ advisor software categories (including CRM systems, performance reporting, compliance, digital marketing, and especially account aggregation) are particularly prone to disruption from new competitors. And in some categories (like trading and risk/behavioral assessments), advisors are so dissatisfied with the current solutions that a disproportionately high number of firms are building their own solutions from scratch, rather than buying anything in the existing marketplace!

Which shows how, as the advisor value proposition increasingly shifts from a focus on product sales and portfolio management to the delivery of advice itself as a service for which advisors charge fees, there is an emerging gap in advisor technology to solve the problems of advice delivery itself. And at the same time, while the leading advisor technology firms are trying to add (or even acquire) complementary features to become more ‘all-in-one’ systems, advisors are increasingly looking to alternatives to implement a more ‘best-of-breed’ approach to fill in the unique gaps they’re experiencing in their own firms.

In the end, though, the latest Kitces Independent Advisor Technology research shows that the advisor technology marketplace remains incredibly robust, and that, despite more than 300 offerings on the AdvisorTech Solutions Map, and existing incumbents who continue to retain their market leadership in the core of the advisor technology stack, there is still a great deal of opportunity for new firms to grow and capture market share, especially as the advisor business model itself continues to change and evolve!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that, according to population and moving data with increased relocations during the pandemic’s era of remote work, the states that lost the most population in 2021 were those with the highest personal income tax rates (and likewise, the states that gained the most population were those with the lowest tax rates), which, while not definitively proving that tax rates were a primary factor for remote workers taking advantage of the freedom to live and work anywhere, does show that Southern and Western states (which make up the majority of lower-tax states) continue to hold allure for workers seeking a lower cost of living or better economic opportunity.

Also in industry news this week:

The CFP Board issued new guidance and case studies focusing on satisfying their “fiduciary-at-all-times” duty of care, navigating the seven-step financial planning process as a solo advisor, and managing conflicts of interest in compliance with the Code of Ethics and Standards of Conduct that has been in force since June 2020
A new research study from TIAA concluded that high school coursework on personal finance has no impact on a student’s likelihood to eventually save for retirement or own a home (though previous research has suggested that financial literacy education can at least improve young adulthood credit and debt behavior)

From there, we have several articles on client communication:

An extensive new study from FPA concluding that advisors may overrate their own communication skills, as compared to how clients view them, suggesting the need for a more systematic approach to gathering both quantitative and qualitative client data to understand clients’ personal and financial priorities in more depth
Why, when clients of financial advisors fail to act on recommendations, it may not be a sign of their being unwilling to act so much as not (yet) being ready to act – and how pushing the client to take the “right” action can actually have the opposite effect (and cause the client to even further delay a needed course correction)
How the nature of financial advice is expanding beyond the strictly financial aspects of clients’ lives (although clients may not yet be willing to go too far beyond the boundaries of their financial lives)

We also have a number of articles on retirement:

How data from both the United States and United Kingdom show that average annual spending after inflation declines throughout retirement, and the implications for creating financial plans
Why mini-retirements can not only be relaxing, but also create significant tax planning opportunities in the low-income years (that can even help to offset the long-term cost of taking extended time off from work!)
How advisors can apply the lessons of those pursuing financial independence at an accelerated pace, not just in terms of savings habits, but the mindset it takes to FIRE early (from ignoring social comparisons to getting clearer about what is ‘Enough’)

We wrap up with three final articles, all about how negative emotions can actually lead to self-improvement:

How experiencing sadness, anger, and anxiety can actually make you happier and smarter in the long run
Why learning to get comfortable with the loss of the known (as opposed to reducing future uncertainty about the unknown) may be the key to getting comfortable with change
How addressing, rather than avoiding, regrets can lead to self-growth, and perhaps fewer regrets in the future

Enjoy the ‘light’ reading!

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First introduced in the 1970s, index funds have grown in popularity over time thanks to their ability to provide broad-based diversification at (typically) very low costs, making their benefits available to investors of any level of wealth. And while mutual funds and Exchange-Traded Funds (ETFs) have been the dominant way for investors to get index exposure, thanks to improved technological capabilities and reduced trading costs, direct indexing – buying the individual component stocks within an index – has emerged as an alternative tool with a range of potential use cases.

Historically, direct indexing was developed as a means to unlock the tax losses of individual stocks in an index – even if the index itself was up – and was primarily used only by the most affluent investors (who had the highest tax rates and benefitted the most from the available loss harvesting). However, direct indexing can be used not only to harvest tax losses but also to harvest capital gains (particularly for those taxpayers in the 10% and 12% tax brackets). In addition, direct indexing can provide tax benefits to investors who are charitably inclined by allowing them to donate the underlying shares within an index that have the largest gains, thereby helping them to maximize their tax savings.

For those whose primary goal is to benefit from a more personalized indexing strategy that still gains broad market exposure while specifically adjusting for personal preferences, using a personalized index can ensure the investor’s capital will support the exact industries or companies they wish to support (while also saving on the management fees otherwise charged by more packaged ESG/SRI mutual funds and ETFs).

The direct indexing framework also is relevant for advisors whose default strategy is to own “the market” (i.e., broad-based index funds), but who also want to overlay various rules that subsequently modify or tilt the allocations based on their own (or their clients’) investment preferences or outlook, such as over- (or under-)weighting certain sectors, factors, or segments of the market.

Finally, direct indexing can be used to help a client with a large, highly appreciated or concentrated investment position, or one whose human capital is tied up in one company or industry. For these clients, an advisor can build around the holdings committed to an existing company or industry by diversifying the remaining assets into an index, better positioning the client away from exposure to a potential downturn in their company’s (or its industry’s) performance.

The distinctions between the four types of direct indexing are important, as the various uses of direct indexing necessitate very different capabilities from the platforms themselves. Which in turn means that more than multiple different indexing providers can each have the potential for breakout success, by building the best-in-class solution for a particular direct indexing approach… while recognizing that what it takes to be most successful in one direct indexing category may be very different from what it takes in others.

Ultimately, the key point is that the value of direct indexing is no longer limited to tax benefits for high-net-worth clients. The developing uses for direct indexing – personalized indexes, rules-based advisor investment strategies, and customized completion portfolios – can benefit a wider range of clients. And while it remains to be seen whether direct indexing will start to displace mutual funds and ETFs in advisor-managed portfolios, its expanded uses, increased outside funding into direct indexing providers, and growing platform capabilities, suggest that direct indexing’s value to advisors is likely to expand in the future!

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Welcome back to the 268th episode of the Financial Advisor Success Podcast!

My guest on today's podcast is Patti Brennan. Patti is the CEO of Key Financial, an independent RIA based in the Greater Philadelphia area that oversees more than $2 billion in assets under management for nearly 800 client households.

What's unique about Patti, though, is how she has scaled her firm by centralizing her departments into a unique team structure, and systematizing processes amongst her client service team – not lead financial advisors – to create a high-touch experience for her clients.

In this episode, we talk in depth about how Patti adopts the “Starbucks” model where her advisors create tailor-made plans for each client by utilizing customizable templates, how Patti has designed a concierge-style client services department that she refers to as ‘key’ client services (a play on the name of her firm, and because she wants her clients to feel like they are key), and how Patti has, in the vision of KFC’s Colonel Sanders, leveraged her personal image and reputation as a symbol of her brand and marketing, even if she is not the forerunner of each client’s relationship with the firm anymore.

We also talk about how The 4 Disciplines of Execution by Sean Covey motivated Patti to form systems to get past just visualizing her business goals and move toward actualizing them, how Patti was inspired to increase her firm’s yearly goal after hearing an advisor describe bringing in $50 million in AUM in one year when she wasn’t growing at even half that rate, and how she focuses on optimizing her team’s individual talents to create a well-oiled organization.

And be certain to listen to the end, where Patti shares how she realized that to truly scale her business, she needed to let go of fear and learn to trust her team to implement her plans and vision, how Patti feels newer advisors would benefit most from working at a firm that is growing and has potential to keep growing, and why it is important as a leader to show vulnerability, admit mistakes, and master the art of apology.

So whether you’re interested in learning about how Patti organizes the departments in her firm to create an efficient workflow, why Patti places importance on cultivating deep, long-lasting relationships with both her employees and her clients, and how Patti stays inspired to continue setting and achieving goals, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Patti Brennan.

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For financial advisors in the early phases of starting their own practice, especially in the fee-only part of the industry, being successful often comes down to the resources and advice available to the advisor. A call with a mentor or peer to ask something as simple as, “Was this hard for you, too?” or “Is this a good choice?”, or even just to ask for references and resources can provide not only monumental comfort but also affirm an entrepreneur’s choices, thus allowing them to take the next step forward – and hopefully to become a successful advicer in the meantime! However, the advisors on the other end of the call, who are eager to give back to the community that originally gave them support and mentorship, often face their own challenges as they look to provide support to up-and-coming advisors without overwhelming their own calendars and potentially stalling the growth of their own firms.

In this article, Meg Bartelt, founder of Flow Financial Planning, explains how (and why) she developed her own “Office Hours/Ask Me Anything” system, how she prevents time creep, and how advisors can develop their own systems of mentorship and trust.

From an overarching perspective, Meg’s Office Hours structure – 45 minutes, every Friday, with up to three people – starts from a time management perspective. Many advisors looking to give back begin with a very open structure. For example, Meg started by setting aside 30 minutes each Friday to have one-on-one discussions with whoever wanted to talk to her. However, more advisors began to reach out, and more slots were added – plus, conversations occasionally went over 30 minutes and ate into even more time! Designating a set block of time for Office Hours for multiple people at the same time helps manage both expectations and time for advisors on the call. And, of course, advisors are not obligated to hold weekly Office Hours. Biweekly or even just monthly meetings can be more than sufficient.

Once an advisor has decided how frequently to hold Office Hours, all that’s left is to get started. Initial set-up doesn’t have to be complex: a sign-up system, such as ScheduleOnce (which Meg uses) or Calendly, and a social media post or email broadcasting the service may be sufficient depending on how much of a following the advisor already has. Preparation can also be minimal; Meg asks participants for their contact information only, and often enters Office Hours without having done any research or advance preparation for the session.

Ultimately, the key point is that giving back to the advisor community doesn’t have to be hard, complicated, or time-consuming. Sometimes, it’s as simple as lending expertise, empathy, and community when an advisor needs it most. One connection, insight, or aid can be all it takes to help transform a young advisor’s career – but first, one has to start by opening the door!

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Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the Financial Planning Association, under new Executive leadership and a renewed Board focus, is now explicitly stating that its ‘core member’ will be a CFP professional. In addition, leaders of the organization reiterated the importance of the FPA’s local chapters, which had come under threat in a proposed 2018 restructuring plan. Together, these measures signal a return to the organization’s roots as a ‘home’ for CFP professionals with strong local chapters, as the beleaguered membership association tries to reignite its growth against a backdrop of strong and steady growth of CFP professionals themselves.

Also in industry news this week:

The SEC has proposed a new rule that, if it comes to pass, would require investment advisers to significantly beef up their cybersecurity planning and reporting
More than a year after Regulation Best Interest was implemented, a FINRA report has found that many broker-dealers are failing to live up to many of its requirements designed to protect consumers

From there, we have several articles on broker-dealers:

How FINRA will start to identify “high-risk” broker-dealers under its new Rule 4111 after June 1, 2022, providing the first significant test of whether it will truly incentivize firms to rid themselves of their problem brokers
How major independent broker-dealers like LPL Financial and Commonwealth Financial Network have changed their recruiting incentives to align with the industry’s broader shift to advisory services over product sales (by providing forgivable loans based on AUM, not the advisor’s trailing-12 GDC)
How the headline payout rate offered by many independent broker-dealers often obscures hidden costs paid by both advisors and clients, and can frustrate advisors who want to offer more fee transparency and keep a higher percentage of the revenue they earn

We also have a number of articles on investing:

Why investors are pouring money into ultra-short-duration bond funds in anticipation of the Federal Reserve’s expected interest rate hike
How ETFs in model portfolios that are affiliated with the model portfolio provider themselves are likely to have higher fees and lower performance than those that are not similarly conflicted
How Legos as an asset class outperformed the S&P 500 over a nearly 30-year period (at least for those who managed to hold on to their original, unopened sets!)

We wrap up with three final articles, all about attracting and retaining talent:

How the current tight labor market has led to a ‘Great Upgrade’ in which many employees are leaving their current jobs… for new ones that offer better pay and work-life balance
Why the recipe for happiness on the job goes beyond quantitative measures such as compensation and into qualitative aspects, including a feeling of earned success and being able to serve others
How to identify the ‘Non-Fungible People’ in a company, and why these employees are the most important to retain

Enjoy the ‘light’ reading!

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Traditionally, financial advisors built their clientele by working with anyone who had the financial wherewithal to buy whatever products or services they had to offer. And as advisor platforms have become increasingly open architecture, advisors have had an increasing number of offerings available to work with an ever-widening range of clientele. However, at the same time, the fact that ‘any’ advisor can offer almost ‘any’ product has made it more difficult for a particular advisor to differentiate themselves from other advisors. For many advisors, the solution to this challenge is to get more focused – which means choosing a specific niche or a specialization and differentiating themselves by offering an even more specific offering for their particular clientele. The idea may seem simple in concept, but implementation of a niche or specialization can feel daunting, risky, and even downright scary!

In our 79th episode of Kitces & Carl, Michael Kitces and client communication expert Carl Richards discuss how to begin the process of finding a niche, ways advisors can conduct research to decide if a chosen niche is a good fit for their firm, and, once a niche is chosen, how to begin attracting new clients.

As a starting point, it’s important for advisors to understand the types of clients they already serve. Compiling a list of existing clients and differentiating them through qualifiers such as occupation (and whether they have enough revenue to be financially viable) can give clarity as to whether a potential niche already exists. From that list, advisors can then choose 5-10 (reasonably remunerative) clients they like working with and decide if they would like to work with more of that same type of client. A good way to approach this is to consider whether there is a common problem these clients face, and if the problem would be interesting for the advisor to solve for more prospective clients who face the same challenges.

Once a set of clients has been chosen, advisors can set up meetings over coffee or lunch with the intention of learning more about the types of issues these clients face, and what it would take to attract more clients like them. By interviewing these clients and asking a predesigned set of questions, advisors can gain an understanding of the viability of the proposed niche. Taking this a step further, information gathered can be used to write a white paper that can serve as both a reference for market research, and as a handout back to the interviewed clients so that they may share it with others potentially within the same niche to help attract future clients.

Ultimately, the key point is that financial advisors considering a change in their business focus may not have to look far to find their niche or specialization. Communicating with current clients gives an opportunity for advisors to discover how they can not only help them, but future clients with similar financial planning issues. Which means choosing a niche doesn’t have to be a grandiose declaration that feels foreboding and irrevocable; it can be as simple as just taking a renewed focus on a segment of clients that are already “working” for the business and pursuing more clients just like them!

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