News About IRS And Tax: March 2018

Friday 30 March 2018

Weekend Reading for Financial Planners (Mar 31 – Apr 1)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big news that the CFP Board has officially approved its new CFP Code of Ethics and Standards of Conduct, which for the first time will require CFP professionals to be a “fiduciary at all times”… albeit while leaving most CFP Professionals on their own in determining what conflicts of interest are, or are not, permissible to engage in without breaching that fiduciary obligation.

From there, we have several more articles related to advisor regulation, from the news that the National Association of Fixed Annuities (NAFA) has decided to withdraw its Appeal fighting the DoL fiduciary rule now that the 5th Circuit has already ruled against the DoL (to avoid creating a further split amongst the Appeals Courts), to a look at how fiduciary rulemaking is likely to play out in the coming year under the SEC if the DoL fiduciary rule really is vacated, the rise of a “point-in-time” fiduciary as the scope of fiduciary advice is applied to one-time advice interactions (rather than what was historically just ongoing regular interactions between the advisor and client), and a look at why just charging AUM fees alone doesn’t necessarily ensure the advisor is properly managing their conflicts of interest (especially if the firm charges different AUM fees for equities versus fixed-income allocations).

We also have a few advisor technology articles, including: the launch of the Orion “Compass” solution that provides additional compliance reports for RIAs using its performance reporting software (which may be especially helpful the next time the SEC shows up for an exam); the rise of estate planning “FinTech” solutions like EverPlans and Yourefolio as estate planning increasingly shifts from estate tax planning to actual planning around the distribution of the estate itself; and the new “Quick Start” offering from Tamarac that aims to make it easier for breakaway brokers to get up-and-running quickly on their trading and performance reporting software tools.

We wrap up with three interesting articles, all by industry commentator Bob Veres, about various trends in the advisory industry: the first explores how even as the CFP Board lifted up its Standards for the first time in 11 years to expand its fiduciary duty, it is still accommodating a wide range of sometimes-questionable commission compensation models under the auspices that certain products and solutions simply aren’t available or feasible for non-commission advisors… which may become a moot point in the coming decade as more and more firms finally launch “advisory” product solutions and technology makes it easier and easier to serve an ever-widening range of clients; the second details a painful list of the true costs of the low bar of suitability for brokers, which isn’t about the majority of brokers that still do the right thing for clients anyway (simply because it’s good business), but the extent to which bad behavior by a small subset of especially bad actors can and is condoned under the low suitability bar; and the last raises the interesting question of whether in the long run it’s a problem for us to have so many “overlapping” membership associations all serving financial planning and wealth management, whether it would be a better use of resources for them to merge and consolidate together, or if instead it’s actually better to have so many different organizations because the nature of competition helps to ensure that they collectively keep pushing to advance the financial planning profession forward (if only to out-compete the others trying to do the same thing).

Enjoy the “light” reading!

6 Tax Write-Offs for Your Wedding

Weddings are expensive, so it is too bad that they aren’t tax deductible. But wait – though tax write-offs may not be top-of-mind when you are planning your wedding, with careful planning there are some ways you can garner a tax deduction or two.

source https://blog.turbotax.intuit.com/tax-tips/6-tax-write-offs-for-your-wedding-5133/

Who Should Take Education Tax Breaks: Parents or Students?

When it comes to education tax breaks, it’s important to carefully consider your options, and decide who is going to take what tax break. Parents have to communicate with their kids since the education tax breaks are only allowed to be claimed on either one of your tax returns and not both.

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/education/who-should-take-educational-tax-breaks-parents-or-students-11132/

Three Big Reasons to Not Wait for The Tax Deadline

The IRS tax filing deadline for the 2017 tax season is Tuesday, April 17, 2018. Many people dread it, but maybe you should embrace it and file as soon as possible! I dare you: try it! There are at least...

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source https://blog.turbotax.intuit.com/tax-planning-2/three-big-reasons-to-not-wait-for-the-tax-deadline-22764/

Thursday 29 March 2018

How Brokers And Agents Can Get Paid Directly For Delivering A Financial Plan

For decades, financial planning was compensated primarily by the insurance or investment products that were implemented at the end of the plan. But as advisors increasingly become more financial-planning centric, and bring financial advice to clients who don’t necessarily want or need to implement products – they just want the advice – there is a growing desire from many advisors to simply get paid directly for the financial planning advice they provide and the plans they deliver. With the caveat that technically, it’s not permissible to be paid a standalone fee for financial planning advice as a broker or insurance agent!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we explore how advisors are licensed to deliver financial advice, why you can’t receive fee-for-service compensation through a broker-dealer or insurance agency, and how you must be registered in order to get paid a planning fee (if your firm will allow it!)!

Most “financial advisors” are licensed and registered in one of three ways: either you are a registered representative of a broker-dealer, an agent of an insurance or annuity company, or you are an investment adviser representative (IAR) of a Registered Investment Adviser (RIA). These licenses dictate what advisors can, and cannot, do, and how they may be legally compensated: if you have an insurance license, you can sell insurance… If you have a securities license, you can sell securities… And if you have a license to be an investment adviser, then you can “sell” (and get paid for) investment advice.. Of course, some advisors are licensed multiple ways, but the fundamental point is that technically, getting paid for advice is only associated with the third category: having your Series 65 and being an IAR of an RIA.

As a result, advisors increasingly are becoming dually-registered with their broker-dealer and a corporate RIA, or operating as a hybrid with their own standalone independent RIA separate from their broker-dealer in order to get paid for their financial plans. Because again, you do need to be associated with an RIA to get paid for financial advice… though when you’re also with a broker-dealer, it must be disclosed to a broker-dealer as an Outside Business Activity, which in turn must be approved by your B/D). Which means in practice, not all advisors at a broker-dealer can actually charge for a financial plan, either because the broker-dealer does not have a corporate RIA, won’t allow the advisor to have an outside RIA as an OBA, or both. And even broker-dealers that do permit such activities still have the ability to decide which advisors will be approved to do so… and how.

As a result, the ability to become dual-registered and operate under the broker-dealer’s corporate RIA, or have your own independent RIA as a hybrid, is increasingly turning into a differentiator itself in the selection of a broker-dealer. Which has implications both for the control that the advisor has over their financial planning services and compliance oversight, and also the financial split of the fees between the broker-dealer and the advisor. Not to mention the technology that the advisor can, cannot, or must use to process those financial planning fees.

Nonetheless, the fundamental point is that if you’re at a broker-dealer or an insurance agency, and you want to actually get paid directly for a financial plan and giving financial advice, you need to operate under an RIA. It can be your broker-dealer’s corporate RIA, or your own independent RIA if your broker-dealer will allow it (or you can just break away from the broker-dealer and start your own RIA), but one way or another, you need to pass your Series 65 and be affiliated with an RIA if you are going to receive “fee-for-service” compensation for financial advice!

Wednesday 28 March 2018

Capital Gains Strategies For Highly Appreciated Investments After A Big Bull Market Run

Executives and small business owners often struggle to figure out how to diversify a concentrated investment in company stock, due to the adverse tax ramifications of liquidating a highly appreciated investment. Which leads to strategies including variable prepaid forward contractors, exchange funds or stock protection funds to facilitate diversification, or leveraging available tax laws like Net Unrealized Appreciation to mitigate the tax consequences.

But after nearly 9 years of a bull market since the bottom in March 2009, “most” long-term investors now have substantial capital gains. Not because they held a concentrated stock investment that grew, but simply because even a diversified portfolio of mutual funds and/or ETFs may be up 100%, 200%, or even 300% since the bottom. And ironically, the more tax-efficient and “tax-managed” the fund or advisor has been all along, the less turnover there’s been, and the more likely it is to have very substantial embedded capital gains now!

And unfortunately, such large embedded capital gains create real tax complications for engaging in even routine investment adjustments like periodic rebalancing, and especially in situations where the advisor might want to switch strategies (or the investor might want to switch advisors), but “cannot” do so because of the adverse tax consequences.

On the plus side, the reality is that the tax benefits of deferring capital gains are often smaller than most investors realize, as they confuse “tax avoidance” (not recognizing the capital gains) with what really is just tax deferral (the capital gains will ultimately have to be paid if the investor is ever going to use the money).

In addition, relatively straightforward tax strategies can further help investors to get comfortable with unwinding investments with large capital gains, from establishing a “capital gains budget” for the amount of capital gains to be triggered each year (perhaps targeted to stay under the threshold for the next capital gains tax bracket), setting targets for staged sales at progressively higher (or lower) prices to help investors pre-commit to making a change, or simply engaging in a “donate-and-replace” strategy that leverages the tax preferences of contributing appreciated securities for a tax deduction (and eliminating the capital gains altogether) and then replacing the investment (as a new higher cost basis) with the cash that would have been donated in the first place!

Tuesday 27 March 2018

#FASuccess Ep 065: Building A True One-Stop Shop Advisory Firm To Drive Organic Growth with Peter Mallouk

Welcome, everyone! Welcome to the 65th episode of the Financial Advisor Success Podcast!

My guest on today’s podcast is Peter Mallouk. Peter is the President of Creative Planning, one of the largest independent RIAs in the country with nearly $35 billion in assets under management for more than 20,000 clients, spanning 12 states and 21 office locations.

What’s unique about Peter, though, is that he’s been able to grow the firm from under $100 million to nearly $35 billion in AUM in just 15 years, and without relying on mergers and acquisitions… instead building an organic growth machine through a combination of strategic partnerships, and trying to build a “one-stop shop” with enough size and scale to deliver the kind of comprehensive value that really makes clients refer.

In this episode, we talk in depth about how Peter’s firm includes not only financial planning and investment management services but also divisions for tax preparation, estate planning, and trust services (stemming from his own early days as an estate planning attorney before becoming an advisor), why he felt it was necessary to expand and deepen the services of his firm to provide real value to his clients, and why even at $35 billion in AUM Peter still views his firm as a small “boutique” in the marketplace, even as the size of the firm is allowing them to attract more and more affluent ultra-high-net-worth clientele.

We also talk about the broader trends in the advisory industry, how the consumer marketplace is splitting into pursuing either the highest value or the lowest cost (and why that’s a threat to most advisors in between), why both wirehouses and the retail divisions of RIA custodians are simultaneously moving away from selling products and into financial advice, and the competitive threats that advisory firm owners must navigate in the coming years.

And be certain to listen to the end, where Peter shares why he still personally spends a whopping 70% of his time every week sitting in front of prospects and clients, and his philosophy of minimizing layers of management in order to keep the firm efficient, even as they approach 500 employees.

So whether you are interested in learning how to achieve organic growth through strategic partnerships and delivering high-value services that make you referrable to clients, how the advisory industry is splitting into pursuing either highest value or lowest cost, or are interested in how Creative Planning has minimized layers of management even while growing to $35 billion in AUM, I hope you enjoy this episode of the Financial Advisor Success podcast!

Monday 26 March 2018

Life Events Series: How Will Buying My First House Help My Taxes?

A great milestone of your financial life is the purchase of your first home. While less exciting, the tax implications of that achievement are no less critical. After all, home ownership creates several new opportunities for you to save on your federal income taxes. Got your attention?

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/home/life-events-series-how-will-buying-my-first-house-help-my-taxes-11906/

The True (Hidden) Costs Of Migrating Data To New Financial Planning Software

As we live in the “Golden Age” of advisor fintech, the number of great products to help financial advisors increase the value they deliver to clients continues to expand. Yet, an unfortunate reality of switching from one technology solution to another is that such changes can often come with substantial switching costs, both in terms of the financial costs that might be incurred during the process, and also the costs of the time and effort that must be invested by staff and advisors in order to get data transferred to the new tool and the entire team up to speed on using it. And when it comes to financial planning software, these costs can be even higher, as planning software generally doesn’t have an export functionality needed for migrating data from one program to another, and the required training of advisory staff is higher relative to some other types of technology (e.g., CRM and performance reporting software), since advisors increasingly need to be able to confidently use planning software “live” in the client meeting in order to not undermine their credibility with clients.

In this guest post, financial planner Matt Cosgriff shares his perspective on BerganKDV Wealth Management’s recent transition from MoneyGuidePro to eMoney, including their lessons learned, how to build an internal transition team, tools for “gamifying” the process, and how the transition can actually serve as a great training opportunity for both advisors and administrative staff. As Matt notes, a successful transition is crucial not only for preserving your existing work for clients, but also understanding how much variation exists between the results of your old software and your new software and why, so that you can effectively use your new software going forward and communicate any different outcomes to clients.

So if you’re contemplating a transition from one financial planning software program to another, or perhaps are just interested in how you can incentivize staff to make progress on a large goal by “gamifying” the process, I hope that you find today’s guest post and the insights from BerganKDV’s transition from MoneyGuidePro to eMoney helpful!

Sunday 25 March 2018

Can You Deduct 401K Savings From Your Taxes?

Contributions you make to your 401(k) plan can reduce your tax liability at the end of the year as well as your tax withholding each pay period. 401(k) plan contributions.

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/can-you-deduct-401k-savings-from-your-taxes-7169/

Friday 23 March 2018

Weekend Reading for Financial Planners (March 24-25)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that the Investment Adviser Association, in collaboration with Charles Schwab, has begun an effort with lawmakers to both reverse the recent changes that eliminated the tax deductibility of investment advisory fees and expand the scope of the new “pass-through” business deduction (intended to support businesses that grow jobs and and hire people) to allow at least larger advisory firms that really do hire people and create jobs to be eligible for the deduction as well.

From there, we have several marketing-related articles this week, including: how most financial advisor websites are like a “bad date” that mostly talks about themselves instead of trying to connect with the other person; how Googling around to check out other advisory firms in your area can help to show you how you can better differentiate (or how undifferentiated you may actually be); the steps to follow to create a successful lead-nurturing campaign with prospective clients; key tips for starting your own Public Relations (PR) initiative in your advisory firm with (local) media; and a discussion of a unique COI referral opportunity that most advisors miss out on (working with investment bankers that facilitate the sale of small-to-mid-sized businesses).

We also have a few articles on advisor technology trends, from a look at how performance reporting software may eventually be replaced by “PFM” tools that advisors can give to their clients (which both better engage them, and are less expensive), the rise of the next wave of “robo” firms now targeting disruption in the small-to-mid-sized 401(k) plan marketplace, and a glimpse of the new “Advisor Innovation (AI) Labs” effort from Lori Hardwick and Mike Zebrowski that is aiming to create a new form of advisor desktop that would sit on top of existing broker-dealer or custodial platforms to let independent advisors be more independent (at least, if those firms will cooperate and “let” AI Labs do so with “their” data!).

We wrap up with three interesting articles, all around the theme of raising financially successful children: the first examines the results of a recently published study that took a 40 year(!) view of children in 1968 and again in 2008 to see which children traits were most predictive of the greatest financial success (and found that the “rule-breakers” were often the most financially successful in the end, despite their challenges as children); the second reviews another recent research survey, though, and finds that while those with above-average talent often do at least make above-average income, the greatest levels of success are more commonly driven by luck than talent (or at least talent alone); and the last explores how to raise children to be more grateful, in recognition of both the long-term emotional and other benefits of having an “attitude of gratitude”, and the challenges of doing so in a world where parenting styles that aimed to bolster the self-esteem of children may have unwittingly made them more entitled (and less inclined towards gratitude) in the process.

Enjoy the “light” reading!

Thursday 22 March 2018

Familias Multigeneracionales: Las deducciones tributarias y créditos más importantes que no te puedes perder

El siguiente artículo se aplica correctamente para tus impuestos del 2017, los que se deben presentar este año antes de la fecha límite de abril del 2018. Alguna de la información tributaria que aparece a continuación cambiará el próximo año...

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source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/family/familias-multigeneracionales-las-deducciones-tributarias-y-creditos-mas-importantes-que-no-te-puedes-perder-29874/

IRS Free File Program is Open

The IRS has opened its popular Free File Program, available at www.irs.gov, a public-private partnership between the federal government and private tax preparation companies, including TurboTax maker Intuit. This year, taxpayers with an adjusted gross income of $33,000 or less,...

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source https://blog.turbotax.intuit.com/turbotax-news/irs-free-file-program-is-open-22779/

When A Client’s Failing Retirement Plan Sometimes Isn’t Really

As financial advisors, we never want to see a client run out of money, especially “on our watch” as the advisor. Which makes it especially challenging to deal with clients who appear to be spending “too much” and may be on an unsustainable spending trajectory… especially if you’ve done a comprehensive financial plan for them, and know that their current spending pattern is unsustainable. Even if it’s sometimes difficult medicine to give them – telling them that their spending and lifestyle need to change – it’s an essential value of good financial planning to deliver the sometimes-difficult message when it’s necessary to do so. Except, in some cases, it turns out that the problem isn’t actually that the client has a spending problem at all… instead, the real problem is simply that the client didn’t yet trust us enough to tell us about all their assets in the first place.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we explore situations where clients who have a “spending problem” actually don’t have a spending problem… they have a trust problem that leads them to be unwilling to share information about all of their assets with the advisor. A situation that may occur more and more frequently in the future, as the advisory industry continues to converge on the AUM model… and clients feel increasingly pressured to consolidate all their assets with their current advisor once the advisor “finds out” there are other assets he/she doesn’t already manage!

Learning that a client has been “hiding” assets can come as a shock for many advisors. It’s the situation where you thought you were being a good holistic financial planner, and giving them guidance about unsustainable spending, and then abruptly find out the client is terminating the relationship and consolidating all of their assets with another advisor. Which leads to three surprising and related realizations: (1) they actually had another advisor we didn’t know about, (2) they actually had other assets we didn’t know about, and (3) they weren’t actually overspending in the first place. We only thought they were overspending because they didn’t want to tell us about all of their assets for fear of being solicited about them!

And the reality is, as more and more of the advisory industry shifts to the AUM model and packages together financial planning and investment management, this problem is going to get a lot worse. When we look at the financial advisory market as a whole, about one-third of the 115 million US households are at least mass affluent, only about one-half of those have more than $100k that could be managed by a financial advisor (i.e., outside of a retirement plan), and only about one-third of those are actually delegators who are looking to hire an advisor. Which means, when you do the math, there may only be about 7 to 8 million households to divvy up among 300,000 financial advisors, resulting in about 21 clients per advisor (of which only 5 are millionaires!). Ironically, this means that if all clients did consolidate all of their assets with one advisor, many advisors would go out of business (or at least be compelled to pursue other advisor business models that can serve other types of non-AUM clientele!)!

Fortunately, in practice clients tend to split assets across multiple advisors (which keeps more advisors employed and engaged!), but clients don’t necessarily tell us, because they don’t want to be solicited to consolidate assets… which can result in a dysfunctional financial planning relationship in the process! For me, this led to the realization of the importance of being even more focused on leading with financial planning first, and to be less aggressive about insisting we “have to” be holistic and do “everything” for clients all at once. Because if clients can’t trust you to do the financial planning work first and build that relationship over time, then they may never have enough trust to consolidate their assets regardless. But if you can lead with financial planning and build that trust, then you can end up eventually winning all of their business in the long run anyway. Without clients feeling so pressured that they keep some of their assets a secret in a way that further undermines the planning relationship you’re trying to build.

The bottom line, though, is just to acknowledge that if you have a client who has a “spending problem” and is heavily overspending and just keeps ignoring your advice, it is possible they really have a spending problem, but it is also possible that they have a different problem – one where they don’t actually trust you and feel as comfortable with you as you may have thought, leading them to hide assets from you so that you don’t solicit them to consolidate. And as the industry continues to converge on the AUM model for providing both financial planning and investment management services, we’ll likely continue to see more and more clients with “spending problems” that might not actually be!

Wednesday 21 March 2018

How Healthcare Sharing Programs Compare To Traditional Health Insurance

With health insurance premiums continuing to rise every year – in some areas, compounding at double-digit rates – more and more consumers are questioning whether it’s even worthwhile to have health insurance at all. Especially now that the Tax Cuts and Jobs Act of 2017 has repealed the Individual Mandate that would have applied a tax penalty for those who decline to enroll in health insurance through an individual exchange.

At the same time, though, rising health insurance premiums have also increased the popularity of alternatives to traditional health insurance, including so-called healthcare sharing programs. Typically organized under ministries or other religious organizations, healthcare sharing programs operate outside of traditional health insurance, and in some cases may be more restrictive with their benefits… but are also operating at a cost that is substantially less than traditional health insurance.

In this guest post, Jake Thorkildsen – a financial advisor who has helped clients make decisions about traditional health insurance versus healthcare sharing programs, and has actually pursued a healthcare sharing program for his own family – provides an in-depth explanation of what healthcare sharing programs here, a review of the most popular healthcare sharing programs and ministries, why healthcare sharing programs are not for everyone, and the kinds of situations where they might at least be considered.

So whether you’re simply curious to better understand an increasingly popular alternative to traditional health insurance – now covering more than 1,000,000 people – or are actually trying to evaluate and compare programs for a particular client situation, I hope this comparison and review of the various healthcare sharing programs is helpful!

Tuesday 20 March 2018

Child Tax Credit 101 [Video]

The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline. Tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more...

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source https://blog.turbotax.intuit.com/deductions-and-credits/child-tax-credit-101-1921/

#FASuccess Ep 064: Scaling Up To $1.4M Of Revenue With (Only) Hourly Financial Planning Fees with Mark Berg

Welcome, everyone! Welcome to the 64th episode of the Financial Advisor Success Podcast!

My guest on today’s podcast is Mark Berg. Mark is the founder of Timothy Financial Counsel, an advisory firm that does purely hourly financial planning for hundreds of clients in the Chicago area.

What’s unique about Mark’s practice, though, is that while “hourly financial planning” is usually characterized as a purely transactional business, for less affluent middle market clients, that can’t be scaled effectively… Mark’s firm actually did a whopping $1.4M of hourly planning fees last year, across a team of 5 advisors and 2 support staff, and 75% of the firm’s clients are recurring hourly clients!

In this episode, we talk in depth about how Mark structures the hourly fee model at Timothy Financial, with a series of 5 “Levels of Service” based on client complexity and hourly rates that vary from $280 to $400 per hour depending on which advisor is serving the client, why he publishes all of the details about his fees and service tiers on his website for clients to see before ever talking to him, and how doing so has led to a whopping 83% close rate on his qualified prospects last year.

We also talk about some of the “myths” of the hourly model, including how Mark has been able to successfully scale of the reach of the firm, why he believes that firms interested in doing hourly financial planning work should only do hourly work to focus on efficiencies, how he has been able to drive the growth of the firm because so few other advisors are effective at doing hourly financial planning for clients, the tremendous opportunity of building an hourly model precisely because so few advisors do it well, and yet why most advisors who start out fail at the hourly model despite the opportunity.

And be certain to listen to the end, where Mark talks about how he decided to come up with the name Timothy Financial Counsel – instead of just naming the firm Berg Financial Counsel after himself – and why, 17 years later, his decision to not name the firm after himself has actually helped him to scale it up with additional advisors beyond himself.

So whether you are interested in learning how to deliver hourly financial planning services in a scalable and profitable manner, how you can boost your close rate through being transparent about your services and fees, or are interested in why so many advisors are bad at delivering hourly financial planning more generally, I hope you enjoy this episode of the Financial Advisor Success podcast!

Monday 19 March 2018

How The Product Distribution Industry Beat DoL Fiduciary By Proving Their “Advisors” Aren’t Real Advisors

Notwithstanding its recent regulatory focus in financial services, the concept of being a “fiduciary” long predates the Department of Labor’s proposed fiduciary rule. Not only because a fiduciary duty has applied to Registered Investment Advisers (RIAs) since/under the Investment Advisers Act of 1940, but also because the obligations of a fiduciary duty have existed under common law for centuries (and in other societies, for millenia) before. In fact, a fiduciary duty is what has always applied to special (advisory) relationships of trust and confidence. The primary issue is simply to determine when an advice relationship actually exists.

Accordingly, as the brokerage and annuity industries have increasingly trained their brokers and agents in more holistic advice, pursued advice-oriented education (e.g., CFP marks), and adjusted everything from their national advertising to their business cards to convey that their primary role is no longer just product sales but actual advice, it was arguably inevitable that regulators would eventually respond by applying a fiduciary duty to all those “advisor” brokers and annuity agents. As the Department of Labor ultimately did with its fiduciary rule.

Yet ironically, despite their ongoing transition into the business of financial advice, the financial product distribution industry and its representative associations – including FSI (independent broker-dealers), SIFMA (the securities industry), IRI (the annuity industry), and NAIFA (insurance and annuity agents) – have now prevailed in their 5^th Circuit Appeal against the DoL’s fiduciary rule, by successfully arguing that, notwithstanding their advertising and the titles on their business cards, their brokers and annuity agents are not advisors at all, but mere salespeople who do not have a relationship of trust and confidence with their clients, for which their (commission-based) compensation is not in any way payment for the delivery of advice but merely for effecting a product sale. Even as they continued to lament to the public and the media that the DoL’s fiduciary rule would restrict their ability to give advice to consumers (the very advice relationship they explicitly denied providing to clients in their own court briefs!).

Nonetheless, while it remains to be seen whether the 5^th Circuit Appeals decision will actually lead to vacating the rule, will lead the Department of Labor to try to walk back the rule, or whether the fact that last week the 10^th Circuit Court of Appeals upheld the DoL fiduciary rule – potentially setting the stage of a showdown in the Supreme Court – the fact that the financial product distribution industry of broker-dealers and insurance and annuity agents continues to adopt “financial advice” in their advertising to the public, it seems only a matter of time before some fiduciary rule takes hold, whether from the Department of Labor, the SEC, or a growing number of states that are taking fiduciary rulemaking into their own hands to fill the void.

Yet at the same time, the fact that the product distribution industry was able to prevail by convincing the court that their brokers and annuity agents are “just” salespeople and not advisors does emphasize the fact that there is a role for salespeople to play in the financial services industry, as distinct from actual advisors, and long recognized with separate regulation (i.e., the Investment Advisers Act vs broker-dealer regulation under FINRA). Which ultimately raises the question of whether the real issue is not whether the Department of Labor (or the SEC) are the best to issue a uniform fiduciary regulatory framework for all investment advisers and broker-dealers (and annuity agents), but whether a uniform fiduciary rule is the right solution in the first place… or whether the better path is simply to allow salespeople and advisors to continue to co-exist, but with proper regulation of titles and advertising to ensure that consumers have clear disclosures not just with respect to the products they may purchase, but the very nature of the sales-versus-advice relationship they’re engaging in the first place!

Saturday 17 March 2018

5 Ways to Save Your Green on St. Patrick’s Day

Got any fun St. Patrick’s Day plans this weekend? Whether you’re heading out of town or staying local to unwind, make sure your weekend doesn’t drain your wallet! Check out these five ways you can save more green and still...

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source https://blog.turbotax.intuit.com/income-and-investments/5-ways-to-save-your-green-on-st-patricks-day-33724/

Friday 16 March 2018

Multigenerational Families: Top Family Tax Deductions and Credits You Should Not Miss

The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline. Tax information below will change next year under the new tax law effective on your 2018 taxes, but won’t...

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source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/multigenerational-families-top-family-tax-deductions-and-credits-you-should-not-miss-29816/

Weekend Reading for Financial Planners (March 17-18)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big news that the 5th Circuit Court of Appeals has ruled against the Department of Labor and its fiduciary rule, and moved to vacate the DoL fiduciary rule entirely… with the caveat that a separate decision from the 10th Circuit Court of Appeals this week upheld the fiduciary rule, setting the table for a potential final showdown in the Supreme Court, and creating even greater uncertainty about the fiduciary rule in the meantime. Also in the news this week was the revelation that the SEC’s own fiduciary rule proposal may be coming soon – sometime in the second quarter – and its likely to focus more not just on fiduciary disclosures, but also whether advisors and brokers need to be clearer with their titles.

From there, we have several practice articles this week, including: how to conduct effective staff/team meetings (which are especially important as your team grows!); why “compensation” problems with employees are rarely about compensation alone, and effective employee retention is about the more holistic job opportunity and offering; why rearranging your office space (and who sits where) can spur creativity and innovation in the business (albeit at the risk of impairing productivity); and a look at what it will take in the future to be a true “destination” advisory firm (for both future clients, and future employees).

We also have a few articles on retirement planning, from a look at planning strategies to discuss with clients in their 50s when they’re still 5-10 years away from the retirement transition (or in the home stretch to saving enough to achieve it), to recent research that finds a disturbing spike in the mortality rate (especially for men) upon reaching age 62 and becoming eligible for Social Security, and a look at the pros and cons of so-called “bucketing” (or time-segmentation) strategies for retirement portfolios.

We wrap up with three interesting articles, all around the theme of household spending and cash flow: the first looks at the phenomenon of “lifestyle creep”, and why it’s so important to establish systems that aim to save your future raises going forward (so they don’t automatically creep into your lifestyle spending); a fascinating study that finds, due in large part to how judgmental society is of the rich, that most affluent people actually try to hide their wealth and are hypersensitive to being judged about it); and the last looks at how, because money is often a major point of contention between couples in a marriage, that one of the best ways to reduce marital conflict over spending is to give each spouse a guilt-free “allowance” that they can spend on any discretionary expense they want (without fear of being judged!).

Enjoy the “light” reading!

Thursday 15 March 2018

Handling The Up-And-Down Stress Of Being A Financial Advisor

Being a financial advisor is a high-stakes stressful job. Not only can it be emotionally exhausting to be the supporting pillar for our clients during their times of emotional stress, but for most of us, it’s also our livelihood, and our family’s livelihood, and our employees’ livelihood when they rely on the business for their jobs… and of course, we may be responsible for dozens or hundreds of our clients and their life savings. Which means being a financial advisor comes with its own emotional rollercoaster as an advisor – from the wonderful feelings that come from times of great business and client success, to the pressure and stress that come from more difficult times. Which raises an important question: Where do you as a financial advisor turn for support to deal with your own emotional stress of being a financial advisor?

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss where financial advisors can turn to deal with the emotional stress of being a financial advisor, and why it is so important to build a social support system for yoruself that may include different “tiers” of support, since you will likely need to turn to different people for help with different problems and needs!

For most advisors, our first support system for the ups and downs of the business is our support system for all the ups and downs of life: our spouse, other family members, and/or our close friends. These people are close to us and we can trust that they want what’s best for us, so they are great for support – whether it’s just someone to vent to or a shoulder to cry on, or to give us candid and sometimes critical feedback when we need it. Of course, the biggest caveat to going to friends and family as your support system for the business is that they don’t necessarily know anything about the actual advisory business. So while they may be able to provide some basic emotional support – which may be crucial during tough times – they often won’t be able to provide the type of advice that may be needed to truly change an advisor’s situation for the better.

As a result, the second tier of support for financial advisors is peers and colleagues in the business. Much like how support systems evolve around people facing similar problems in many areas (e.g., AA for those suffering from alcoholism), sometimes the best people to go to for support are your peers who have similar experiences. For many advisors, these are co-workers in their office, but particularly for those working under an independent broker-dealer without a large local branch, or starting an independent RIA (which may not even have an office), this support system can be formed through friends outside the firm but in the advisor industry. The benefit of this support system is that these advisors can better commiserate with you on the challenges you face, and give even better context for what’s really a big deal, and what’s not. The downside to this support system, however, is that sometimes the relationships may not be intimate enough for you to truly turn to when you need help (e.g., people you only communicate with occasionally on message boards), and other times they may not be people you can openly communicate with regarding certain issues you may be facing (e.g., you may not feel comfortable discussing career opportunities with your manager or at an association meeting).

The third tier of an advisor support system – the study group (or “mastermind” group, since it’s not really about “studying” but finding experienced peers) – can help address some of these prior issues. Due to the smaller and more intimate setting of study groups, you can form deeper trust and make yourself vulnerable to the people in the group. Additionally, since study groups are formed by people far enough removed from your own situation that they won’t have conflicts of interest in how they advise you (unlike an employer or co-workers), you can receive more objective feedback. The challenge for many advisors in this tier is forming a study group in the first place. But fortunately, the process isn’t that complex (find a half a dozen advisors or so that you want to trust and get to know better, invite them to be in a study group, start meeting regularly, and form those connections!), but it does take time and effort.

All of that being said, sometimes people simply do not prefer to interact in a group setting when dealing with certain issues, which brings us to the fourth tier of an advisor support system: mentors and executive coaches. Finding a mentor means finding someone who has at least a little more experience than you, and hopefully a little more wisdom and perspective from that experience, that you can go to with your problems. Mentors can provide great support, but the challenge here is that not everyone will be a great mentor (even if they are a great advisor), and sometimes it’s simply too hard to find a great mentor. As a result, some advisors will decide to hire an executive coach. Notably, this is not a consultant for technical business issues, but instead, someone who can help you figure out what you want from your business, hold you accountable when needed, and sometimes just provide a bit of emotional support. Of course, coaches aren’t cheap (especially for financial advisors), but a skilled coach can have a really powerful impact that more than recovers their cost.

The bottom line, though, is just to understand that you need to have some kind of personal support system, to deal with the inevitable ups and downs that come from being a business owner in general, and a financial advisor in particular. We’re all human, so we need to keep an eye on our own mental health. So make sure you have the support system you need. And if you don’t… go find someone!

Wednesday 14 March 2018

How Much Your March Madness Bracket Will Cost You at Tax Time

Last year, ESPN estimated that March Madness bets would total to the whopping amount of $10.4 billion. That’s real money! And real money comes with real tax implications. How much your March Madness bracket will cost you at tax time...

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source https://blog.turbotax.intuit.com/income-and-investments/how-much-your-march-madness-bracket-will-cost-you-at-tax-time-33586/

8 Last Minute Tax Tips to Help You File Before the Tax Deadline

There’s just a little over a month left in the tax season, and if you haven’t filed your taxes yet, don’t worry you still time left to get them done! To help get you to the finish list, TurboTax has these 8...

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source https://blog.turbotax.intuit.com/tax-planning-2/8-last-minute-tax-tips-to-help-you-file-before-the-tax-deadline-22738/

Financial Planning Research Highlights From The 2018 CFP Board Academic Research Colloquium

From February 20th through February 22nd, the CFP Board’s Center for Financial Planning hosted their second annual Academic Research Colloquium (ARC) for Financial Planning and Related Disciplines in Washington D.C. The event brought together 225 attendees, of which close to 200 were researchers and academic faculty, to share and discuss research relevant to the financial planning profession, as a part of the CFP Board Center’s longer-term goal of establishing itself as the “academic home” for the financial planning profession (and the research that supports it).

In this guest post, Dr. Derek Tharp – a Kitces.com Researcher, and a recent Ph.D. graduate from the financial planning program at Kansas State University – provides a recap of the 2018 CFP Academic Research Colloquium, and highlights a few particular research studies with relevant takeaways for financial planning practitioners.

The 2018 CFP Academic Research Colloquium again had a strong showing from some core financial planning academic programs, with scholars from Texas Tech, Missouri, and Georgia serving as lead authors for nearly 25% of all research presentations and poster sessions. Notably, this representation is more diverse than last year, as last year the top four programs accounted for nearly 50% of research presented. Additionally, the colloquium was successful in drawing in scholars from outside of the core financial planning programs, featuring lead authors from a total of 35 different academic institutions, including Harvard, Duke, Georgetown, and Notre Dame.

The colloquium featured a wide range of topics. Some particularly relevant themes for financial planning practitioners ranged from biases that influence financial decision making among both financial advisors and their clients (e.g., how human use of technology to assist with statistical decision-making can help…or not), to issues related to quality of life in retirement (e.g., are retirees happier living near their friends or children?), and racial diversity in the financial services industry, including an examination of the role of empathy in black consumers choice of a financial advisor.

Overall, the second Academic Research Colloquium again brought together a strong mix of academics and practitioners to present and discuss financial planning research. Notable challenges and opportunities for growth in coming years will include the launch of the Center for Financial Planning’s new academic journal (Financial Planning Review), the Center’s push to establish the ARC as the core conference interview location for financial planning faculty positions, and continuing to attract a diverse group of scholars to build and contribute to the financial planning knowledge base. Only time will tell if Center for Financial Planning can be successful in their pursuit of becoming the “academic home” of financial planning research, but the ARC continues to be a strong conference for both financial planning academics, and practitioners interested in financial planning research.

Tuesday 13 March 2018

#FASuccess Ep 063: Overcoming A Material U-4 Disclosure To Build A $125M AUM Advisory Firm with Kevin Kroskey

Welcome, everyone! Welcome to the 63rd episode of the Financial Advisor Success Podcast!

My guest on today’s podcast is Kevin Kroskey. Kevin is the founder of True Wealth Design, an independent RIA based on Akron, Ohio, that has grown to nearly $125M in assets under management with 6 employees serving 160 clients, built over the span of the last 10 years.

What’s unique about Kevin’s practice, though, is that he’s been able to persevere in building his practice despite what for many advisors would have been a “catastrophic” setback in his early career… the fact that in his mid-20s, just a few months after his first job at a broker-dealer, he went to prison for 17 months after the law finally caught up with him for selling ecstasy back when he was in college.

In this episode, we talk in depth about Kevin’s journey, from starting out as a high school physics teacher straight out of college, to switching into the financial services industry by working at that independent broker-dealer in his mid-20s, then finding his entire career and life brought to a halt by his criminal conviction for selling ecstasy – despite the fact he had already stopped and left that life behind several years earlier and how he began the process of trying to rebuild a path back into the financial services industry after he got out, starting with a 3-year ordeal with multiple appeals just to try to get a license to become a mortgage loan officer as an ex-con, before finally switching to hang his shingle has an independent RIA.

We also talk about how Kevin actually built his advisory business, by falling back on his early teaching skills to begin doing local adult education classes on personal finances, borrowing money with a bank loan to be able to send out 10,000 mailers at a time to get participants in the class, and then slowly and steadily accumulating a client and asset base over time, supplemented in more recent years by trying to further establish himself more visibly in his community, including by writing a regular financial column in a local community newspaper.

And be certain to listen to the end, where Kevin shares his advice about what any advisor can do to try to persevere through the highly adverse challenges that can hit us in life, and how he handles the situation today when prospective clients still sometimes ask him about a crime that is still a felony disclosure on his U-4, despite being completely unrelated to the financial services industry, for events that happened in his life nearly 20 years ago now.

So whether you are interested in learning more about visibly establishing yourself within your community through writing, how advisors can address talking through disclosures with prospective clients, or are interested in how advisors can persevere through highly adverse challenges more generally, I hope you enjoy this episode of the Financial Advisor Success podcast!

Monday 12 March 2018

The Steps I Took To Set Up And Launch My Own Independent RIA

Once a financial advisor has determined they would like to break away from the broker-dealer or wirehouse environment and launch their own independent RIA, many questions will naturally arise. What steps are involved in the process? How do you evaluate the many different platforms that are out there? What technology should a financial advisor consider as they go out on their own and are, often for the first time, responsible for making their own decisions regarding practice management, financial planning, performance reporting, and CRM software? At times, the process can feel downright overwhelming.

But the reality is that many financial advisors have successfully made the transition, and it isn’t necessary to reinvent the wheel with each breakaway. In this guest post, Aaron Hattenbach of Rapport Financial, an RIA Aaron founded when successfully breaking away from Merrill Lynch in late 2016 (while retaining 100% of his clients), shares his own experiencing breaking away from a wirehouse, including a detailed, step-by-step overview of his process to successfully launching an independent RIA.

Ultimately, the process does take a lot of work. Aaron notes that there are areas where he could have better avoided unnecessary expenses, kept start-up costs lower, and curated better technology and service providers for his firm, but for any advisors who are serious about breaking away and forming their own independent RIA, Aaron’s overview should provide much food for thought on your own breakaway, as well as some things you may want to consider in order to navigate it successfully!

Saturday 10 March 2018

Where’s My Tax Refund? How to Check Your Refund Status

This post can be found en Español here. With refund season well underway and the average direct deposit tax refund being over $3,000 last tax season, we are hearing the common tax season question: “Where’s My Refund?” We know that...

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source https://blog.turbotax.intuit.com/tax-refunds/wheres-my-tax-refund-how-to-check-your-refund-status-18855/

Friday 9 March 2018

Buy or Lease Your New Business Vehicle?

Recently I had dinner with friends who run a business, and the conversation turned to buying new cars. The “buy versus lease” question was asked of me, the so called tax expert at the table. As always, I don’t answer...

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source https://blog.turbotax.intuit.com/tax-tips/buy-or-lease-your-new-business-vehicle-67/

Weekend Reading for Financial Planners (March 10-11)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that after several years of scrutiny, the SEC’s examination rate for RIAs has risen significantly, up from an average of once every 9-10 years as recently as 2016 to an average of “just” once every 5 years this year (thanks in large part to a reallocation of examiners from the broker-dealer unit into the SEC’s RIA unit instead). Also in the news this week is an investigation from the Massachusetts securities regulators into Wells Fargo Advisors, raising the question of whether the firm may be violating the DoL fiduciary rule by switching clients from commission-based accounts into fee-based accounts when it would have been better for them to just continue to pay occasional commissions in the original account. And new legislation has been (re-)introduced in Congress that aims to increase both the number of small businesses that offer an employer retirement plan (with a proposed up-to-$5,000 tax credit to roll out a plan), along with additional tax incentives for employers that create the plan with automatic enrollment provisions.

From there, we have several articles around the theme of marketing and engagement with clients, including a look at how systematically asking existing clients for their input on the agenda for each client review meeting can potentially increase referrals, how to more deeply engage clients by conducting a simple “Hidden Gems” poll with them, and how to reframe the traditional financial planning discovery questions around identifying client goals to more deeply understand what really motivates them and what they really want to work towards in their financial plan (that they may not have even realized about themselves yet).

We also have a few articles on practice management, including the importance of formally articulating the culture of your advisory firm, the issues to consider when it’s time to increase the equity stake of next generation advisors who thus far only have a small slice of the business, and the rise of “co-planning” as a means to more deeply connect with clients and provide greater value in a more advice-centric future for financial planners.

We wrap up with three interesting articles, all around the theme of trends in the world of financial planners themselves: the first is a good dive by industry commentator Bob Veres into the world of CPA financial planners, who under the AICPA have their own membership group (now 11,500 strong and up 12% in just the past 2 years alone), their own designation (the PFS), and their own views about the professional status of financial planners; the second is a challenge by CFP Board CEO Kevin Keller on whether CPAs, who admittedly have very in-depth knowledge and training on tax and accounting issues, really have the competency to deliver personal financial planning services without going through training like CFP certification; and the last explores whether the best path forward for the profession is to get away from the rising volume of “disclosures” to address various fiduciary conflicts of interest, and instead establish a simpler system that “grades” conflicts of interest, both to help consumers evaluate which conflict of interest disclosures really “matter” or not, and also to provide a means for advisory firms to want to eschew their conflicts of interest rather than just disclose them (in order to increase their advisor rating!).

Enjoy the “light” reading!

There’s Still Time to Take Advantage of $0 State Filing with TurboTax Absolute Zero

There’s still time for millions of hard-working Americans with simple tax returns to file both their federal and state tax returns for absolutely free, but the clock is ticking! To take advantage of the TurboTax® Absolute Zero® offer, you must file...

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source https://blog.turbotax.intuit.com/turbotax-news/theres-still-time-to-take-advantage-of-0-state-filing-with-turbotax-absolute-zero-19007/

Thursday 8 March 2018

The Plight Of The Wholesaler In An Advice-Centric Future

As technology continues to drive change for financial advisors, commoditizing basic tasks of portfolio construction and product selection and forcing advisors to add more value on top, the ripple effects of the shift impacts not only the financial advisor business model and value proposition, but also the way that insurance and investment product manufacturers – and their wholesalers – must interact with the advisor of the future. A microcosm of this challenge is already playing out in the RIA space – which for wholesalers, is notoriously difficult to break in to – and when combined with other industry trends, paints the picture of a highly challenging environment for wholesalers going forward.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why I do believe there’s a solid future for wholesaling in the coming decade and beyond, but why the nature of wholesaling is changing, and what wholesalers can (and must) do to continue to succeed in an advice-centric world!

Historically, “financial advisors” were paid to implement products, and the wholesaler was an ally in product distribution, educating advisors about not only the products themselves, but sales ideas to pair with them, what other advisors were doing to successfully sell the products, and even running wholesaler-supported events for clients and prospects.

Yet as financial advisors shift from a sales-centric model compensated by product implementation, to an advice-centric model compensated by clients, the relationship shifts, as the financial advisor is no longer a distribution channel to deliver good products to clients, but a gatekeeper that shields clients from potentially bad products. Which is a big deal, because it means that advice-centric advisors don’t necessarily care about sales ideas, or free golf balls, or money for the next client/prospect event… instead, advice-centric advisors want: (1) a product that is actually, factually superior to something we’re already using, and (2) an extremely knowledgeable wholesaler who can hold their own when it comes time to vet that product against what the advisor is already doing or using.

The second shift underway in the industry, that also impacts the advisor-wholesaler relationship, is the trend towards firms outsourcing investment management through a TAMP, or centralizing through a large RIA or broker-dealer’s in-house investment team and investment models. The reason these shifts matter is that it means in the future, the actual “financial advisor” is simply going to be less and less responsible for the selection of the specific investments products that go in the portfolio in the first place. Which means there is less need for wholesalers broadly distributed across the country to call on individual advisor offices, and instead, a need for wholesalers who deal with centralized investment teams at RIA, TAMP, or broker-dealer home offices. And ironically that group – an investment team of CFAs and other investment experts – will be even harder for wholesalers to pitch to.

As a result, I have three tips for wholesalers out there struggling in the current advisor landscape. First, find a job at a company that actually has great products, because if you don’t have great products to present, advisors simply will not be interested. Period. Second, invest in your knowledge and skills by pursuing credentials such as the CLU designation (for insurance/annuity wholesalers) and CIMA certification (for investment wholesalers), because the demand on you to provide real expertise is only going to increase as you begin to deal more with centralized teams of experts within advisory firms (and as advisors in general are compelled to increase their own educational standards). And third, please do your homework before you contact us. Don’t mass email us asking to “catch up for 15 minutes” or “learn about our investment approach” when you can find a lot of that information on our websites or in our ADVs. Take the time to figure out exactly what you have to offer that adds value for our clients, and then make a targeted and direct pitch that is relevant; given how much advisors are swamped and overwhelmed with inbound wholesaler inquiries these days, targeted relevance is what it takes to break through the noise.

The bottom line, though, is just to recognize that the nature of the advisor-wholesaler relationship is changing alongside the shift from a sales-centric to an advice-centric industry, and with that shift comes changes in what advisors need from wholesalers, as well as the depth of expertise wholesalers need to deliver value to advisors. These changes require that wholesalers actually have a great product to offer, and reach out in a more targeted manner, which means wholesalers won’t be able to reach out to as many advisors (and there may be fewer wholesalers more generally), but the future is still very bright for great wholesalers with real expertise and great products!

5 Tips for Adjusting Withholding Allowances with Your Employer

At this time of the year, many people, especially those expecting a tax refund, are rushing to get their income tax returns completed and filed. Similarly, individuals concerned about owing taxes may want to complete their taxes as early as possible...

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source https://blog.turbotax.intuit.com/tax-planning-2/5-tips-for-adjusting-withholding-allowances-with-your-employer-33449/

Wednesday 7 March 2018

Do Babysitters Have To Report Their Income on Taxes?

Working from home has been a wonderful way to have more time with our daughters. The relative flexibility of my schedule allows me to earn money and avoid paying for daycare. However, there are times when I do need some...

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source https://blog.turbotax.intuit.com/income-and-investments/do-babysitters-have-to-report-their-income-on-taxes-33550/

The Favorable Tax Treatment Of Financial Advisor Commissions Over Fees After TCJA

The annual requirement of all Americans to pay taxes on their income requires first calculating what their “income” is in the first place. In the context of businesses, the equation of “revenue minus expenses” is fairly straightforward, but for individuals – who are not allowed to deduct “personal” expenses – the process of determining what is, and is not, a deductible expense is more complex.

Fortunately, the basic principle that income should be reduced by expenses associated with that income continues to hold true, and is codified in the form of Internal Revenue Code Section 212, that permits individuals to deduct any expenses associated with the production of income, or the management of such property – including fees for investment advice.

However, the recent Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the ability of individuals to deduct Section 212 expenses, as a part of “temporarily” suspending all miscellaneous itemized deductions through 2025. Even though the reality is that investment expenses subtracted directly from an investment holding – such as the expense ratio of a mutual fund or ETF – remain implicitly a pre-tax payment (as it’s subtracted directly from income before the remainder is distributed to shareholders in the first place).

The end result is that under current law, payments to advisors who are compensated via commissions can be made on a pre-tax basis, but paying advisory fees to clients are not tax deductible… which is especially awkward and ironic given the current legislative and regulatory push towards more fee-based advice!

Fortunately, to the extent this is an “unintended consequence” of the TCJA legislation – in which Section 212 deductions for advisory fees were simply caught up amidst dozens of other miscellaneous itemized deductions that were suspended – it’s possible that Congress will ultimately intervene to restore the deduction (and more generally, to restore parity between commission- and fee-based compensation models for advisors).

In the meantime, though, some advisors may even consider switching clients to commission-based accounts for more favorable tax treatment, and larger firms may want to explore institutionalizing their investment models and strategies into a proprietary mutual fund or ETF to preserve pre-tax treatment for clients (by collecting the firm’s advisory fee on a pre-tax basis via the expense ratio of the fund, rather than billed to clients directly). And at a minimum, advisory firms will likely want to maximize billing traditional IRA advisory fees directly to those accounts, where feasible, as a payment from an IRA (or other traditional employer retirement plan) is implicitly “tax-deductible” when it is made from a pre-tax account in the first place.

The bottom line, though, is simply to recognize that, while unintended, the tax treatment of advisory fees is now substantially different than it is for advisors compensated via commissions. And while some workarounds do remain, at least in limited situations, the irony is that tax planning for advisory fees has itself become a compelling tax planning strategy for financial advisors!

Tuesday 6 March 2018

#FASuccess Ep 062: Building A High-Income Lifestyle Practice By Engaging With Clients Deeply And Unfiltered with Lee Munson

Welcome, everyone! Welcome to the 62nd episode of the Financial Advisor Success Podcast!

My guest on today’s podcast is Lee Munson. Lee is the founder of Portfolio Wealth Advisors, an independent RIA that manages nearly $280 million in assets under management in Albuquerque, New Mexico.

What’s unique about Lee’s practice, though, is that he built it while overcoming a rather scathing article published about him nearly 15 years ago in the New York Observer, in which he was presented as the poster-child of the excesses of the 1990s wirehouse… at the exact moment that stories on the internet that live forever became a “thing”.

In this episode, we talk in depth about Lee’s career path, from leaving his early success in the wirehouse world after both the infamous Observer article and the impact of 9/11 and the subsequent recession on the brokerage industry, to working for several years at Charles Schwab as a Schwab Private Client advisor, before ultimately founding his own solo advisory firm, and working over several years of writing on websites like Seeking Alpha and appearing on CNBC and other television media to rebuild his online persona and bring in new clients to grow the firm.

We also discuss Lee’s own process for serving clients, where he deliberately does not meet with clients on a regular quarterly basis – despite the fact that he manages their portfolios – and instead focuses not on the frequency of the communication with clients but how meaningful each touch is by engaging with them deeply and unfiltered (whether it’s in an in-person meeting once a year, or via a long email), how he justifies a fee schedule that starts at 1.5% on the first $1M despite meeting relatively infrequently with clients (by trying to delight his clients in other ways instead), and the email folder he keeps with all the positive feedback he’s received from clients, as an affirmation of the value the firm is delivering to them.

And be certain to listen to the end, where Lee talks about how he’s managed to build his practice with everything from active networking at the local level, to regularly appearing on national television… despite the fact that he’s actually an introvert, who relishes the quiet refuge lifestyle of living in New Mexico.

So whether you are interested in learning more about engaging with the media to grow your firm, overcoming adversity in the financial advisory industry, or how you can structure your fee schedule and service model based on the depth of contact rather than the frequency, I hope you enjoy this episode of the Financial Advisor Success podcast!

Monday 5 March 2018

The Latest In Financial Advisor #FinTech (March 2018)

Welcome to the March 2018 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 announcement of Fidelity’s new “Consolidated Data” platform, that aims to become a central account aggregation hub of all the relevant information regarding an advisory firm’s clients and its own business… which creates not only a newfound potential for Fidelity to create new technology value-adds for advisors, but supports Fidelity pivoting to a more open-architecture system (with a newly announced Integration Xchange that would just provide it more data to feed), and appears to be part of an even broader strategic shift that Fidelity is aiming to make Data – and not just technology – its unique custody/clearing value proposition for wealth-management-centric advisors of the future.

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

After castigating Schwab 3 years ago for including its own proprietary funds in its robo-advisor solution, Wealthfront launches a new proprietary mutual fund (at twice its base advisory fee) and defaults its taxable clients into it
LifeYield launches a new Portfolio Advantage solution that aims to make Asset Location a more central value proposition for advisors to help clients make their portfolios more Taxficient
LPL announces the launch of a new Virtual Assistant service for its advisors, though it’s not clear if the company simply wants to develop a new revenue line for its advisors, or more aggressively compete with its own OSJs
A slew of new solutions to help advisors market to and attract clients, including a new Advisor Ratings website called StackUp, a lead generation service from SmartAsset called SmartAdvisor, and a digitally-driven webinar marketing system from Snappy Kraken called Seminar Freedom
Wealthbox launches a new 3.0 version of its CRM, including a native email system with automatic two-way sync to popular email clients like Gmail, iCloud, and Outlook or Exchange Server

Read the analysis about these announcements, and a discussion of more trends in advisor technology in this month’s column, including the launch of several new Risk Tolerance Questionnaire tools from PreciseFP, DataPoints, and Capital Preferences, a new version of the robos-vs-advisors battle for consumers playing out in the small business 401(k) space between Betterment and Human Interest (formerly Captain401) versus Vestwell, a new tech-based competitor called Grove that is aiming to scale the monthly retainer fees model with tech-enabled CFP professionals, and the rise of new business intelligence software tools like Advisor Metrix and Advisor Clarity.

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!

Sunday 4 March 2018

Oscars and the Taxation of “Swag Bags”

The outfits are picked, parties planned, and the votes for the 2018 Oscar winners tallied. This Sunday, Hollywood’s nominees will gather for the 90th Academy Awards ceremony. And while most hopefuls will not be walking away with the coveted, eight...

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source https://blog.turbotax.intuit.com/tax-news/oscars-and-the-taxation-of-swag-bags-13557/

Saturday 3 March 2018

Most Overlooked Tax Deductions [VIDEO]

Here are a few overlooked tax deductions that people miss out on. I'll group them by home, and finally business. TurboTax makes it easy. Find out more here.

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/most-overlooked-tax-deductions-8658/

Friday 2 March 2018

Weekend Reading for Financial Planners (March 3-4)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the announcement that FINRA is considering a proposal that would reduce the obligation of broker-dealers to oversee outside RIAs of hybrid advisors… though it remains unclear if that means broker-dealers will finally be more hands-off from outside RIAs (and the revenue they charge for supervising outside RIAs), or simply require their hybrid advisors to either use the corporate RIA or the broker-dealer’s custody and clearing services for the outside RIA instead.

Also in the news this week is a new letter from the Consumer Federation of America urging the Department of Labor to step up its enforcement of the now-in-effect Impartial Conduct Standards under its fiduciary rule (given the recent enforcement action by Massachusetts securities regulators against Scottrade), and the announcement that David Lau (formerly of Jefferson National, which launched one of the first RIA-friendly variable annuities) is launching a new company called DPL Financial aiming to bring an even wider range of no-commission insurance products to the RIA community.

From there, we have several articles around the theme of practice management, including a look at the new HIFON study-group-cum-membership-organization for operations staff members in advisory firms, a discussion of how the Super OSJ model in broker-dealers is evolving away from “just” providing compliance oversight to a wider range of back-office support and training and technology for their advisors, and a review of the current wirehouse landscape given the ongoing unraveling of the Broker Protocol.

We also have a few articles on financial advisor pricing and compensation, from suggestions on how to handle the infamous question “How do you justify the value of your advisory firm fees?”, to a discussion about how advisory firm business and pricing models tend to change over time for an advisor, and why it’s important for larger advisory firms to have a compensation model for advisors that covers all of their needs (following Maslow’s hierarchy from covering ‘basic’ needs, to those for esteem and belonging to a community, and finally achieving greater levels of self actualization).

We wrap up with three interesting articles, all around the theme of getting your financial house in order: the first examines the rising trend of financial advice and financial wellness programs in the workplace, as employers are discovering that financial stress is so damaging to employee productivity that it actually “pays” to help employees get more financially literate and shore up their debt and emergency savings shortfalls; the second looks at new research finding that community involvement shows a strong relationship to one’s self-assessed financial well-being (providing yet another example of how giving to others helps fulfill our own happiness); and the last is a great walk-through of all the various financial documents that we should keep, don’t need to keep, or can at least scan electronically to help declutter the paper in our lives!

Enjoy the “light” reading!