Nerd's Eye View blog

Increasing Client Referrals By Scaling Your Internal Marketing Brand

June 15, 2020 07:03 am 1 Comment CATEGORY: Marketing

Established financial advisors who aim to accelerate the growth of their firms often look to increase their marketing efforts to attract more prospects and bring in additional new clients. In practice, this is often done by taking the main components of a firm’s brand – value, verbal messaging, and visual design – and refining, in particular, the firm’s visual design, with a new website and new marketing materials designed to instill new and faster growth. Yet, in reality, the biggest driver of accelerated growth is often to improve verbal messaging first… and upon doing so, many advisory firms discover that it’s even more appealing to leverage that new messaging as internal marketing to generate more referrals from existing clients instead!

In this guest post, Angie Herbers – Chief Executive and Senior Consultant at Herbers & Company, an independent management and growth consultancy for financial advisory firms – talks about the core components of a brand, and why these components are important to drive firm growth. As while the value of a firm lies in its services offered, the client experience as a whole, and how the firm delivers on both, many advisory firms make the mistake of investing too early and heavily in visual design upon recognizing the value they provide, without first working out the verbal messaging which defines and communicates their own identity and values. The end result of this disconnect between the value and the messaging about it is lackluster lead flow; accordingly, the visual design should actually be defined by the verbal messaging and will be most impactful when it can serve to communicate the firm’s values and convey its identity. Which is only possible when the firm’s verbal messaging has been clearly defined in the first place.

The two primary modes of marketing communication are internal and external. All new firms must start out with external marketing efforts to grow their client base in the first place – in other words, they need to target strangers, website visitors, and prospects to simply convey that the firm exists and to identify the services available. In addition to prioritizing the main components of a firm’s brand, understanding the firm’s different audiences and knowing how to effectively communicate with each are paramount to effective external marketing to increase lead generation.

However, for existing firms, especially those with well-established client bases, internal marketing can be a much more valuable marketing approach, if done correctly. Internal marketing targets existing clients exclusively, providing not only updates about the firm’s growth and progress, but also reminders of the firm’s value through educational content and the ongoing provision of outstanding client service. In fact, ideally, internal marketing strategies should provide exclusive marketing value and messaging that is only available to existing clients. If done right, internal marketing can leverage clients themselves as promoters who generate referrals for the firm. Because with the right branding, client service experience, and exclusive internal marketing outreach efforts, clients will be enthusiastic about telling other people they know about the firm and will eventually become the firm’s own best marketers!

Ultimately, the key point is that firms who are just starting out will need to rely on external marketing efforts to cultivate clients in the first place, but firms with a well-established client base can leverage their own clients as effective promoters of the firm by using an internal marketing strategy that targets clients exclusively. However, this is only effective if the firm has invested in creating a well-defined brand with verbal messaging that clearly conveys their identity and values (which is then communicated consistently with internal scripts for client review meetings), developing employees as part of the brand, and specializing their marketing communications… all available only to existing clients who may then refer the advisory firm (even more often than they did before!).

Weekend Reading for Financial Planners (June 13-14)

June 12, 2020 02:56 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with a hard look at the current state of advisor technology surveys, and the challenging question of which survey(s) advisors can and should even trust as an indicator of industry trends (and which are not sampling enough advisors or in a consistent enough manner to really know).

Also in the advisor technology news this week is a look at how wealth management firms at large held up with their digital tools in the midst of the coronavirus pandemic (finding that most firms are lagging badly, but that in general, independent wealth management firms and the platforms they use actually fared better than most), and a reminder that the coming new CFP Board Standards of Conduct will require them to actually understand the details of their financial planning (and other) software and cannot rely on 'black box' solutions when crafting recommendations to clients anymore.

From there, we have a number of articles around succession planning, including a recent industry study showing the majority of mid-to-large-sized advisory firms still aren't confident they'll be able to transition the firm to the next generation without at least a lot of bumps along the way, a look at how 'sick' many succession plans became through the midst of the pandemic turmoil (from next-generation owners who can no longer afford to make payments on their equity purchases, to both buyers and sellers getting cold feet to do the deal), and some tips for both founders and next-generation advisors on how to start the succession planning conversation (particularly if they're concerned the 'other side' isn't picking up the conversation themselves).

We also have a few marketing-related articles, from tips on how to handle 'Negotiator' clients and develop the confidence to avoid yielding to those asking for fee discounts, advice to new advisors about where to focus first on marketing (hint: local marketing, local SEO, and LinkedIn), and a reminder that, in the end, clients don't hire an advisor for what the advisor does but for what the advisor can do to help clients become who they want to become (which means marketing should be all about the transformations that advisors can create for their clients to achieve that vision for themselves!).

We wrap up with three interesting articles, all around the theme of office culture and team-building in the virtual world: the first explores the dynamics of whether business cultures can survive if they 'stay' virtual and don't go back to being in-person as offices reopen; the second looks at the value of playing games during work hours as a way to build team connections and culture (especially during the remote pandemic environment); and the last explores how to build a strong Virtual Culture (from the authors of the book by that very name!) for those who are thinking that they do want to remain more virtual, but are trying to figure out in practice how to do so while sustaining a strong culture.

Enjoy the 'light' reading!

New Disclosure Obligations For Informed Consent And Other Reporting Requirements Under CFP Board’s New Standards Of Conduct

June 10, 2020 07:03 am 1 Comment CATEGORY: Ethics

One of the fundamental challenges that professionals face when providing recommendations to consumers is that the recipient may struggle to fully understand the ramifications of their decision about whether or not to accept and follow the recommendation in the first place. After all, professionals tend to be engaged with respect to matters that are especially complex or challenging – such that the average person cannot make the decision quickly or effectively on their own, and must rely on the services of a professional. Yet, in a world where consumers still must give their consent to pursue recommendations that may have adverse outcomes, it’s hard to be certain that the consumer really understands enough to give their “informed” consent in complex matters in the first place. Accordingly, various professions have evolved over time the framework of what it takes to ensure a consumer is giving “informed consent” – to act on a recommendation made by the professional with full awareness of the potential risks that it may entail.

And in its latest update to its Code of Ethics and Standards of Conduct (“Code and Standards”), CFP Board will now require that CFP® professionals obtain informed consent with respect to any recommendations they make to clients that may entail a Material Conflict of Interest, to be certain that the Client truly understands the prospective conflict before deciding whether to engage the CFP® professional. In practice, this will entail not only providing upfront information about the CFP® professional’s services and compensation (which may be delivered orally for Financial Advice engagements but must be written for Financial Planning engagements) but also disclosures of the CFP® professional’s Material Conflicts of Interest (which may be oral or written), and obtaining the Client’s informed consent (by any means desired, though clearly for professional liability protection, CFP® professionals will likely want to document this in writing!).

Fortunately, the reality is that for most CFP® professionals individually, such disclosure documents will have already been created by their RIA as their Form ADV Part 2 (for an investment adviser representative), or by their broker-dealer (as a registered representative), along with their respective Form CRSs, such that few will have to create new and separate documents themselves. Nonetheless, being aware of the obligation to provide such information and disclosures, and, in particular, the burden to obtain informed consent (and a likely desire to document it, either with contemporaneous notes in the advisor’s CRM or perhaps with a delivery-and-acknowledgment receipt), means CFP® professionals will still need to be cognizant of what it takes to comply with the new rules.

In turn, CFP Board’s new Code and Standards also expand the obligations of CFP® professionals to report external disciplinary matters to CFP Board, comply with CFP Board investigations, and adhere to CFP Board’s Terms and Conditions. Recognizing that, in the end, the CFP® marks are not a formal license (and CFP Board is not a government-sanctioned regulator), but CFP® professionals who pay CFP Board to use the CFP® marks still, in the process, agree to adhere to CFP Board’s rules… providing CFP Board with the means to ensure that CFP® professionals uphold rules of professionalism, or risk having their CFP® marks suspended or permanently revoked!

#FASuccess Ep 180: Getting A Year’s Worth Of Growth Every Month By Going All-In On A Clear Target Market, with Ryan Inman

June 9, 2020 07:03 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 180th episode of Financial Advisor Success Podcast!

My guest on today's podcast is Ryan Inman. Ryan is the founder of Physician Wealth Services, an independent RIA based in San Diego that serves over 140 physician clients. What's unique about Ryan, though, is the way he's gone all in on the niche of serving physicians to the point of renaming his advisory firm, launching a "Financial Residency" podcast, and restructuring his entire financial planning process into ‘inpatient’ and ‘outpatient’ services, to the point that now in his fifth year of business, he's adding more clients every month than he added in his entire first year as a generalist.

In this podcast, we talk in-depth about how Ryan chose the niche of working with physicians, the mindset shift he had to go through to get comfortable narrowing the focus of his practice, how going to the FinCon Financial Bloggers Conference gave him the inspiration to actually market to and reach his niche, and how he has ultimately found that having a focused niche is making it easier to market because you don't actually need to reach a lot of people to get new clients when your niche marketing is focused.

We also talk about Ryan's financial planning services themselves. His unique fee structure of charging clients either $500 a month or $833 a month (those are his only two options), the unique expertise in student loan planning he had to develop to really serve his niche effectively, what he does for his clients upfront and on an ongoing basis to earn those monthly fees, and why Ryan ultimately had to go outside of traditional financial planning software and to use tools like YNAB to actually help his clients in the areas that they needed advice most.

And be certain to listen to the end, where Ryan talks about the importance of having your own financial foundation set before you launch your own firm and why he waited almost two extra years before going out on his own. Why even though Ryan is glad he waited to launch his firm, he regrets not focusing into a niche earlier on, and how if he could do it over again, the only thing he'd really change is finding a business partner sooner rather than later, because, in the end, it can be pretty lonely launching an independent advisory firm from scratch.

Summer Reading List Of “Best Books” For Financial Advisors – 2020 Edition

June 8, 2020 07:01 am 3 Comments CATEGORY: Personal/Career Development

In a ‘normal’ year, summer is the season of vacation and family trips, as client meetings tend to slow down (if only due to the clients' own vacations), and advisors get a little more time for rest and relaxation. Unfortunately, the coronavirus pandemic has disrupted a lot of family and vacation plans for 2020… yet the need for getting some rest remains, as it is arguably even more important to find time to recuperate from the client and business stresses of recent months. Which in practice, often includes finding a little time to catch up on some good books!

The question, of course, is then to figure out “what’s a good book to read these days?” As a voracious 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 new lists of books in 2014, 2015, 2016, 2017, 2018, and a fresh round last year in 2019.

And now, I'm now excited to share my latest Summer Reading list of top books for financial advisors in 2020, including some suggestions from our growing ‘team of nerds’ here at Kitces.com (including Derek Tharp, Erica Crane, and Matt Nelson), with suggestions on books about building a virtual culture (if you decide to keep your advisory firm virtual even after businesses are permitted to re-open in person!) or alternatively hiring a virtual assistant, how to refine and focus your marketing message by figuring out exactly what your value is to clients (in essence, what ‘job’ your clients are really hiring you to fulfill) and how to more effectively differentiate (under the philosophy that for branding purposes, “it’s better to be different than [just] better”), tips on how to better communicate with clients and help them change their behaviors to achieve their own goals, ways to take small steps to improve your own life (and why it’s easier to improve yourself by taking small steps instead of making big change resolutions), a discussion of whether we’re focusing on the wrong measures of economic growth and wealth in setting economic policy, and a look at how various government policies over the past 200 years have limited the ability of many minority populations to be able to accumulate wealth in the first place (which, due to two centuries of compounding – or the lack thereof – have amplified the racial wealth gap in America, with profound implications on the diversity of financial planners and who we serve as well).

So as the summer season gets underway, 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!

Weekend Reading for Financial Planners (June 6-7)

June 5, 2020 03:01 pm 3 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the big industry news that both the Department of Justice, and the shareholders of both Charles Schwab and TD Ameritrade, have all approved the proposed 'Schwabitrade' merger, making it now only a matter of when (not if) the merger will happen (for what may still be a multi-year transition before the integration is complete in 2022 or 2023!).

Also in the news this week is a new Department of Labor fiduciary proposal that has been sent to the Office of Management and Budget (OMB) for review and should be revealed in July (but more likely to coordinate with Regulation Best Interest's lower standard than reinstituting the prior DoL fiduciary rule), and a new industry study finding that the AUM model is weathering the pandemic recession better than the traditional commission-based model, but the pullback may still leave scars on some advisory businesses.

From there, we have a number of tax-related articles, including the passage of a new Paycheck Protection Program (PPP) Flex Act from Congress that will make it easier for businesses to use PPP (and to still benefit from payroll tax deferral even if they have a PPP loan forgiven), the tax issues that arise from remote workers doing their work from a new/different state (that may trigger multi-state taxation, even if only there on a temporary basis during the pandemic shutdown), and how ultra-low interest rates are stirring fresh interest in ultra-HNW estate planning strategies from IDGTs and intra-family loans to GRATs.

We also have a few advisor technology articles, including the latest annual tech survey from financial planning magazine showing a growing interest in model marketplaces and 'robo' solutions (albeit with some concerns about their sampling methodology and whether it is really representative of the advisor community), a look at the popular options for advisor portfolio performance reporting, and how increasingly 'capable' advisor tech tools are becoming so complex they're actually becoming less likely to be used and valued in many cases!

We wrap up with three interesting articles, all around the theme of #BlackLivesMatter and the explosion of conversations around race, which have significant implications for the financial services industry as well: the first explores how advisors of color (and those from communities of color) are being impacted by the widespread protests; the second examines some of the challenges of black advisors, in particular, who are trying to build their financial planning careers; and the last provides some helpful and grounded suggestions for advisors who do want to 'do something' and better understand race issues but aren't certain where to start and how to become a better Ally, with a "Justice In June" program that provides concrete exercises of books, videos, and podcasts that take 10, 25, and 45 minutes per day.

Enjoy the 'light' reading!

Kitces & Carl Ep 35: Favorite Questions To Ask A Prospective Client To Build Trust In The First Meeting

June 4, 2020 07:19 am 3 Comments CATEGORY: Kitces & Carl Podcast

Every business transaction (whether for a good or a service) moves both parties involved towards a desired state. A prospective customer or client needs something, and they also need someone to help them get it. Along the way, the person providing the good or service may or may not be successful in helping the customer or client reach their desired outcomes (whatever those may be), and one of the biggest determinants of their success is good questions.

In our 35th episode of Kitces & Carl, Michael Kitces and financial advisor communication expert Carl Richards explore their favorite questions to ask in a first meeting with a prospective client in order to get to know them better, start to establish trust, and take the initial steps towards building what will hopefully develop into a long-term, mutually beneficial relationship.

As a starting point, it’s important to keep in mind the path that the prospective client took in order to book their initial meeting in the first place (e.g., were they referred by an existing client or did they come in ‘cold’?) because that will help frame the initial conversation and give the advisor a confidence boost as the prospective client and advisor get to know each other.

Because asking good questions is about far more than checking off each box from a 17-point intake form or formulaically reciting from a predetermined script. In fact, the best questions are often ones that people have never been asked before, or are, at least, asked in such a way that offers someone a different perspective. While such questions can often create some discomfort (the best questions usually do!), they can also pave the way for some meaningful insights.

From there, perennial favorites include such questions as, “What's important about money to you?” (which helps lay the groundwork for establishing what really matters to the client and what might help keep them on track later on down the line), Dan Sullivan’s “What would need to happen in the next three years for you to deem this relationship a success?” (which provides a more concrete time frame around figuring out what their ‘desired future state’ is), and George Kinder’s famous three questions about what someone would do given increasingly narrow time frames on their longevity.

Perhaps one of the most useful questions, however, is simply, “What brought you in to see me today?” Because the disappointing reality of this business of financial advice and planning is that people don’t spontaneously come to the realization that they really need to get a comprehensive financial plan as soon as possible. Rather, there has usually been some sort of triggering event that brought them in and there’s some immediate and pressing need that they have at the moment, and understanding the triggering event accompanying their pain point can be very powerful when building trust.

Ultimately, the key point is that, no matter which questions an advisor uses in their first meeting with a prospective client, building trust is about being open to having a conversation, being comfortable and confident, and being empathetic to whatever a prospect’s pain point may be. Because, at the end of the day, the real beauty of this business is helping clients get from what they want to what we all know they need.

When CFP® Professionals Have To Actually ‘Do’ Financial Planning

June 3, 2020 07:08 am 0 Comments CATEGORY: Ethics

One of the hallmarks of recognized professions is that they have established Practice Standards that define the process that professionals of that discipline are expected to engage in to ensure that their clients/patients/etc. are well-served. The end result is not only a more consistent quality of service from that professional discipline – when everyone engages in a vetted process that has been refined by recognized best practices – but also an important means of protection for professionals themselves, who can point to the fact that the process was diligently followed, even and especially in scenarios where the outcome isn’t favorable (e.g., the doctor who can point to the fact that the processes were conducted appropriately, even if the patient themselves unfortunately didn’t survive).

Accordingly, CFP® professionals have long had a version of “Financial Planning Practice Standards” that apply to the delivery of Financial Planning itself, known by the EGADIM acronym (short for Establish relationship, Gather data, Analyze the client situation, Develop and present planning recommendations, Implement the recommendations, and Monitor). But effective on October 1^st of 2019 (which were first enforced starting on June 30^th of 2020), CFP Board updated the Financial Planning Practice Standards to a new 7-step process of CGADPIM (understand Circumstances, Gather data, Analyze, Develop recommendations, Present recommendations, Implement, and Monitor).

CFP® professionals providing Financial Planning are expected to engage in the full 7-step Financial Planning process with clients, unless the Scope of Engagement specifically excludes the Implement and Monitor phases (e.g., for an hourly or project-planning-only engagement). In addition, the full Financial Planning Practice Standards will apply if the Client engages the CFP® professional for Financial Advice that broadly integrates a wide range of advice areas or otherwise requires Financial Planning based upon a weighing of factors that CFP Board specifically identified in the Code and Standards (i.e., “Financial Advice that Requires Financial Planning”), or in situations where the Client has a reasonable basis to believe the CFP® professional will provide or has provided Financial Planning (i.e., if the CFP® professional suggests the Client is going to receive Financial Planning based on how they market and hold out, they have to actually do so!).

Notably, though, CFP® professionals do not have to engage in comprehensive (7-step) Financial Planning with every client. In situations where clients do not engage for Financial Planning, or seek out only narrow-scope (i.e., non-integrated) Financial Advice – or where the Client outright refuses to engage in the comprehensive Financial Planning process after being warned of the consequences – CFP® professionals may still proceed in providing non-Financial-Planning (i.e., not comprehensive and following the full 7-step process) Financial Advice. However, in all cases, CFP® professionals will still be held to CFP Board’s new ‘fiduciary-at-all-times’ standard with respect to the advice itself (even if not delivered pursuant to the full 7-step process).

The key point, though, is simply to understand that whenever CFP® professionals are engaged in Financial Planning itself – or provide advice that is so comprehensive and integrated it necessitates the full scope of Financial Planning – they are expected to follow the full 7-step Financial Planning process. Which isn’t intended to be unduly burdensome, but simply to help ensure that when financial planning advice is given, the CFP® professional has fully considered all the relevant facts and circumstances, as well as Client goals and objectives, before coming to a fiduciary recommendation in the Client’s best interests!

#FASuccess Ep 179: Investment Banking For Wealth Management And The Evolution Of Advisor Enterprise Value, with Elizabeth Nesvold

June 2, 2020 07:06 am 0 Comments CATEGORY: Financial Advisor Success Podcast

Welcome back to the 179th episode of Financial Advisor Success Podcast!

My guest on today's podcast Elizabeth Nesvold. Elizabeth is the managing director and head of asset and wealth management investment banking for Raymond James, which provides investment banking services for some of the largest independent advisory firms engaging in capital transactions. What's unique about Liz though, is that she has covered wealth management as an investment banker for more than 25 years now, and has seen firsthand how the valuation of wealth management firms has evolved over the decades to become what it is today.

In this episode, we talk in-depth about how an investment banker looks at the valuation of an advisory firm. The way that, early on, RIAs were valued primarily by their assets under management and how evolving advisory fee models, away from the traditional 1% AUM fee, caused a shift for RIAs to be valued by their gross revenues instead. The way further shifts in what advisory firms do (and don't do) to provide value for their fees, and the associated cost for those services, have caused advisory firm valuations to shift again to focus on multiples of free cash flow instead, and how obtaining a valuation of an advisory firm can be a powerful tool for the firm owner to understand whether the business is really getting a good business ROI on the resources it expends to service its clients.

We also talk in-depth about what investment bankers actually do for wealth management firms, the dynamics of raising capital when starting an advisory firm and who actually can raise capital to start a firm, how it works when an investment banker is engaged to help an advisory firm recapitalize and buy out an existing partner or founder, why advisory firms engage investment bankers to facilitate mergers and acquisitions when buying or selling a firm, and the typical success fee that investment bankers receive to help make sure a deal actually goes through.

And be certain to listen to the end where Liz shares her own journey as someone who sat down at her kitchen table and started her own firm, Silver Lane, that grew into a practice, and then into a business, and then ultimately was sold to Raymond James. How she navigated the challenges in crossing the deserts of profitability that emerged as the business reinvested for growth, and what she learned as a founder that sold her own firm that she now brings to the table in counseling other advisory firm founders that are getting ready to sell their businesses as well.

The Latest In Financial Advisor #FinTech (June 2020)

June 1, 2020 07:08 am 2 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the June 2020 issue of the Latest News in Financial Advisor #FinTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors and wealth management!

This month's edition kicks off with the news that Goldman Sachs has acquired Folio Institutional and its $11B RIA custody platform for 450 (mostly small) RIAs… and raising the question of whether Goldman is making a play to compete for small RIA custody opportunities as Morgan Stanley acquires E*Trade Advisor Services and Schwab acquires TD Ameritrade, or if Goldman will repurpose Folio to capture large wirehouse breakaway teams, or simply use it as a custodial platform for their own RIAs (Ayco and United Capital), or turn it into a robo-advisor solution paired with Marcus, or use Folio’s fractional share trading capabilities to build a direct indexing solution. Or perhaps all of the above!?

From there, the latest highlights also include a number of other interesting advisor technology announcements, including:

Franklin Templeton acquires the robo-advisor-for-advisors AdvisorEngine, but the real play may be to reinvigorate Junxure CRM?
AdvicePay rolls out Offices for Enterprises as LPL signs on to the trend of fee-for-service financial planning
Smarsh acquires Entreda as device management cybersecurity becomes a more pressing issue in a future with more remote workers
Plaid launches an integration with Microsoft that will offer consumers (or advisors and their clients) a spreadsheet-based budgeting tool with automated account aggregation
PlanTechHub launches a new financial planning software competitor built around actually showing the value of a financial advisor’s recommendations to clients

Read the analysis about these announcements in this month's column, and a discussion of more trends in advisor technology, with special AdvisorTech consulting guests Craig Iskowitz and Kyle Van Pelt, covering news including Aurora Capital acquiring FMG Suite to build ‘Hubspot for financial advisors’ as interest grows in advisor digital marketing, Vise.ai launches a new robo-tech-turned-TAMP solution for advisors, Envestnet launches a next-generation client portal that includes not just performance reporting and news but also client To-Dos, Fidelity rolls out a new Virtual AI assistant not for clients but to support advisor back-office servicing, and Morningstar doubles down on its bet of a more ESG-centric future by fully acquiring Sustainalytics (after buying an initial 40% stake back in 2017).

And be certain to read to the end, where we have provided an update to our popular new “Financial Advisor FinTech Solutions Map” as well!

I hope you're continuing to find this column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!