Enjoy the current installment of “weekend reading for financial planners” – this week’s issue is focuses on practice and career management issues, and starts off with some notable regulatory news, including a discussion of whether the landscape is shifting for potential adviser oversight as Congresswoman Maxine Waters may re-introduce SEC user fee legislation in the coming days that could put FINRA on the defensive, and some updated guidance from the SEC on the use of social media that should make it easier for advisors under an RIA to use social media.
From there, we have a long list of practice management articles, including a review of a recent Schwab survey that shows the primary desire of young advisors is to work with clients (sooner rather than later), a discussion by Angie Herbers about how to restructure your firm’s org chart to facilitate associate advisors getting more face time with clients, some insights from Philip Palaveev about the importance of balancing both practice management research and good old trial-and-error to improve your firm, a look at some of the challenges to consider for brokers who wish to break away and transition to independence, and how to handle prospective situations where friends and family want a discount.
There are also two technology articles, including some guidance from Bill Winterberg about how to get a better return on investing in your website by going a step beyond just making it look prettier and being more mobile-friendly, and a discussion by consultant Craig Iskowitz about how client portals are changing and a look at the JunxureCRM ClientView platform in particular.
We wrap up with three articles: the first is from the Harvard Business Review blog, providing some guidance and advice about why you should not try too hard to fast-track your career; the second by Philip Palaveev suggesting that it’s time to stop talking about “practice management” and start looking at “business management” instead; and the last is a nice list of productivity and anti-procrastination tips and techniques from Psychology Today – including a few common ideas, but also a few you may not have seen before.
Enjoy the reading!
(Editor’s Note: Want to see what I’m reading through the week that didn’t make the cut? Due to popular request, I’ve started a Tumblr page to highlight a longer list of articles that I scan each week that might be of interest.You can follow the Tumblr page here.)
Weekend reading for March 23rd/24th:
Politics Of Adviser Oversight Starting To Change – Mark Schoeff of Investment News notes that Congresswoman Maxine Waters (D-California) may re-introduce SEC user fee legislation as soon as next week, a reprisal of her legislative proposal last fall that the independent advisor community rallied around as a preferred alternative to Congressman Bachus’ proposed SRO legislation that was widely anticipated to hand investment adviser oversight to FINRA. The significance of the Waters legislation coming now, though, is that by being introduced first in 2013, it may become the new baseline for discussion, shifting the focus from “why not FINRA” to “why not the SEC” instead. In addition, the Bachus SRO legislation is not expected to return, given Bachus’ replacement by Jeb Hensarling as the chair of the House financial committee. Notably, the direction from all parties is that some increased oversight is coming for investment advisers – and likely some additional cost, directly or indirectly – but with the potential for an SEC user fee to become the focal legislation this year, the odds appear to be declining that FINRA would become the overseer for RIAs. Nonetheless, Schoeff cautions that FINRA shouldn’t be counted out entirely, and that the Financial Planning Coalition still has a lot of work ahead if the Waters legislation is going to gain any momentum.
SEC Clarifies Social Media Requirements – Earlier this month, the SEC released “Filing Requirements for Certain Electronic Communications” which provides updated guidance on what social media does and does not have to be submitted to the SEC for review. The guidance emphasizes that the SEC really only needs to review communications that genuinely represents advertising, and not just any/every bit of social media interactive communication; in fact, even mentioning a fund, investment, or performance does not have to be filed if it social media discussion doesn’t explicitly pertain to a recommendation of the investment or a comment of its [investment] merits. Ironically, it appears that the primary driver of the updated guidance is that the regulators are being overwhelmed by the volume of social media communication being submitted for review; the purpose of the guidance is to encourage advisors to submit less for review, and only share with the SEC what should genuinely be reviewed for advertising purposes. Notably, though, this doesn’t excuse the firm from still archiving and monitoring all social media communication – if only to be able to review and verify it’s not advertising – but the bottom line is that, as with all communication, the SEC is not concerned about general discussions or what you ate for dinner last night, but just the situations where social media is specifically being used to advertising investment products and services.
Want to Hire Young Advisors? Let Them Work With People – This AdvisorOne article highlights a recent Schwab Advisor Services survey of Texas Tech personal financial planning students that found “the opportunity to work with people” is the #1 role that students want as they enter financial planning firms. Given this priority, the students emphasized the value of “soft skills” like communication, problem-solving, and self-motivation as key traits, and acknowledged that being able to communicate and build relationships is crucial to success. In fact, the students generally rated understanding financial markets and investment strategies as less important, and actually rated their own technical skills below their communication/interpersonal skills. Notably, the survey results also found that online activity may be overrated amongst students; almost twice as many students ranked offline networks as their primary networking activity versus online networking. The survey also found that students don’t just want careers where they can build connections with clients, but also value balance; 64% of students said work/life balance was a top-3 priority. In addition, while about half the respondents said the financial reward was a top-3 priority, notably only 5% said it was their #1 criteria for a fulfilling career.
Diamonds In The Rough: Reorganizing The Org Chart – In her monthly Investment Advisor column, practice management consultant Angie Herbers tackles the financial planning firm organization chart, and the various ways that firms organizer senior and “junior” or associate advisors. The primary challenge is that the traditional structure – where associate planners do a lot of the analysis and plan-writing work while senior advisors meet with clients – fails to ever train associate planner in the client-facing skills necessary to someday become a senior advisor! The solution Herbers advocates is to go from a two-tier tree structure – with a senior advisor and one or several associate advisors – to a diamond-shaped organization chart instead – with one senior advisor, several “lead” advisors, and fewer associate advisors. The point here is that the senior advisor works with the biggest key clients, and the rest work with the lead advisors, who begin to integrate associate advisors into meetings as well – in a lower “risk” setting for the firm – and gives the associate advisors a clear career track (to become lead advisors, without waiting to “unseat” the senior advisor). In fact, the point here is that lead advisors still do the bulk of the work (which also improves productivity, as they’re ready for client meetings more quickly since they did the work hands-on themselves), and that associate advisors spent a lot of time simply sitting in client meetings (and being responsible for ensuring follow-up on key client action items). The benefit of this approach is that the firm is structured so that associate advisors can actually begin to learn what happens IN a client meeting, and how to prepare themselves for a lead advisor role, instead of being indefinitely buried in senior advisor busy work. An added benefit is that the advisors often begin to specialize as well, allowing the firm to segment clients and ultimately serve them better. And notably, because the firm is structured to allow associate advisors to see clients from day one, it’s easier to recruit the top talent.
How I Advise Advisors To Run An Advisory Business From My Pulpit – This RIABiz article by Philip Palaveev shares some of his insights about how to design good compensation programs for administrative staff – blending together both what the research says, and what seems to work in practice. For instance, industry surveys suggest amongst the best firms, administrative staff get incentive compensation bonuses that amount to 5% – 15% of total compensation; the caveat, though, is that we don’t really know if the firms became the best because of this structure, or if the firms adopted this structure after or coincidental to becoming so profitable/large/successful. Unfortunately, though, this confusion is common – and as different consultants look at the data, they each have their own take, which means if you see enough consultants, you will be told to change your practices, whatever they are! As a result, Palaveev also relies on his own experience, having consulted with over 1,000 firms in the past 15 years, and concludes that as with so many practice management decisions, the best approach will vary by firm and may require some adjustments and experimentation to get it right. At the same time, relying on the insight and experience of experts – as well as peers – can be helpful to at least cut down how many iterations of trial-and-error are necessary! Perhaps most important, though, is to recognize that much of the ultimate success relies on good judgment, and that good judgment often comes from the experience of having made bad judgments in the past; so be willing to experiment a little, recognize that failures occur along the pathway to success, do the best you can, understand the theory but don’t rely on it too much, and keep moving forward.
Identifying And Overcoming The Challenges Of Transitioning – This article from the Journal of Financial Planning talks about some of the challenges and concerns that arise from advisors who are considering going independent (to an independent broker-dealer or an RIA) – typically due to dissatisfaction with their broker/dealer or corporate culture, a desire for more flexibility in what they offer, more control over their practice, or simply higher payouts. The article notes a Fidelity study that found 90% of advisors who went independent were happy with the decision, although a whopping 45% expressed that they were very unsure about the step initially. To handle the transition effectively, the author notes six important factors that should be considered: can you maintain your production/income level (many advisors see at least a temporary drop in income during the transition, not to mention startup or transition costs as well); will you be able to retain clients (do you know the legal obligations you have to your former firm, and what support will be provided by your new firm?); how will marketing and advertising work at the new firm (can/will they be supportive of your planned marketing/growth strategies?); what is the firm’s back-office support (and/or do you know what staff you’ll need or where you’ll outsource to address the issue?); what technology does the broker-dealer or custodian provide (and what will you need to buy?); and what is a realistic timeline for making the transition (and can the firm help to provide guidance about how to expedite it and/or ensure its success?). If you find the choice of broker-dealer and custodian options, consider using a firm that helps with placement and matchmaking, and when you decide on a finalist visit their home office to make sure you’re comfortable with key staff (e.g., head of technology, compliance, and back-office administration).
Clients With Benefits: How to Protect Against Would-Be Moochers – In his monthly Investment Advisor column, Mark Tibergien discusses how to handle “would-be moochers” – those friends and family members who ask for a discount (or even free services) because they know you personally. Yet whether out of guilt, shame, or a desire to be loved, Tibergien notes that advisors rarely say these arrangements were worth the pain in the end. So how do you handle it? While Tibergien notes that many firms do provide discounts, he suggests that if you’re going to do so as well, be certain to still set clear boundaries about to whom it will apply or not, how much you will discount, if there’s a maximum number you’ll discount, etc. The goal is to avoid a never-ending series of one-off exceptions that make your business even more complex and less efficient (on top of having provided the discount itself!). And be cautious about creating a two-tiered service; in other words, still be ready to treat them like “real” full-paying clients, both because it’s right for your clients, and because friends, family, and centers of influence can still be referral sources even if they’re receiving a discounted service themselves! And be careful not to undermine the value and viability of your whole firm by relying on too few profitable clients to subsidize a wide base of discounted clients. On the other hand, if you’re going to say “no” to discounting outright, take some time now to think about what you’d say to handle this situation, so you’re prepared and it doesn’t become an awkward moment when it happens in person.
Increase Your Website ROI – On Morningstar Advisor, technology consultant Bill Winterberg provides some guidance on how to generate more prospective client leads by making improvements to your website, beyond the routine upgrades that many firms are already implementing, like social media feeds, blogs, and video content, designed in a mobile-friendly layout. For instance, while most firms have a “Contact Us” page, there’s not much to really incentivize someone to actually contact the firm – and hand over their own contact information in the process – so consider offering a free resource in exchange, such as the ability to download a white paper or temporary access to some kind of exclusive content. From there, you can begin to build a list of names and email addresses of prospective clients – people who were interested enough to get something from you, but may not be ready to become full clients yet – but to whom you can mail periodic correspondence as a form of drip marketing, supported by email newsletter services like MailChimp, Constant Contact, of AWeber. Of course, email lists potentially create another silo of information, if they’re separate from your CRM, but Winterberg notes a recent integration between Advisor Websites and Redtail CRM as a solution, where the advisor can add a form to the website that both adds the person to the email newsletter list and into the firm’s CRM. Again, though, the real point is not the integration – although it’s helpful – but that the website stresses a “Call to Action” that encourages a prospective client to fill out the (integrated) contact form in the first place! For example, some firms are offering prospects the chance to “stress test” their own portfolios using HiddenLevers (again integrated to create a contact in Redtail CRM or Salesforce CRM when a prospect goes through the process). The bottom line is that while upgrading your website visually may be a necessary minimum in today’s world, getting visitors to actually hand you their information and truly become prospects in your pipeline takes additional effort, but really helps you leverage the return on investment for your website costs and efforts.
5 Ways A Web Portal Can Excite Your Clients – This article by Craig Iskowitz on his blog discusses the JunxureCRM ClientView Live web portal, which came up as a part of a panel discussion at the Technology Tools for Today (T3) conference about how advisors are using technology. The advisor on the panel, Jennifer Henderson of Pinnacle Wealth Planning Services, noted the appeal of using ClientView as their one-stop-shop central portal for clients, and uses it to send/receive messages to/from clients, automatically post performance reports for clients to download, deliver online portfolio information, provide an online vault for storing and sharing documents with clients, and having an integrated single-sign-on for clients to then use other software through the portal. The firm then also uses MoneyGuidePro for financial planning and Black Diamond for portfolio performance reporting, which are able to integrate their respective reports into ClientView as well. The article also notes some other ways that Henderson’s firm has integrated technology, including a conference room rebuild around using Apple devices, with 4-5 iPads available for clients and advisors to use that are set up with GoToMeeting to broadcast/share presentations. Henderson’s firm has also fully migrated to the cloud, and no longer maintains any servers in the firm – which they found was especially positive for their employees not in the central office who find it easier to interact with the cloud software directly rather than remotely connecting to computers/servers physically located in the office.
Stop Fast-Tracking Your Career – From the Harvard Business Review blog, this article takes a somewhat harsh look at today’s 20- and 30-somethings, suggesting that this “Generation Impatient” is trying too hard to exchange a predictable linear career growth path for an exponential-trajectory-or-give-up path instead. The author suggests this is a result of a “digital comparison trap” where we compare to the posts about family and friends successes on Facebook (not recognizing that we might only be seeing 1% of the picture); the fact that it’s so easy to change and learn something new (given the ubiquity of information) and that the economy continues to grow also appears to support the behavior. This doesn’t mean that you should never quit – sometimes, quitting early to avoid getting stuck in a rut makes sense. Nonetheless, the author suggests that there should be a greater focus on the slow and steady path; across most industries, those who reach success/popularity/sales more slowly typically have the better overall results. In addition, given how short-term everyone else is these days, taking a longer-term view actually reduces your competition (since not everyone is willing to de-rush the process!) and makes it easier to succeed. Furthermore, taking a slower path allows us to enjoy the journey, which is no trivial thing, as research suggests our sense of well-being is brought about by the pursuit of happiness, not attaining it! So take your time; otherwise, “If you climb too fast without solid groundwork, you might go into an unintended freefall.”
No More Practice Management – This article by Philip Palaveev for Wealth Management suggests that the prevailing view of independent advisors – that they’re naive small business owners who are unsophisticated and naive in how they manage their firms – may be outdated, even though it’s still the prevailing approach of many service providers and vendors that work with them. Instead, Palaveev notes that the advisory firms have grown significantly in the past decade; there are RIAs with over $10B of AUM, and it took $535M to make REP magazine’s list of the top 100 RIAs. In addition, Palaveev finds that as he meets advisors at conferences and in his own training programs, they are increasingly larger and more sophisticated firms. As a result, Palaveev suggests that it’s time to stop talking about practice management, and start talking about business management instead, as these firms really are no longer small practices but are becoming larger businesses. The distinction is important, because many of the rules and recommendations so common for good practice management are terrible for good business management, including: focus on the owner’s strength (the business enterprise should transcend the individual!); do the things you enjoy (instead put the needs of the business first, and build yourself around it as necessary); “you are the brand” (if it’s a real enterprise, the business is the brand, not you!); delegate the worst clients and tasks you dislike to staff (not exactly constructive to build a motivate business staff!); use compensation and bonuses to manage your staff (instead, focus on building the right staff culture that manages everyone!); and do what other successful practices are doing (instead, recognize that while it’s important to understand business fundamentals, you also need to know when to break the rules because your firm is unique).
15 Psychology Experts Share Their Best Productivity Tips – This article from Psychology Today shares a few good tips for productivity and beating procrastination. A few are probably not news to you – take breaks from your desk to stimulate and refresh yourself, don’t be afraid to schedule tasks you keep avoiding and then close your door to force yourself to focus and get them done, and remember that stress relief can actually help reduce distractibility. But a few tricks might be new – for instance, the “George Washington” method where you only focus on a specific task (and nothing else) for an hour at a time, or the Pomodoro Technique where you set a timer for 25 minutes to focus intently on something (then take a 5 minute break, and start over again for the next 30 minutes); another approach is to simply set one task and keep at it until it’s done no matter what. Fight procrastination by setting a low bar for yourself to just get started (e.g., commit to writing a first draft, even if it’s bad; you can always edit it later to improve!), and make sure you set yourself up in environments where you can succeed (e.g., if you do good work in a library, go there when you have important work that needs to get done!). And perhaps the best bits of advice: don’t be afraid to buck the conventional wisdom on productivity tips if something else works best for you, and where possible try to choose projects/engagements for which you already have a passion and let your intrinsic motivation carry you through!
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!