News About IRS And Tax: November 2017

Thursday 30 November 2017

Offering Financial Planning As An Employee Benefit For Your Advisory Firm Employees

As financial planning firms, we offer a valuable service to consumers who are willing and able to pay for our services. Which is what makes the business of financial advice so valuable, and why the average income of a CFP professional is nearly double the median household income in the US. The unfortunate caveat, though, is that financial planning services still are not affordable to a large segment of consumers. Including, alas, the employees of most advisory firms, which means the very people who work there and are expected to advocate for the value of their firm’s services and the benefits of financial planning have never actually experienced it themselves!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss the issues to consider for advisory firms that want to remedy this gap offering financial planning as an employee benefit to the employees of their own firm… including considerations such whether to provide such services internally or externally, whether to let employees choose their own advisor, the tax consequences to consider, and why providing financial planning to employees can actually provide an Return On Investment as employees gain better perspective on how to improve the firm’s client experience (by actually experiencing financial planning themselves!).

The first question you have to evaluate when considering how to offer financial planning as an employee benefit is whether you’re going to provide the financial planning services internally or externally. Offering financial planning “internally” means the firm’s advisors actually do the financial planning for its employees. Firms may put one associate advisor in charge of all internal planning, or perhaps provide several advisors that employees can go to (since it may be awkward to get financial planning from your direct supervisor). Which raises a real issue with trying to do financial planning internally for employees: there are many conflicts of interest that can arise. For instance, what if an employee’s financial plan includes a desire to leave the firm and go into another field? Or what if employees want to talk through the considerations of saving up enough money to buy out the founder in a firm (but don’t want to announce their intentions to their co-workers yet)? These issues may be awkward to discuss internally.

As a result, most advisory firms I’ve seen that offer financial planning as an employee benefit offer it externally. The most straightforward approach is simply to engage in a reciprocal agreement with another similar-sized advisory firm – where each provides services to the other firm’s employees. In this scenario, you will likely have a cost to actually pay the other advisory firm for their services as well, but if the firms are similar in size, presumably each firm will have roughly the same costs (and income) paid to each other. The caveat even with this approach, though, is that the firm may not actually have the expertise to help your employees, nor will you necessarily have the expertise to help theirs. Are you really prepared to develop for them a 3-year roadmap to repaying debt, navigating debt consolidation services, and repairing their credit scores, if that’s what your employee’s planning needs are?

Which leads to a third option for financial planning as an employee benefit: just give employees a budget for financial planning, and let them go and find their own advisor. And the benefit of this approach is that employees can seek out their own advisors through organizations like the Garrett Planning Network or XY Planning Network, which include financial advisors whose expertise is in the areas that typically-younger “rank-and-file” employees actually need, while also having pricing that is less expensive than larger independent RIAs (and therefore more affordable to the advisory firm offering the employee benefit).

Beyond the enhancements in employee well-being that can come from having access to financial planning services (e.g., reduced stress, less absenteeism, better utilization of employee benefits, and lower employee turnover), one of the biggest indirect benefits of using an external firm is that employees can actually experience what it’s like to seek out and be a financial planning client. Going through the process of finding an advisor, being onboarded, and then working with that advisor on an ongoing basis, gives employees perspective not only on the value of financial planning, but may also generate ideas about how to provide services better for the firm’s own clients. Of course, in order to avoid unintended negative feelings, it is important that employees understand the tax consequences of receiving financial planning as an employee benefit. Because financial planning is not a tax-qualified employee benefit perk, any money actually paid to an external firm (or possibly the market value of the services received internally), must be reported as W-2 income and becomes taxable to the employee.

The bottom line, though, is simply to recognize that financial planning services can be an excellent benefit to provide to employees, and particularly when employees get to seek out an external advisor and gain valuable insight into how your own firm can better service clients!

Introducing TurboTax Live! Have a TurboTax CPA or EA Review Your Tax Return Before You File

We are excited to announce that starting today, TurboTax is transforming assisted tax preparation with the introduction of a new way to do taxes, TurboTax Live! Customers can take advantage of a nationwide virtual network of credentialed tax experts to...

Full Story

source https://blog.turbotax.intuit.com/turbotax-news/introducing-turbotax-live-have-a-turbotax-cpa-or-ea-review-your-tax-return-before-you-file-32044/

Wednesday 29 November 2017

6 Ways to Help Secure Your Personal Identity

This week the IRS is hosting the second annual National Tax Security Awareness Week all across the country to encourage taxpayers to take steps to protect their identity. In partnership with the IRS, we are sharing some important tips to...

Full Story

source https://blog.turbotax.intuit.com/tax-tips/6-ways-to-help-secure-your-personal-identity-32450/

New IRMAA Surcharges On Medicare Part B and Part D Taking Effect In 2018

Since 2007, the Medicare Modernization Act of 2003 has required high-income Medicare enrollees to pay an “Income-Related Monthly Adjustment Amount” (IRMAA) surcharge on their Medicare Part B premiums, which lifts the Medicare Part B premium from covering “just” 25% of costs up to as high as 80% of results, increasing Medicare Part B premiums by as much as 219% in 2017. And since 2011, a similar IRMAA surcharge has applied to Part D premiums, applying a flat dollar surcharge of as much as $914/year in 2017.

Beginning in 2018, though, the IRMAA surcharges on Medicare premiums will apply even more quickly, as changes under the Medicare Access and CHIP Reauthorization Act of 2015 will reduce the top Modified-AGI threshold from $214,000/year down to “just” $160,000 (for individuals, or $320,000 for married couples). And individuals with MAGI as low as $133,500 (or married couples at MAGI of $267,000/year) will be forced into a higher IRMAA tier, resulting in a nearly $1,000/year increase in IRMAA surcharges.

Which means going forward, it will be even more important to engage in proactive income tax planning for affluent retirees, to manage their exposure to IRMAA, especially in a low-inflation environment where being impacted by IRMAA also renders the household ineligible for the so-called “Hold Harmless” rules that limit annual inflation increases to Medicare Part B premiums. Especially since even “one-time” income events, like a sizable Roth conversion, or liquidating substantial capital gains, can be IRMAA triggers (at least for that one year the income event occurs).

On the other hand, it’s important to recognize that IRMAA surcharges still only amount to a roughly 1% to 2% cost increase, relative to the income the household must have to be subject to IRMAA in the first place. Which means that while managing taxable income (or really, MAGI) is important, it’s equally crucial not to let the tax tail (or the IRMAA tail) entirely wag the dog.

Nonetheless, the new 2018 IRMAA rules will just make Medicare-related tax planning more popular than ever. Although notably, for new retirees, the best IRMAA planning strategy is simply recognizing the opportunity to file Form SSA-44 to receive an exception to the IRMAA surcharge, as the act of retirement itself is a valid “life-changing event” that can allow new Medicare enrollees to avoid IRMAA premium surcharges on Part B and Part D in their initial Medicare years!

Tuesday 28 November 2017

Give the Gift of Charitable Donations on Giving Tuesday

According to the National Retail Federation, it’s estimated that over 164 million people planned to shop this past Black Friday weekend and on Cyber Monday. For many, it was to pick up gifts for their loved ones. When we sometimes get...

Full Story

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/give-the-gift-of-charitable-donations-on-giving-tuesday-20719/

#FASuccess Ep 048: Creating Tangible Advisor Marketing Messages For Intangible Financial Planning Services With Gail Graham

Welcome, everyone! Welcome to the 48th episode of the Financial Advisor Success Podcast!

My guest today is Gail Graham. Gail runs an eponymous marketing consulting firm called Graham Strategy, that works with both advisory firms and B2B vendors serving financial advisors, on how to more effectively craft relevant marketing messages to reach their target clientele.

What’s fascinating about Gail, though, is that she’s had a similar marketing role in a wide range of advisory industry businesses, from the private wealth division of PNC bank, to Fidelity’s private client group, and later as Chief Marketing Officer for the mega-RIA United Capital. And through the journey, Gail has gained some incredible insights about what it really takes to effectively market an intangible like financial planning services.

In this episode, we talk in depth about how to more effectively communicate financial planning and its value, from the importance of using plain language that people understand (instead of saying “I’m a fiduciary” simply say “Here’s how it works – I’m personally liable if I give bad advice”), to the benefits of converting your value proposition into a physical proposal sheet and bringing a Sample Financial Plan to every prospect meeting (because it literally makes the advice value proposition more physically tangible), to the benefits of including “proof points” that actually validate your value proposition with prospective clients (such as “we’ve helped 300 families do this in the past 8 years”).

We also talk about why getting better at financial advisor marketing is all about getting clear for yourself on who your ideal client really is, why it’s absolutely essential to focus in order to find the right marketing messages that really resonate, and Gail’s process to finding and refining your own value proposition.

And be certain to listen to the end, where Gail shares her perspective on the benefits and challenges of the RIA custody model, and why she’s decided to collaborate as a marketing strategist with Apex Clearing to try and help disrupt the status quo, for the betterment of advisors and their clients.

So whether you have been contemplating to how to make your own marketing of intangible financial advisory services more tangible, have been reconsidering who your ideal client truly is, or are simply interested in hearing some new perspectives on marketing topics, I hope you enjoy this episode of the Financial Advisor Success podcast!

source https://www.kitces.com/blog/gail-graham-strategy-podcast-marketing-intangible-united-capital-apex-clearing/?utm_source=rss&utm_medium=rss&utm_campaign=gail-graham-strategy-podcast-marketing-intangible-united-capital-apex-clearing

Monday 27 November 2017

Taxfile’s Autumn 2017 Newsletter

The Autumn 2017 edition of Taxfile's newsletter is now out and it's packed full of useful information, tips, recommendations and key dates in the tax and accounting calendar, including some things you need to act on right away if you want to save time and money. Here is a quick overview of the articles: Page 1:

Self-Assessment Tax Return Deadline Approaches - Act Now!
Late with your Tax Return & Tax Payment for a Previous Year?
Taxfile Now Open Saturdays by Appointment
Deadlines & Key Dates
The Future is Digital

Page 2:

Accounting for VAT
Have you made a Capital Gain?
Assets Overseas? Non-Resident Landlord? Read This!
Do you Employ People?
C.I.S. Sub-Contractors: Claim your Tax Refund for Christmas!
Tip!

Page 3:

The Benefits of Using Taxfile
All Your Tax & Accounting Needs Taken Care of
Tax Affairs in a Mess?
Who Works at Taxfile?
Thank You

If you haven't already received a copy by email, then view the newsletter online here or

source http://www.taxfile.co.uk/2017/11/autumn-2017-newsletter/

How Mindset Trumps Best Practices For Financial Advisor Success

Financial advisors looking to improve their businesses have a wide range of “Best Practices” research to tap for new ideas, from industry benchmarking studies to specialized white papers. And of course, this Nerd’s Eye View blog. For those seeking methods to run their advisory business more efficiently and profitably, there are a lot of relatively simple tactics to try.

In fact, as highlighted in this guest post from Stephanie Bogan and Matthew Jarvis, arguably the greatest challenge in improving a financial advisor’s business is not actually figuring out the Best Practices methods at all… and instead is almost entirely about changing the mindset of the advisory firm owner. Because most business improvements to an advisory firm are fairly straightforward – from standardizing service offerings, to eliminating fee schedule exceptions. The blocking point is in our heads. Literally.

Because as Bogan and Jarvis discuss, the real reason that most advisors struggle to take their businesses to the next level is the limiting beliefs that we impose on ourselves as financial advisors and business owners. The idea that certain aspects of the business “must” be done a certain way, or the business will fail. When in reality, it’s simply that we don’t want to go through the awkwardness of change and the discomfort of feeling threatened and worried that a client might push back… even though at worst, making changes will probably just threaten to cause a few clients to leave (and usually it’s those clients who weren’t even the best fit in the first place!).

In other words, the key to financial advisor success isn’t really about implementing the right methods – the business tactics and best practices – but more about having the right mindset that makes it easier to implement those methods in the first place. Because once as advisors we have clarity and focus in the business, a confidence in our own worth and the value we provide, a focus on leveraging our time and relationships, and an abundance mentality that the money and business success will come by doing the right things… it becomes remarkably easy to make the changes necessary for that success to actually happen!

Saturday 25 November 2017

Self Employed – Small Business Saturday and Giving Back

As we enter the season of giving, you may see a lot of stores and companies giving back to the community. Some may donate a portion of sales to a charity, and others may donate their products or services to...

Full Story

source https://blog.turbotax.intuit.com/self-employed/self-employed-small-business-saturday-and-giving-back-32612/

Friday 24 November 2017

Weekend Reading for Financial Planners (November 25-26)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with a look at the latest part of the Senate Republican tax plan generating buzz amongst advisors… that all investment sales may be required to use FIFO treatment in the future, eliminating the specific lot identification method, which would substantially curtail tax loss harvesting strategies.

Also in the recent news is the announcement that the military is overhauling its traditional 20-or-nothing pension system to a slightly scaled down version of the pension combined with government involuntary plus matching contributions to the Thrift Savings Plan (and a choice for enlisted military with less than 12 years of experience about whether they want to stay in the old system or switch to the new one). And there’s also a timely article on providing ideas for client holiday gifts, just in time for Black Friday sales!

From there, we have several articles about pricing and marketing advisory services, from a look at how to properly set and then communicate your fees, to an outsider’s perspective on how financial planners should be pricing their services (or rather, offering a menu of variously-priced services), and a good reminder about how it’s impossible to effectively market the value of your services until you get a clear understanding of your internal business strategy on how you plan to create (and differentiate) your value to your intended target market.

We also have a few practice management articles, including: how a growing number of advisory firms are shifting from lifestyle practices to enduring businesses (which provides more upside value potential to sell the business, but introduces substantial complexity along the way); a good primer on how a valuation expert looks at the real issues involved in trying to determine an advisory firm’s value; and a look at what today’s RIAs may be missing in how the DoL fiduciary rule will apply to them (including during the current “transition BICE” period until the full rule takes effect in July of 2019).

We wrap up with three interesting articles, all around the theme of how the advice industry, and the needs to be successful in the industry, are changing: the first looks at the challenges in attracting women into the financial planning profession, noting that the real challenge may not be the concern about whether there’s “too much math” or not, but that too many financial planning jobs are still overly sales-oriented, too inflexible, and too unwilling to given upwardly mobile Millennials the autonomy they crave; the second explores the emerging field of financial therapy, and how just as financial planners have been blurring the line between advice and product sales, so too is financial therapy blurring the line between advice and making (and treating) mental health diagnoses; and the last notes that as more advisors master the technical skills in financial planning, it’s the communication skills that are increasingly important, especially in a world where money remains such a taboo subject, which means perhaps it’s time to rename the “soft skills” to something more commensurate with the gravitas they are taking on in the path to being a successful financial planner!

Enjoy the “light” reading!

The Chancellor’s Autumn Budget 2017

This week, Chancellor of the Exchequer Philip Hammond delivered his Autumn Budget Statement to the House of Commons. View his full 1 hour speech in the official UK Parliament video below, which also includes a response from Jeremy Corbyn, leader of the opposition: The biggest news from this budget was the Stamp Duty announcement, wherein […]

source http://www.taxfile.co.uk/2017/11/autumn-budget-2017/

Wednesday 22 November 2017

10 Easy End of Year Tax Tips to Increase Your Tax Refund

It’s hard to believe that we are in the last quarter of the year! With 2017 coming to an end, now is a great time to make some easy and smart tax moves to help lower your tax bill and increase...

Full Story

source https://blog.turbotax.intuit.com/tax-planning-2/10-easy-end-of-year-tax-tips-to-increase-your-tax-refund-20523/

Change Up Your Fall Festivities with these Fun and Frugal Activities

As this year wraps up, many people are getting ready to travel or have family over. Whether you’re celebrating the holidays or just looking to connect with your loved ones, spending time together is a priority. Typically, it’s all about...

Full Story

source https://blog.turbotax.intuit.com/income-and-investments/change-up-your-fall-festivities-with-these-fun-and-frugal-activities-32572/

The Wealth-Limiting Risks Of Diversifying Too Soon – Redwoods, Bushes, and Pear Trees

Good diversification is a staple of financial planning advice, though the principle long pre-dates financial planners. From the aphorism “don’t put all your eggs in one basket”, to Talmudic texts from 3,000 years ago directing people to split their wealth evenly between cash, real estate, and business, the virtue of limiting exposure to risk from diversification is an “accepted truth”.

Except the reality is that, when you look to those who achieve the greatest wealth or have the greatest impact, virtually none of them ever diversify… or at least, not throughout most of their years. After all, if Bill Gates had “just” diversified into the S&P 500 after Microsoft IPO’ed, he’d have barely 1/40^th of the wealth he does today. In fact, most of those on the list of the richest billionaires are people in their 60s, 70s, or 80s, who have held a concentrated interest in their businesses for nearly their entire lives. Like the redwood tree, they waited a very, very long time before branching out… and as a result, were able to grow the tallest.

Of course, that doesn’t mean that diversification is always bad. Most “trees” are actually short bushes and shrubs, that grow just a few feet tall, but are still able to broaden their shoots and leaves enough to grow healthy. In the investing context, it’s the equivalent of a person who diligently saves and invests in a portfolio for decades, and retires with “comfortable wealth”.

Still, it’s important to recognize that diversification isn’t literally always the winning strategy, and for those who are young and have a long time horizon, arguably not even a necessary one. In fact, the weakest tree is the Bradford Pear – known for growing a V-shaped trunk, effectively diversifying itself from the start… in a manner that virtually ensures the tree will eventually either collapse under its own weight, or succumb to external forces.

For those who have decided they have “enough”, the satisficing strategy of the bush may be just fine. But for those who decidedly want to generate more wealth or have more impact, perhaps the redwood strategy is underrated after all? In fact, the highest-risk losing strategy may actually be the pear tree strategy of trying to have it both ways at once!

Tuesday 21 November 2017

#FASuccess Ep 047: Pursuing An Operations Career Path In An Advisory Firm With HIFON Study Group Support With Shaun Kapusinski

Welcome everyone! Welcome to the 47th episode of the Financial Advisor Success Podcast!

My guest today is Shaun Kapusinski. Shaun is the Director of Operations for Sequoia Financial Group, a hybrid RIA based in Akron, Ohio, that manages more than $3.7 billion across private client and institutional divisions spanning four office locations.

What’s unique about Shaun, though, is that while he started out in the industry over 15 years ago like many advisors of the time – as a “financial advisor” selling life insurance for a career agent life insurance company – he made a shift early in his career to the operations side of the business, and has since been able to grow his career by following an Operations career track inside of an advisory firm, rather than the more traditional paraplanner, then associate advisor, then lead advisor career track.

In this episode, we talk in depth about the organizational structure of this mega advisory firm, how they split apart a division of “Shared Services” including centralized paraplanners, a centralized investment team, and centralized operations (all supporting advisors with local client service associates in multiple locations), the core technology stack of Tamarac, eMoney, and Microsoft Dynamics that Sequoia uses to run the business, and why the firm is looking to make a shift from Dynamics to Salesforce Financial Services Cloud for the next stage of growth.

We also talk about Shaun’s own fascinating career track, from starting out as a life insurance agent, transitioning to an operations role early in his career, why he believes that getting an MBA is even more valuable for those in an Operations role at an advisory firm than getting the degree as a financial advisor, and Shaun’s perspective on why “growth” is such an imperative for advisory firms – because it’s the growth that creates the career track opportunities in operations in the first place!

And be certain to listen to the end, where Shaun talks about the study group he created, called HIFON – short for High Impact Financial Operations Network – which gathers together operations team members from advisory firms across the country. And in recent years, HIFON has grown to the point that it’s no longer just a study group, but an emerging membership group for the operations staff of advisory firms, with not only study group opportunities, but also private discussion forums, private vendor webinars, and even shared data about what technology various advisory firms are using!

So whether you are trying to figure out how to grow the operations side of your business, interested in making a transition to operations yourself, or simply interested in learning about the resources such as HIFON that are available for operations team members, I hope you enjoy this episode of the Financial Advisor Success podcast!

source https://www.kitces.com/blog/shaun-kapusinski-sequoia-financial-group-podcast-hifon-study-group-operations/?utm_source=rss&utm_medium=rss&utm_campaign=shaun-kapusinski-sequoia-financial-group-podcast-hifon-study-group-operations

Monday 20 November 2017

Are Black Friday and Cyber Monday Deals Really Worth it?

With Thanksgiving approaching this week, you might be thinking about a strategy for your Black Friday and Cyber Monday shopping and ending up with a few questions. Are the deals really worth it? How can I make sure I’m are getting...

Full Story

source https://blog.turbotax.intuit.com/income-and-investments/are-black-friday-and-cyber-monday-deals-really-worth-it-18369/

When Can You Claim a Tax Deduction for Health Insurance?

With the end of the year approaching and open enrollment for 2018 health insurance in the Health Insurance Marketplace ending on December 15, 2017, now is a good time to review your health insurance coverage and ensure that it still...

Full Story

source https://blog.turbotax.intuit.com/health-care/when-can-you-claim-a-tax-deduction-for-health-insurance-17419/

Giving Referral Thank-You Gifts That Actually Make Someone Happier

Receiving a new client referral has a substantial value for a financial advisor – so much that advisors often provide “thank-you” gifts, either as a simple expression of gratitude, or even as a means to encourage more referrals. Of course, regulators want to be certain that advisors don’t inappropriately “buy” prospective client referrals – in a conflicted or undisclosed manner – and consequently FINRA Rule 3220 limits client gifts to just $100 per year, and the SEC similarly expects RIAs to establish their own gift-giving (and gift-limiting) policies. Nonetheless, the fact remains that referral “thank-you” gifts are relatively common.

Except often the biggest challenge of giving a good referral thank-you gift is simply picking the “right” gift – something that is commensurate with the value of a referral (not too big nor too small), is appropriately personalized and relevant to the recipient, and will likely be appreciated and well-received by the referrer. Which for some advisors, is so stressful that it’s actually easier to give nothing at all – beyond perhaps a simple verbal statement of “thanks” – than risk giving the “wrong” gift.

Yet recent research on happiness suggests that the best thank-you gifts might not actually be giving a “thing” at all, but instead gifting an experience, or giving someone an opportunity to themselves spend on others. And in the modern digital age, a growing number of online platforms make this possible – from online experience-buying sites like Excitations and Experience Days, to donation sites like DonorsChoose to help teachers fund classroom projects, or even TisBest, which simply sells “charitable gift cards” that the recipient can then redeem as a donation to any one of 300+ charities.

The virtue of such services is that ultimately, it puts power in the hands of the recipient to select the final gift – whether an experience, or a donation to someone else – which helps to reduce the risk of making a poorly-matched gift. But in the end, the true value of gifting experiences or the gifting the opportunity to spend on others is that it increases the likelihood that the recipient will actually feel happier after receiving the gift… which is perhaps the most powerful way to express gratitude for a referral.

Friday 17 November 2017

Weekend Reading for Financial Planners (November 18-19)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that the CFP Board has decided to issue a second draft of its proposed changes to the CFP Standards of Conduct, which is expected to be released in mid-December with a comment period running in January of 2018. Also in the news this week was a new report from PIABA that points out 5 out of the 13 “public” members of FINRA’s Board of Governors (who are supposed to represent consumers and have no ties to the industry) actually do have substantive ties to the financial services industry, which raises the significant conflict-of-interest concern that the majority of FINRA’s Board is actually comprised of industry representatives (whereas it is supposed to maintain 13-out-of-24 board seats with non-industry public governors).

From there, we have a number of articles on mergers and acquisitions of advisory firms, including a discussion of some of the key factors that drive an advisory firm’s valuation (beyond just its size and revenue), what an “earn-out” is and why it’s often used as part of the terms of an advisory firm acquisition, and how the ongoing wave of industry consolidation is likely to progress in the coming years as a small subset of mega-firms begin to emerge.

We also have several investment-related articles, from a discussion of how the “p-hacking” phenomenon (of doing so many tests for statistical significance that, ironically, it becomes inevitable that there will be a large number of false positives) may have inappropriate spurred the “investment anomalies” research, a look at the rapid rise and fall of many ETFs (which also appears to be tied to how many ETFs are being launched on spurious anomalies research), and an explanation of how Research Affiliates formulates its own forward-looking return assumptions (important for both portfolio design, and determining reasonable investment assumptions to plug into financial planning software).

We wrap up with three interesting articles, all focused around the theme of financial services industry change: the first raises the question of whether, as the Broker Protocol unravels, if it’s time for the SEC to step in and formally codify a version of the Broker Protocol for all firms (broker-dealer and RIA) under Regulation S-P; the second looks at whether it’s time to ditch life insurance illustrations and instead demand and require that insurance companies provide more detailed projections (which more clearly explain what are guaranteed costs and what are uncertain assumptions that could be manipulated); and the last suggests that perhaps the best way to fix the compliance woes at broker-dealers is for independent B/Ds to become more stringent on their hiring processes in the first place, vetting prospective brokers and weeding out the bad ones, so that they don’t have to create compliance procedures that cater to such a low level “lowest common denominator” broker (to the detriment of all the rest of the good and honest advisors at the broker-dealer). Which is especially important in today’s environment of broker-dealer consolidation, where large swaths of brokers – good and bad – may be getting absorbed into other broker-dealers in the coming years!

Enjoy the “light” reading!

How Holiday Bonuses are Taxed for Contract Workers

Are you expecting a year-end bonus for your contract work this year? If so, think of everything you can spend that money on: holiday gifts, paying off credit card debt, a big screen TV. However, if you’re a contract worker,...

Full Story

source https://blog.turbotax.intuit.com/self-employed/how-holiday-bonuses-are-taxed-for-contract-workers-32535/

Thursday 16 November 2017

Save the (Tax) Dates!

2018 is right around the corner, and that means two things: it’s time to buy a new calendar, and tax season is almost here. Once you have that new planner (or your phone calendar!) handy, check out these important tax...

Full Story

source https://blog.turbotax.intuit.com/tax-planning-2/save-the-tax-dates-24860/

The Latest Advisory Industry & FinTech Trends From #SchwabIMPACT

While it is becoming increasingly clear that “robo-advisors” are not disrupting human financial advisors, the adoption of robo technology by financial advisors themselves is beginning to shift the competitive landscape… both amongst financial advisors themselves, and the technology vendors who serve them, as the very role and value proposition of financial advisors themselves begins to get re-defined.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, I’m interviewed by Neesha Hathi, Executive Vice President and Chief Digital Officer at Schwab, at the Schwab IMPACT 2017 conference, about the latest advisory industry and FinTech trends – including the Robo 2.0 trend currently rolling through the industry, why Robo 2.0 will spur the rebirth of next generation financial planning software, and why it’s the rise of better “small data”, rather than “big data”, that is likely to be most important to advisory firms in the coming decade.

One of the biggest trends rolling through the advisory industry right now is rise of “Robo 2.0”. Robo-Advisor 1.0 was all about companies like Betterment and Wealthfront, which made convenient and easy-to-use tech tools for opening accounts, investing those accounts, and managing them over time, and offered directly to consumers. However, we’ve learned that only a small subset of consumers actually want to buy these solutions directly, while there is a large base of financial advisors who want to use these same tools within their own businesses. As a result, Robo 2.0 tools are focused on facilitating the ability of financial advisors to quickly and easily open investment accounts, get the dollars actually transferred, invested, allocated in reasonable models, and model management tools to make it very easy to allocate and rebalance models along the way. The good news for advisors is that these trends drive efficiencies and lower business costs. But the challenge going forward is that now that all of this can be done with a click of a button, advisors need to find new ways to add value for their clients.

Looking forward a bit further, the biggest change we’re likely to see in the industry 5 to 10 years from now isn’t actually the adoption of Robo 2.0 tools, but instead, the rebirth of next-generation financial planning software as investment management receives less attention. As advisors are forced to focus on other areas of financial planning – everything from HSAs and healthcare conversations, to debt management issues, and cash flow planning more generally – advisors are going to need better financial planning software tools to help clients with these issues. Which presents a huge opportunity for those who are interested in building tools oriented towards financial planning, and advisors who want to focus more on financial planning… while for those still mostly focused on investments, the next decade is going to present more of a competitive business challenge.

Another trend that many have predicted will influence the next decade is artificial intelligence, machine learning, and big data. But I’m very skeptical about the discussion of these technologies coming into advisory businesses. Because the reality is that so many of the challenges in what we do for clients are not big data problems. Instead, it’s small data – i.e., the uniqueness of every advisory firm and the clients they serve – where better insights are needed. So while there will certainly be some applications for large firms to leverage big data and bring insights on the entire industry, at the advisor level, the most exciting advancements are in the small data areas that are directly relevant to firm owners and their clients. For instance, automated business management and benchmarking data that makes it easier to track the components of business growth and performance, and tools that automate the many business management reporting processes that advisors are manually doing today.

The bottom line, though, is simply to recognize that we’re in the midst of some big FinTech trends within the advisory industry right now. So if you are an advisor who wants to stay relevant and continue to add value to your clients in the future (or a tech provider who wants to make the tools to help advisors do so!), it is important to understand how these trends will shape financial planning in the future!

Wednesday 15 November 2017

Financial Planning Research Highlights From The 2017 Academy of Financial Services Annual Meeting

From October 1st through October 3rd, the Academy of Financial Services’ annual meeting was in Nashville, TN – partially overlapping with the FPA’s BE Annual Conference. The event brought together many academics and practitioners to share and discuss research, with the intention of increasing academic-practitioner engagement by holding two of the largest conferences for both researchers and practitioners in conjunction.

In this guest post, Derek Tharp – our Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University – provides a recap of the 2017 Academy of Financial Services Annual Meeting, and highlights a few particularly studies with practical takeaways for financial planners.

The 2017 Academy of Financial Services (AFS) Annual Meeting showcased research from scholars at a wide range of institutions – with first author affiliation on paper and poster sessions representing roughly 40 institutions. As expected, the core financial planning programs had a strong presence, with scholars from just seven of those institutions serving as lead authors for more than 50% of all research presentations and poster sessions.

The AFS annual meeting featured research on a number of different topics. Some notable sessions for practitioners ranged from topics such as whether having resources from friends and family reduces a household’s willingness to establish an emergency fund (not as much as you might expect!), how bull and bear markets impact the subjective assessments of portfolio risk, the links between certain types of personality factors and likelihood of financial stress, and quantifying the financial advisor’s value when it comes to making efficient investment decisions (and how that value varies depending on the investor’s existing capabilities in the first place).

Overall, holding the AFS Annual Conference and FPA BE Conference in conjunction appeared to be successful in creating greater engagement between practitioners and researchers (with some research presentations filling large rooms at standing room only capacity!). As both the AFS Annual Conference and CFP Board’s Academic Research Colloquium strive to create more robust platforms for sharing and engaging in academic research, the future appears bright for financial planning researchers (and research that can really be used by financial planning practitioners)!

Tuesday 14 November 2017

#FASuccess Ep 046: Training Financial Advisor Empathy And Communication Skills Through The CeFT Designation with Susan Bradley

Welcome everyone! Welcome to the 46th episode of the Financial Advisor Success Podcast!

My guest on today’s podcast is Susan Bradley. Susan is the founder of the Sudden Money Institute, which trains financial advisors in how to improve their empathy and communication skills when working with clients who experience so-called “Sudden Money” transitions – whether from a business liquidity event, a personal injury settlement, an inheritance, or the settlement proceeds of a divorce. Because as Susan puts it: “When life changes, money changes. And when the money changes, life changes.” Which means as advisors, we need the training in how to help clients through those change transitions – which Sudden Money Institute teaches through a designation program called the CeFT (short for Certified Financial Transitionist).

In this episode, we talk in depth about what it really means to help clients through these kinds of financial transitions, why it requires a unique skillset to help people through what is not only a big financial change but typically the major life transition that inevitably accompanies it, the “Purpose, Method, and Outcome” framework that Sudden Money Institute uses to have productive conversations with clients, why it’s ineffective to help people in transition to plan for their goals (because they usually don’t even know what’s possible after a major life transition!), and why it’s important to give clients a “decision-free zone” after a major transition before they actually implement any new financial planning strategies.

We also talk about why it is that helping clients through financial transitions really requires more specialized training, the reason that Susan decided to create a formal advisor designation specifically to train advisors in a better and more consistent process, why the CeFT is positioned as a “post-CFP” designation – as you need 5 years of client-facing experience, and an advanced technical designation like the CFP or CPA/PFS, to even qualify for the CeFT training – and what it really takes to complete the year-long training program.

And be certain to listen to the end, where Susan shares her vision of the future value proposition for financial planners, which is all about developing in two directions at once by pursuing post-CFP training, including the technical competency skills that are necessary to actually give the best financial advice, and the empathy and communication skills necessary to really listen to clients and get comfortable being their thinking partner and their guide (and NOT just “the expert” that tells them what to do to achieve their stated goals).

So whether you’ve been looking for better ways to assist clients through financial transitions, thinking about pursuing post-CFP training in communication and empathy skills, or are interested in the evolution of more behavior-change-oriented financial advisor value propositions in the future, I hope you enjoy this episode of the Financial Advisor Success podcast!

Monday 13 November 2017

Save with a New Tax Relief Donation Law and Holiday Giving

As the holiday season quickly approaches, the giving season is also upon us, as many of us feel encouraged to donate during the last few months of the year. This year, in the wake of the recent devastation caused by...

Full Story

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/save-with-a-new-tax-relief-donation-law-and-holiday-giving-32423/

Why Performance And Fulcrum Fees Are Banned For Most Financial Advisors

As financial advisors feel increasing pressure to differentiate themselves, a recently emerging trend for those who (actively) manage client portfolios is the idea of charging clients not an AUM fee that is a percentage of assets, but instead, a performance-based fee that is a percentage of upside (or outperformance of a benchmark index), where the advisor’s fee is forfeited if he/she fails to achieve the required threshold or hurdle rate. Such a compensation structure would compel active financial advisors to eschew closet indexing and really, truly, try to outperform their benchmarks – which can be a very compelling proposition to prospective clients.

However, the reality is that performance fees have a very troubled past. Because while a performance-based fee does incentivize the advisor to not be a closet indexer and own a substantially different portfolio than the benchmark, one of the “easiest” ways to do so is simply to take on more risk and amplify the volatility of the portfolio. After all, if the markets rise substantially – as they do on average – a high-volatility portfolio will often provide a substantial performance fee in a bull market. In when the inevitable bear market occurs, the “worst case” scenario for the advisor is simply a year of zero fees.

In fact, this “heads the advisor wins, tails the client loses” asymmetry of performance fees is why when Congress created the Investment Advisers Act for RIAs in 1940, it banned most financial advisors from charging performance-based fees at all to retail investors (and of course, brokers under a broker-dealer cannot charge performance fees because they are not serving as actual investment advisers in the first place!). It was only in 1970 that Congress partially relented and allow RIAs serving as investment managers to mutual funds to charge performance fees, and only then if it was a “fulcrum fee” where the advisor participates in both the upside for outperforming and at least some of the downside for underperformance. In turn, it wasn’t until 1985 that the SEC began to allow RIAs to charge performance fees in certain situations to retail clients, and even then the offering must be limited to “Qualified Clients” who meet one of three financial tests… either: a) $1M of assets under management with the RIA charging a performance fee; b) a $2.1M net worth (and thus are presumed to be financially experienced and “sophisticated” enough to understand the risks inherent in performance fees); or c) be an executive officer, director, trustee, or general partner of the RIA, or an employee who participates in the investment activities of the investment adviser.

In addition, it’s notable that research over the years on incentive fees in the context of mutual funds has failed to find any sign that incentive fees are actually associated with better risk-adjusted performance anyway. Instead, the research finds that – perhaps not surprisingly, given the problematic history of performance-based fees – mutual fund managers compensated by incentive fees tend to just generate higher returns by taking more risk, and then amplify their risk-taking activity further once they fall behind their benchmarks! Ironically, though, the researchers did find that mutual funds with incentive fees are more likely to attract client assets, suggesting that substantial consumer demand remains for paying investment managers via performance fees!

Nonetheless, the real-world operational challenges of executing what would be a more complex billing process, the revenue volatility that financial advisors introduce to their businesses (particularly if they use a fulcrum fee structure which means if the advisor underperforms, they really do take the risk of seeing their fees cut substantially), the limitations of only offering a Performance Fee structure to affluent Qualified Clients in the first place, and the conflicts of interest that must be managed, suggests that a widespread shift towards performance fees for RIAs is not likely in the near future… especially as many firms seek to shift their value propositions away from being centered around the investment portfolio and towards financial planning and wealth management instead! But for those RIAs who want to pursue charging performance fees on investment portfolios, it is an option… at least for their Qualified Clients who want to take the risk!

Friday 10 November 2017

Weekend Reading for Financial Planners (November 11-12)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with a recap of the latest tax plan from Senate Republicans that was released this week, which is similar to the one issued last week by House Republicans, but contains a number of key differences (from excluding estate tax repeal but bringing back the medical expense deduction), setting the stage for challenging compromises as Republicans try to find a way to reconcile the differences between the two in a manner that stays under the $1.5T deficit target (necessary to avoid a Senate Democrat filibuster) but keeps enough Republicans on board to pass the legislation with a narrow 2-seat majority in the Senate.

Also in the news over the past two weeks is the announcement that the final version of a DoL fiduciary delay has been submitted to the Office of Management and Budget (OMB) for final approval to delay the full implementation of the Best Interests Contract Exemption until July of 2019 (and opening the door for the SEC to begin a rulemaking process of its own in the interim), and the news that Morgan Stanley has withdrawn from the Broker Protocol in what may quickly be an unraveling of the ability of brokers to change broker-dealers (at least, not without messy lawsuits and Temporary Restraining Orders) and cause a compression in the valuation of broker-dealer-based advisory firms.

From there, we have a number of articles on hiring and career development, including why advisory firms should institute a 6-week training and onboarding process for new financial advisors (including and especially for experienced financial advisors who can hit the ground running with clients but need time to be trained in how to do so consistent with the firm’s established processes and procedures), a look at a fascinating Millennial advisor survey that finds young advisors are most likely to leave and go solo between the ages of 26 and 35 (after they have a few years of experience but before becoming “too embedded” in an existing firm), and tips for employee advisors about what they can do to advance their own career and promotion prospects.

We also have a number of advisor technology articles this week, from a review of the latest from Riskalyze as the company continues to expand from “just” risk tolerance software into an increasingly comprehensive advisor platform, a discussion of the latest advisor technology developments at major broker-dealers like Commonwealth, LPL, and Securities America, and why video conferencing technology may prove to be even more disruptive to financial advisors and the delivery of financial advice than robo-advisors.

We wrap up with three interesting articles, all focused around the theme of working outside the office for improved productivity: the first explores the growing trend of conducting business meetings outside the office (from business owners meeting with key partners, to employees meeting with each other) as a way to improve both employee creativity and improve employee-to-employee connections; the second looks at the latest research that helps to explain why people can be productive in coffee shops (as it turns out, ambient noise is good and helps our creativity) but why open office plans are so inefficient (because ‘background noise’ from people we know tends to actually distract us), and a controlled experiment study in the benefits of working from home that found a whopping 13.5% increase in productivity by allowing employees to work from home… along with a massive 50% decrease in employee turnover rates!

Enjoy the “light” reading!

Observe Veterans Day with 7 Savings and Tax Deductions Available for Military Families

Veterans Day is a day of celebration and remembrance for all of the Veterans who served our country and those military members still serving our country. In honor of our military members and their families, we would like to share...

Full Story

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/observe-veterans-day-with-7-savings-and-tax-deductions-available-for-military-families-20592/

Tax Benefits Available for Victims of Natural Disaster

If you haven't already filed your taxes and were a victim of recent severe storms, flooding, or disasters you may have more time to pay taxes and file your tax returns if you were affected and in counties designated as federal disaster areas qualifying for individual assistance.

source https://blog.turbotax.intuit.com/tax-planning-2/tax-benefits-available-for-victims-of-natural-disaster-9616/

Thursday 9 November 2017

The Gap In Advisor-Supported 529 College Savings Plans For RIAs

A longstanding challenge for independent RIAs has been finding a way to effectively and efficiently help their clients with 529 college savings plans – due primarily to the fact that “advisor-sold” 529 plans are actually built primarily for broker-dealers, while “direct-sold” plans aren’t meant to have any advisor involvement at all… and leaving advisors at RIAs stuck in between. As a result, there has been little growth of 529 plans in the RIA channel, and fiduciary advisors who would like to help their clients comprehensively manage their wealth have had few options to facilitate the implementation of 529 plans and manage them thereafter.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss the traditional broker-sold and direct-sold channels for 529 college savings plans, the blocking points of why more RIAs don’t get involved with 529 college savings plans, and why a third option – the “advisor-supported” 529 plan – is needed to better facilitate RIAs helping clients invest in 529 college savings plans.

From their start, there have been two distribution channels for 529 college savings plans: advisor-sold, and direct-sold plans. Direct-sold plans were simply sold (marketed) directly to do-it-yourself consumers, who could open and invest the accounts themselves. Yet because not every consumer wants to do it themselves, many state 529 plans also created an “advisor-sold” option (and/or mutual fund companies that had long-standing relationships with advisors – like American Funds – established advisor-sold plans that they hoped would become appealing to advisors regardless of their state location). Yet the caveat is that because advisor-sold plans can only compensate advisors via the mutual fund commission structure, they would more aptly be described as “broker-sold” plans and can only be used by those who work under a broker-dealer. Since RIAs can’t receive a commission, RIAs can’t even access and use “advisor-sold” (broker-sold) 529 college savings plans at all!

Instead, advisors in RIAs generally have to work with clients through the “direct-sold” plans for do-it-yourselfers. But this is a problem for most RIAs, since direct-sold plans aren’t built for an advisor to be involved at all, leaving RIAs with no way to track performance, manage the account, nor to bill the account for services rendered! At best, advisors can try and work around this by using account aggregation tools like eMoney Advisor or ByAllAccounts to access the client’s account directly, and some plans (such as the Utah Education Savings Plan) have provided solutions to pipe client account data directly into portfolio reporting tools from the UESP website. But Utah’s plan seems to be the exception to the general rule for direct-sold 529 plans right now: that they are not practical, and certainly not scalable, for independent RIAs to use with their clients.

Which means if (direct-sold) 529 plan providers really want to better engage the rapidly-growing RIA community to help their clients with 529 plans, then we need a third type of 529 plan: the “advisor-supported” plan, where the advisor isn’t a broker who sells the plan, but an independent advisor who supports and advises on the plan. And a successful advisor-supported 529 college savings plan is going to have to get good in 4 core areas: 1) reporting (which means providing transaction-level data feeds to popular performance reporting tools), 2) trading (by integrating to existing rebalancing and model management trading software for RIAs), 3) billing (to make it feasible for RIAs to include the 529 plan as part of their billing process on their expanded assets under advisement, ideally with an option to bill the fee from the 529 plan directly); and 4) educational and planning tools to help RIAs understand when an out-of-state advisor-supported 529 plan is appropriate and when an in-state plan might be better (e.g., for in-state tax benefits).

But the bottom line is simply to recognize that, while 529 plan adoption has not been significant in the RIA channel, and the few who do use them tend to just choose simple age-based glidepath portfolios in direct-sold plans… it’s not necessarily because that’s the only thing that RIAs want from a 529 plan. It’s because, with the lack of advisor-supported 529 plan options, that has been the only option that was feasible in the first place, given that RIAs fall into the crack between direct-sold and broker-sold plans. And with better advisor-supported 529 plan options (particularly in light of the House GOP tax plan that may expand their use for private elementary and high school savings as well), there’s potential for a lot of growth of 529 plans in the RIA channel… if we can get a true advisor-supported plan!

Bonus Time: How Bonuses Are Taxed and Treated by the IRS

Bonuses can change your tax situation depending how large the bonus and what methods employers use to tax the income. Find out how bonuses(supplemental income) are taxed.

source https://blog.turbotax.intuit.com/income-and-investments/bonus-time-how-bonuses-are-taxed-and-treated-by-the-irs-8003/

Wednesday 8 November 2017

Providing Small Business Health Insurance Benefits With A QSEHRA

For many small businesses, it’s simply not economically or administratively feasible to offer group health insurance to employees, which can create a competitive disadvantage for business owners trying to attract top talent that needs health coverage. The good news of the launch of state health insurance exchanges under the Affordable Care Act was that, for the first time, individuals had guaranteed access to health insurance regardless of employment status, eliminating the need or requirement for employers to provide coverage. The bad news, however, was that to avoid disrupting the existing employer group health insurance marketplace, the Affordable Care Act imposed penalties on businesses if they tried to simply give employees tax-preferenced reimbursements to buy their own coverage on the exchanges.

However, the 21^st Century Cures Act, signed by President Obama shortly before leaving office, created a new Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), which allows small businesses with fewer than 50 full time equivalent employees to offer an HRA for employees to purchase their own health insurance on a tax-preferenced basis – tax-deductible to the employer and tax-free to the employee – without running afoul of the ACA coverage mandates. Although employees cannot “double dip” and obtain premium assistance tax credits and employer HRA dollars, it is now possible for employers to give a specified tax-preferenced dollar amount reimbursement to employees – up to $5,050 for individuals and $10,250 for couples and families in 2018 – for their medical expenses, including health insurance premiums for coverage purchase on an exchange.

The primary appeal of the QSEHRA for most small business owners is that it’s a way to provide employee “health benefits”, without taking on the full burden – and cost uncertainties – of offering group health insurance. Instead, employers can control their costs by explicitly setting a monthly dollar amount that becomes available to employees for reimbursement, avoiding payroll taxes on any dollars actually spent, and keeping any unused QSEHRA dollars that aren’t actually claimed by employees as a reimbursement (since technically an HRA is a health reimbursement arrangement, not an actual account).

Notably, the QSEHRA benefits are not available for most small business owners themselves, though with the above-the-line deduction for health insurance premiums for small business owners, the QSEHRA would often be a moot point anyway. Nonetheless, for small business owners looking to do “something” to support employee health benefits, and have better control over their business and costs than offering group health insurance directly (or joining a PEO), a QSEHRA may be a very appealing tax-preferenced alternative!

Tuesday 7 November 2017

Save With These 8 End-of-Year Tax Tips

The key to tax planning near the end of the year is simple – defer income and accelerate expenses if either is going to save you money on your taxes. Income is taxed in the year it is earned, so...

Full Story

source https://blog.turbotax.intuit.com/tax-planning-2/save-with-these-8-end-of-year-tax-tips-32414/

#FASuccess Ep 045: Compensating Employees For Generating Profit Instead Of Revenue So They Understand The Advisory Business with Rebecca Pomering

Welcome back to the forty-fifth episode of the Financial Advisor Success podcast!

My guest on today’s podcast is Rebecca Pomering. Rebecca is the Chief Practice Officer of Moss Adams, a mega-accounting firm with more than $600 million in revenue and two thousand eight hundred employees… which includes a wealth management division with more than $2.1 billion of AUM, and the consulting division that originated benchmarking studies for financial advisors.

What’s fascinating about Rebecca, though, is that her own personal career across all of these business lines at Moss Adams, having started as a 23-year-old in the firm’s financial advisor consulting division, becoming a partner with Moss Adams by the time she was turning 30, taking over Moss Adams Wealth Advisors at $800 million of AUM right before the financial crisis and nearly tripling the size of the firm in the 7 years after the market bottom… and applying her practice management expertise across all the professionals in Moss Adams’ 28 industry niches.

In this episode, we talk in depth about Rebecca’s lessons learned in practice management in a career that’s spanned consulting, leadership, and executive roles, with a particular focus on how to structure compensation for employee advisors, why bonuses should be tied to both business development and the profitability of the firm, and why it’s a good idea to share your advisory firm’s income statement with your entire team so everyone understands how the business really works.

We also talk about the challenges of growing a wealth management firm within an established accounting firm (which makes a lot of sense on paper, but is much more difficult to implement in practice!), why accountants actually feel that it’s risky to make referrals to outside financial advisors (and can be even riskier to referral internal financial advisors at the firm), and her lessons learned in taking over Moss Adams Wealth Advisors right before the market crash… and the changes she had to make to keep the firm on track.

And be certain to listen to the end, where Rebecca talks about how she established her own credibility as a young consultant by focusing her expertise into a particular niche, and how, even and especially at the size of Moss Adams crossing $600 million of revenue, Rebecca still sees the firm’s path forward as being entirely focused about going deeper into niches. Which at the size of Moss Adams and its 28 hundred employees, actually means going into 28 different niches simultaneously.

So whether you’ve been contemplating your own firm compensation for employee advisors, wondering how transparent you should be with financials within your firm, or interested in the challenges of growing a wealth management firm within an established account firm, I hope you enjoy this episode of the Financial Advisor Success podcast!

Monday 6 November 2017

Daylight Savings Time is Ending: Save Money with These Energy Tax Tips

As the days draw shorter and Daylight Savings Time draws to an end, we're reminded that the end of the year is almost here. You've probably already turned on the heat for the first time this winter and it's time to start thinking about energy bills. There are a number of energy-saving ways to improve your home’s tax efficiency. Here are two of the tax breaks available for 2016.

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/home/daylight-savings-time-is-ending-save-money-with-these-energy-tax-tips-15573/

The Latest In Financial Advisor #FinTech (November 2017)

Welcome to the November 2017 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 big debut of CleverDome, a next-generation cybersecurity solution that aims to bring all major financial services providers into a closed network that operates with a “Software Defined Perimeter” (SDP) to block out hackers and only permit known entities to interact with vendors. At the T3 Enterprise advisor technology conference, CleverDome announced that it is launching with Redtail CRM, Orion Advisor Services, Riskalyze, Entreda, and TD Ameritrade all “under the dome”, and is looking to rapidly add more advisor tech providers in the coming months.

Also in the news this month was a slew of new “Model Marketplace” announcements, including the launch of Orion Advisor Services’ “Communities” model marketplace built around its new Eclipse rebalancer, a pivot by Oranj to build a new MAX model marketplace around its recently acquired TradeWarrior rebalancing software and make its platform free to advisors to place assets in MAX, and the announcement that Apex Clearing is launching its own API-based rebalancer called Equilibrium that may also become a future player in Model Marketplaces (while enhancing its capabilities to compete with other RIA custodians as well).

From there, the latest highlights also include a number of major new product and feature rollouts this month, including:

Morningstar launches its “Best Interests Scorecard” solution to help advisors with DoL fiduciary due diligence and compliance on IRA rollovers
Redtail launches “Redtail Speak”, a new compliant text-messaging solution for advisors
Advisor launches “Accelerate”, which will allow advisors to directly open investment accounts or begin insurance applications from within a financial plan presentation
CapGainsValet re-opens its annual tracking database of end-of-year mutual fund distributions

You can view analysis of these announcements and more trends in advisor technology in this month’s column, including fresh Series A rounds of capital for Snappy Kraken and Vestwell, the launch of U.S Bank’s “FundKeeper” platform that aims to reinvigorate the “direct mutual fund” business of small- and mid-sized broker-dealers (with better compliance oversight and a fraction of the cost!), and the release of a series of “Consumer Protection Principles” from the Consumer Financial Protection Bureau to re-assert that consumers are the owners of their financial data and have a right to grant third-party data aggregators access to it (despite a desire of many Financial Institutions to limit the flow of data that is increasingly being used against them!).

I hope you’re continuing to find this new 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 TechNews@kitces.com!

Saturday 4 November 2017

6 Ways to Help Secure Your Personal Identity

As you grew up, you were taught how to play safely and be aware of your surroundings. As adults, the same concept can also apply to a variety of things, including the most important part of your life: personal finances....

Full Story

source https://blog.turbotax.intuit.com/tax-tips/6-ways-to-help-secure-your-personal-identity-32450/

Friday 3 November 2017

Evaluating The Proposed Tax Reforms Under The House Republican Tax Plan

(Michael’s Note: In light of the breaking news of the long-awaited release of the House GOP tax reform legislation, we have pre-empted the usual Friday Weekend Reading with this special “In-Depth Review Of The Proposed Tax Reforms” edition of Weekend Reading! Hope it helps!)

After more than a year of buzz from both House Republicans, and President Trump, and high-level proposals that were scant on crucial details, this week the House GOP finally unveiled the actual draft legislation of its proposed tax reform – kicking off the messy process of Congressional compromises that may still be necessary to actually pass the reforms into law, but providing a first real glimpse at exactly what is on the table.

While the proposals of the “Tax Cuts and Jobs Act” are not quite the sweeping level of “file your tax return on a postcard” that Republicans had proposed early on – as the inevitable push for compromises eliminated the elegant simplicity of the original version – the House GOP proposal nonetheless represents some of the most sweeping tax reform in more than 30 years, with a reduction in tax brackets, the repeal of the AMT, and substantial simplification employee fringe benefits, college tax preferences, and itemized deductions… along with a dramatically increased standard deduction that will make itemizing a moot point for most individuals anyway.

On the other hand, the proposed changes also bring a whole host of crackdowns that will likely trigger complaints for many – but then again, sweeping tax reform virtually always means that everyone has at least some pet deduction or tax credit to lose. Though for many, the negatives will be made up by the expanded standard deduction, an increased $1,600 child tax credit, a new “Family Flexibility Credit” of $300, fewer (and for many, lower) tax brackets, and an opportunity for many types of pass-through business income to be taxed at favorable 25% tax rates (though, alas, not the pass-through income for financial advisors!), as well as a delayed repeal of the estate tax (starting in 2024).

Ultimately, it remains to be seen whether or how much the Tax Cuts and Jobs Act will be altered from here, as the messy process of compromise begins in an effort to garner the necessary votes to pass the legislation. Nonetheless, the fact that so many compromises have been brought already, from the original House GOP framework, suggests that legislators are truly positioning this proposed tax reform legislation as something that can garner enough votes to pass. Which means that while some of the exact details may shift, the current proposal has a real chance of being passed in the coming months, setting a new foundation for the Internal Revenue Code in the coming decade!

Thursday 2 November 2017

The Do’s and Dont’s of Writing Off Business Travel When Self-Employed

When you run your own business, travel seems inevitable, and when it comes to deducting that business travel on your taxes, it can feel like a laundry list of gray areas. If you ask a dozen friends who are business...

Full Story

source https://blog.turbotax.intuit.com/self-employed/the-dos-and-donts-of-writing-off-business-travel-when-self-employed-32244/

B/D Advisor Valuations To Compress As The Broker Protocol Unravels

Since 2004, brokers moving from one wirehouse or broker-dealer to another, or breaking away entirely to the RIA channel, have relied on the Broker Protocol to set the rules for switching firms without fear of being sued. However, the big news this week is that Morgan Stanley – the largest wirehouse by advisor headcount – is leaving the Broker Protocol effective Friday November 3^rd, in what is likely the beginning of the end of the Broker Protocol, and a reversion back to the dark days of breakaway lawsuits.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why Morgan Stanley leaving the Broker Protocol is likely to result in the unraveling of the Broker Protocol, and the subsequent implications, including reduced payouts at wirehouses and a compression of advisory firm valuations for those at broker-dealers.

For those that are unaware, the Broker Protocol stipulates the specific five pieces of information (client names, addresses, phone numbers, email addresses, and account titles) that departing brokers can take with them without fear of being sued for violating the firm’s non-solicit agreements or any client privacy and confidentiality obligations under Reg S-P. Originally put in place by Merrill Lynch, UBS, and Smith Barney (now Morgan Stanley) in 2004, the Broker Protocol effectively served as a cease-fire of breakaway lawsuits between the major wirehouses, but in the decade since has grown to also include over 1,600 other firms (including independent broker-dealers and RIAs that hire brokers away from wirehouses).

The reason why it is such a big deal that Morgan Stanley is leaving the Broker Protocol isn’t just about what happens to brokers at Morgan Stanley who want to leave in the future, but because Morgan Stanley’s decision to leave the Broker Protocol will likely unravel the entire Broker Protocol in short order. Because as it stands now, if Morgan Stanley recruits a Merrill or UBS broker, the broker can leave under Broker Protocol. But if UBS or Merrill recruits a Morgan Stanley broker, then Morgan Stanley is reserving the right to sue the broker for leaving (and likely UBS or Merrill Lynch as the recruiting firm). So, from Merrill Lynch’s perspective (and UBS, and Wells Fargo), it’s not a good deal to stay in the Broker Protocol when Morgan Stanley isn’t. As long as they were all in, they all shared the potential pain and the potential benefits together. But once Morgan Stanley leaves, there’s not much reason for the others to stay, either. And the more firms that leave, the less value there is for any to remain, including a number of independent broker-dealers that have been net losers of broker recruiting in recent years.

Which means we’ll be moving back to the dark days of breaking away from a broker-dealer in the early 2000s and the 1990s, where breakaway attempts were almost immediately followed by a cease-and-desist order, which might then be followed by a judge issuing a Temporary Restraining Order requiring that the broker stop contacting clients or risk going to jail for being in contempt of court. And then the breakaway lawsuit would come, alleging theft of trade secrets (for the former broker taking the broker-dealer’s client list), breach of confidentiality and client privacy, and/or breach of non-solicit agreements. Of course, there were brokers who still made the breakaway transition, but it was far more risky and expensive, and broker-dealers were often eager to sue if they could, as even if they didn’t prevail against a particular broker, the legal costs effectively raised the cost of breaking away in order to make it less appealing for any other broker to consider trying it as well.

Yet if the end of the Broker Protocol makes it difficult, more risky, and more expensive to try and leave a broker-dealer, that also means that broker-dealers will have more leverage to cut their payouts to advisors as well (what are you going to do, try to leave?). And when it is harder to leave and take clients, brokers will increasingly be compelled to sell to other brokers on the same platform… which means brokers can’t sell to the top buyer willing to pay the best price as they become more captive to only buyers at their current B/D. As a result, the valuation of advisory businesses under a broker-dealer will likely compress going forward, and sellers will have more difficulty negotiating favorable tax and payment terms from buyers.

Realistically, not all broker-dealers will leave the Broker Protocol, as those that have been successfully using it to hire away from their competitors (e.g., Raymond James, RBC, and Janney) will want it to stick around. But in a world where most broker-dealers have been net losers on recruiting, either to other larger broker-dealers, or to the RIA channel, most broker-dealers will not likely stay in the Broker Protocol – and especially not the firms that brokers would most likely want to leave! Which means brokers at other firms contemplating leaving – especially at the major wirehouses – may want to accelerate their plans… at least while they still can! Because, as Morgan Stanley has shown, a firm can depart the Broker Protocol very quickly once they make the decision to do so!