It's Memorial Day once again, which means we're well past tax season, and the busy spring season of industry conferences is coming to an end... and it's time for the annual summer slowdown for most advisory firms, as clients begin to go on summer vacations and it's harder to schedule them for meetings, and as advisors we have some time for ourselves to relax with family... and catch up on some good books.
As an avid reader myself, I'm always 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 a new list of books in 2014, another in 2015, and a fresh round of recommended books for financial planners in 2016.
Continuing the annual series, I'm now excited to share my latest 2017 Summer Reading list for financial advisors, with suggestions on books about everything from how to minimize burnout and more fully (re-)engage with your advisory firm, and how the principles of computer algorithms can help you gain personal efficiency and better productivity in your daily life, to building an "enduring" advisory firm that lasts beyond its founder to the next generation of advisors (and how to serve the next generation of clients that will be necessary to perpetuate the firm), practice management books on everything about how to properly value and/or think about selling your firm and how to actually run your business like a business that is scaling up in size, to why humans will likely remain relevant (including and especially with the rise of computers and robots) and what it will take for financial planning to finally, truly become a profession in the 21st century.
So as we head into the summer season, 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!
Financial Advisor Book List For Summer Reading
The Pursuit Of Absolute Engagement (Julie Littlechild) – Burnout is a common challenge in many client-oriented professions, where the ongoing grind and demands of serving clients can lead to a level of chronic stress that takes a mental (and sometimes even physical) toll. The added complication in the context of being a financial advisor is that successfully engaging with clients usually brings more of them, which grows the business larger and necessitates the hiring of more staff, and in turn can just accelerate the burnout stress for an advisory firm founder who is now mired in both the service demands of clients and the demands of running the business itself. Until eventually, the advisor doesn’t even feel in control of their life and their business; instead, the business controls them, and it’s a beast that must be fed, given the even-more-adverse financial ramifications of having the business fail. So what’s the way out for advisors who find themselves stuck in this trap? Littlechild suggests that it starts with taking an intentional pause and step back to look at the business itself, your role as the advisor (particularly if you’re the founder/owner), and to begin setting a proactive vision of what you want the business to look like, and what you want your role to be. Because it turns out that advisors who engage in their business the way they want to be engaged – doing the tasks that give them energy, instead of draining them – end out being more financially successful anyway, in addition to feeling happier and less stressed (and even taking more vacation!). Of course, in the real world, it’s usually not feasible to just drop everything and redirect (yourself or your business), but Littlechild emphasizes that just as it was a series of incremental changes and steps in the evolution of the business that may have gotten to this (not-so-happy) point, making a (deliberate) set of incremental changes from here can start to redirect you on a better path of engagement.
Algorithms To Live By (Brian Christian & Tom Griffiths) – Author Brian Christian and cognitive scientist Tom Griffiths team up to examine how computer algorithms and insights from computer science can be applied to decision making in our own everyday lives. Like the machines that play such a large role in our lives, we too are constrained to a finite amount of time and resources, which we must manage on a daily basis. Christian and Griffiths find there are some interesting insights into how we search, sort, schedule, predict, deal with others, and even forget information, that can be enhanced or justified based on insights from computer science. In fact, the authors also note how seemingly irrational and inefficient behavior may be more rational than we realize – once we properly account for the limited time and resources we are operating with. For instance, a simple pile of papers on a desk is actually one of the most well-designed and efficient caching structures we can devise. What looks to outsiders as an unorganized mess is actually a highly-efficient "self-organizing mess" which can hardly be improved upon without knowing the future. Of course, that doesn't mean you want to actually use this method if you meet with clients in your office, but the key point is that we can modify our messy desk in a way that maintains the benefits of a simple pile of papers better than the ways we often think we ought to "organize" information. The authors cover a wide range of real-world applications – from dating and finding an apartment, to hiring employees and making other business decisions – which can all be more effectively navigated through the use of some simple decision rules.
The Enduring Advisory Firm (Mark Tibergien & Kim Dellarocca) – Mark Tibergien is one of the best known practice management consultants for financial advisors, and has written several seminal books on the topic, including “Practice Made (More) Perfect” with Rebecca Pomering on growing an advisory firm, and “How to Value, Buy, or Sell a Financial Advisory Practice” with Owen Dahl. In his latest book, co-authored with Kim Dellarocca (head of Practice Management for Pershing), Tibergien delves into what it takes to build an “enduring” advisory firm – in other words, a business that lasts, beyond its founder. And in his usual style, Tibergien debunks practice management myths – in today’s environment, that advisors are reducing their fees to compete with robos, and that the Millennial generation lacks the work ethic to build the firms of the future – and then delves into the real challenges advisory firm owners must consider, including margin compression (which is the real impact and threat from robo-advisors), the challenges of growing a more mature firm, and ongoing industry consolidation and when/whether it makes sense for an advisory firm owner to sell or merge (or not). The bulk of the book, though, is about looking across the generations, and the different ways that Gen X and Millennial clients seek out and engage financial advice. The fundamental point: if you really want to build an enduring advisory business beyond just a founding (typically baby boomer) owner, it needs to figure out how to serve clients beyond the founder’s (typically baby boomer) generation, and make itself relevant to the future generations of financial planning consumers. The Enduring Advisory Firm serves as a primer for advisors to start thinking about how their services and value proposition may need to be reshaped to serve those future generations (for the advisory firms that wish to pursue them).
Buying, Selling, And Valuing Financial Practices (David Grau, Sr.) – As the founder of FP Transitions nearly 20 years ago, there’s arguably no one who has seen and consulted on more advisory firm transactions than David Grau and his team. And in this book, Grau shares his perspective on the way that advisory firms are valued in the real world – not the theory of business valuation, but the hard math of how buyers and sellers actually come together to agree on a price, and the relevant factors that impact the agreed-upon value, from client transition risk and the “quality” of the cash flow, to the terms of the deal that impact the tax structure (and valuation itself) for the buyer and seller. And what’s unique about Grau’s book is that it’s clearly written with the seller in mind, who as Grau notes is often at a disadvantage in the typical advisory firm transaction, as despite the fact that it’s a “seller’s market” (with an estimated 50 interested buyers for every seller), the caveat is that many/most buyers are serial buyers (who have already done numerous deals), while virtually all sellers will only ever go through the process once, which means there’s a substantial imbalance of knowledge and experience in conducting the transactions. Accordingly, Grau provides valuable insight into what sellers should expect and demand in particular, and why sellers often get the short end of the stick from both buyers (if they don’t retain adequate outside counsel) and from their own custodians and broker-dealers (who are often more interested in retaining the advisor’s client assets than actually helping to ensure the selling advisor maximizes the deal). In the end, the book is not exclusively for sellers – it’s quite relevant for buyers wishing to understand the mechanics of advisory firm valuations and purchase deals as well – but is arguably a “must read” for any advisor who is seriously considering whether to sell their firm, and wants to be certain to make good decisions with the one and only chance they get to sell the business they spent a lifetime building.
Scaling Up (Verne Harnish) – Most large advisory firms reached that point by growing slowly and steadily for a long period of time; early on, adding just one or two clients per month can take years just to achieve a livable income, but steady new business development eventually leads to the hiring of a paraplanner, and then another financial advisor, and then another, and then some staff infrastructure… and suddenly, the advisory firm has grown beyond a founder-centric “practice” into a bona fide “business”. Yet the challenge is that while there is a growing volume of “practice management” advice for financial advisors, there is still almost nothing out there about how to grow and run a bona fide business, with all the challenges of hiring, developing, and retaining people, aligning them to execute strategic objectives of the firm, and truly managing the growth over time. In this context, “Scaling Up” is a true “business management” books, about how to manage a “small business” that is trying to scale up to become 10X its current size and grow beyond $10 million (or from $10 million to $100 million) of revenue. The book is built around the idea of mastering the “Rockefeller Habits” (the title and subject of Harnish’s first edition of the book), a series of principles and “business habits” that the legendary John D. Rockefeller used to build his business empire. Key points about how to truly run an effective (and especially a rapidly-growing) business include the ability to truly set business priorities and align the whole team to deliver on them, effectively collect and evaluate and leverage the quantitative and qualitative data that is crucial to actually manage a business, and setting “meeting rhythms” of daily check-ins, weekly team meetings, monthly objectives, quarterly big goals, and annual strategic initiatives. So if you’ve ever felt frustrated as the advisor of a growing advisory business that no one teaches us how to actually truly run a business, you should find Scaling Up incredibly helpful, as its author Verne Harnish is an active consultant to entrepreneurs, and the tactics recommended are not just business management theories, but tried-and-true tools that Harnish has actually executed with the business owners he works with.
Ask (Ryan Levesque) – The essence of most marketing is to figure out what consumers want, and then position and communicate that your product or service can deliver it to them. The caveat, however, is that the standard approach inherently assumes that most people actually know what they want, and can articulate it – or at least recognize it when they see it. Levesque suggests that in reality, this approach fails, precisely because most people don’t actually know what they want, particularly if they might be buying something that they’ve never used, seen, or experienced before. (As the famous Henry Ford quote goes, “If I had asked them what they wanted, they would have said faster horses.”) Instead, then, if you want to understand what your customers or clients really want, you must start by asking them what they don’t want (which most can articulate more clearly) as well as what they’ve done in the past (which again we can articulate clearly, because we actually did it). What follows is Levesque’s own story of how he discovered and refined this process in his own business, and the structured way that he asks survey questions to prospective customers/clients to refine the marketing and services of various businesses. While the process is ultimately rather focused on digital marketing – which isn’t how most financial advisors market today – “Ask” nonetheless makes interesting points about how an advisory firm might try to refine the targeting of who it serves, what it does for them, and how it reaches them, and could be especially relevant for those trying to refine their business focus on a particular niche. At a minimum, it will certainly challenge you to think very differently about marketing than what we’re typically taught in the financial planning world!
No Longer Awkward (Amy Florian) – For most financial advisors, there are few situations more awkward and uncomfortable than a grieving recently widowed client who starts crying in your conference room. For most, it’s not a situation that we have much worldly experience with, nor one that anyone has trained us to handle. Which is why few of us would know that offering the crying client a box of tissues is actually not the appropriate way to handle the situation – as it’s a subtle but direct signal to the client that it’s time to stop the crying and move on, even if they aren’t ready to do so. (For those who are wondering, the correct approach is to leave a box of tissues within reach of the client, and let him/her reach out and take them whenever they’re ready to go so.) In her book, Florian details this and numerous other insights into the proper ways to handle and respond to grieving clients, in an effort to make literally make it “no longer [so] awkward” for financial advisors who may be unfamiliar with how to handle such situations. And the book include not only guidance about how to handle a wide range of such client-in-grieving situations, and what to say and do (and what not to say and do!), but even includes templates that advisors can use or adapt for everything from condolence cards to follow-up letters that might be sent later.
Suggestible You (Erik Vance) – It has long been recognized that as human beings, we are highly "suggestible", a trait that is helpful as a social animal to get along with the "herd" of other human beings, but can also lead to such phenomena as placebo effects, hypnosis, and false memories. Journalist Erik Vance explores this research, and the "inner pharmacy" of chemicals that our bodies unconsciously release - including opioids, cannabinoids, serotonin, and dopamine - all of which impact our behavior, including the way that professionals relate to (and provide advice and guidance to) their clients. For instance, in the medical field, our ability to be suggestible is what allows doctors to influence and change our behavior for the better, but has also supported the growth of several less respected fields (e.g., alternative medicine, miracle pills, and even witch doctors). Yet the medical profession had long resisted the study of placebos, and is only now beginning to become more interested in the science, from new findings related to who is susceptible to placebos, to how they work, and how we might be able to better invoke or control them... which has profound implications for medicine (and potentially other industries) going forward. More generally, though, the science of suggestibility has many potential impacts for financial advisors, as research in the medical context implies that we need to be careful in considering everything from the way we dress, to the office environment where we meet clients, and even think about how a client's own beliefs (right or wrong) that can influence their well-being and willingness to accept and act on an advisor's advice.
Humans Are Underrated (Geoff Colvin) – With the ongoing rise of exponential technology, it’s become increasingly popular to suggest that most/all human jobs will soon be replaced by robots. Yet Colvin suggests that there are unique values that only humans themselves can bring to the table, that are being ignored in the ongoing discussions. Specifically, while it may be true that a lot of technical, classroom-taught, “left-brained” skills may no longer be as relevant in the future (because computers will do them faster and better), the fact that we are “social animals” – hard-wired to react to other human beings in ways that computers cannot evoke – simply means that the human value proposition of the future will increasingly be focused on so-called “right-brain” skills of sensing the thoughts and feelings of others, working productively in groups, and building relationships to problems together. In essence, empathy will be the key skill for success in the future, as computers replace the value of knowledge workers and force us to be “relationship workers” instead. In other words, “Humans Are Underrated” at performing the tasks that truly are uniquely human, which are built around the social interactions of connecting with other human beings. Which, notably, actually presents an optimistic and upbeat path about the future relevance of human financial planners… albeit one where our value proposition in the future will not be defined by our technical knowledge, but our ability to use our social interaction and relationship skills to help better define the problem and goals in the first place – given that for most people, they are ever-changing – and then communicate a solution (that may well be analyzed and calculated by a computer) in a manner that connects with other human beings, to help them actually implement it. Because it’s not about what computers can or cannot do, but what we as humans feel compelled to get (and are hard-wired to get) from other human beings.
Financial Planning 3.0 (Dick Wagner) – The late Dick Wagner was one of the great thinkers of financial planning, author of the seminal article “To Think… Like A CFP”, and a tireless advocate for the (future) recognition of financial planning as a profession… in fact, he claimed that financial planning would become the most important authentic profession of the 21st century, as our entire culture and society increasingly shift away from the ancient days of barter and reliance on communities for support, to a world where money becomes a primary means of human interaction. An “Age of Money” that our brains are not well wired for, for which the professional financial planner will become the key professional to help people navigate the varying and powerful forces that money exerts in our lives. In fact, Wagner suggests that ultimately, the financial planning “garden of knowledge” (a term he preferred to “body of knowledge”) will formulate its own liberal arts category, which he dubbed “Finology” – just as Sociology describes how large numbers of people behave, and Economics describes their financial behaviors en masse, Wagner predicted that Psychology (which describes how individuals behave) will be complemented by Finology (financial behaviors and our relationship with money, at the individual rather than societal level). Ultimately, Wagner’s book itself – which fortunately was released less than a year before his untimely accidental death from a fall – is a collection of his thoughts and essays on these dynamics of Finology, the Age of Money, and the emerging role of financial planning as a 21st century recognized profession (separate and distinct from the broader financial services industry). If you read the book, be prepared to “think big” beyond your advisory firm and what you do with clients on a day-to-day basis, and into the higher purpose of what role the financial planning profession and financial planners should play in society at large in the future.
Michael's Own Published Books
One of the questions I often get is "Michael, when are you going to publish a book of your own?" In point of fact, I've actually co-authored several books over the years. While they tend to be more focused on particular planning topics or issues, I include them here in case you would find them useful as well!
Advisor's Guide To Annuities, 5th Edition (Available Soon) (John Olsen & Michael Kitces) - The early days of my career coincided with the dramatic rise of variable annuities, particularly those with retirement income (so-called "living benefit") riders. Unfortunately, most articles (and even books) of the time were very polemical, either ardently for or against annuities in virtually all cases, leading me to begin a process of systematically reading variable annuity prospectuses, doing extensive product comparisons, and beginning to write and speak about annuities. The effort culminated in a decision to co-author with fellow annuity expert John Olsen the "The Annuity Advisor", which was intended to be an objectively analytical and comprehensive look at annuities (of all types), which not for consumers but for financial advisors and related professionals (e.g., attorneys and accountants who often come across clients with complex annuity situations). The book covered not only the mechanics of various types of annuities (from variable to fixed to equity-indexed), but all the unique and complex tax rules that apply (both during life and to distributions after death), the evolution of annuity products and features, the regulation of annuity products and annuity salespeople, and even a pair of chapters that thoroughly assessed (and where appropriate, debunked) both the leading myths for and against annuities (one chapter for each). The original edition was published in 2005, and since then we've updated the book with the latest changes in tax rules, product design, regulation, and more. In 2012, the book was re-titled to become the "Advisor's Guide to Annuities", and in the coming month we're excited to release the latest 5th edition update (available later in June), which includes new content on everything from "longevity annuities" and QLACs, to the latest changes in indexed-annuity product design, and how the Department of Labor's fiduciary rule won't be the end of annuities, and instead will likely make them even better in the future. Notably, the book is fairly dense in technical detail, which means while some advisors do read it straight through, most use it as a reference book in the office when they have questions about a complex annuity situation (or as a textbook for teaching about annuities in a financial planning classroom).
The Monthly Retainer Model In Financial Planning (Alan Moore & Michael Kitces) - As many readers of this blog know, I've long been a student of business and pricing models, and have advocated that offering financial planning services for an ongoing monthly retainer can be a highly effective model to reach new prospective clients who are willing to pay for financial planning, but simply don't have an available portfolio of assets to manage (for an AUM fee) and don't want to buy a financial services product (to pay for financial planning via a commission). Ultimately, we founded the XY Planning Network specifically to help teach and support financial planners who wanted to deliver this business model approach to get paid for doing financial planning for younger (Gen X and Gen Y) clients. And after several years of watching XYPN advisors execute the model successfully, we decided to collect their insights and best practices into a book, aptly titled "The Monthly Retainer Model in Financial Planning". The book covers everything from how to price and structure the monthly retainer fee for your particular target clientele, how to craft an appropriate service model to justify the (ongoing) financial planning fee, tips for effectively implementing the monthly retainer model in an (existing or new) advisory firm, dealing with common prospective client questions and objections, and a series of Case Studies of (typically young) advisors who have been implementing the approach successfully with their own clients. And so for anyone who's ever been curious what the monthly retainer model (now also known as financial planning for a "monthly subscription fee"), what it's all about, and how people actually do (and charge for) financial planning for young people... I hope this book helps!
If you’re still looking for more book ideas, be certain to also check out our prior summer reading lists, along with our overall list of recommended books for financial advisors.They may be lists we've published in the past, but if you haven’t read the books yet, they're still new to you! 🙂
Top Must-Read Books for Financial Planners
2016 Summer Reading List of “Best Books” For Financial Advisors
2015 Summer Book List For Financial Advisors
2014 Summer Reading List Of Best Books For Financial Advisors
2013 Summer Reading List Of Top Financial Advisor Books
So what do you think? Will you be reading any of these books over the summer? Do you have any suggestions of your own that you’re willing to share? Please share your own great reads in the comments below!