Enjoy the current installment of “Weekend Reading For Financial Planners” – this week’s edition kicks off with a look at the new health insurance planning opportunities that have emerged under the American Rescue Plan, from the potential to receive several months of “free” (tax-credit-subsidized) COBRA coverage to new rules for Premium Assistance Tax Credits that can produce thousands of dollars in tax savings for those who buy health insurance from state insurance exchanges in 2021.
From there, we have several articles on advisor marketing:
- What is a “Retargeting Ad” and why retargeting can be an especially efficient way for financial advisors to spend their marketing dollars
- Why “Email” continues to be the #1 most popular marketing channel for financial advisors (and is becoming more popular with the rise of email marketing automation tools)
- What it takes to become “an authority” where your expertise attracts your ideal prospective clients
- The rise of website providers dedicated to working with financial advisors to produce websites at a “reasonable” (i.e., not $20,000+) cost
We’ve also included a number of articles focused on retirement planning:
- Why new retirees are beginning to look at taking a “gap year” between the end of work and the beginning of retirement (to better figure out what they want to do, and where they want to live, in retirement)
- How “retirement” itself isn’t just a phase, but continues 6 sub-phases in retirement (that advisors can help their retired clients navigate through)
- A new approach to thinking about more “flexible” retirement spending strategies and why “spending flexibility” itself is a continuum along which retirees can choose an optimal spending strategy
- The rise of new Social Security training programs, from the National Social Security Advisor (NSSA) program to the new Registered Social Security Analyst (RSSA) certification
We wrap up with three final articles, all around the theme of (re-)drawing the line between work and home life:
- How work itself is increasingly becoming “omnipresent”, where “are you available” isn’t a question of whether you’re actually available and have time, but whether you’re ready and willing to give attention to work at that moment
- How the pandemic gave rise to the staycation (taking a vacation but staying at home), and now the work-from-home work is leading to the rise of the “workcation”
- The ways that businesses are (re-)designing Paid Time Off programs in the modern environment, from more flexible sick-plus-vacation time, to “forced” vacation days, and floating holidays
Enjoy the ‘light’ reading!
New Health Insurance [Tax] Planning Opportunities Under The American Rescue Plan (Carolyn McClanahan, Advisor Perspectives) – While the primary financial advisor focus of the recent American Rescue Plan legislation has been on the rollout of new “Recovery Rebate” stimulus checks (and ensuring clients qualify for all the dollars they can), another key change of the legislation was the introduction of several new forms of tax and financial support for health insurance. Of particular note for financial advisors is a change to the Premium Assistance Tax Credits, which are made available to those who purchase health insurance from a state insurance exchange. In the past, Premium Assistance Tax Credits (PATCs) were only available to those with a Modified Adjusted Gross Income (MAGI) below 400% of the Federal poverty level (which was $51,520 for a single individual, $69,680 for a couple, and $106,000/year for a family of four); now, however, PATCs are available without any income limits for anyone whose health insurance premiums exceeds 8.5% of their AGI. Thus, if a married couple who retired “early” at age 62 and aren’t eligible for Medicare yet earn $70,000/year, and pay ~$2,000/month for health insurance for the two of them (given their age), in the past their PATC would have been $0 (as they were just over the $69,680 threshold for eligibility), but now their premiums are capped at 8.5% of their $70,000 of income (or $5,950/year), providing them a tax credit of nearly $18,000/year for their health insurance premiums! (And for those who don’t currently have coverage through an exchange, the open enrollment period has been re-opened and extended to August 15th.) Other notable changes for health insurance planning opportunities under the American Rescue Plan include: anyone who received PATCs in 2020 and then ended out earning more income than anticipated (such that they would not have been eligible for some or all of the PATCs previously earned) will not need to repay them for 2020; anyone who receives even just one week of unemployment benefits in 2021 will be deemed as having earned no more than 133% of the Federal poverty level for the entire year, which will make them eligible for a no premium Silver plan on their health insurance exchange (and as a “low-income” individual, will also receive cost-sharing subsidies to lower their deductibles), even if they otherwise have substantive income from other sources this year; and for those who lose employer-based health insurance coverage due to a job loss or reduction in hours, new tax credits will cover the cost of COBRA health insurance premiums between April 1st and September 30th (but bear in mind that health insurance coverage cannot then be purchased until COBRA eligibility ends, or until the next open enrollment period for coverage that won’t start until next January).
Advertising And Retargeting: Does It Work For Advisors? (Samantha Russell, Advisor Perspectives) – “Retargeting” is a form of advertising where visitors who come to a website are shown ads after they leave that “re-target” them to come back to the original website… as most financial advisors themselves have experienced when they check out a product they’re thinking about buying, leave that website, and then “suddenly” start seeing ads for that product on other websites all over the internet. The significance of retargeting is that in the end, most people (as many as 97%) do not engage in a purchase or transaction the first time they visit a website; instead, it’s virtually always a reality that they will need to see an advertisement multiple times before they act, which makes retargeting ads an especially valuable way to target those visitors (while deliberately only “re”targeting those who have already visited the website, instead of just putting ads in front of cold strangers who may not have any reason to visit). All of which is important for financial advisors because the new SEC advertising rules that take effect in May are expected to create more flexibility and latitude for financial advisors to begin using retargeting ads more proactively as a way to attract clients themselves, whether to increase the conversion rate of prospects who already visit the firm’s website, highlight new services and offerings to prior visitors, offer more “free” content to prospects as a way to get them to come back, or simply to engage in more (re-)targeted advertising to get better leverage out of the limited advertising budget they may have. Ultimately, there are many ways to create retargeting ads, which most commonly are served up via platforms like Google or Facebook; Russell suggests using Canva or Creatopy to create the retargeting ad images themselves, and then Adroll to manage retargeting campaigns, bearing in mind that consumers can become “blind” to the same ad over time (with one study suggesting that clickthrough rates on a particular retargeting ad will fall by almost 50% after 5 months of the same time), so it’s important to monitor retargeting ad results and occasionally rotate in new retargeting ad images from time to time.
3 Reasons Experts Voted Email #1 Advisor Growth Tool For 2021 (Brendan Kenalty, Reach Stack) – While marketing has long been a realm of new strategies, new trends, new fads, and always taking a fresh look at “what’s working now”, a recent survey from Wealth Management on “must-do’s” for Advisor Marketing in 2021 highlighted that the top-recommended category for marketing is still the old stalwart of email marketing (and the marketing automation tools that support it), ranking above recent hot trends like LinkedIn and Facebook, video and YouTube, virtual events and online advertising. In part, the appeal of email is that with new marketing automation tools, it’s possible to make email marketing more personalized than ever before, in a realm where so many other marketing channels are still advertising shotgun blasts that pepper out the message widely in the hopes that it hits “something”… and as long as we continue to live in our email inboxes, personalized email is especially effective at staying in front of prospects with particularly relevant (marketing) messages. In addition, email itself is virtually free to send (with just the cost of time to create it, and perhaps the nominal cost of a marketing automation tool to manage it), as contrasted with many other marketing strategies that still have a significantly higher hard-dollar cost. Though at the same time, the time-consuming nature of creating individual or personalized emails means implementing some form of marketing automation software as a financial advisor is a necessity for email marketing at scale today.
How To Become An Authority In The Eyes Of Your [Ideal] Prospects (Darius Foroux) – Robert Cialdini literally wrote the book on Influence and Persuasion, for which the principle of having “Authority” is a major pillar in being persuasive (including and especially when it comes to convincing someone to do business with you). The reason is that in a world where most people are too busy to analyze every day and weigh all the pros and cons of every decision, relying on an “authority” can be an effective way to shortcut the process to a decision… which means being an authority can materially influence the decisions of those the authority communicates with. So how does one become an authority? The starting point is simply to get clear on what you’re going to be an authority at – in a realm where it’s not possible to be an expert in everything at once, and being a true authority means really being the best at something (which, in turn, requires getting really specific about what, exactly, you can and will become “the best” at). In turn, if you want to be known for being the best at something, it’s crucial to put your thoughts out there – publishing them somehow, whether in the form of a book or a blog (though Foroux suggests that ultimately, “writing the book” is still one of the best ways to truly be seen as an authority), so that you can be known as the author/creator of your ideas. Once you’ve put your idea(s) out there, find people who have been positively impacted and are having favorable results from your strategies or ideas, and share those stories (whether in the form of anonymous case studies or soon in the form of testimonials under the SEC’s new marketing rule)… because being recognized as an authority is all about showing exactly what kinds of problems you help them solve. And bear in mind that when lots of people “claim” to be an authority, having some form of social proof is important as well… which means getting “the logos” (e.g., the logos of media outlets you’ve spoken to, interviewed with, or been published in) and displaying them to show that you are viewed by reputable third parties as the authority.
How To Build The Best Financial Advisor Website… Without Paying $20,000 (Tobias Salinger, Financial Planning) – Now that the SEC requires RIAs to report their website and social media presence, we now know that nearly 90% of all SEC-registered RIAs have a website or social media profile (of which the majority maintain both). However, the quality of those digital presences varies greatly, with many websites just relying on generic boilerplate content that more resembles a digital version of a physical marketing brochure than an engaging marketing interaction with a prospect. At the other end of the spectrum, there are purely “custom” website designers that build sites for financial advisors that cost upwards of $20,000 with a deep level of design visuals. But in the end, most financial advisors will differentiate on themselves, their capabilities, and their authority – not necessarily their visual design (as long as it is otherwise “professional” looking), and there are now a growing number of website providers serving financial advisors in particular, from Twenty Over Ten (now part of FMG Suite) to Broadridge to Advisor Websites, as well as more custom designers like Impact Communications. Though given the sheer necessity of having “a website” in the modern era, a growing number of broker-dealers are now providing centralized support for advisor website design, some either offering websites entirely for free, heavily subsidized, or at least with in-house marketing expertise for those who want more upgraded support.
Taking A “Gap Year” On The Cusp Of Retirement (Kerry Hannon, MarketWatch) – For those who have successful careers and have been a part of something bigger than just themselves, the transition to retirement can feel not only isolating (with the loss of team and camaraderie) but also result in a feeling of losing one’s sense of purpose. The end result can be a frantic search for new hobbies and new ways to get (re-)engaged in life… a transition that retirees are often ill-prepared for with the expectation that “it will all be easier after I retire”. Which, in turn, is leading to a rise in programs specifically aimed at helping retirees figure out “what’s next” to keep them engaged after they leave their original career. For instance, the Tower Fellows program from the University of Texas at Austin is specifically intended for adult professionals to spend a school year on campus as full-time students exploring any combination of classes to re-discover what may be of interest for the next chapter of their lives. In fact, research from the IZA Institute of Labor Economics finds that people who are close to retirement age are just as intent on learning new skills as their younger colleagues (which is particularly appealing to many colleges that themselves are facing flat or declining enrollment forecasts, especially in the face of the pandemic and its aftermath). And hotel entrepreneur Chip Conley recently founded the Modern Elder Academy, specifically dedicated to “midlife learning”. More generally, though, the key point is simply that education is a pathway to transform ourselves from where we are to where we want to be… and when retirement itself is a major transition from the known to the unknown, we often don’t even know what we want to transform into. Which is feeding a rising interest in taking a year out for midlife learning to explore and figure out what should come next, all built around the goals of building community, recalibrating wellness, and renewing one’s purpose.
The 6 Phases Of Retirement (Andy Millard) – The classic view of retirement is that it is the third and “final” phase of life, after we go through the first phase of youth and learning (from birth to adulthood), and the second phase of our ‘productive’ working years (from adulthood until we can no longer work anymore), allowing us to reach a final stage of rest, relaxation, and leisure. However, in practice, retirement itself is really a multi-phased experience – given both the substantive nature of the transition itself from what precedes it and the sheer duration of retirement that encompasses many years and decades (throughout which our lives continue to change). Accordingly, Millard highlights a series of 6 key phases of retirement, including: Honeymoon (when the initial retirement transition happens, and suddenly you’re free from work and have the time to take that extra-long cruise, finish that home project, or pick up an ad hoc hobby); Rest and Relaxation (once you’ve gotten through the honeymoon activities, where you settle into the ongoing routine of retired life and the extra time it allows); Disenchantment (when eventually it settles in that all this rest and relaxation is nice for a while, but then begins to lead to a sense of lost purpose and a gnawing wonder of “is this all?” and “what’s next?”); Reorientation (where we try to break ourselves out of the disenchantment phase by finding a new way to become engaged and have purpose, looking for new ideas and new possibilities, from taking up a new hobby to joining a new club, getting involved in a non-profit or even starting a new business); Retirement Routine (as the new reality becomes the new normal, with the new more-meaningful activities in retirement becoming the new retirement routine); and then, alas, Termination (the harsh reality that all good things come to an end… and that it is important to plan for it, even if only so we can better enjoy retirement as long as we can?).
Beyond the 4% Rule: Flexible Withdrawal Strategies Using Certainty-Equivalent Spending (Druce Vertes, Advisor Perspectives) – The original “4% rule” from Bill Bengen showed how a balanced portfolio can sustain 30 years of inflation-adjusted retirement spending as long as the initial withdrawal rate is set at no more than 4% of the starting account balance. The caveat, though, is that Bengen’s approach effectively constrains retiree spending to the initial amount that would have worked in the one worst-case scenario, even though in practice (by definition) the other 99%+ of scenarios will simply accumulate excess unused wealth, and that even in bad scenarios retirees often can trim their spending to get back on track in the face of a market downturn (rather than only spending the least possible upfront that would avoid ever making a spending adjustment in the first place). Accordingly, an alternative approach would be to determine the amount of “safe” retirement spending that could be consumed if retirees are assumed to cut in bad market years (and then make it up again later when markets recover). For instance, Vertes explores strategies where retirement spending is a combination of a percentage of the original portfolio and a percentage of the current portfolio. When modeling such strategies, Vertes finds that the 4% rule effectively becomes a 4.6% rule, by taking 3.54% of the starting portfolio plus 1.06% of the current portfolio, which in practice may fall to 3.6% for a period of time in the worst-case scenario, but ends out averaging 5.3% as markets rise more often than they fall. Alternatively, for those who can tolerate more spending volatility, it may be more appealing to target a withdrawal pattern of 2.7% of the starting portfolio plus 2.9% of the current portfolio, which results in a starting withdrawal rate of 5.6% (and an average of 6.9%, but a worst-case scenario that falls to just 2.9% of the starting portfolio balance). In essence, then, the trade-off becomes a function of what Vertes calls “Certainty-equivalent spending”, where real-dollar spending is discounted by volatility (and one’s aversion to volatility), where a highly-risk-averse investor may take Bengen’s 4% and a highly-risk-tolerant one may take 2.7%-starting-plus-2.9%-current (which are “equivalent” in that they’re simply at different risk points on the same efficient retirement frontier).
New Option For Social Security Training For Advisors (Mary Beth Franklin, Investment News) – In recent years, there has been a growing interest in both professional designations like CFP certification and various “post-CFP” certifications to become more specialized and differentiated in the advisor marketplace. When it comes to Social Security in particular, the market leader has been the National Social Security Advisor (NSSA) certificate program, which has provided its NSSA certificates to more than 2,500 advisors. But now, with the growing demand for specialized education, the National Association of Registered Social Security Analysts (NARSSA) was launched, which, for a cost of $1,500 and an offering of 8.5 hours of CE credits (for both CFP Board and CPAs and EAs), awards the “Registered Social Security Analyst” certification. In practice, the two programs are substantively similar – in teaching the same Social Security rules – though Franklin highlights that the RSSA program includes a module on incorporating Social Security claiming strategies into the overall retirement income plan, and also covers Medicare (and where Medicare claiming overlaps with Social Security claiming strategies), with a particular focus on learning through Case Studies that apply the knowledge to practical sample client scenarios. All built around the recognition that as technology increasingly commoditizes the “basic” elements of financial and retirement planning, the pressure is on financial advisors to up their game and expertise to continue to add more value on top.
[Editor’s Note: The original text of this article incorrectly credited Laurence Kotlikoff with creating NARSSA. NARSSA was co-founded by Martha Shedden and Michael Rosedale.]
The Omnipresence Of Work (Lawrence Yeo, More To That) – One of the unique things about being human is that the creativity and thinking of our brains has no “off” switch, as even when we sleep and dream, we continue to think of ideas (and sometimes awake inspired). Writ large, this continuous creativity has advanced us from the development of the wheel and the cup to the light and the modern computer. The irony of all this creativity is that we continuously think of new things to do and create to make our lives easier… and then end out working in jobs as the source of labor to create and deliver them (from the humans that staff the assembly line of the factory to the cubicles of the office). The “good” news of this dichotomy at least was that work time was work time, home time was home time, and the brain could take environmental cues of what to focus on based on where it was. But in our new work-from-home era, the challenge is that the physical divide between work and home has vanished, leading to a world where our brains don’t know how to turn off, and we often have no clear way to denote when work ends… resulting in a veritable “omnipresence of work” in our lives. And the situation is only made worse by the presence of smartphones and other digital tools, which means we’re never really able to disconnect from work. In fact, even the very work question of “are you available right now?” is no longer really a question of whether one is available (and has the time), per se, but simply whether one is willing to give attention to the inquiry now (or say “my brain is tired, let’s talk about this tomorrow”). So is there a way to effectively disconnect from the omnipresence of work? Ultimately, Yeo suggests that the nature of ever-present communication is here to stay, and that consequently, the only way to navigate the omnipresence of work in the future will be to get very clear about when and how we want to focus our attention in a particular direction and use that as the basis to determine if we are or are not “available” to talk or think about work right now.
The Rise Of The [Dreaded?] Workcation (Erica Pandey, Axios) – Over the past year, the limitations on travel as a result of the pandemic have popularized the “staycation”… where someone takes a vacation, but doesn’t actually go anywhere or do anything, and instead simply stays at home on their vacation but remains unplugged from work. But now, as travel begins to re-emerge and many employees are now accustomed to working remotely, there is an emerging rise of the “workcation” – where someone goes on vacation but chooses to work while they’re there. In fact, a recent Harris Poll reported that 74% of Americans who are working from home would consider taking a “workcation” now, given that in practice we can work from anywhere (and the brain rarely stops thinking about work just because we’re not at the office). The shift towards workcations appears especially appealing given that a growing number of Americans tend to have unused vacation days they never manage to take… such that even a “workcation” is better than taking no vacation at all. Still, though, productivity experts caution that in the end, unplugging from work entirely is an essential component of being able to recharge, and a “workcation” fails at the essential element of letting go for a few days of mental freedom. Accordingly, even as worker interest grows for workcations, a growing number of companies are exploring various forms of “mandatory vacation” policies to encourage and even force employees to take their time off as vacations. Nonetheless, the point remains that as the dividing lines between office and home (and work and vacation) continue to blur, our future will increasingly be either one where it all blurs together (with the rise of workcations) or one where we have to deliberately and consciously keep them apart (with the intentionally unplugged vacation).
How to Design a 21st Century Time-Off Program (Danielle Braff, SHRM) – The traditional view of “vacation” and paid time off was a combination of 2-3 weeks’ worth of vacation and a handful of fixed annual holidays. But with the ever-growing competition for top talent, plus changing dynamics in the workplace itself (from the ability to do remote work, to the rise of work-from-home), the nature of what “time off” means, and how those benefits are structured, is in the midst of great change as well. Key trends emerging in the modern 21st-century time off program include: combining PTO (paid time off) to include sick and vacation leave all in one time bank (which has grown from 38% of employers in 2010 to 63% by 2015), which both gives more flexibility and autonomy for workers, and can save businesses themselves on the time and effort of tracking sick time (and forcing employees to “prove” they were sick), though employees with significant health conditions may not appreciate that their disproportionately high use of sick time is eliminating any remaining time for them to ever take a vacation; forced time off, where companies actually require that employees take their vacation time (with some employers going so far as paid, paid leave, where employees not only get paid time off, but receive an additional allowance that might amount of $1,000, $3,000, or even $7,500, to have funds to spend on their vacation, recognizing how re-energized and productive employees can be after returning from a vacation); sabbaticals for those “longer-term” employees (e.g., one large IT company is now offering a 6-week paid sabbatical every 4 years that they work at the company); and Floating Holidays, where instead of setting one-size-fits-all holidays (especially with growing religious and ethnic diversity), employees get a “floating” holiday that they can variously use for their own holiday of choice, from Passover to Ramadan, Good Friday to Kwanzaa… or simply their birthday if they prefer.
I hope you enjoyed the reading! Please leave a comment below to share your thoughts, or make a suggestion of any articles you think I should highlight in a future column!
In the meantime, if you’re interested in more news and information regarding advisor technology, I’d highly recommend checking out Bill Winterberg’s “FPPad” blog on technology for advisors, and Craig Iskowitz’s “Wealth Management Today” blog as well.