News About IRS And Tax: June 2017

Friday, 30 June 2017

Weekend Reading for Financial Planners (July 1-2)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that, as predicted previously on this blog, the DoL fiduciary debate is open once again, as the Department of Labor has issued a new Request For Information (RFI) about potential modifications to the DoL fiduciary rule (including whether full applicability and enforcement should be delayed even further past January 1st of 2018, and whether a new streamlined exemption should be added for the use of clean shares). Also in the news this week were several notable industry studies, including one from PriceMetrix showing the rapid growth of fee-based accounts in brokerage firms (which in the near term are generating lower fees and less revenue as firms switch from upfront commissions to ongoing AUM fees), and a Fidelity white paper showing how tech-savvy “eAdvisors” continue to outpace all other advisors in everything from AUM to success getting HNW clients and take-home profits and even job satisfaction!

From there, we have a few technical articles on retirement strategies, including Wade Pfau on what he calls the “Four Ls” of retirement planning goals (Longevity, Lifestyle, Legacy, and Liquidity), a look at how the HEART Act of 2008 allows widow(ers) of military servicemembers to roll over up to $500,000 of SGLI and related death benefits into a Roth IRA (but with a limited 1-year time window), and how managing retirement liquidations from a blend of traditional and Roth IRA accounts is superior to the “traditional” approach of simply liquidating all pre-tax retirement accounts first and the Roth accounts last.

We also feature several articles specifically on wirehouse trends this week, from a look at what wirehouse advisors should consider when thinking about whether to break away, the intense flurry of phone calls (150 client calls in 48 hours!) it takes to successfully break away, and how wirehouses are now reinvesting into new-advisor training programs as wirehouse-to-wirehouse recruiting continues to slow.

We wrap up with three interesting articles, all focused around personal productivity and business success: the first examines the concept of a “Mastermind Group”, what it takes to form one, and best practices for running one; the second explores the research on what it takes to have moments of inspiration and creativity (either artistic, or for your business), and that the key is finding time to relax and step away; and the last looks at the growing base of personal productivity research finding that the best way to increase your results is to say “no” more often… recognizing that whenever you say “yes”, you’re just closer to running out of time and being forced to say “no” to something else later anyway, so you may as well be more proactive about saying “no” so that you still have the room to say “yes” to the right and best opportunities when they come along!

Enjoy the “light” reading!

Social Media Tips for Your Small Business

One of the great things about owning and running a business these days is the boundless opportunity. In the past, your clients likely lived very close to you. Now small businesses can have clients and customers all over the world!...

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source http://blog.turbotax.intuit.com/self-employed/social-media-tips-for-your-small-business-31196/

Thursday, 29 June 2017

How Some RIAs Sell Life Insurance Through A BGA Without A B/D

One of the primary blocking points for those at a broker-dealer who want to transition to an RIA is how to handle insurance once they make the switch. Investment portfolios can be shifted from commission-based products with 12b-1 fees to institutional shares with an advisory fee… but there are still virtually no “no-load” insurance products (and few fee-based annuity products) available to RIAs. However, the reality is, RIAs actually can sell – and get paid for – many types of insurance and annuity products, without a broker-dealer relationship!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss how RIAs can leverage a relationship with a Brokerage General Agency (BGA) to get paid for implementing most insurance and annuity products, without a broker-dealer relationship!

The key is to understand the different types of investment and insurance licenses that exist. The Series 7 exam (to become a “General Securities Representative”) is actually only necessary to get paid a commission to sell “securities” – stocks and bonds, along with mutual funds, ETFs, and variable annuities and insurance. In turn, those with a Series 7 (or a Series 6) must have an affiliation to a broker-dealer, as technically it’s the broker-dealer that sells the product and collects a Gross Dealer Concession (GDC) commission, a portion of which is then remitted to the selling broker.

By contrast, in order to sell insurance products, it’s only necessary to have a life (and health) insurance license from the state, and to get appointed by the insurance company to sell their products. In some cases, there’s an overlap – given that products like variable annuities are both an annuity and a securities product. However, for those who just want to implement term life insurance, whole life insurance, or universal life insurance that is not variable, then the advisor simply needs a life insurance license… but not a Series 6 or 7, and thus the advisor does not need a broker-dealer, either!

Of course, this still raises the question of how an RIA gets appointed by a company to sell insurance in the first place, and manages product selection across a wide range of companies. If the goal is to sell fixed products, the solution is for an RIA to work with a Brokerage General Agency (BGA). Conceptually, a BGA is similar to a broker-dealer, except they only work in the realm of (fixed) insurance products. Fortunately, there are a lot of BGAs out there to choose from (some work nationally, many work regionally, and some simply operate locally), of which many will work with RIAs – for which the primary differentiators are the BGA’s service, breadth of products, and commission payouts (though notably because insurance commissions are standardized with the state insurance department, the products themselves will generally still be the same price to the client, regardless of the BGA).

But the bottom line is that if an RIA wants to sell fixed insurance products, then a broker-dealer relationship isn’t necessary, as the RIA can work through a BGA relationship instead. Though it’s important to remember that a BGA relationship must still be disclosed on Form ADV Part 2, and that CFP professionals at the RIA cannot call themselves “fee-only” if there are insurance commissions involved (even if paid to a separate-but-related entity)!

Wednesday, 28 June 2017

Taxes 101: The Gift Tax

“It’s my money and I’ll do with it what I want.” Nice thought, but not quite true. You needed to account for it when you earned it, and likely paid tax at that time, and you need to be aware of the rules for giving it away if that’s your intention.

source http://blog.turbotax.intuit.com/tax-tips/taxes-101-the-gift-tax-2705/

IRS Extends Portability Deadline (Retroactively) Under Rev. Proc. 2017-34

Since 2011, when one member of a married couple passes away, the surviving spouse is eligible to carry over any unused portion of the deceased spouse’s estate tax exemption amount. This rule, allowing “portability” of the deceased spouse’s unused exemption (DSUE) amount, provides a substantial reduction in estate tax exposure for couples whose combined net worth is more than $5 million (or is expected to grow above that amount in the future), and reduces or eliminates the need for many couples to utilize a bypass trust in their estate plan.

However, the caveat to portability of the estate tax exemption at the death of the first spouse is that it only applies if a Form 706 estate tax return is filed in a timely manner to claim portability – even, or especially, if the estate under the filing threshold and otherwise wouldn’t even need to file an estate tax return.

Unfortunately, though, many executors don’t even realize that there is a requirement to file an estate tax return for those who are not subject to an estate tax, and the oversight often isn’t discovered until the surviving spouse subsequently passes way. And by that time, it’s too late to go back and file for portability. At least, not without submitting a potentially costly request to the IRS for a private letter ruling to be granted an extension.

To help ameliorate this common oversight of executors – and the high volume of PLRs the IRS was receiving – in 2014 the IRS granted executors the opportunity to retroactively claim portability by filing an estate tax return for anyone who had passed away since 2011, under Rev. Proc. 2014-18. Yet since those rules lapsed (at the end of 2014), it has once again become increasingly common for executors to submit PLR requests to the IRS to receive an extension for an accidentally missed Federal estate tax return deadline.

Thus, the IRS has now issued Rev. Proc. 2017-34, which grants a permanent automatic extension for the time to file an estate tax return just to claim portability, beyond the original 9 months requirement. In order to utilize the extension, the executor merely needs to file a not-otherwise-required-to-be-filed Form 706 estate tax return within 2 years of the decedent’s date of death, and note on the return that it is being filed as a permissible extension under Rev. Proc. 2017-34.

In addition, the IRS has granted prior estates yet another opportunity for retroactive portability as well. For any member of a married couple who died after 2010, there is once again an opportunity to file a (now very late) Form 706 estate tax return to claim portability, with a deadline of January 2^nd of 2018. Which allows surviving spouses (including same-sex married couples) to claim a carryover of the DSUE amount for any spouse who passed away in 2011 or later. And in situations where the then-surviving spouse also passed away and owed an estate tax, there’s even an opportunity to retroactively claim portability, and then file an amended estate tax return, and receive an estate tax refund of up to $2 million!

For most, though, the new rules simply provide an extended time window for executors to realize the need to file a Form 706 estate tax return to claim portability in the first place. Nonetheless, in situations where at least one member of a married couple passed away in 2011 or later, there is a limited time window to claim retroactive portability through the end of the year as well!

Tuesday, 27 June 2017

Can Unpaid Taxes Keep Me From Buying a Home?

If you have tax debt that you’re unable to pay, there are simple steps you can take to avoid further tax consequences. It’s important to understand the IRS can take several actions to collect if you don’t pay your taxes...

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source http://blog.turbotax.intuit.com/tax-planning-2/can-unpaid-taxes-keep-me-from-buying-a-home-30920/

#FASuccess Ep 026: Stop Asking For Referrals And Improve Your Referrability Index Instead with Steve Wershing

Welcome back to the twenty-sixth episode of the Financial Advisor Success podcast!

This weeks’ podcast guest is Steve Wershing. Steve is a practice management and marketing consultant for financial advisors, with a particular focus on how to generate more referrals to grow your business.

But what’s unique about Steve, though, is his approach to referral marketing, which starts with a simple statement: Stop. Asking. For. Referrals. And instead of asking for referrals, focus on how to make yourself more referraBLE in the first place – by having a clear niche. Because as Steve puts it, “a Niche is simply a need”, and if you can fulfill a clear need, then people with that need will be referred to you… without even asking for it. Or viewed another way, Steve finds that the best way to get more referrals is not to hunt for them one at a time, but to plant the seeds for a large number of them, and then harvest them over time.

In this episode, Steve talks about the 6 different types of niches that financial advisors can form – including technical, educational, experiential, psychosocial, affinity, and values niches – with great examples of each. And based on his own experience as a financial advisor and former broker-dealer executive, Steve talks about how advisory firms can interview their clients and leverage a client advisory board to better understand what they’re most valued for and then formulate a niche around that value over time. Because the reality is that, while it’s not required, it’s still usually easiest to build into a niche where you already have some initial connections or solution.

And be certain to listen to the end, where Steve talks about how to manage a niche practice over time, and why it’s OK that your clients may eventually move on from or outgrow your niche – because even if they came and picked you in the first place for your niche, once they’re working with you, they’ll stay for the service and the relationship they have with you as their financial advisor.

So whether you’re struggling to figure out what niche you should go for, are looking for ideas on how to create a greater focus on your niche, or are simply looking to better understand how to get more referrals (without just asking for them more often), I hope you enjoy this latest episode of the Financial Advisor Success podcast!

Monday, 26 June 2017

Did You Owe Taxes in Two States This Season? We Explain Why

For the longest time, I thought I only had to pay taxes based on where I lived. If I spent the whole year in Maryland, I’d only owe Maryland taxes, right? Wrong. If you thought the same thing, you aren’t...

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source http://blog.turbotax.intuit.com/tax-planning-2/did-you-owe-taxes-in-two-states-this-season-we-explain-why-31047/

CFP Board Commission On Standards Expands CFP Fiduciary Duties… But Can It Enforce Them?

After a nearly 18-month process of working to update its Standards of Professional Conduct, the CFP Board’s Commission on Standards has released newly proposed Conduct Standards for CFP professionals, expanding the breadth of when CFP professionals will be subject to a fiduciary duty, and the depth of the disclosures that must be provided to prospects and clients.

In fact, the new CFP Board Standards of Conduct would require all CFP professionals to provide a written “Introductory Information” document to prospects before becoming clients, and a more in-depth Terms of Engagement written agreement upon becoming a client. In addition, the new rules also refine the compensation definitions for CFP professionals to more clearly define fee-only, limit the use of the term fee-based, and updates the 6-step “EGADIM” financial planning process to a new 7-step process instead.

Overall, the new Standards of Conduct appear to be a positive step to advance financial planning as a profession, more clearly recognizing the importance of a fiduciary duty, the need to manage conflicts of interest, and formalizing how CFP professionals define their scope of engagement with the client.

Ironically, though, the CFP Board’s greatest challenge in issuing its new Standards of Conduct is that the organization still only has limited means to actually enforce them, as the CFP Board can only mete only public admonishments or choose to suspend or revoke the CFP marks, but cannot actually fine practitioners or limit their ability to practice. And because the CFP Board is not a government-sanctioned regulator, it is still limited in its ability to even gather information to investigate complaints in the first place, especially in instances where the complaint is not from a client but instead comes from a third party (e.g., a fellow CFP professional who identifies an instance of wrong-doing).

In addition, the CFP Board’s new Standards of Conduct rely heavily on evaluating whether the CFP professional’s actions were “reasonable” compare to common practices of other CFP certificants… which is an appropriate peer-based standard for professional conduct, but difficult to assess when the CFP Board’s disciplinary proceedings themselves are private, which means CFP professionals lack access to “case law” and disciplinary precedents that can help guide what is and is not recognized as “acceptable” behavior of professionals. At least until/unless the CFP Board greatly expands the depth and accessibility/indexing of its Anonymous Case Histories database.

Nonetheless, for those who want to see financial planning continue to advance towards becoming a recognized profession, the CFP Board’s refinement of its Standards of Conduct do appear to be a positive step forward. And fortunately, the organization is engaging in a public comment process to gather feedback from CFP certificants to help further refine the proposed rules before becoming final… which means there’s still time, through August 21^st, to submit your own public comments for feedback!

Friday, 23 June 2017

Tax Tips for Those Renting Their Home on Airbnb

As Airbnb’s popularity continues to rise, more and more people renting out their homes and learning about the tax implications that come with it. When you offer your home, or a room in your home, as a short-term rental, you may be...

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source http://blog.turbotax.intuit.com/income-and-investments/tax-tips-for-those-renting-their-home-on-airbnb-23817/

Weekend Reading for Financial Planners (Jun 24-25)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the release of the CFP Board’s newly proposed Code of Ethics and Standards of Conduct for CFP professionals, which would further expand their scope of fiduciary duty to virtually all forms of financial advice.

Also in the regulatory news this week was an interesting public comment letter from the CFA Institute about the SEC’s potential consideration of fiduciary rulemaking, suggesting that the starting point would simply be to regain control of advisor titles and labels (and require anyone who even holds out as a financial advisor to be subject to the Investment Advisers Act of 1940). And in the meantime, the state of Nevada just passed a “surprise” piece of legislation that, in just over a week, will suddenly require all financial advisors in Nevada – including those at RIAs and broker-dealers – to be subject to a fiduciary duty when working with clients, regardless of whether it’s a retirement account or not.

From there, we have a few practice management articles this week, including: how developing “Core Values” for your firm can help you figure out how to filter out who are the right clients, the right employees, and the right opportunities for the business to pursue; why it’s so crucial to have a personal support network as a financial advisor that can keep you positive and motivated when the inevitable business challenges come; and why it’s crucial for advisory firm owners and the entire leadership team to establish a clear and consistent vision for where the business is going (and then work to keep aligned on that vision).

We also cover a few articles about the intersection of financial planning and cash flow/spending behavior, from why it’s important to not just analyze a client’s household cash flow but examine the underlying financial habits they represent (e.g., how the client makes decisions about large purchases, and whether they save intermittently or automatically), to the reason why behavioral biases mean in practice consumers tend to fare better contributing to a Roth 401(k) than a traditional 401(k), and how the tendency for one member of a couple to be a “spender” can trigger marital strife (though notably, being married to a “tightwad” does not typically trigger marital conflict!).

We wrap up with three interesting articles, all focused around broader industry trends: the first looks at how the rise of no-load funds and increased transparency were associated with an explosion in the adoption of mutual funds (and ETFs), while the still-commission-based and still-transparent insurance industry has seen its sales drop by almost 50% in the past 30 years, and whether a new company called Assurance (which aims to be the Morningstar of life insurance policies) can help to change the trend; the second examines how, despite an incredible 8-year bull market, most of the financial services industry is not very exuberant, or is outright gloomy, which appears to be a result of the fact that almost all the gains of the bull market have gone to just Vanguard, while the rest of the asset management industry has failed to participate in the rally; and the last is an investigative report from Reuters, which finds that FINRA is struggling to rein in a subset of broker-dealers who continue to actively hire brokers with problematic disciplinary records, raising the question of whether FINRA is even capable of fully executing on its investor-protection mandate, and whether state securities regulators may try to expand their oversight of broker-dealers to fill the void.

Enjoy the “light” reading!

Thursday, 22 June 2017

Self Employment Taxes – How Much are They and What Do They Include?

You may have heard of self-employment tax and wondered if, and when, it might apply to you. The self-employment tax isn’t complicated: it’s a tax that is a combination of Social Security and Medicare taxes. But many people are confused...

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source http://blog.turbotax.intuit.com/self-employed/self-employment-taxes-how-much-are-they-and-what-do-they-include-31166/

Navigating Compliance Oversight When Blogging As A Financial Advisor

As digital marketing for financial advisors slowly gains momentum, there is growing interest amongst financial advisors to launch their own blog as a means to showcase their expertise. Yet the challenge, for advisors at both broker-dealers and RIAs, is that any prospective advertising content to the public must first be reviewed by compliance, and the compliance oversight process can make financial advisor blogging difficult – especially for those in a large broker-dealer environment.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss blogging as a financial advisor, the compliance rules that apply to financial advisor blogging, and the issues to consider when navigating compliance oversight, both for RIAs and those operating in the broker-dealer channel!

Because in practice blogging is more popular at this point amongst RIAs than broker-dealers, a common question is whether the compliance requirements are different between the two channels. However, the reality is that whether you’re an RIA or a broker-dealer, anything you do that advertises to prospective clients or solicits prospective clients for your business is deemed “advertising”, and is subject to compliance (pre-)review. Technically broker-dealers are covered by FINRA Rule 2210, and RIAs are covered by Rule 206(4)-1, but in the end, both have requirements that compliance should review blog content before it goes out to the public, ensure blog content isn’t misleading, and record and archive blog content for later review. Which means, the key difference between channels is not really the regulatory compliance requirements.

Instead, the key difference is actually firm size. Most RIAs are small (at least by broker-dealer standards), and operate as either solo advisors, or with just a dozen or few advisors as a large RIA. By contrast, mid-to-large-sized broker-dealers may have hundreds or even thousands or brokers. And it’s this size difference that drives major compliance differences for financial advisor blogging between channels. Because in a small (or even “large”) RIA, an advisor is either themselves the chief compliance officer, or likely knows the compliance officer very well. Which means it is easy to get buy-in from the compliance officer to take the time to review the content of a blog. By contrast, a compliance officer in a broker-dealer rarely knows the brokers who many want to blog, and the sheer magnitude of trying to oversee advertising for such a large number of brokers leads to compliance officers to adopt very strict and very limited rules that force brokers to stay inside a small box of activities!

Fortunately, there are some more progressive broker-dealers that have begun to find solutions to allow advisors to blog. But unfortunately, many of those programs have been slow to roll out. For advisors who do want to start a blog, regardless of what channel you are in, there are some things you can do to increase your odds of solving the compliance issues. First, try to work proactively with your compliance department. Explain to them what you want to write about, and, if it’s not related to products, investments, or performance, tell them, because that will make their job easier. Second, write some content well in advance, and send it to them for review. After they’ve seen your content for a while and realize it is not a compliance risk, you may find they ease up a bit.

In the end, the challenges of overseeing such a large number of advisors in the broker-dealer environment have unfortunately squelched the ability of a lot of brokers to engage in blogging, but it’s not because they can’t, or that FINRA won’t allow it. Rather, it’s because broker-dealer compliance departments are struggling to oversee a huge number of brokers that they don’t necessarily know, while the more limited span of oversight at RIAs makes it easier to expedite the process!

Frugal Alternatives to Staying Physically and Financially Healthy This Summer

Summer has officially begun and the timing couldn’t be better. Working from home with two kids under six usually means I have a full schedule and not much time to waste. It also means that if we’re looking to make...

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source http://blog.turbotax.intuit.com/income-and-investments/frugal-alternatives-to-staying-physically-and-financially-healthy-this-summer-31141/

Wednesday, 21 June 2017

How Financial Counseling Laboratories Will Change Financial Planning

It is widely acknowledged that there is both an ‘art’ and a ‘science’ to financial planning. Technical knowledge – the “science” – is crucial to delivering the technically accurate advice to clients. But the best advice in the world is meaningless if the financial advisor can’t master the “art” of delivering it in a skillful manner – leading a client to actually take action and improve their financial well-being. Yet despite its label as “art”, the reality is that how best to deliver financial advice advice can itself be subjected to scientific scrutiny. Which is beginning to happen, with the emergence of several “financial counseling laboratories” in educational institutions across the country.

In this guest post, Derek Tharp – our new Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University – examines what a financial counseling laboratory is, and how researchers are using financial counseling laboratories to subject the ‘art’ of financial planning to scientific investigation.

A financial counseling laboratory is an environment in which financial planning, counseling, or therapy research can be conducted. The space itself is akin to the kind of office with tables and chairs that financial advisors might use to meet with their clients. However, the key feature of a financial counseling lab is that it contains some unobtrusive means of observation, such as one-way mirrors or cameras, allowing the interactions between a financial advisor and their client to be scientifically measured and tested (and sometimes also monitored by students who may be gaining practical observational training, or even engage in the supervised practice of their financial planning skills).

The existence of financial counseling laboratories is important given how conducive they are to conducting highly relevant research for practitioners about how to actually be better financial planners, and get clients to engage their financial advice. In fact, some of this research is already beginning to emerge, delving into topics such as how the physical office environment influences client stress, how coaching techniques can help clients save more, and how measurements of brain activity suggest receiving counseling from an advisor with a CFP designation (relative to a non-credentialed advisor) may actually reduce stress during market declines! In essence, laboratory research – in a financial setting, examining questions relevant to advisors – may soon begin to shape the future of how financial planners interact with their clients!

Advisors who are interested in supporting or assistance with the research process have several options, from getting involved with organizations like the Financial Therapy Association (where many of the Financial Counseling laboratory researchers are engaged), collaborating with researchers themselves on future projects, contributing financially to organizations such as the CFP Board’s Center for Financial Planning, or contributing directly to the handful of universities which already have permanent on-campus financial counseling laboratories.

But the bottom line is that, for the first time ever, the “art” of financial planning itself is beginning to be subjected to scientific scrutiny, with the potential to yield important insights into the practice of financial planning, and how advisors can better get clients to actually adopt their advice!

Tuesday, 20 June 2017

Happy Summer Solstice! 4 Ways to Save This Season

Today is the official start of summer! Thoughts of vivid sunsets, theme parks, beach days and weekend getaways come to mind. All of these activities can take a toll on your bank account, but remember that you don’t have to...

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source http://blog.turbotax.intuit.com/income-and-investments/happy-summer-solstice-4-ways-to-save-this-season-23422/

#FASuccess Ep 025: Leveraging A TAMP To Roll Out Wealth Management Services In A CPA Firm with Tim Delaney

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

My guest for this week’s podcast is Tim Delaney. Tim is the co-founder of JDH Wealth Management, an independent RIA in northern California that oversees nearly $200 million of assets for 120 affluent clients.

What’s unique about Tim is that, unlike most financial advisors who started out selling life insurance or mutual funds, Tim began his career as a CPA, and it wasn’t until after 20 years of experience doing accounting and tax preparation that he decided for the first time to launch a wealth management firm, from within the existing accounting business, with a goal of leveraging the firm’s existing relationships with its tax clients to expand into wealth management.

In this episode, Tim talks about the transition from tax preparation into wealth management, why he decided from day 1 to build his wealth management business on a TAMP platform – despite the fact that it would take a material chunk of his long-term revenue – how he structured the wealth management firm as a separate entity from the tax practice, and why he ultimately decided to buy out the wealth management division and part ways from the accounting firm after more than a decade… which, as it turned out, just accelerated the growth of his wealth management firm even further!

We also talk at length about the opportunity that CPAs have in offering wealth management services to clients, how the typical accounting firm can likely generate an additional 25% of gross revenue by offering investment management services to existing clients, and why most accounting firms still fail to capitalize on the business opportunity. Which provides some interesting insights into the opportunity – and challenges – for financial advisors seeking to generate wealth management referrals from CPAs, too.

And be certain to listen to the end, where Tim talks about how he’s executing an internal succession plan, with his son who has now taken over as the managing partner, and how he structured the arrangement not to gift shares but to have his son buy into the practice over time… in large part because that’s what was necessary to balance the value of the business against what his other two children, who aren’t involved in the business, will also someday inherit.

So whether you’re a CPA considering whether to go into wealth management, an advisor trying to better understand the mindset of CPAs who offer (or may be considering) wealth management services, or are looking for perspective on why a TAMP can make a lot of sense when launching a planning-centric advisory firm, I hope you enjoy this latest episode of the Financial Advisor Success podcast!

Monday, 19 June 2017

The Passive Investing Mirage And The Disintermediation Of Mutual Fund Managers

As financial advisors increasingly adopt ETFs, the wholesale shift from actively managed mutual funds to passive investment vehicles is driving more inflows to ETF providers like Vanguard and Blackrock and State Street and than all other mutual fund families combined… and leading mutual fund companies into a mad scramble to figure out what they have to do to once again appeal to financial advisors.

Yet the reality is that, with the rise of the internet, the fundamental role of the financial advisor themselves is changing. In a world where consumers can purchase virtually any publicly traded investment online themselves, financial advisors are compelled to add value above and beyond “just” bringing third-party mutual fund managers to the table. In fact, an increasing number of financial advisors appear to be “coping” by eliminating third-party managers, and instead becoming the investment portfolio managers themselves.

In this context, the rise of ETFs is not so much about a shift from active to passive, but simply a recognition that when financial advisors build investment portfolios, we prefer to do it using ETFs as our “building blocks”, rather than individual stocks and bonds. Although in point of fact, a recent FPA Trends in Investing Survey revealed that advisors are increasingly building portfolios with ETFs, and stocks, and bonds, and even private equity funds – anything except third-party mutual funds. Which just helps to show how the shift from active to passive is really just a mirage; what’s really occurring is a process where financial advisors are remaining active, but disintermediating mutual fund managers and going hands-on to actively build the portfolio themselves, whether as an independent RIA, or under a Rep-As-PM arrangement in a broker-dealer.

Of course, the caveat is that just as many mutual fund managers have struggled in an increasingly competitive market for alpha to outperform their benchmarks, there’s no indication that individual financial advisors are any better at the process. Which means ultimately, the financial-advisor-as-investment-manager shift itself may be short-lived, as advisors further shift to providing financial planning value outside of the portfolio altogether. But until financial advisors get to the point that the majority of us truly view our value-add as going beyond the investment portfolio – where a bona fide shift to passive investing may gain further traction – the ongoing rise of ETFs will remain less about a shift to passive itself, and more about how financial advisors are defending their own fees by squeezing out the costs of the investment products they use for client portfolios!

Sunday, 18 June 2017

Happy Father’s Day! The Best Savings Tips from Our Authors’ Dads

Father’s Day is here! From life lessons to how to throw a baseball, we can learn a lot from our fathers, especially when it comes to savings. To celebrate Father’s Day, we thought it would be fun to hear what...

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source http://blog.turbotax.intuit.com/income-and-investments/happy-fathers-day-the-best-savings-tips-from-our-authors-dads-19904/

Saturday, 17 June 2017

How the Sales Tax Holiday Can Boost Your Back-to-School Savings

With several of my family members working in the education field, I know it will be only a matter of time before I’ll get tweets and Facebook shares on the back to school deals they find. Depending on where you...

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source http://blog.turbotax.intuit.com/tax-planning-2/how-the-sales-tax-holiday-can-boost-your-back-to-school-savings-19933/

Friday, 16 June 2017

Weekend Reading for Financial Planners (Jun 17-18)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with several stories on the initial aftermath of the DoL fiduciary rule becoming applicable on June 9th, including the growing number of annuity agents who are opting in to using the Best Interests Contract Exemption (instead of PTE 84-24), state insurance regulators considering whether to change the annuity suitability rules to a more fiduciary-like standard, and a look at the latest Schwab Independent Advisor survey that finds as DoL fiduciary shifts more advisors towards the AUM model and increases competition, that more advisors are feeling compelled to offer more services and spend more time with clients to justify their advisory fees (but without being able to charge more for the extra effort and offerings).

From there, we have a few technical articles this week, from Ed Slott discussing how HSAs can be used not just for ongoing health costs but as a supplemental tax-preferenced savings account for future retiree health care costs, the rise of 81-100 group trusts as a lower cost alternative for small business employer retirement plans (in a world where it’s still difficult to offer a Multiple Employer Plan [MEP]), and a discussion of what Private Placement Life Insurance (PPLI) is and where it fits for certain ultra-high-net-worth clientele.

We also have several practice management articles, focusing on hiring and building our your advisory team, including: a roadmap on how to hire top talent (by first determining core values and core competencies, and using those to screen out candidates first); why it’s better to look for “cultural add” than just “cultural fit” to improve diversity (and how hard that really is, given our tendencies to hire people like ourselves); and guidance from Julie Littlechild on how to establish a mentoring program to aid in the personal development of your team.

We wrap up with three interesting articles, all focused around homeownership, housing policy, and the country’s growing challenges with affordable housing: the first looks at how the trend of Millennials to live in the urban core of cities (instead of the suburbs) is exacerbating the housing crisis, as there simply isn’t as much room to build housing in already-densely-populated urban areas (and the high cost of land in urban centers tends to lead developers to build more expensive housing to generate a return on their own real estate investment, which just makes the problem worse); the second explores how the shift of the economy from manufacturing to knowledge workers is leading to a growing concentration of workers in urban areas (where “smart people” can meet and gather and form businesses together), which suggests the housing challenges created by urban concentration will just get worse (even as it provides an unexpected windfall for existing homeowners in major cities); and the last explores how the emerging affordable housing crisis is bringing newfound scrutiny on the popular mortgage interest deduction, which over the years has shifted to disproportionately become a tax subsidy for upper-income individuals (who can actually afford houses, and have mortgages that charge enough interest to exceed the standard deduction, and benefit the most from the deduction at their higher tax rates), and whether it’s time to reform the program into at least an alternative 15% mortgage interest credit (which would reduce the benefit for upper-income individuals, and make it more accessible for lower-income individuals, even and including those who don’t itemize their deductions at all).

Enjoy the “light” reading!

Real Talk: How Does Receiving Alimony Affect My Taxes?

We all know life can be complicated, and while taxes often touch upon the most joyful moments in life, many of our toughest times have tax implications as well. “Real Talk” is our monthly blog series that answers the tax...

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source http://blog.turbotax.intuit.com/income-and-investments/real-talk-how-does-receiving-alimony-affect-my-taxes-31089/

Thursday, 15 June 2017

Why Actively Managed Mutual Fund Performance Is About To Improve

This week is the first that financial advisors must operate under the Department of Labor’s fiduciary rule, subject to Impartial Conduct Standards which require that they must give best interests advice, for reasonable compensation, and make no misleading statements. While much has been said about the impact this will have for advisors and their clients, there’s also a not-well-discussed secondary shift that will be triggered by the DoL fiduciary rule, which will impact actively managed mutual funds and their performance in the coming years – in a “surprisingly” positive way.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss how the DoL fiduciary rule will likely end out causing an improvement in the return performance of actively managed mutual funds, thanks to the rise of clean shares and a shift in how brokers are compensated for recommending such funds!

Most predictions about the likely impact of the Department of Labor’s fiduciary rule is that it will lead to a (continued) decline in the use of actively managed mutual funds, and support the ongoing rise of passive ETFs, thanks to the fiduciary rule’s focus on low cost. But the truth is, that there actually is no requirement in the DoL fiduciary rule that financial advisors eschew actively managed funds and switch to lower cost passive funds. The only real requirement is that if an advisor is going to use an actively managed fund, that there needs to be a clear reason and justification for paying that active manager’s fee. And if you can make the case for the active manager, there’s nothing wrong with using the actively managed fund.

There is, however, a requirement to use the lowest cost share class if multiple share classes of the same fund are available. This is why we’ve seen the launch of T shares and clean shares – which either pay a uniform 2.5% upfront commission and 0.25% trails, or eliminate commissions entirely with the broker-dealer then wrapping a levelized commission around the whole fund or account. And this matters, because mutual funds currently have to report their performance net of commissions and broker compensation. But as broker-dealers shift to being compensated by levelized commissions outside of the funds (even if the consumer still pays a 1% fee via the broker-dealer equivalent to the 1% trail in a C share), the mutual fund itself will no longer have to count the broker’s compensation against their own performance!

And this is important because a lot of mutual fund managers have not been underperforming by the amount of the manager’s fee, but instead, they’ve been underperforming because of the drag of the broker’s commission compensation. Which means, “suddenly”, we’re going to start seeing the average actively managed mutual fund begin to improve on its performance… starting this week, with the rollout of the DoL fiduciary rule (and the rapidly rising adoption of clean shares in particular). Not because mutual fund managers are necessarily managing any differently or better, but simply because they’re no longer paying broker compensation out of their own performance track records! Ironically, this may even handicap RIA performance reporting relative to brokers, given that brokers typically point to mutual fund performance (which will not include the broker-dealer’s level commission payout) instead of account performance, whereas advisors in an RIA that want to market GIPS-compliant performance track records will still have to follow specific rules requiring a full accounting for fees.

In the end, this shift may still result in a roughly-similar total cost to consumers – whether it’s a 1% AUM fee, a 1% commission, or a 1% broker-dealer payout wrapped around clean shares – but the net result nonetheless is that with a shift to clean shares, reported performance for actively managed mutual funds is going to start looking better. Which means in a few years, we may suddenly be talking about how much better actively managed mutual funds are doing again. But it won’t be because “the pendulum swinging from passive to active”… or because that’s when the Fed started accelerating their rate increases… or whatever else happens economically from here. It will be because DoL fiduciary reconfigured how brokers get paid, reducing the need for 12b-1 fees, reducing the expense ratio of actively managed mutual funds, and improving the reported performance of the mutual fund itself!

Wednesday, 14 June 2017

Maximizing Tax Deductions For Long-Term Care (LTC) Insurance

With the 1996 introduction of “tax-qualified” long-term care insurance under the Health Insurance Portability and Accountability Act and IRC Section 7702B, Congress affirmed that long-term care insurance benefits are tax-free, and began to offer tax benefits for purchased LTC insurance coverage.

However, over the years the evolving landscape of both individual tax deductions in general, and long-term care insurance tax preferences in particular, have created a confusing myriad of options to purchase LTCI and receive favorable tax treatment.

In this article, we explore the full range of options, from the most favorable (purchasing on behalf of employees, or for employee-owners of a C corporation or who are less-than-2% shareholders of an S corporation), to the slightly less favorable (purchasing for owner-employees of partnerships and LLCs, more-than-2% owners of S corporations, and sole proprietors), to the least favorable (paying for LTC insurance premiums directly, subject to age-based limitations, medical expense AGI thresholds, and itemized deduction limitations). And there are also the less-common-but-also-sometimes-appealing alternatives, like using the money in a Health Savings Account (HSA) to purchase LTC insurance, or funding it via a partial 1035 exchange into a standalone LTC insurance or hybrid LTC policy.

Ultimately, the reality is that some people won’t actually have many choices about how to pay for coverage – the choice will simply be whether to purchase or not, and write a check for the premiums as the only means eligible. Nonetheless, it’s important to understand the full breadth of options for how to pay premiums on LTC insurance, especially given the nuanced but substantial difference in tax treatment across the different choices!

Tuesday, 13 June 2017

Five Military Tax Tips to Help You Keep More of Your Money

If you are in the military, we thank you for everything that you do. And Uncle Sam appreciates your service as well – the government recognizes your sacrifice and rewards you with a big basket of tax breaks. Here are five of them:

source http://blog.turbotax.intuit.com/tax-planning-2/five-military-tax-tips-to-help-you-keep-more-of-your-money-17515/

#FASuccess Ep 024: How Mindset Drives Success And The 7 Freedoms Of Limitless Advisers with Stephanie Bogan

Welcome back to the twenty-fourth episode of the Financial Advisor Success podcast!

This week’s guest is Stephanie Bogan. Stephanie is a practice management consultant for financial advisors, who founded her own very successful consulting firm, Quantivus, at the age of just 24, and ultimately sold it a decade later for 7 figures to Genworth Financial, back in 2008.

What’s fascinating about Stephanie, though, is the consulting work she’s been doing since then. Because – as with many entrepreneurs who have successfully built and sold a business, Stephanie soon realized that what she’d built and sold hadn’t really brought her the life satisfaction that she had hoped. And that in turn led her into a journey into the neuroscience of success, life satisfaction, and what helps us find purpose and meaning in our own businesses.

In this episode, Stephanie talks about the journey she went through in building her consulting practice – as a young 24-year-old women trying to give practice management advice to advisors with multi-million-dollar firms that were more than twice her age, the mindset she had to create for herself to stay optimistic through the challenges, and key practice management areas that she consulting on with advisors, including Business Strategy and Planning, Human Capital, Operations, and Marketing & Growth.

We also talk at length about how our mindset as a financial advisor and business owner can both drive our success, and often limit it without even realizing there’s a problem, leading to problems like the “Stress of Success”, why most time management problems are really an “inability to say ‘no'” problem, and what Stephanie calls the “7 freedoms of being a limitless adviser”, to free yourself from a mindset of limiting beliefs that may be holding you back.

And be certain to listen to the end, where Stephanie talks about how she helped one advisory firm overcome the all-too-common problem of saying “yes” to too many accommodation clients, and not being able to draw the line between “investment-only” clients and full financial planning clients, but creating a simple one-page visual that broke the firm’s services into 3 categories, set prices for each, and let the CLIENTS choose which tier they wanted.

So whether you’re simply looking for practice management advice and ideas from one of the industry’s leading experts, or perhaps need some help getting over a mental mindset of limiting beliefs that may be limiting your own success (without even realizing it, until now!?), I hope you enjoy this latest episode of the Financial Advisor Success podcast!

Monday, 12 June 2017

Tax Tips for Self-Employed Personal Trainers

When it comes to keeping fit, personal trainers can often keep you motivated to finish your workouts the right way. If you’re a self-employed personal trainer, your forte is probably in fitness, not taxes. Did you know there are a...

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source http://blog.turbotax.intuit.com/self-employed/tax-tips-for-self-employed-personal-trainers-31046/

Last Few Saturday Appointments for Claiming CIS Tax Refunds!

If you still haven't claimed your CIS tax refund or submitted the tax return, Taxfile can help! However, there are only a few remaining Saturday appointments left for those wishing to see us at the weekend. So, call 0208 761 8000 or book your free appointment in Tulse Hill here without delay. Your figures and records are required for the period 6 April 2016 to 5 April 2017, including CIS statements and receipts etc. Learn more about what documents you need to supply and how we can help you apply for your refund and submit your CIS tax return for you, here. Or, alternatively,

source http://www.taxfile.co.uk/2017/06/last-few-saturday-cis-appointments/

Nerd’s Eye View 2017 Reader Survey – Your Input Is Requested!

Here at Kitces.com, the goal is always to make the Nerd’s Eye View blog and the Members Section an ever-more-valuable resource for all of you, the readers. Which means we want to hear from you about what we can do to make this website even better for you.

Over the years, reader feedback has shaped everything from the visual design of the blog (from its original dense small font!) and the Disqus comment system we use, to the expansion of our Members section to offer CFP and then IMCA CE credit (and soon, CPE for accountants as well!) for Nerd’s Eye View blog posts, the launch of the Financial Advisor Success podcast, and more.

And while I’m happy with the progress we’ve been making, I’m sure there’s still more than we could do differently to serve you better. Accordingly, every year we conduct a feedback survey to all of you who read this blog, to get your thoughts and feedback about the features we’re offering, some new ideas we’re considering, and whatever other input you’re willing to share about what we could do to make this a more valuable site (and a better user experience) for you.

So regardless of what kind of reader you are: an advisor, an individual consumer who reads this blog for your own benefit, a related professional that works with financial advisors, or you’re associated with a vendor who serves advisors… I hope you’ll participate in this year’s survey. It’s only 10 questions, should take no more than a few minutes, and will remain open until the end of next week (June 24th).

Thanks in advance for taking a few minutes to click through on the “Read More” link below to access our reader survey, and share your feedback! 🙂

Weekend Reading for Financial Planners (Jun 10-11)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the implementation of the Department of Labor’s fiduciary rule, with the previously-delayed Impartial Conduct Standards taking effect today, June 9th… even as the DoL begins the public comment process of modifying the rule, and Congress proposes further legislation to potentially kill it, suggesting that the fiduciary battle is far from over, especially given that full enforcement is still not scheduled to take effect until 2018 (allowing room for further debate and at least modifications to the rule and its requirements).

From there, we have several articles around marketing and business development, including some very practical ideas on how to improve your client onboarding process to improve trust (and generate referrals), marketing ideas on how financial advisors can build the business (hint: it’s more about persistency of the marketing strategy than a super-creative idea to do something completely new!), and a look at the latest research on how we determine who to trust in the first place (in the context of both employees trusting company leadership, and prospective clients trusting a new advisor).

We also have a few technology-related articles this week, from suggestions on what financial advisor websites need to do to actually generate real prospects, to the new technology solutions coming forth (from financial planning software enhances to online risk tolerance assessment tools) to help aid in advisor digital marketing, a new kind of risk tolerance solution that uses facial recognition to detect when clients become financially stressed, a new digital 401(k) solution for financial advisors, and a look at the proliferating number of “client portals” that financial advisors can offer (none of which really do everything that a financial advisor actually needs!).

We wrap up with three interesting articles, all focused around crafting and improving the financial advisor value proposition: the first is a fascinating look at “The Elements Of Value” from a recent study published in the Harvard Business Review, finding that the key components of value break down into a series of 30 categories, organized around four categories of Functional, Emotional, Life-Changing, and Social Impact (where businesses don’t need to offer all 30, but can excel but thinking about how to be especially good at 5-10 of them); the second looks at the way one financial advisor describes his value proposition to clients, emphasizing that while most people can do it themselves with available technology tools today, few have the time, knowledge, inclination, and behavioral focus to do it well (whereas the value of the financial advisor is knowing and ensuring that it will be done right!); and the last is a look at how the rise of a fiduciary duty, coupled with the rise of technology, is leading financial advisors around the world to struggle in articulating their value proposition going forward, and suggesting that ultimately the way forward will be a shift from helping clients with the “hows” (which they can just look up online), and instead work with them on their financial “whys” instead.

Enjoy the “light” reading!

Friday, 9 June 2017

Freshly Graduated? 5 Tax and Financial Tips You Need to Know Before Entering the Real World

Life in the “real world” can be daunting, especially after the excitement of graduation. There seems to be so much to do, so it’s understandable if it feels overwhelming. You don’t need to feel that way, the first few months...

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source http://blog.turbotax.intuit.com/tax-planning-2/freshly-graduated-5-tax-and-financial-tips-you-need-to-know-before-entering-the-real-world-19986/

Investment Wholesaling And Segmenting The Four Types Of Financial Advisors

Historically, different financial advisors operated different business models depending on their industry channel – RIAs managed investment portfolios, while wirehouses sold proprietary products and securities from their inventory, and independent broker-dealers sold third-party investment products. Accordingly, asset managers and product manufacturers aligned their investment wholesalers to those channels, with one for wirehouses, another for independent broker-dealers, and a third for the independent RIA community. The challenge, though, is that as the advisor value proposition evolves, along with industry business models, and the regulatory environment, the “traditional” industry channels are breaking down as a way to segment financial advisors!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss, from the investment wholesaler perspective, the four different types of financial advisors that have emerged, how they differ based on client approach and value proposition, and how wholesalers can best add value to these different types of advisors!

The key issue is to recognize that financial advisors tend to have fundamentally different ways in which we frame our own value proposition, and approach client situations, that are no longer necessarily defined by industry channel. And this matters, because when companies with their own wholesalers are trying to reach advisors, the ways in which an advisor approaches their clients and define their own value proposition heavily impacts what that advisor will and will not see as valuable from their wholesalers!

For instance, some advisors taking a very financial planning-centric approach to clients, while others are more investment-centric. And when it comes to delivering value to clients, some are more advice-centric, and others are more product-centric. Thee various combinations result in four categories of financial advisors: (1) fee-for-service financial planners; (2) investment managers; (3) needs-based sellers; and, (4) asset gatherers.

From the perspective of the wholesaler, it is crucial to recognize that each of these segments receives different value from a wholesaler, and demands different types of products and services. Because if an advisor is an asset gatherer, they are going to want to see a product that can easily help them gather assets… but if they are needs-based sellers, they will want planning strategies and sales ideas… and if they are an investment manager, they will want products that they can manage to demonstrate their own expertise (without outsourcing to other active managers!)… and if an advisor is a fee-for-service financial planner, they will want solutions that help them simplify investment management to free up time to service clients and focus on planning. Thus, investment managers (which might be an RIA or a Rep-As-PM at a broker-dealer) tend to use stocks, bonds, and ETFs, but asset gatherers (which might be RIA or at a broker-dealer) are more likely to use multiple TAMPs and SMA, and fee-for-service financial planners (usually RIAs) will typically just use one TAMP for all of their assets and be uninterested in individual investment products at all!

The bottom line, though, is simply to recognize that the whole advisory industry is in the midst of reorienting itself, and trying to segment financial advisors by wirehouse, broker-dealer, and RIA industry channel no longer works. Advisors are reinventing their value propositions and where they focus, while DoL fiduciary further forces firms to re-draw their lines and tech innovation accelerates these trends. Which means, if wholesalers want to reach financial advisors and add value to them, wholesalers need to pay attention to the four different types of financial advisors!

Wednesday, 7 June 2017

Dynamic Retirement Spending Adjustments: Small-But-Permanent Vs Large-But-Temporary

The origin of the “safe withdrawal rate” approach was simply to set retirement spending low enough to survive the worst historical sequence of returns we’ve ever seen; if a future scenario was comparably bad, the retirement portfolio would make it to the end, and if market returns turn out better, the retiree simply has to decide what to do with their “extra” money.

The caveat, however, is that for at least some retirees, the approach of “be conservative upfront, and increase your spending later if returns permit” is not very appealing. Instead, it’s more desirable to spend more in the early years, and simply engage in spending cuts if returns end out being less favorable. Except remarkably little research has ever delved into what the best approach is to cutting spending, if it actually does become necessary to make adjustments in order to stay on track!

In this guest post, Derek Tharp – our new Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University – analyzes safe withdrawal rates based on various dynamic spending adjustments retirees could choose to adopt, finding that small-but-permanent strategies are generally both more effective, and realistically implementable, than large-but-temporary spending adjustments.

Notably, this is different than how many retirees often react when a substantial market decline occurs, where the instinctive response is often to engage in substantial spending cuts for a “temporary” period of time, until the market recovers. For instance, if there’s a precipitous market crash of at least 20%, the retiree might trim spending by 20% as well for the next 3 years, until the portfolio recovers. Even if engaging in such spending cuts present serious strains to the retiree’s current lifestyle.

Except as it turns out, engaging in a more rapid series of smaller – but permanent – spending cuts can be even more effective. For example, rather than cutting spending by 20% for 3 years after a market decline, if the retiree simply commits to trimming real spending by 3% (permanently) in any year that market returns are negative – approximately the equivalent of forgoing an inflation adjustment during the down year, and a fairly trivial spending adjustment for most retirees – the safe withdrawal rate rises by almost 0.5% (to more than 4.5%). With the large-but-temporary cut, the safe withdrawal rate only rises by 0.1%, instead.

Ironically, it may feel to retirees that engaging in “small” cuts aren’t enough to ameliorate the consequences of a significant market decline early in retirement. Yet the reality is that the cumulative effect of small cuts really does add up – more than engaging in large-but-temporary cuts – in a manner that not only helps keep retirement on track if there’s an unfavorable sequence of return, but arguably better aligns to how most retirees spend as well, where real inflation-adjusted spending typically declines in the later years anyway. And of course, if market returns are actually favorable, the retiree not only avoids substantial spending cuts, but enjoys the benefit of starting their retirement spending from a higher level in the first place!

Can You Write off Solar Panels?

Hot enough for you? As summer starts to heat up, most of us begin to think of ways to keep cool. And you might be wondering about ways to get tax credits and deductions for the cost of doing so....

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source http://blog.turbotax.intuit.com/tax-deductions-and-credits-2/home/can-you-write-off-solar-panels-31004/

Self-Employed? Don’t Forget About the Estimated Tax Deadline

Perhaps you’ve taken the plunge into self-employment. Congrats on being your own boss! Whether you’re working as a contractor or making money in the fast-growing sharing economy, don’t forget you may need to pay estimated taxes. The upcoming second quarter estimated...

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source http://blog.turbotax.intuit.com/self-employed/self-employed-dont-forget-about-the-estimated-tax-deadline-19852/

#FASuccess Ep 023: Delivering Workplace Financial Wellness With A Salaried CFP Career Path with Liz Davidson

Episode 023 Feature Liz Davidson Welcome back to the twenty-third episode of the Financial Advisor Success podcast!

My guest this week is Liz Davidson. Liz is the founder of Financial Finesse, the largest independent provider of workplace financial wellness programs, that leverages CFP professionals to provide financial education and financial coaching to employees in the workplace.

What’s fascinating about Liz’s firm is that in a world where most financial services providers aim to deliver financial wellness and education as a lead-in to selling a product, or an avenue to build lucrative advisory relationships with the executives and key employees, Financial Finesse is truly dedicated to simply helping employees improve their financial wellness, and is solely paid on a flat-fee basis from employers to provide their services.

In this episode, Liz shares the way that Financial Finesse justifies and demonstrates to employers how paying to improve the financial wellness of employees really does lead to a Return On Investment for the employer by reducing employer costs on everything from employee absenteeism to health care claims, how they reach employees through a combination of an online platform, one-to-many workshops, and one-to-one coaching, and the ways they tried – and failed – to approach the challenge of financial wellness in a direct-to-consumer approach before pivoting to work through employers.

You’ll also hear about the incredible business opportunity that Financial Finesse is creating for CFP certificants, who have the chance to earn an $80,000 base salary, plus bonuses that can take them to a six-figure income, simply by providing financial education and coaching to clients, without any obligations for sales, production, or business development – an entirely new channel and career path for expanding the reach of financial planning.

So whether you’ve been curious about the opportunities to deliver your own version of a financial wellness program in the employer channel, or are a CFP looking for ideas on a new career path, or simply want some fresh perspective on new ways that financial planning is being delivered, I hope you enjoy this latest episode of the Financial Advisor Success podcast!

Monday, 5 June 2017

The Latest In Financial Advisor #FinTech (June 2017)

Welcome to the June 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 not-so-surprising news that “robo-advisors” are increasingly pivoting towards offering human advisors and pursuing a more affluent (i.e., not-necessarily-Millennial) clientele, and the somewhat-more-surprising news that one new robo platform – BrightPlan – has decided to enter the marketplace by raising $25M of capital and using it to buy an existing $3.6B life-planning-oriented (and human-advisor-based) independent RIA, raising the question of whether advisor tech companies could become an entirely new buyer category in the world of advisor M&A and whether existing RIAs may actually be a superior way to distribute new technology (rather than trying to compete with them!).

From there, the latest highlights also include:

Envestnet is beginning to reveal how it intends to leverage its Yodlee acquisition, by building out client-facing PFM (Personal Financial Management) solutions that help clients track not only their long-term financial plans, but their shorter-term cash flow and spending as well.
Apex Clearing appears to be making a move into the independent RIA community to compete against Schwab, Fidelity, and TD Ameritrade, leveraging “robo-advisor-for-advisor” software solutions like RobustWealth and AdvisorEngine to reach financial advisors, even as Wealthfront pivots away from building on Apex.
Morningstar appears to be working on its own financial planning software tools, though it’s not yet clear if they’ll be for financial advisors, or it “self-directed” consumer tools offered to retirement plan sponsors.
Following on the heels of popular Social Security software for advisors, a number of providers are now building Medicare planning software solutions for advisors who want to further differentiate their expertise with retirees and justify their value proposition beyond the portfolio alone.

You can view analysis of these announcements and more trends in advisor technology in this month’s column, including a fascinating look at why, exactly, performance reporting software for advisors is so expensive (the answer: a lack of quality data and poor data standards in the data feeds from custodians), whether Amazon Alexa may become a new communication channel for financial advisors to reach their clients, and the news that XY Planning Network is running its second annual FinTech competition for advisor technology startups (deadline for those who wish to enter: June 15th).

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!

It’s Summer…Can I Deduct My Child’s Camp Costs?

It's summer and your kids are out of school and off to camp and day care. Are these summer expenses eligible for your child care credit?

source http://blog.turbotax.intuit.com/deductions-and-credits/its-summer-can-i-deduct-my-childs-camp-costs-175/

Friday, 2 June 2017

Weekend Reading for Financial Planners (Jun 3-4)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big news that the SEC has issued a new request for public comment on standards of conduct for brokers and investment advisers, raising the question of whether the SEC will finally act on a fiduciary rule, just as the Department of Labor’s version takes effect on June 9th… and whether a new SEC fiduciary standard would help level the playing field for investment advice, or risk just watering down the fiduciary standard instead.

From there, we have a series of articles looking in particular at the broker-dealer industry as the DoL fiduciary rule rollout looms in the coming week, from a discussion of UBS’s new compensation changes for retirement accounts (eliminating commissions and production payments in lieu of a simpler asset-based compensation system), to a look at how Merrill Lynch’s commission ban and step away from wirehouse recruiting makes it look as though the company might be pivoting itself to become a giant national RIA, how Morgan Stanley is developing new technology to make its fiduciary advisors more proactive with clients, an industry survey of broker-dealer presidents finding that concerns about adapting to the DoL fiduciary rule have become all-consuming for most (to the point that they may be neglecting key investments into advisor technology tools), a look at the ongoing plight of the small broker-dealer, and whether the ongoing diminishment of the broker-dealer community may lead to the diminishment of FINRA itself (unless, perhaps, the organization reinvents itself as the new overseer of a uniform fiduciary standard?).

We also have a few more technical articles, including strategies to (legally) delay or minimize the impact of RMDs, the benefits of using a trusteed IRA (as an alternative to the typical custodial IRA arrangement), and how tolerance-band rebalancing strategies can increase returns (by helping to leverage market momentum, though not necessarily as much as just engaging in an actual momentum strategy!).

We wrap up with three interesting articles, all focused around the brain and how we think and learn: the first looks at how our brains actually take in and interpret information, driven primarily by a small section of the brain’s left hemisphere whose job is to interpret what is happening around us (but given its limited information, the interpretation isn’t always accurate or correct in its assessments!); the second explores the difference between “long-term” and “expiring” knowledge, recognizing that most people spend their time consuming the latter (e.g., news headlines and cable TV), and not enough on the former (obtained through reading books, and perhaps the occasional long-form blog post!); and the last looks at how, if you really want to make progress, the key is not just to set goals for yourself, but to establish systems that you can execute to get there… recognizing that if you’re really good at creating effective systems for yourself, you may not even need to set goals in the first place!

Enjoy the “light” reading!

Tax Tips for Same-Sex Couples

In honor of June being National LGBT Pride Month, we’re breaking down filing tips for same-sex couples. In 2013, the IRS began recognizing marriages between same-sex spouses if they were valid under state law where the marriage took place. Since...

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source http://blog.turbotax.intuit.com/tax-planning-2/tax-tips-for-same-sex-couples-2-21313/

Thursday, 1 June 2017

How Do Online Classes Affect My Taxes?

Now that you’re in summer-time bliss on break from college you may be dreaming of sleeping in late for a few months until fall, but summer may be a great opportunity to get ahead and take a course or two....

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Monte Carlo Investment Assumptions In Your Retirement Planning Projections

Monte Carlo analysis is a superior retirement planning approach to the standard “straight-line” retirement projection, because it implicitly considers not only average returns, but a range of potentially volatile returns, allowing the prospective retiree to understand how the retirement plan might fare in various scenarios. However, with the additional capability to illustrate a range of volatile returns – potentially across multiple investments or asset classes – comes a greater burden to craft appropriate investments assumptions for the Monte Carlo analysis. Otherwise, there’s a risk that the Monte Carlo analysis could mis-state the risks of various retirement portfolios.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss how Monte Carlo investment assumptions impact retirement planning projections, and particularly how important it is to include an appropriate correlation matrix when including multiple investments or asset classes in a Monte Carlo projections. As failing to include a proper correlation matrix will generally lead to a retirement projection that understates risk and overstates the probability of success!

The key issue is that when selecting investment assumptions for a Monte Carlo analysis, there are three core points of data that are necessary for each investment: expected return, volatility, and correlation. And correlations are much more challenging assumptions, because it’s necessarily to make an assumption for the relationship between each investment and every single other investment paired to it! And a rising number of investments necessitates dramatically more correlation pairs – as a result, 3 investments requires 3 correlations, but 5 investments requires 10 correlations, and 10 investments requires assumptions for a whopping 45 correlation relationships!

And the reality is, given the underlying math of a Monte Carlo analysis, even making no correlation assumption is an assumption. It’s just an implicit assumption of zero correlation… which is actually a very dangerous assumption, because, in the real world most investments don’t have zero correlation. Yet by assuming zero correlation when the correlation is actually higher, the projection ends out overstating the benefits of diversification, and therefore understating the risk to the retiree and overstating their probability of success in retirement!

In the end, this doesn’t mean it’s bad to have a diversified portfolio, but it’s crucial to recognize that adding more investments to a Monte Carlo analysis doesn’t necessarily make it more “accurate”, and in fact will decrease the accuracy of the projection unless the entire correlation matrix is properly included (with appropriate assumptions). As a result, a better practical approach for many advisors may be to utilize simpler two-asset-class portfolios of stocks and bonds for Monte Carlo purposes… as while this may slightly understate the benefits of having a fully diversified portfolio, at least it won’t overstate the benefits, and it is far easier to help a client adjust to a retirement that is going better than expected, than to adapt to one that is going worse!