Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big news that yet another state, Maryland, has now jumped into the fiduciary fray, with its own version of a rule that would require brokers operating in the state to meet a fiduciary standard of care, given ongoing concerns from state legislators about the potential consumer consequences of President Trump’s order to review (and potentially further delay or kill) the Department of Labor’s fiduciary rule. Also in the news this week was a discussion from SEC regulators suggesting that they may be focusing less now on creating new rules for robo-advisors, and instead simply looking to apply the existing principles-based fiduciary regulation under the Investment Advisers Act of 1940 to the robo-advisor business model (with a particular focus on whether robo-advisors, or human advisors using “robo” tools, are probably explaining how broad, or narrow, the scope of their financial advice really is).
From there, we have several articles on the new tax law, including how many small businesses are taking a fresh look at the ideal business entity structure (with some pass-through businesses considering whether to become C corporations for the new 21% corporate rate, and some C corporations considering whether to switch to pass-through status to take advantage of the new 20% Qualified Business Income deduction), a discussion of whether some employee advisors at broker-dealers may want to switch to become independent contractors to take advantage of the new pass-through deduction, how some couples may want to use the “Married Filing Separately” filing status to preserve the pass-through deduction where one spouse is a business owner and the other has (even higher) non-business income, and a look at how the change in tax rates from 2017 to 2018 creates interesting opportunities over the next two months for people to engage in “tax rate arbitrage” by contributing to IRAs for the 2017 tax year and then converting them in the current 2018 year at lower rates.
We also have a few marketing-related articles this week, from tips to squeeze more value out of your client communication and events (by focusing on how to expand or better leverage or re-purpose the content), to how having a narrower niche or target market allows you to build rapport faster with clients by getting to know their common needs and issues (which makes you look like a mind-reader when you can tell them what’s on their minds before they even say it!), and how clients begin to develop a deeper relationship with a professional in as little as 3 extra minutes of the professional listening and making clients feel like they’re heard and cared for.
We wrap up with three interesting articles, all around the theme of selling and business incentives: the first explores a recent research study that finds it’s not the lower fees of robo-advisors that are attracting clients, but the transparency of those fees (and their subsequent performance reporting systems), which has important lessons and implications for all advisors; the second looks at how business model incentives may help to contribute to the unique (and not necessarily pro-long-term-investor) way that brokerage firms typically develop their client statements and websites; and the last provides a good reminder that even if we’re in the business of advice and not product sales that we’re all still selling something to clients, which means perhaps we should focus less on trying to avoid discussions about sales altogether and instead focus more on the most productive ways to ethically “sell” and help clients to reach better financial outcomes!
Enjoy the “light” reading!