Nerd's Eye View blog for Financial Planners at Kitces.com

Weekend Reading For Financial Planners (May 27-28)

May 26, 2023 02:00 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the 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!

5 Screening Questions To Assess Client Readiness And Appropriateness (And Why It’s Especially Useful For Some Firms)

May 24, 2023 07:02 am 0 Comments CATEGORY: Client Trust & Communication

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!

#FA Success Ep 334: Finding Clarity On Fees And Clients By Allowing The Business To Evolve Over Time, With Meg Bartelt

May 23, 2023 07:07 am 0 Comments CATEGORY: Financial Advisor Success Podcast

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.

Best Practices For Running A Financial Planning Internship Program (And Creating A More Productive Outlook)

May 22, 2023 07:07 am 0 Comments CATEGORY: Planning Profession

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!

Weekend Reading For Financial Planners (May 20-21)

May 19, 2023 02:00 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the 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!

Kitces & Carl Ep 112: When You No Longer Want To Be A Manager And Have To Let An Associate Advisor Go

May 18, 2023 07:02 am 0 Comments CATEGORY: Kitces & Carl Podcast

Kitces Carl Ep Who To Hire First As Your Advisory Firm Grows And Why Do You Even Want To

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!