Weekend Reading for Financial Planners (May 11-12)

Posted by Michael Kitces on Friday, May 11th, 6:02 pm, 2012 in Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition focuses entirely on practice management issues, leading off with a discussion in the Journal of Financial Planning about whether the profession needs to institute a process of peer review to both clean up those delivering poor advice, and to help challenge everyone to deliver better advice. From there, we look at some articles about how to navigate the challenges of being in a small firm, from how to demonstrate that you can compete with the services of larger firms, to supporting the career development of staff in a small firm environment, to managing the challenges when you're both the business owner and the financial advisor driving the firm. We also look at some articles that share how to know whether your website is a clunker, how advisors are adopting video on their websites, and how your marketing efforts should be certain to both capture target clients and allow unqualified clients to slip through your marketing net so you don't waste time finding out you can't work with them anyway. We also look at a good article by Mark Tibergien about the key traits for an enduring advisor firm, and a discussion by Bob Clark of how some independent broker-dealers are stepping up to define a new offering - with remarkably high payouts for the B-D world - to be appealing to the new independent advisor. Wrapping up, we look at an interesting article from the Harvard Business Review about how Gen X and Y are redefining a new, more human definition of what it means to be a "professional" and a nice article from Bill Bachrach reminding us how important it is to take a real vacation - with some concrete tips about how to really do that, especially if you're not good at taking vacation in the first place. Enjoy the reading!

Weekend reading for May 11th/12th:

Peering Into The Future - This article by Dan Moisand in the Journal of Financial Planning discusses the challenges of the CFP Board in effectively overseeing CFP certificants, with the example of a fellow planner who knew of a questionable advisor who eventually had a complaint filed with FINRA... yet reporting to the CFP Board resulted in no action while FINRA reviewed the case, raising the question of the CFP Board's culpability if a prospective client was harmed by the advisor in the intervening 15 month period while the CFP Board waited for a FINRA outcome to proceed on its own. Moisand suggests that ultimately, the solution to this may be for the profession to begin using Peer Review, a process where practitioners (either voluntarily or perhaps as a future requirement) have their advice reviewed by peers to determine its appropriateness, ultimately with the goal of both detecting especially poor advisors and providing constructive feedback to improve all advisors. 

How to Make Your Small Financial Planning Firm Look Big - This article by Jude Boudreaux in the Journal of Financial Planning shares ideas about how to take a small firm - e.g., a solo practitioner - and show that it can accomplish everything a bigger firm can, while still delivering the small firm personal touch. Boudreaux notes that having a website is a minimum requirement now; it can be as similar as a digital brochure, but ideally should be the hub of your entire digital presence that incorporates the use of social media, and communicate your company's values and a clear voice about what you think is important and why prospective clients should work with you. And the website - along with your email address - should be customized to your business; no Gmail or Hotmail business email addresses. Virtual telephones like Line2.com or Skype allow you to maintain a telephone presence without even installing a landline, and affordable business cards can be printed in small batches from Moo.com. As you beef up the presence of your firm, though - especially in a digital world - be certain to use proper password protections for all your devices, though.

How to Achieve Career Development in a Small Office - This article by Joni Youngwirth in the FPA Practice Management Solutions magazine explores how to implement "career development" in a small firm. This might include providing staff opportunities like earning FINRA licenses or professional designations, providing tuition reimbursement to take some classes to improve job skills, or providing new responsibilities (whether a new ongoing duty, or spearheading a new initiative), and perhaps a new job title to recognize the employee for the achievement of those new responsibilities. Youngwirth also provides several excellent questions for a firm owner to ask employees to better understand what their goals within the firm really are, to ensure that the career development opportunities are matched to the right employees who would benefit and grow the most from them.

Two Hats - This article by Joni Youngwirth in Financial Advisor magazine discusses how advisors deal with the most challenging "two hats" situation - where advisors have to manage the roles as a business owner, even while providing services as a financial advisor. Youngwirth provides a number of simple but straightforward takeaways to focus on. Besides just being aware of the financials of the firm, be prepared to deal with the key areas in any firm, including: human resources (have job descriptions, performance reviews, and an employee handbook, and try to keep staff meetings efficient); operational efficiency (use checklists, especially for those common functions that occur day after day and week after week); marketing and growth (have a niche, build a marketing calendar to know what to do and when with a plan, and hold yourself accountable to it), and risk management (have a succession plan and know how you'll deal with a potential disaster). Obviously, many of these are far easier said than done, but this is a remarkably concise list of the key issues to focus on in each area to achieve success.

Is Your Website A Clunker? - This article from the FPA Practice Management Solutions magazine continues the theme of websites, asking the fundamental question "is the virtual front door to your organization enticing people to knock?" The starting point, though, is to know the purpose of the website in the first place. Are you trying to just build your brand? Or generate clients? Or generate engagement with current clients? Does your website call people to take action? Be certain to incorporate whatever social media platforms you use as well. Fortunately, though, in today's world websites can increasingly be adapted easily using CMS (content management system) platforms, allowing you or anyone on your staff to make simple updates. Perhaps most important, though - be certain to track the results, using tools like Google Analytics to understand what activity is being generated on your site. 

The Producers - This article in Financial Planning magazine explores how advisors are using video as a part of their marketing to prospects and communication to clients. So far, advisor adoption of video has been slow - an Aite Group survey found that only 6% of advisors use YouTube professionally. Nonetheless, advisors who are using video are getting increasingly savvy about it. The key is to make videos informational, and keep them short (no more than just a few minutes). You can use videos to provide your own educational perspective on topics relevant to clients, or to help prospects understand what you do and how it can help them. Notably, video doesn't have to be fancy; consistency and useful content matters most. While still on the fringe for the advisory community, as the tools become easier to use, it seems likely that advisor use of video will increase. 

Marketing Nets Need Holes - This article from Investment Advisor magazine makes the important point that while marketing and growing a financial planning firm is a numbers game, it's important not only to look at number of people you meet with, but also the amount of time you waste seeing prospects who aren't an appropriate fit. Accordingly, casting an effective marketing net should include some holes - so that you can catch the fish you want, but let the ones that are too small or the wrong fit slip through. Doing this effectively means really understanding who your target client is, as well as who it's not. Otherwise, there's no way to know which fish you're aiming for and which you want to let swim on by.

The Enduring Advisory Firm - In his monthly column in Investment Advisor, Pershing Advisor Solutions CEO Mark Tibergien shares his thoughts on how to build an enduring advisory firm, which requires five key qualities: consistent profitability; transferable value; loyal clients; career growth for employees; and multigenerational client appeal. Profitability should be determined by the decisions of the firm regarding pricing, productivity, the balance of service and client mix, as well as volume and cost controls. Firms should be certain to value their employees as much as their clients; both are long-term assets. Important blocking points to success include relying on too few key clients for the bulk of revenues or profits; failing to create a true vision for the business and where it's heading; and a reluctance to sacrifice short-term benefits for long-term gain; sheer inertia; and the lack of professional management to help translate ideas into action and strategy into results. The bottom line from Tibergien: "If you build a business to last, you will always have a valuable business to sell [too]." 

Paychecks and Balances - This article by Bob Clark from Investment Advisor magazine looks at how even the independent broker-dealers are getting creative in supporting advisors to operate under a fiduciary standard with a new level of advisor independence, using as an example LPL Financial, with both its hybrid RIA program and its hyrbid affiliate Independent Financial Partners (IFP). Under the model, IFP advisors earn a remarkable 95% payout on average, while still receiving a strong array of offerings for clients and support with compliance (in fact, for some low-compliance-issue advisors, LPL allows the advisors to take home a full 100% of AUM fees, earning its own money solely through the underlying custodial platform). In the meantime, the advisor retains control of the firm and clients (by written agreement, the clients are the advisor's), the advisor can execute his/her own vision, and the advisor operates as an independent contractor (not a W-2 employee). 

What Does "Professional" Look Like Today? - This article from the Harvard Business Review blog discusses the proactive use of social media by some businesses, and the reluctant use by others, especially those deemed as "professionals", whether a CEO or a professional services provider. The issue ultimately gets to the core of what it means to be a "professional" in the first place, as social media challenges some of the traditional lines we've drawn in the past. Interested readers might just skip to the end of the blog post, which provides a great summary chart of the old-versus-new world: where the new professional is open and accessible, acknowledges mistakes, shares interests and hobbies and passions, searches for answers as much as having them, and shares power instead of taking and holding it. The bottom line is that the new professional acknowledges, shares, and even embraces the human side of being a professional, and the uptake of social media amongst Gen X/Y is simply one of the many ways this new professionalism is manifesting. 

More Vacation - This article by Bill Bachrach in Financial Advisor magazine provides a nice balance to all the practice management articles out there, with the helpful reminder that ultimately, you need to take vacations yourself as an advisor to keep yourself fresh, or you'll just burn out in your own business. And Bachrach emphasizes it's about a real vacation, where you truly unplug from your business for a week. Given how difficult it is for most advisors to take a real vacation, Bachrach provides a number of helpful tips. For instance, determine your goals for the year, but divide them into only 40 weeks, instead of 52, setting yourself up to achieve all your business goals with time left over for yourself. Set expectations for your clients that you will be on vacation, and that problems can wait until you get back, with real emergencies handled by your staff. Don't let your ego get in the way (the world will not be nudged off its axis because you didn't contribute today!). Empower your staff while you're in the office and affirm they can get everything done without you, so you won't need to be contacted when you're gone. Have a plan with your team about how to interrupt your vacation if there really is a true business emergency, but also review what is a true emergency and whether the staff could handle it directly (hint: virtually nothing should really be a true emergency your empowered staff can't handle for a week). Know what you will tell people on vacation if they ask what you do, so you don't get sucked back into thinking about and talking about work, and be prepared to steer conversation away from work. And lose the prospecting mindset; you're not on vacation for clients, you're on vacation for you!

I hope you enjoy the reading! Let me know what you think, and if there are any articles you think I should highlight in a future column! And click here to sign up for a delivery of all blog posts from Nerd's Eye View - including Weekend Reading - directly to your email!

Michael E. Kitces

I write about financial planning strategies and practice management ideas, and have created several businesses to help people implement them.

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