Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that a recent survey sponsored by CFP Board demonstrates the upsides of a career in financial planning, from a median salary of nearly $200,000 to flexible work schedules and a strong sense of purpose among advisors. In addition, related research suggests further opportunities for firms looking to acquire and retain talent, from providing a greater sense of autonomy to building effective service teams.
Also in industry news this week:
- A recent study finds that having a defined marketing strategy is a linchpin of marketing success, as advisors with a defined strategy were more likely to have seen an increase in inbound leads during the past 12 months and have more confidence in meeting their practice goals during the coming year than those without one
- The number of RIA-focused annuity marketplaces and their sales volume continues to grow as many brokers turn to the RIA channel and commission-free annuity offerings make annuities more attractive to fee-only advisors
From there, we have several articles on advisor marketing:
- How creating content that answers the questions of a firm's ideal target client can help it build trust with prospective clients even before meeting with them
- How advisors can best leverage client testimonials and reviews, including why video is often the most effective medium to deliver them
- How advisors can effectively ask for client referrals without coming off as too 'salesy'
We also have a number of articles on cash flow and spending:
- How advisors can help clients better understand the "why" of their spending habits
- Why a significant number of younger Americans are suffering from "money dysmorphia" and how advisors can help them see the reality of their finances
- An exploration of research-backed methods for generating the most happiness when it comes to spending money, from 'buying' time to delaying consumption
We wrap up with 3 final articles, all about saying "no":
- How curating a shorter to-do list can help individuals overcome "planning bias" and get more done on time
- Why saying "no" to invitations and opportunities can free up time for one's highest priorities
- Experimental findings suggest that people tend to overestimate how upset those offering an invitation will be if the invitee decides to decline it, suggesting that individuals can keep more free time in their schedule without burning bridges with friends and family
Enjoy the 'light' reading!
(Mark Schoeff | InvestmentNews)
When a high school student, college graduate, or someone thinking about changing careers is considering different fields, they might seek a job that has strong compensation, good work-life balance, and provides a sense of meaning and purpose. While there assuredly are many fields that meet these requirements, a recent study indicates that financial planning can provide this type of well-rounded career.
According to the study (which was sponsored by CFP Board), the median total compensation (including base salary, variable pay, company profits, and profit sharing) for financial planners in 2022 was $198,500 (notably, the median salary for CFP professionals was 12% higher than that of other planners). Further, financial planners have seen strong compensation growth over the past few years, rising 7% to 9% each year between 2019 and 2022. And as might be expected, compensation tends to increase with years spent working as a planner, with those having less than 5 years of experience receiving a median of $100,000 total compensation in 2022, compared to $250,000 for those with more than 20 years of experience.
The study also found that the benefits of working as a financial planner go beyond cash compensation, with 80% of CFP professionals surveyed rating their work-life balance as either "good" or "excellent". Planners surveyed reported working a median of 42 hours per week and receiving 21 days of paid time off each year. And at a time when many workers appreciate the flexibility to work from home for at least part of the week, the average CFP professional surveyed works away from the office 1 day a week and 20% work remotely 4 days or more per week. The study also found that many CFP professionals achieve a sense of purpose from their work, with 46% of those surveyed reporting a "very high" level of personal fulfillment from their work and another 38% saying that it was "somewhat high".
Altogether, this recent study tracks with Kitces Research showing that advisors tend to have strong compensation and overall wellbeing, both in absolute terms and relative to the working population as a whole. Further, the Kitces research found that notable factors influencing advisor wellbeing include autonomy (i.e., being in control their work schedules and ability to perform the duties they have selected for themselves) and "team" (i.e., working with robust service teams, particularly if the advisor values working collaboratively). Which means that firms might look beyond compensation to these less tangible elements when seeking to attract and retain advisor talent (though pay no doubt remains an important factor for many advisors!).
(Josh Welsh | InvestmentNews)
Financial advisors tend to have a wide range of talents, from the technical knowledge needed to provide effective financial advice to the client communication skills that can help them better understand client needs and effectively discuss planning recommendations. However, because advisors typically do not come from a marketing background, many find this aspect of the job challenging, from deciding how much to spend on marketing (in terms of time and money) and which tactics to pursue.
According to a study sponsored by advisor technology provider Broadridge, 99% of U.S. advisors surveyed said they find marketing to be challenging, with finding time for marketing efforts cited most often as a factor (with 3% of advisors spending more than 7 hours per week on marketing). Recognizing the cost of this time (that could be used for serving current clients or other functions), some advisors choose to (also) spend hard dollars on marketing efforts, with advisors surveyed spending an average of $15,908 on marketing.
The study identified having a defined marketing strategy as an important element of marketing success, as those with a defined strategy were more likely to have seen an increase in inbound leads during the past 12 months and have more confidence in meeting their practice goals during the coming year than those without one (notably, only 20% of advisors surveyed had a marketing plan, down from 28% in 2019). The study also found that advisors who communicate regularly with clients and provide more personalized content in their marketing are more likely to reach their goals.
In sum, while financial advisors have a range of options when it comes to individual marketing techniques, this study suggests that simply having a defined marketing plan can put a firm on better footing than many of its competitors. Which suggests that, for a given firm, taking the time to consider the appropriate balance of spending time and/or hard dollars on marketing (e.g., a newer advisor with few clients might have plenty of time to create marketing content tailored to their ideal target client while a more mature firm might prefer to pay to hire a staff marketing professional or outsource much of its marketing functions) and then focusing on specific tactics most likely to reach their chosen market (rather than taking a more haphazard approach) could be an effective investment!
(Oisin Breen | RIABiz)
The number of advisory firms using a fee-only business model has increased greatly over the past 20 years, and much of that growth has come from advisors who moved over from the commission-based brokerage industry to start offering advice on a fee-only basis as an RIA. And within that segment of advisors, there are some who had primarily been involved with selling securities (e.g., they had sold stocks, bonds, and/or mutual funds on commission) while others had dealt more with insurance products (e.g., cash value life insurance and annuity policies). And while former securities brokers' knowledge of stocks, bonds, and funds lends itself naturally to the management of traditional investment assets under an AUM fee model, the former insurance brokers' expertise in insurance products provides its own opportunities to add value, particularly as it regards to guaranteed lifetime income products (i.e., annuities) that can help support retirement planning.
And so as increasing numbers of securities and insurance brokers have broken off from their former firms to become fee-only RIAs, there has consequently been more demand for the products that had formerly been sold by those brokers, to be offered on a fee-only basis within their new RIA platform. Which has contributed both to the rise of no-load mutual funds and ETFs, which feature no upfront commission and can be managed on an ongoing basis and traded with no (or minimal) costs; as well as more recently to an emerging demand for fee-only annuities, which can be managed by advisors on an ongoing basis and included in their billable AUM.
This emerging demand for fee-only annuities has led to the growth of marketplaces targeted at RIAs, including DPL Financial Partners (which recently announced that it sold more than $1 billion worth of annuities in a 14-month period after taking 3 and a half years to reach its first $1 billion in annuity sales) and RetireOne (which reported a 90% year-over-year increase in annuity sales). The space has attracted newer entrants as well, with Flourish (which is owned by insurance giant MassMutual) recently debuting an RIA-centric annuity offering.
Nonetheless, RIA-related annuity sales are relatively small; for example, DPL's annuity sales in 2023 represented about 0.3% of the $350 billion of annuities that were sold that year across all advisor and brokerage channels. At the same time, this total sales figure demonstrates the continued overall demand for annuities and the potential for more annuity dollars to come to RIAs given the trends of the increasing availability of commission-free annuities and the number of breakaway brokers making the transition to independence. Though it remains to be seen whether (or perhaps, to what scale) incumbent advisors within RIAs (who weren't already selling annuities in their past as an insurance agent and "grew up" entirely in the RIA channel) will be swayed by the potential benefits of commission-free annuities (i.e., providing a potential solution to client longevity concerns while being able to charge fees on the annuity assets) compared to more 'traditional' portfolio management approaches?
In the 21st century, there is no shortage of information available on just about any topic imaginable, including on personal finance-related issues. Which, for financial advisors looking to attract prospective clients through educational content, presents both a challenge (given the number of competing information outlets) as well as an opportunity to become the 'trusted source' of information for individuals in their target market.
While a certain number of consumers are actively looking for a financial advisor at a given time, a larger number are look to the internet for potential answers to financial problems that they face. And while these latter individuals might be seeking a 'DIY' solution at the current time, they could eventually face a problem for which they do not feel comfortable handling on their own. Which means that advisors who are able to gain these consumers' attention by 'answering' their initial question (through a blog post or other medium) and then keep it over time (e.g., by getting them to sign up to the advisor's email list to receive regular content) could become the obvious trusted source for advice when the consumers do decide that they need professional help.
The key step for advisors, though, is to be able to stand out from the seemingly endless amount of finance content to gain the attention of individuals in their target market. Which could mean producing content that specifically addresses these individuals' common pain points rather than more general personal finance topics (e.g., an advisor's blog post on "retirement income strategies for military veterans" almost certainly will have less competition on Google than a post on "the benefits of Roth IRAs"). Because even if fewer consumers are likely to search for a more-specific topic, those who do are more likely to be shown the content in their search (given the more limited number of posts covering the topic) and are likely match the advisor's ideal client persona (which could support the advisor's conversion rate if the prospect reaches out for a discovery meeting)!
(Dan Solin | Advisor Perspectives)
Financial advisors often use their marketing efforts to demonstrate their expertise, whether it is writing a blog post on an emerging topic relevant to their ideal target client or a webinar that allows for interaction with prospective clients. In addition to seeking an advisor with the requisite skills, given the high stakes involved in financial planning, prospective clients also often assess trustworthiness when shopping for advisors. And because a consumer might be skeptical of an advisor's self-proclaimed trustworthiness, testimonials and reviews from an advisor's current clients can play an important role in attracting and converting prospects.
One reason testimonials and reviews can be effective is because they provide "social proof", where in uncertain situations where an individual is not certain what to do, they have a strong tendency to just go along with the herd. Which means that when an advisor has a number of 5-star reviews on Google or publishes positive client testimonials on their website, prospective clients can gain a sense of confidence in the advisor's trustworthiness based on the experiences of their current (and potentially previous) clients.
While advisors often publish written testimonials on their websites, Solin suggests that video testimonials can be even more effective because they demonstrate authenticity (as viewers can gauge the client's sincerity on the video), emotional connection (which is hard to get through a written endorsement), and can be more visually engaging. Further, the sharable nature of video content can increase their reach if clients and prospects send the testimonials to friends and family members who might be interested in the advisor's services.
Ultimately, the key point is that client testimonials and reviews can help build an advisor's reputation as a trustworthy source for financial advice in a prospective client's mind before they actually meet with the advisor. And thanks to the SEC's new(ish) marketing rule, SEC-registered investment advisers now have even more opportunities to leverage these tools (though firms will want to be careful to remain in compliance with the specific due diligence, disclosure, and other requirements within the rule related to testimonials and reviews!).
(Beverly Flaxington | Advisor Perspectives)
For advisors who entered the industry in product sales roles, asking clients for referrals of friends or family members might come naturally (and could be a relative relief compared to cold calling or other more challenging sales tactics). But for advisors who do not want to appear too 'salesy', making this ask might feel more difficult.
With this in mind, Flaxington offers several ways for hesitant advisors to overcome mental hurdles when it comes to asking for client referrals. To start, she suggests that advisors reframe "client referrals" as "introductions", as being introduced to someone who might have interest in the advisor's services (and just having a conversation with them) can feel like less of an ask than referring someone to become a client (further, because people like to help others, framing this request as asking the client for help can encourage them to make these introductions). In addition, having a structured plan for asking for these introductions (e.g., taking a standardized 3-question approach during client meetings) can make this tactic less intimidating and more effective. Finally, she notes that, in reality, advisors are 'selling' every day through the services they are providing to their clients (and the trust they are building in the relationship). Which suggests that advisors do not necessarily need to come up with groundbreaking planning ideas to prompt their clients to make introductions, but rather provide a consistent level of service over time that will make clients more inclined to refer others.
Altogether, while many financial advisors engaged in comprehensive planning do not consider themselves to be salespeople, attracting new clients does require some sales skills. That said, 'selling' advice does not necessarily require high-pressure sales tactics, but rather (in the case of client referrals) demonstrating the advisor's value to clients and then having a plan to ask them to 'help' the advisor by providing introductions!
(Morgan Housel | Collab Fund)
While some research suggests that income is positively correlated with happiness (particularly for those who also feel like they have control over their time), having more money is no guarantee of greater wellbeing (as many advisors have likely witnessed with certain clients!). This phenomenon can be explained by a variety of factors, including how individuals view money and how they use it.
Housel suggests that there are 2 ways to use money: either as a tool to live a better life or as a yardstick of status to measure oneself against others. For instance, an individual using money to live a better life might use it to 'buy' freedom in the form of working fewer hours or in a job they prefer (or retiring altogether). Money can also be used to make purchases that can provide happiness more indirectly, whether it is an experience like a vacation or a 'thing' like a home amenable to entertaining friends and family. On the other side of the spectrum, money also can be used to buy 'status', whether it is a fancy car or a flashy watch. And while such purchases can provide a certain level of satisfaction (e.g., to remind the owner of the work they put in to earn a hard-won promotion), this path can lead to a never-ending chase for 'more' (as someone else almost certainly will have a fancier car or watch!).
Ultimately, the key point is there is no single 'right' way to spend money and, notably, the question of how to do so can become more challenging as income rises (as someone with relatively low income might have just enough to cover their necessities, while higher-income individuals will have many more options!). Which suggests that while advisors might not be positioned to tell their clients what to buy, they could potentially add value by working with clients to explore what they value most and helping them align their spending (and their financial plan) to match these values (which could mean spending more, less, or just differently than they currently are!).
(Erin Lowry | Bloomberg News)
Financial advisors have likely come across situations where a new client's feelings about their financial situation do not match reality. For instance, a client with significant wealth (but whose peers are even more wealthy) might feel like they are falling behind or unable to retire when, in reality, they have more than enough to support their needs.
According to a recent survey by Credit Karma, individuals in younger generations are particularly susceptible to this phenomenon, dubbed "money dysmorphia", or feeling insecure about one's finances no matter the reality of their situation. The survey found that 43% of Gen Z respondents and 41% of Millennials suffer from money dysmorphia, compared to 29% of all survey respondents. Potential reasons for this phenomenon include regular predictions on the news about an impending recession or a potential stock market crash (and perhaps linked memories of the impact of the Great Recession on their families when they were younger). Social media can add to this angst, as the carefully curated images of fancy vacations or stylish clothes seen there can make viewers feel like they are behind the curve with their finances (even if they have sufficient income and wealth to meet their needs).
These findings suggest that financial advisors can play an important role in helping clients suffering from money dysphoria; in addition to putting financial news into context (e.g., how often market corrections actually occur) and showing clients the reality of their financial situation, advisors can also help them develop financial goals that reflect their own desires (and not those suggested by social media influencers), offering these clients not only a more accurate view of their finances (and how they might be effected by external forces), but also giving them confidence that they are on a sustainable path to financial success and can weather (inevitable) bumps along the way!
(Eric Barker | Barking Up The Wrong Tree)
For some people, it is easy to know what kind of spending brings them happiness, while for others it can be more challenging. And while individual spending preferences vary (meaning that there is no 'one size fits all' formula), researchers have identified certain types of spending tend to boost happiness the most.
One common assumption is that buying 'experiences' will lead to more happiness than buying 'things'. While this tends to be true in the aggregate (e.g., a family vacation might bring more happiness than a new television), recent research suggests that material goods with 'experiential' qualities can often bring just as much happiness (e.g., buying a television to host a Super Bowl party is likely to generate greater wellbeing than buying one to binge shows alone). Relatedly, 'buying time' (e.g., hiring someone to mow the lawn) can also be an effective way to spend money, as it can free up time for additional experiences. And in addition to these purchases for oneself, giving money away has also been shown to provide a significant happiness bump.
In addition to what someone is buying, how they buy it can affect happiness as well. For instance, researchers have found that buying many small pleasures can generate more happiness than a few larger ones (as the string of small joys can provide an ongoing happiness boost, whereas the gains from a larger purchase can fade relatively quickly). Also, increasing anticipation by delaying consumption (e.g., buying tickets in advance for a concert) can also boost the happiness derived from a purchase (as the anticipation of an event can be just as, if not more, enjoyable than the event itself).
In the end, while there is no universal prescription for turning spending into happiness, these general principles offer a roadmap for making better spending decisions. Whether it is buying a weekly coffee (or, better yet, treating a friend!), a new tennis racket (an example of an 'experiential' material good), or planning the next vacation, individuals have many ways to get a wellbeing bump from their spending!
(David Epstein | Range Widely)
Creating a to-do list is a common and relatively simple activity. However, deciding how much time to allow to each individual task, let alone the full list, can be challenging and comes with consequences, particularly if a certain task ends up taking significantly more time than originally allotted (potentially leading to missed deadlines for the remaining items).
This "planning fallacy" refers to a natural bias when forecasting one's productivity to focus on the best-case scenario (often in the form of assuming that a task will take less time than it actually will). The problem, though, is that there is a good chance this 'best case' might not occur (perhaps a client calls with an urgent question or research on a planning issue leads to finding additional articles of interest [sorry for any lost time resulting from a "Kitces rabbit hole"!]). Given the number of potential interruptions (and the related difficulty of making time estimates), Epstein suggests that a solution might be to simply put fewer items on a daily to-do list. In his case, he puts 1 item at the top of his daily to-do list, as well as a few 'bonus' tasks. In this way, he can focus on getting the most important thing done, and, if he ends up with additional time, already knows what he will work on.
Ultimately, the key point is that given the difficulties involved in estimating how much time it will take to get something done (and the bias to assume it will take less time than it will in reality), prioritizing what really needs to be done and focusing on that could lead to more completed goals, whether looking at the day ahead or the coming months!
When an individual is young, they might have plenty of time to accept every invitation that comes their way, whether it is a networking happy hour or an extra assignment at work. But as time goes by and responsibilities build up, it can be harder and harder to fit all of these offers into one's day.
With this in mind, Holiday stresses the importance of recognizing the tradeoffs involved when accepting an invitation or new responsibility. Because any time committed to a certain task means that there is less time available for other opportunities (e.g., going to a work event in the evening could mean less time at home with family). With this in mind, he suggests that individuals grow increasingly comfortable with saying "no" to certain opportunities that come their way. Notably, those who do so are not alone; for instance, after he left the presidency, Harry Truman received many letters from citizens asking for his perspective on different issues. Rather than replying to them individually, Truman spent time publishing his thoughts in book form so that he could reach even more people (recognizing that the opportunity cost of responding to each letter would have been the time to write for the broader public).
In sum, because time is a finite resource, managing it can require prioritization of the responsibilities we face and the opportunities we receive. And while it might be difficult to turn an offer down (given the unknown possibilities it might have created), a simple "no" can often help keep one's highest priorities on track!
Imagine that you have plans all day this coming Saturday, perhaps shuttling kids to birthday parties in the morning followed by midday yardwork and a trip to Costco in the afternoon (good luck finding a parking space!). With this busy schedule in mind, a relaxing night of delivery pizza and a movie on the couch might sound nice. But earlier in the week you receive an invitation to go out to dinner with friends on Saturday night. Do you accept the invitation (and likely be tired throughout the dinner) or decline (and perhaps sour your relationship with these friends)?
According to experimental research by Julian Givi and Colleen Kirk, individuals who reject an invitation tend to overestimate the negative ramifications that arise in the eyes of inviters if they decline an invitation. In one experiment, the researchers had one member of a couple write down an invitation to their partner for an activity the inviter wanted to do. The partner was then asked to write a rejection to the invitation and note that they would prefer to stay home and relax. The researchers found that no matter the length of the couple's relationship, the 'rejector' tended to assume that their partner would be angrier than they really were (and that the inviter did not just dwell on the rejection, but also considered the reasons for it).
This research suggests that individuals have greater latitude to turn down invitations without burning bridges with friends and colleagues. Which could ultimately lead to reduced stress (by creating open time blocks) and more time for the opportunities and activities you prioritize the most!
We hope you enjoyed the reading! Please leave a comment below to share your thoughts, or make a suggestion of any articles you think we should highlight in a future column!
In the meantime, if you're interested in more news and information regarding advisor technology, we'd highly recommend checking out Craig Iskowitz's "Wealth Management Today" blog.