Under the existing rules for 529 plans, account owners can only make investment selection adjustments once per year (or when there is a change in beneficiaries). Under the new relief just released from the IRS for 2009, 529 plan account owners will now be eligible to make changes... twice.Read More...
Earlier today the Supreme Court issued its ruling in the case of Department of Revenue of Kentucky v. Davis, stating that Kentucky's tax rules which exempt the interest earned on Kentucky muncipal bonds while taxing the interest of other state's bonds is not a violation of the so-called dormant commerce clause of the Constitution. The ruling spared what may have been a tumultuous disruption to the municipal bond market, but the Supreme Court's decision still leaves the door open for several issues...
Financial advisors add value for their clients not only by helping them grow their wealth, but also by working with them to create a plan for how to use it. While much of this process may focus on the client's own lifetime planning needs (e.g., helping them develop a retirement income plan), it often also addresses the client's goals for their wealth after their death. With this in mind, many financial advisors offer estate planning guidance to clients. However, because few advisors are also legal professionals (who can offer more detailed guidance and draft legal documents), many often collaborate with estate planning attorneys to ensure their clients' estate planning needs are met.
In this guest post, David Haughton, Team Lead for Advanced Planning at Commonwealth Financial Network, explores the relationship between financial advisors and estate planning attorneys, how advisors can add value for clients during the estate planning process, and how advisors and attorneys can create mutually beneficial arrangements.
Financial advisors can play a valuable role in the strategy, implementation, and funding stages of the estate planning process. For example, advisors can start by identifying whether a client even has an estate plan in the first place and, if so, what the current plan entails. The advisor can then consider whether the current plan (if it exists) meets the client's estate planning goals and, if needed, encourage the client to engage with an estate planning attorney who can recommend potential solutions (ideally in consultation with the advisor, who will be intimately familiar with the client's financial situation and goals) and draft the legal documents necessary to execute them. In the implementation phase, financial advisors can review the estate planning documents to ensure they are appropriate to meet their client's needs and confirm that the client actually executes the documents. Finally, in the funding phase, advisors can provide value by ensuring that accounts are retitled as necessary so that the client's assets are appropriately positioned to meet the goals of their newly crafted estate plan.
Sometimes, estate planning attorneys might be reluctant to work closely with a client's financial advisor. For instance, an attorney might balk at the estate planning suggestions offered by a client's financial advisor (who does not work on estate planning issues full time), while an advisor might question an attorney's proposed strategy (e.g., the attorney might not be aware of a client's ability to actually execute the proposed plan). Nevertheless, the reality is that both the financial advisor and estate planning attorney have much to gain by cooperating with each other, not just to ensure that their mutual client receives a properly prepared estate plan that meets their goals, but also because building a trusting relationship could lead to mutual client referrals down the line (as many estate planning clients could benefit from financial planning services, and vice versa)!
Ultimately, the key point is that financial advisors can add significant value for their clients throughout the estate planning process, from evaluating their current plan to helping them find a qualified estate planning attorney, to working with the attorney to ensure the new or updated plan meets their client's goals and is executed and funded appropriately. And while the advisor's engagement in the estate planning process can increase the level of trust and loyalty between the advisor and their client, it also sets the table for a strong relationship with their client's heirs when the client's assets are distributed at their death, continuing the legacy of providing valuable financial planning to family members when they may need it most!
Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that the final version of the Department of Labor’s (DoL) new “Retirement Security Rule” has been sent to the Office of Management for review, with the rule potentially going into effect in early 2025. While the final submitted text has not been released, some experts suggest that the DoL likely made few changes to its initial proposal, despite significant opposition from broker-dealers that could lead to the judicial system deciding the rule’s ultimate fate.
Also in industry news this week:
- CFP Board this week announced changes to its Sanctions Guidelines and revisions to its Fitness Standards that clarify the factors that determine how potential sanctions are determined and revise the framework use to determine whether a candidate is eligible to become a CFP certificant
- The Financial Services Institute joined other trade groups in filing a complaint against the DoL’s independent contractor rule, arguing that it creates confusion about the status of many financial professionals who prefer to operate as independent contractors
From there, we have several articles on tax planning:
- The IRS has launched its free direct filing program, though it is currently limited to taxpayers in certain states and with relatively simple tax situations
- Clients looking to rollover unused funds from 529 plans have the opportunity do so for both 2023 and 2024, with the deadline for 2023 fast approaching
- President Biden’s budget proposal released this week includes a range of potential tax changes, from raising the top marginal rate to increasing the child tax credit
We also have a number of articles on practice management:
- RIA M&A activity appears to have picked up in the first quarter of the year, with a steady flow of interested buyers and sellers
- Why integrating tech stacks, service offerings, and team cultures is crucial to the success of an RIA acquisition
- How the headline purchase price often does not reflect the final price an RIA buyer pays and the amount the seller receives, highlighting the importance of careful negotiation of deal terms by both sides
We wrap up with 3 final articles, all about Artificial Intelligence (AI) in the advisory industry:
- How generative AI tools could transform the way knowledge workers, including financial advisors, operate, rather than replace them altogether
- How lessons learned from the introduction of the digital spreadsheet can inform advisors’ future use of AI tools
- How current advisor-facing software incorporates AI capabilities and why firm-specific tools might become more common in the future
Enjoy the ‘light’ reading!
My guest on today's podcast is Rob Schultz. Rob is the Senior Partner of NWF Advisory, a hybrid firm based in Los Angeles, California, where he oversees nearly $500M in assets under management for 200 client households.
What's unique about Rob, though, is how he's systematized his meeting process, from his meeting prep down to a standardized agenda flow that allows him to dig into client-specific details while also maintaining an efficient meeting process… which has allowed him to scale up to over 20 client meetings every week… and still keep his sanity and energy levels up so that this is sustainable to him as he builds his firm.
In this episode, we talk in-depth about how Rob sets the agenda for his 20+ meetings per week with his clients using a structured flow that always touches on the same key areas for every client, the way he leverages his paraplanner to prep a stack of client meetings so that he can knock through a week's worth of meeting preparation in just a few hours every Monday morning, and the way Rob leverages the built-in audio transcription features in Microsoft Word itself to quickly wrap up his post-meeting notes at the end of each day.
We also talk about Rob's journey from getting an undergrad in Kinesiology and starting med school to moving into accounting and then ultimately becoming a financial planner through the program at UCLA (because financial planning was the perfect blend of helping people the way he wanted to in medicine, and working with numbers the way he did in accounting), the way Rob has been able to grow by executing a series of "succession plans" where he buys out and takes over the practices of retiring advisors, and the way Rob has been able to scale up his efficiency further by getting more systematized with his investments, especially the rise in recent years of outsourced TAMP providers and the availability of ETF model portfolios.
And be certain to listen to the end, where Rob shares the impact it had when a mentor pointed out how he could be the smartest advisor out there, but if he couldn't make enough money to last, he wasn't going to be able to help anyone, how much Rob has realized that soft skills are required to get his clients into a mindset where they are on a good path and can use any extra money they have to make their own lives better, and how getting to the point where Rob was actually able to say "No" to prospective clients who he knew deep down really weren't a good fit – but Rob finally felt he had the freedom to act on that reality – became the breakthrough that added greatly to his own mental health as a financial advisor .
So, whether you're interested in learning about how to grow your firm through succession plans, how much soft skills and client mindset are just as important as the knowledge you have as an advisor, or how to effectively manage an overwhelming amount of client meetings with ease, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Rob Schultz.
Enjoy the current installment of "Weekend Reading For Financial Planners" - this week's edition kicks off with the news that a Morningstar survey has found that financial advisory clients are more likely to stick with their advisor for emotional reasons rather than investment returns alone. Which suggests that building trusting relationships with their clients and giving them added confidence in their financial decision-making (rather than focusing on ways to juice investment returns) could be the keys to improving client retention!
Also in industry news this week:
- A recent study from advisor digital marketing firm Snappy Kraken suggests firms that invest in Search Engine Optimization (SEO), have a regular cadence of emails to their subscriber list, and include video content in these messages tend to get greater returns from their marketing efforts
- CFP Board has created a guide to help financial advisors vet potential technology providers to ensure not only that software tools will provide accurate outputs for the advisor's clients, but also will allow the advisors to remain in compliance with relevant regulations
From there, we have several articles on practice management:
- A step-by-step guide to the process of buying or selling an RIA, from the due diligence undertaken by both the buyer and seller to the legal documents that can protect both parties
- While the number of minority investments in RIAs slowed down in 2023, they could pick up as some founders nearing retirement are finding their next-gen advisors are unable to buy them out in full
- Why private equity dollars continue to flow into the RIA space and how these investments differ from the common private equity "fix and flip" approach
We also have a number of articles on cash flow and spending:
- The IRS has debuted its Direct File online portal to allow (a relatively small group of) consumers to file their taxes directly through the IRS website for free, though many might still choose to use more advanced software or human tax preparers
- While the new FAFSA form is simpler than its predecessors, its delayed rollout is causing headaches for some families with students applying to college this year
- Why a measure in "SECURE Act 2.0" allowing transfers of leftover funds from a 529 plan to a Roth IRA could give clients more confidence in funding these education savings accounts
We wrap up with 3 final articles, all about health and wellness:
- Why an individual's "healthspan" could be even more important than their lifespan when it comes to determining their happiness and potentially merits consideration when preparing a financial plan
- How maintaining muscular strength can play a key role in promoting health as one ages and why regular weightlifting sessions are not necessarily required to do so
- How caffeine can provide a variety of health benefits in addition to providing a jolt of energy
Enjoy the 'light' reading!
In late 2019, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act, introducing several significant changes to retirement planning. Of the many provisions in the bill, the so-called "Death of the Stretch" arguably received the lion's share of consternation from the financial advisor community. Under the new law, non-spouse beneficiaries (with few exceptions) must now withdraw the entirety of an inherited IRA within 10 years of the account owner's passing rather than over their own lifetimes. This shift has led financial advisors to explore new strategies for mitigating the resulting tax-planning challenges. One effective approach is the use of a Testamentary Charitable Remainder UniTrust (T-CRUT). As a non-person entity, the T-CRUT is not subject to the 10-Year Rule and can be designated as the IRA beneficiary while naming the original non-spouse beneficiary as an income recipient of the trust and a charitable organization as the remainder beneficiary. This allows the account to grow on a tax-deferred basis, with income to beneficiaries being taxed when distributions are made.
In this guest post, Kathleen Rehl, a "reFired" financial planner and author of "Moving Forward on Your Own: A Financial Guidebook for Widows", shares her story of how (and why) she used a T-CRUT to create, upon her passing, a steady stream of income for her son, thus preserving the wealth of his legacy over time, avoiding the income tax burden that he would potentially encounter as the sole beneficiary of her IRA, and leaving a portion of that account to various nonprofits she supports.
Notably, her strategy to preserve her son's wealth while meeting her own charitable goals relies on 4 key principles. First is that the underlying vehicle is a Charitable Remainder UniTrust (CRUT), which pays a fixed percentage of the trust's value for either a specified number of years (not to exceed 20) or through the lifetime of the beneficiary. Second is that the CRUT is testamentary (i.e., it is an 'empty basket' that doesn't receive funds until the owner's passing). Third, the IRA assets are directed to the T-CRUT as its funding source upon her passing, and fourth, that, at the end of the specified period, a minimum of 10% of the initial fair market value of the assets placed within the trust is transferred to a qualified charity (or charities) as the final remainder beneficiary.
While such a strategy may not provide the same level of after-tax benefit to her son if he were to inherit her IRA outright (where he would be faced with the temptation to empty the account and spend the proceeds immediately), the T-CRUT strategy ensures her son's financial security through an annual income stream lasting into his retirement as well as leaving a charitable legacy that matches her values. As such, while leaving funds in an IRA may be the better option for those seeking to maximize wealth, using a T-CRUT to preserve wealth for a beneficiary while meeting philanthropic goals can be a very appealing solution.
Ultimately, the key point is that there are a number of tools that financial advisors can use to help their clients' beneficiaries circumvent the tax burden (as well as other potential challenges) associated with inheriting retirement accounts. More importantly, using various tax-efficient "Give It Twice" charitable tools allows financial advisors to help their clients create comprehensive estate plans that can benefit both their loved ones and the causes that are most meaningful to them!
Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news of a survey indicating that about 90% of financial advisors would switch firms based on bad technology at their current firm, and that 44% have already done so. The survey also suggests that a firm's tech stack can affect its ability to attract and retain clients, with 93% of advisors who said they work with state-of-the-art technology reporting that they have added new clients as a result of another firm's bad technology, and 58% of all advisors surveyed reporting they had lost new business due to bad technology.
Also in industry news this week:
- A House committee has advanced a bill that would extend several expired business-related tax measures from the Tax Cuts and Jobs Act and would increase the value of the Child Tax Credit
- The SEC released its examination priorities for 2024, which include a focus on advisers' adherence to their duty of care and duty of loyalty obligations, including when recommending complex investment products
From there, we have several articles on marketing:
- How financial advisors can address the "Curse of Knowledge" to communicate more effectively with prospects and clients
- How advisors can overcome "impostor syndrome" and market themselves effectively when serving a niche clientele
- How advisory firm owners can better align their staffing and marketing expenses with their growth goals
We also have a number of articles on retirement planning:
- A variety of limits and rules related to retirement planning are changing in 2024, introducing several potential opportunities for financial advisors to use with their clients
- Why financial advisors and retired clients themselves might both be responsible for the relative lack of popularity of immediate annuities, despite the potential benefits they offer
- How retirement income guardrails could help retired clients spend down their assets in a sustainable manner in a variety of market environments
We wrap up with three final articles, all about Artificial Intelligence (AI):
- How Enterprise Large Language Models could help advisory firms overcome the privacy and compliance challenges of using publicly available AI tools
- Why skilled human translators continue to survive amidst competition from AI, and the potential lessons their experience offers for financial advisors
- Why certain AI tools are less cost-effective than human workers for many job functions
Enjoy the 'light' reading!
My guest on today's podcast is Michelle Ogden. Michelle is the founder of Ogden Wealth, an RIA based in Maitland, Florida, that oversees $50M in assets under management for almost 120 client households.
What's unique about Michelle, though, is that after seeing the challenges that come with too-fast growth in her husband's business, she decided to be very slow and methodical in her own growth and limit her need to rely on any staff for more than a decade… only to eventually hit a wall when the whole business relied on her, leading her to eventually decide to partner with a TAMP, and then quickly more-than-double her business in the subsequent few years by finally getting to just focus on what she does best!
In this episode, we talk in-depth about Michelle's journey from vowing to avoid the Financial Advisor industry after a negative internship experience as a woman in a male-dominated wirehouse in the 1990s to eventually coming into the industry with a positive experience at Charles Schwab and ultimately forming her own successful RIA, how a wariness of trusting others led Michelle to slow the growth of her own firm and the way partnering with third-party platforms including Edelman Financial and then Carson Partners ultimately allowed her to unlock the next level of growth and better leverage her own skills, and how word of mouth through Kingdom Advisors and her strategy of simply passing along financial information she found that she thought might be helpful to others on Social Media gave Michelle the reputation of being the person to connect with for any questions surrounding anything with a dollar sign and eventually grew her client base.
We also talk about Michelle's experience with Charles Schwab and Edelman Financial and how to support of those relationships, combined with her husband's travails in running his own business, led Michelle to structure her work in a way that brings her joy rather than just money, how Michelle overcome the challenges that arose when she was forced to learn how to manage the team that she had hired despite not having any prior experience managing people , and the realization, once Michelle decided she had to begin charging a fee to clients who had previously been handled pro-bono, that nobody actually expected her to work for free, and that her fee increase led to an increase in revenue without an increase in workload.
And be certain to listen to the end, where Michelle shares insight on how she wishes she had been more persuasive in convincing clients to do certain things for themselves and how that built her confidence to be more persistent in following up with clients and prospects (and if she was unsure, to just ask them when they felt it would be OK for her to follow up!), how Michelle finds it energizing and recharging for her to make deep and meaningful connections with clients and prospects (which has helped to carry her through the inevitable business challenges that come along the way), and how Michelle has developed her confidence that, through faith and diligent work, everything will work out, even (and perhaps especially) in situations in which Michelle had no control .
So, whether you're interested in learning about how to purposefully control your growth in order to maximize your own skillsets, how to increase your firm's revenue without increasing its workload, or how overcoming an aversion to hiring and trusting your team can allow you to focus on the elements of work that actually bring you joy, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Michelle Ogden.
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My guest on today's podcast is Thomas Kopelman. Thomas is the co-founder of AllStreet Wealth, a financial planning firm for millennial business owners and those with equity comp based in Indianapolis, IN, that has quickly grown to more than $500,000 of run-rate revenue generated from serving 70 ongoing client households.
What's unique about Thomas, though, is how he's been able to use social media, and Twitter in particular, to attract over 170 new prospects this year alone by educating, nurturing, and making a lasting impression on his followers, with relatively short blog posts that seem rather 'simple' but hit his specific prospects' pain points, so that they when finally decide they need a financial advisor… they wouldn't think about going to anyone other than Thomas for Financial Advice.
In this episode, we talk in-depth about how Thomas has built his social media strategy around generating a steady cadence of relatively short but directly-relevant-to-his-ideal-prospects blog posts that allow him to sustainably create content in less than an hour and without getting stuck trying to make it "picture perfect", how Thomas' ability to maintain his ongoing flow of relevant content compounds his social media impressions and has led to an influx of qualified prospects that maintain through both busier and slower months of the year, and how having a hook in the title of Thomas' posts – that isn't click-baity but truly relates to his target audience through set-up, context, and contrasting – is key to getting conversions from potential clients on the fence about whether they really want to have a planning relationship.
We also talk about Thomas' growth in leads led him to create an increasingly stringent filtering process to ensure he only spends time with the most qualified prospects, and minimize discovery calls that would otherwise turn out to be a bad fit, how Thomas' planning process builds up to what can be a 20 to 40 itemized list of recommendations but uses a quick-wins approach to prioritize just a few upfront and spend literally years helping clients through the rest, and how Thomas used the design platform Canva to craft his own customized financial plan template, rather than using financial planning software output, that not only lay out relevant graphics and action items for each client, but are much more visually appealing and easily digestible than traditional Word or Excel documents.
And be certain to listen to the end, where Thomas shares his journey from barely using social media and forgetting his own Instagram password to leaning heavily into Twitter to generate explosive growth in his firm, how Thomas learned the financial planning process in his early years and used social media to seek out and work with advisors that had leveraged the exact techniques he wanted to emulate while growing their businesses, and why Thomas initially planned to be a solo firm but changed his mind and ultimately chose to hire staff, that he enjoyed being around, to get the support he needed to sustain his firm's growth.
So, whether you're interested in learning about creating content that resonates with your target audience, implementing a social media strategy that will effectively turn readers and impressions into real client prospects, or creating a financial plan that not only is attractive, but also contains actionable items of advanced value to your clients, then we hope you enjoy this episode of the Financial Advisor Success podcast, with Thomas Kopelman.