News About IRS And Tax: October 2018

Wednesday, 31 October 2018

Top 10 Reasons Why Taxes Aren’t Scary

How do you feel about taxes? If you’re like some, they can seem intimidating! I know I felt that way years ago when I was first starting out as a freelancer, but it turns out with all of the tools,...

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source https://blog.turbotax.intuit.com/tax-planning-2/top-10-reasons-why-taxes-arent-scary-41914/

How Do You Actually Create A Steady Retirement Paycheck From A Volatile Retirement Portfolio?

For prospective retirees who don’t simply want to annuitize most or all of their wealth, determining how best to invest a retirement portfolio to generate income is a substantial challenge. Not only because of the need to invest for enough growth to sustain inflation-adjusting retirement distributions over time, and managing portfolio volatility to avoid triggering an adverse sequence of returns in the first place… but also because, as retirement investing has evolved beyond simple strategies like “buy the bonds and spend the coupons” and into more total return strategies, it’s surprisingly difficult to come up with a system to actually generate the distributions themselves.

After all, most prospective retirees who are looking at making the transition away from work have spent the better part of 40 years paying their ongoing bills from a steady series of monthly or perhaps bi-weekly paychecks. Which means the most straightforward way to facilitate retirement is simply to re-create those ongoing retirement paychecks. Except as noted, modern retirement portfolios – especially those that include both income and growth (i.e., capital gains) components – aren’t necessarily conducive to generating consistent retirement paychecks. At least not without creating a system behind the scenes to ensure the cash will be there as needed.

Over the years, advisors have created a number of different systematic approaches to address the retirement paychecks challenge. For some, it’s about investing into a “traditional” income-generating portfolio of bonds and dividend-paying stocks (perhaps supplemented today by income-generating alternatives like REITs and MLPs), and simply passing through the income as received. For others, it may start with accumulating interest and dividends, but then “topping up” the portfolio’s cash with periodic liquidations of capital gains. For still others, with the ongoing decline of transaction costs, the approach has shifted to simply keeping all cash fully invested, and making liquidations as needed in real-time to generate retirement distributions without any cash drag at all!

Whatever the particular methodology, though, any advisor needs to be able to answer a number of important questions about their mechanical process of generating retirement paychecks, including how they will handle dividends and interest, whether there will be a cash position (or not), how capital gains liquidations will be handled (in various up- and down-market scenarios), the frequency of distributions (monthly, quarterly, or annual?), the sources of distributions from various account types, and how those distributions will be coordinated with the rest of the client’s retirement income picture (from Social Security to pensions and annuities to reverse mortgages).

The bottom line, though, is simply to recognize that the mechanical challenge of how to actually generate those retirement “paychecks” that transitioning retirees are accustomed to, is an entirely separate matter from just investing the retirement portfolio itself, and entails a number of distinct policy-based decisions about how to standardize a process for a wide range of retirees. In turn, advisors might even consider creating Withdrawal Policy Statements to then codify the processes they will use to generate retirement income withdrawals, just as an Investment Policy Statement is used to codify the processes used to invest the retirement portfolio itself!

Tuesday, 30 October 2018

#FASuccess Ep 096: The 7 Pillars Of Running An Advisory Firm Like A Real Business With Stephanie Bogan

Welcome back to the 96th episode of the Financial Advisor Success podcast.

This week’s guest is Stephanie Bogan. Stephanie is a successful practice management consultant who built and sold her first consulting firm and now has gone on to found a new one called the Limitless Adviser Coaching Program. What’s unique about Stephanie, though, is that despite the fact that she doesn’t need to build another practice management coaching business for advisors, she’s doing so anyways as a means to have a greater positive impact on the advisor community, and in the process, teaching other advisors how to build their businesses to achieve their ideal outcomes as well.

In this episode, we talk in depth about what Stephanie calls the seven pillars or simply the 7P’s of building and running a successful advisory firm. Starting with the key step of planning for what outcome you want to create for your firm, then figuring out how to position the firm to reach the right clientele, and then following through with the packaging, promotion, process, platforms, and people that are needed to implement the vision. Because the irony is that, while most financial advisors are independent entrepreneurs, very little practice management in the industry actually teaches the real methods to build and run a business.

However, we also talk about how in the end improving the methods in your advisory business really actually creates any real breakthroughs, as most of the time the ceilings we hit in our businesses are not actually just a function of how we’re doing the business or whether we’re doing it wrong, instead, most growth ceilings are actually a mindset problem. And once you make the decision to change your mindset, the status quo, and do something differently, it suddenly opens new doors to execute the business differently. And it’s then walking through the newly opened doorways that can really create business breakthroughs.

And be certain to listen to the end, where Stephanie talks about how in the long run the key to success and satisfaction with your advisory business isn’t really about the size of the firm or what you build at all, it’s about figuring out what outcome will make you happy in the business and then crafting a pathway to achieve that vision. Because, just as we as advisors experience with our own clients, few people find satisfaction even with tremendous financial success until you can articulate the non-financial goals you’re really trying to achieve in the first place.

Monday, 29 October 2018

Get Ahead of Holiday Spending with These Seasonal Side-Gigs

With the holidays approaching, some people are beginning to stress out. Buying gifts can be a joy, but it can also be a huge hit to the wallet. According to one study, the average American spent over $900 on gifts!...

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source https://blog.turbotax.intuit.com/self-employed/get-ahead-of-holiday-spending-with-these-seasonal-side-gigs-41878/

Sports Gambling and How Your Winnings are Taxed

You may be headed to the racetrack, casino or to make your sports bet, hoping to win big. But you might be surprised that Uncle Sam has his fingers crossed for your good fortune as well.

source https://blog.turbotax.intuit.com/income-and-investments/sports-gambling-and-how-your-winnings-are-taxed-2-17916/

Daylight Savings Countdown: Energy Tips to Brave the Cold

With winter cold approaching and Daylight Savings ending here are some energy tips from Jim Wang to help brave the cold.

source https://blog.turbotax.intuit.com/tax-planning-2/daylight-savings-countdown-energy-tips-to-brave-the-cold-18232/

How “Robo” Technology Tools Are Causing Fee Deflation But Not Fee Compression

After years of forecasting that robo-advisors would cause fee compression – at best reducing the profitability of advisory firms, and at worst compelling them to fold or at least merge in search of economies of scale to compete – the latest InvestmentNews Pricing and Profitability Study shows that after holding steady since 2012, pricing power of advisory firms took a precipitous downturn in the past two years, with the average revenue yield of an advisory firm falling from 77 basis points to just 69bps since 2015.

The caveat, however, is that even as advisory firm fees may be slipping, the operating profit margins of advisory firms held steady… and did so regardless of the size of the advisory firm. In other words, while fees may be starting to decline, there is no evidence that it’s adversely impacting the profitability of advisory firms… nor that there’s any need to merge, grow, or gain economies of scale to survive and thrive in a lower fee environment.

The reason for this miraculous combination of lower advisory fees and steady advisory firm profitability: productivity. In just the past few years, the average number of clients per staff member, and revenue per staff member, is up a whopping 18%, more-than-fully offsetting any decrease in an advisory firm’s average revenue yield! In other words, “robo” technology isn’t causing fee compression and putting advisory firms out of business; instead, it’s reducing the cost of doing business in the first place, leaving firms room to cut fees, in a phenomenon that looks more like “fee deflation” than “fee compression”!

The caveat, however, is that while advisory fees were able to decline in recent years on the back of improvements in staff productivity, the productivity of financial advisors themselves decreased by 22% in recent years, as advisors are compelled to deepen client relationships and do more work with fewer clients to justify their advisory fees in the first place.

The significance of this trend is that a decline in advisory fees (potentially increasing the appeal of consumers to hire a financial advisor), coupled with a decline in advisor productivity (as advisors do more for each client), may soon make the industry’s looming talent shortage (given the 50-something average age of a financial advisor) far more acute. As even today’s financial advisor population can barely serve 15% of all US households, and the CFP certificant population is only numerous enough to serve 4% of households.

Which means, ironically, the greatest threat to the profitability and growth of advisory firms today is not that robo-advisors are or will compress fees, but simply that there aren’t enough financial advisors in the aggregate to capitalize on the opportunities being wrought by the positive fee-deflationary impact of robo technology efficiencies!

Friday, 26 October 2018

Weekend Reading for Financial Planners (Oct 27-28)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the interesting news that after several years of scandals, two Wells Fargo brokers are actually suing the company and claiming that because the company recruited them with forgivable loans but without disclosure of the impending scandals, that they shouldn’t be required to repay the forgivable loans now that they’re leaving the firm to distance themselves from Wells’ damaged reputation (and potentially setting the ground work for other brokers in the future to sue their platforms for scandals that impair their advisors’ ability to attract and retain clients?).

Also in the news this week was a big “Diversity Summit” hosted by the CFP Board’s Center for Financial Planning where the organization shared research about what financial services needs to do to improve its diversity (and stay relevant in a world where fewer than 3.5% of CFP certificants are black or Latino even though within 30 years people of color are projected to be the majority of the U.S. population!), and a look at a recent Cerulli research study finding that notwithstanding industry buzz about fee compression actual surveys to end consumers suggest that they are not nearly as fee-sensitive as most advisors fear (in part because consumers still aren’t clear enough on the value of financial planning from different advisors in order to price-comparison-shop them in the first place!).

From there, we have a number of retirement planning articles, including a look at end-of-year IRA tax planning strategies (from partial Roth conversions to Qualified Charitable Distributions from IRAs), an analysis of the so-called “Tax Torpedo” (when the taxation of Social Security benefits phases in, and retirees are temporarily boosted from the 24% tax bracket to a 40.7% marginal tax rate), and a review of some lesser-known-but-still-important IRA tax rules… from how the once-per-year 60-day rollover rule can impact spousal IRAs, to the fact that while inherited IRAs cannot be converted to a Roth account, inherited 401(k) plans can be (but are still not as appealing to convert as an individual’s own IRA and 401(k) accounts!).

We also have several articles specifically on referrals, including a reminder that how you initially respond to the person who makes the referral can have a significant impact on whether you get any more referrals from them in the future, to what to be wary of so you don’t turn off an otherwise-warm referral lead, and why it’s important to communicate how you will handle referrals that are not in your target market (so those who might refer to you don’t have to worry about what happens if they refer a friend, family, or colleague who might otherwise be “rejected” by you and embarrass them in the process).

We wrap up with three interesting articles, all around the theme of how to more productive and find more energy in your day: the first looks at how to arrange your activities throughout the day to get the best results (complex work in the morning, creative work in the late afternoon!); the second draws on a big list of productivity tips from various experts in order to get things done more effectively; and the last is a fascinating look at the latest research from Tom Rath’s “Are You Fully Charged?” about what it actually takes to bring more energy to your daily activities and literally feel more energized about what you do in the first place.

Enjoy the “light” reading!

Wednesday, 24 October 2018

When Clients “Need” More Risk Than They Can Tolerate: Adjusting Portfolios, Or Goals?

It is a standard requirement in financial services that financial advisors must first determine an investor’s risk tolerance before making any investment recommendations for their portfolio. Yet in the modern era, good financial advisors don’t just invest a portfolio for growth or preservation of principal alone, but to achieve the investor’s goals, and whatever required return (and associated risk) those goals necessitate. Except in practice, doing so is sometimes impossible – because not all investors are able to tolerate the amount of risk they need in order to achieve their goals in the first place!

For financial advisors, this leads to two alternative paths for implementation. The first is to take a more “authoritative” approach, where the financial advisor is literally “the authority” – the expert – whose job is to implement whatever the investor needs to achieve the goal (i.e., to invest them for what they need, regardless of their tolerance), and then bears the responsibility to help their clients stick with the plan and stay the course (i.e., “behaviorally manage”) through the inevitable market downturn. By contrast, the second option is a more “accommodative” approach, where the financial advisor may educate and make suggestions to the investor about why they need (and should be more comfortable with) a greater level of risk, but in the end accommodate however the client wishes to invest (since it’s their money and their decision in the end, even if it’s a path inevitably doomed to failure by generating insufficient returns).

On the other hand, arguably the real problem is not just about deciding whether to be more authoritative or accommodative with respect to an investor’s mismatch between their need for risk and tolerance to take it, but recognizing that their need for risk is so (problematically) high because their goal itself is very demanding and risky in the first place. Which means the best path forward may not be about trying to determine the “optimal” portfolio at all (because there really isn’t one) but is instead about helping clients to adjust their goals such that they don’t need more risk than they can tolerate in the first place. In other words, the advisor doesn’t need to be authoritative or accommodating of the client’s high-risk-need and low tolerance if the goals can be adjusted so the client no longer has that high-risk need after all!

Or stated more simply, in a world where portfolios aren’t just invested for growth or preservation of principal in the abstract, but specifically to achieve certain goals, the first step of the process is not to align the portfolio to the client’s risk tolerance, but to align the goals (and the amount of risk they would necessitate) to the client’s risk tolerance in the first place. Because once goals themselves are aligned to risk tolerance… implementing the optimal portfolio turns out to be remarkably straightforward!

Tuesday, 23 October 2018

How Your Lottery Winnings Are Taxed

The Mega Millions lottery jackpot is at 1.6 billion! Everyone is scrambling around today getting last minute tickets and hoping to be the winner of the largest jackpot in lottery history. But lottery participants aren’t the only ones excited about...

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source https://blog.turbotax.intuit.com/tax-planning-2/how-your-lottery-winnings-are-taxed-41882/

How to Save Money on Halloween with DIY

One of the scariest things about Halloween is how much Americans spend to celebrate. In fact, the total spending for Halloween this year is expected to reach $9 billion. Most people are planning to spend an average of $86.79 on candy, costume and...

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source https://blog.turbotax.intuit.com/income-and-investments/how-to-save-money-on-halloween-with-diy-20406/

#FASuccess Ep 095: The Never-Ending Process Of Iteratively Building An Advisory Firm with Linda Lubitz Boone

Welcome back to the 95th episode of the Financial Advisor Success podcast.

This week’s guest is Linda Lubitz Boone. Linda is the founder of Lubitz Financial Group, an independent RIA in the Miami area that oversees nearly $250 million of assets under management for 125 affluent clients. What’s unique about Linda, though, is that despite having reached a phenomenal level of success building a $250 million AUM firm over the past 25 years, she continues to proactively iterate on and make changes to improve the advisory firm, from the service provider she uses to support the business, to the very business model itself.

In this episode, we talk in depth about how Linda continues to evolve her advisory firm. From exploring a potential shift from charging an AUM fee plus an upfront planning fee, into a consolidated income plus net worth retainer fee instead, as a way to shift the focus of clients away from the portfolio and towards growing their entire net worth instead, the decision to outsource her back-office investment operations to a third party provider but without fully transitioning to a TAMP, and how Linda is shifting her own role in the business to transition new and existing clients to her next-generation advisors while formalizing a business development training process for the firm.

We also talk about how Linda got started in the first place. The way she built her business in the early years with the philosophy of, “Meet a lot of people, answer the phones quickly, and do what you say you’re going to do,” why it’s so crucial to plan to cover two to three years of personal living expenses when starting an advisory firm, even if you’re confident it’s going to succeed, and how joining or even forming your own study group to have a network of peers to hold you accountable to your own business plan can help keep the advisory business focused and growing.

And be certain to listen to the end, where Linda shares how she made a key personal life transition in the midst of growing her business, splitting 50% of her time between her home base in Miami and out to San Francisco, where her then-new husband’s firm was based, and how in the end, even though we’re often so fearful about how existing clients will react to a change, in reality, once clients trust us, they tend to stick with us and even support us in our own life changes as advisors.

And so with that introduction, I hope you enjoy this episode of the “Financial Advisor Success” podcast with Linda Lubitz Boone.

Monday, 22 October 2018

How Much Does It Cost to Attend the World Series?

With tickets to the game ranging from $600 to over $2,000, airline flight tickets averaging $1,000 round-trip, and hotel prices at a $200 minimum each night, making a trip for the big game could end up costing you $2,000 or...

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source https://blog.turbotax.intuit.com/income-and-investments/how-much-does-it-cost-to-attend-the-world-series-24630/

17 Steps To Successfully Transitioning Clients As A Breakaway Broker To An RIA

While a growing number of advisors who have built AUM practices at a broker-dealer have been making the switch to the RIA channel as a pathway to have better control over their businesses and how they serve their clients, the transition itself is still fraught with risk. At best, launching your own RIA – or even joining an existing one – entails an immense amount of paperwork to transition clients from the old firm to the new one, even as the prior firm may take steps to try and retain them. At worst, the onslaught of required paperwork causes mistakes to be made and transfers to slip through the cracks… undermining client confidence and leading them to decide not to make the switch with the breakaway broker after all.

In this guest post, Grier Rubeling of Advisor Transition Services details what it really takes to make a transition successfully – along with practical tools and templates she’s built – based on her real-world experience as part of a firm that made the transition, and then founding an Advisor Transitions business to help many more advisors work through the transition process since then. Because the reality is that in a high-stakes competitive environment, where the breakaway broker is trying to persuade clients to come along as the prior firm fights to retain them… there is very little room for error.

The key to a successful transition process is to lay the proper foundation to begin with. Not just with respect to the formalities of creating the legal RIA entity and establishing a custodial relationship, but planning out each step of the transition process in advance, and putting the necessary tracking systems in place, so that when the time comes to hand in the resignation letter… the breakaway broker can hit the ground running immediately.

Unfortunately, even when done well, a breakaway transition can take many months of detailed tracking and client interaction to ensure that every account is opened and transferred and funded properly before the burden finally eases. Nonetheless, there are a lot of practical time-saving tips that can be employed along the way to make the transition process at least a little easier to manage!

Friday, 19 October 2018

Fall Family Activities That Fit In Any Budget

While I remember plenty of crisp (and let’s be honest, cold!) October days in upstate New York, here in North Carolina, it’s much milder. Still, the signs of fall are all around us and I think half of our yard...

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source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/family/4-fall-family-activities-that-fit-in-any-budget-32300/

Weekend Reading for Financial Planners (Oct 20-21)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big news that decent all the recent buzz, it appears that the SEC may be waiting nearly a year to release a final version of its Regulation Best Interest advice rule… but only because the Department of Labor may also be working in coordination with the SEC on its own version of an updated fiduciary rule as well. And also in the news this week is an announcement by the CFP Board that the organization is expanding its Mentor Match program, from what over the past two years was focused primarily on mentoring for young women entering financial planning (as part of its Women’s INitiative or WIN program), to be available to any CFP certificant instead.

From there, we have a number of additional articles on retirement planning, from a look at the rise of “financial freedom” and “financial independence” as an alternative to the traditional label and approach of “retirement”, to a fascinating look at the spectrum for total financial dependence to total financial independence (on a 17-step scale!), and the phenomenon of “microadventures” as a way to have more enjoyable vacation experiences even when you don’t have the time for an extended vacation (whether during your working years, or in ‘busy’ retirement itself!).

We also have several practice management articles this week, including: an articulation of the key difference between being a manager and a leader; a different way to think about who your most “valuable” clients are (based not just on their revenue or referrals, but how much they value what you do as a financial planner in the first place, which makes them more likely to become your long-term advocates); while it may be better to ditch the Annual Review for As-Needed Reviews instead; and a look at ideas about how to name (or re-name) your advisory firm if you don’t want to simply name it after yourself as the lead advisor/owner.

We wrap up with three interesting articles, all around the theme of how to make better decisions: the first explores the so-called “distinction bias”, and how we tend to overweight and overvalue small differences (and misjudge how much we’ll really care about them in the future) when we compare objects side by side; the second looks at how delaying decisions tends to increase their stakes, so often the best way to make “easier” decisions is simply to proactively make more/faster small decisions instead; and the last looks at the growing base of research around decision-making itself, and how to better frame decisions for yourselves with techniques like creating a “premortem” analysis or doing proactive scenario planning… or if you want to use the traditional “Pros and Cons” list, at least be certain to assign values or weights to them so that you give each factor its proper consideration!

Enjoy the “light” reading!

Self Employed: Living and Working Abroad? Here’s What You Need to Report to the IRS

One of the more popular trends these days is being a digital nomad. If your work can be done remotely and not at an office, why not travel the world at the same time? You can often live in an...

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source https://blog.turbotax.intuit.com/self-employed/self-employed-living-and-working-abroad-heres-what-you-need-to-report-to-the-irs-41741/

Thursday, 18 October 2018

Why All Financial Planners Need To Create A Sample Financial Plan

One of the biggest challenges we consistently face as financial advisors when creating a financial plan for clients is simply getting the data we need to actually do the plan in the first place. Because, without any information to enter into the financial planning software to begin with, it’s impossible to assess a client’s financial situation, show them the consequences of various trade-offs, and ultimately make our recommendations. Yet while for at least some clients, the problem with getting data is that they literally don’t know their own financial details in the first place – thus their need to hire a financial planner! – more often, the real issue is that the client doesn’t actually understand why they need to provide the data in the first place, and what they’re going to get out of the process.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why it’s not enough to just make the data gathering process mechanically easier for clients (e.g., with online data gathering forms instead of manually entering data into a printed data sheet), and why creating a Sample Financial Plan for prospective and new clients is an essential step in building enough trust with clients that they’re willing to gather and comfortable in sharing their financial information with you in the first place.

Historically, getting clients to complete data gathering forms has been a challenge simply because it’s tedious and time-consuming to fill out a paper form. And the situation is even worse for those who most need financial planning – because their financial lives are currently so disorganized – as the disorganization that makes them want financial planning is also the disorganization that means they don’t even know (and potentially don’t even know where to find) their own data to enter into a form in the first place!

Fortunately, as we move towards a more integrated digital age, the difficulty in obtaining financial planning data in the first place will be mitigated by account aggregation tools. Instead of manually entering information into a form, in the future all clients will have to do is link their accounts to their advisor’s portal, which will then automatically download the pertinent data into the planning software!

Still, even though some of these automations are starting to come online, a client’s hesitation to share their personal financial data often has less to do with the time involved, and more to do with the trust that clients need to feel – in the advisor themselves, and the value of the advisor’s process – before they allow an outsider to have a peek into their personal financial lives.

Because in a world where one of the biggest challenges financial advisors face – besides actually finding prospective clients in the first place – is demonstrating the real value of an intangible financial planning service, one of the most effective ways to get buy-in from new clients is to actually show them a Sample Financial Plan of exactly what they’ll get, and tangibly prove why it’s worthwhile. As even though the real value of what financial planners deliver is the actual process of defining goals, getting clients organized, and delivering advice, that sample financial plan is often the one and only tangible deliverable that clients can see to judge the value of the process.

The bottom line, though, is simply that if you are struggling as an advisor to get clients to share their financial information with you (whether via a data gathering form, or account aggregation), or are having trouble even getting prospective clients to sign on with you in the first place, it implicitly suggests that clients are just not seeing the value that you say you bring to the table. Because, even though we know that the financial planning process is worth it, ultimately, the onus is on us to show our clients that investing their dollars, time, and trust in your services is justified. For which the starting point is to create a Sample Financial Plan to really show clients the relevant value you can bring to them!

Wednesday, 17 October 2018

Getting Real About (Annual) Health Care Costs In Retirement

In its latest update, Fidelity recently estimated that the average 65-year-old couple will need a whopping $280,000 just to cover their health care costs in retirement, between Medicare Part B and Part D premiums, and additional out-of-pocket costs (or the Medigap supplemental insurance plan to mitigate them). Not including the potential cost of long-term care needs as well. As a result, one recent study of prospective retirees found that more Baby Boomers are actually less afraid of running out of money in retirement than they are specifically fearful of handling health care costs in retirement.

Yet the reality is that health care costs in retirement aren’t needed as a “lump sum” on the day of retirement, and the Medicare system actually makes health care costs a remarkably stable annual cost that can be planned for. And in fact, looking at health care expense in retirement as a lump sum masks a number of more direct and substantive planning issues, from the fact that unhealthy retirees may face fewer years of costs but much higher annual costs, to the challenges (and additional costs) of navigating health insurance as an early retiree via state health insurance exchanges.

Accordingly, a recent joint study by Vanguard and Mercer Health and Benefits analyzed the typical (and potentially unexpected) costs of health care in retirement, and showed that the ‘scary’ lump sum cost of retiree health care is actually little more than spending a few hundred dollars per month, per person… for the better part of 2-3 decades in retirement, with the average female spending just $5,200/year throughout her retired years including all health care-related costs (albeit excluding long-term care needs).

Of course, individual health care costs may still vary… but it turns out they vary in rather predictable and plannable ways, from the increase in health care costs for those entering retirement with one or several chronic health conditions, to those who must plan for the additional costs of health insurance via state marketplaces for early retirement, and the additional layer of costs for high-income individuals due to the Medicare income-related surcharges.

Which means in the end, while health care costs may cumulatively add up to a lot over a multi-decade time horizon, they do so in ways that can be largely planned for in advance, saved for with both retirement savings itself or using Health Savings Accounts (HSAs) as a supplemental retirement savings vehicle, managed by making good Medicare enrollment choices, and adjusted for (typically-known-by-retirement) chronic health conditions. Or simply funded by Social Security payments, which for a married 65-year-old couple earning merely “average” benefits, amounts to a lump sum equivalent of more than $600,000 anyway (for those who prefer to convert ongoing retirement cash flows to lump sum equivalents)!

Tuesday, 16 October 2018

#FASuccess Ep 094: Crafting Your Optimal Solo Practice By Simply Charging What You’re Worth With James Osborne

Welcome back to the 91st episode of the Financial Advisor Success podcast.

This week’s guest is James Osborne. James is the founder of Bason Asset Management, a solo advisory firm based in the Denver suburbs that oversees more than $225 million of assets under management. What’s unique about James, though, is the unusual way that he structured his advisory business, with a simple flat fee of $4,800 per client regardless of their assets, which has allowed him to build a high-margin solo practice with just 80 clients generating nearly $400,000 of revenue for the firm at the age of just 35 years old.

In this episode, we talk in depth about why James decided to structure his firm using this flat fee approach in lieu of the AUM model. How the design of his business model makes it possible for him to generate a target of his exact income potential as he reaches client capacity, the way he handles situations where his flat fee would be substantially lower than what another advisor’s AUM fee might be for prospective clients with a lot of assets and net worth, and the reason that he chose to deliberately build a business model that fits his personal lifestyle and family goals.

We also talk about what it really means to reach personal capacity as a financial advisor. The challenging trade-offs that start to emerge as advisory firms try to grow beyond the individual capacity of the founder, why it is that beyond a certain point, doubling the number of clients and revenue at the practice has almost no impact on the take-home compensation of an advisor, and the reason that so many solo advisory firms will actually generate far more value for their founders by staying small even if the practice is never sold.

And be certain to listen to the end, where James talks about how he’s adjusting the way he meets with and takes on prospective clients as he approaches his personal capacity, and what he plans to do to maintain his high-income lifestyle practice once he reaches that threshold.

So, whether you’re interested in learning about some of the benefits of a flat-fee structure, how James approaches investment management, or why most advisors are scaling their practices all wrong, then we hope you enjoy this episode of Financial Advisor Success Podcast.

Monday, 15 October 2018

Extension Filers: The Tax Deadline is Today

If you haven’t filed your 2013 income tax return yet, the clock is ticking. Here are a few last minute tips to ensure you make the filing deadline today:

source https://blog.turbotax.intuit.com/tax-news/extension-filing-ends-today-get-your-tax-return-in-on-time-18182/

The 16 Best Conferences For Financial Advisors To Choose From In 2019

The need to engage in continuous learning is a simple reality for anyone in professional services. As a profession’s body of knowledge grows and evolves with ongoing research and discoveries, new products and solutions, and emerging best practices, even the best practitioners have to update their knowledge and skills from time to time. You want your surgeon to be up to speed on the latest surgical techniques that speed recovery time and reduce scarring. You want your lawyer to know the latest laws and regulations that might adversely impact your business to reduce the risk of regulatory or legal hassles. And consumers want their professional financial advisors to be up to date as well.

And the reality is that while you can get a lot of this continuing professional education directly from the comfort of your own office, in a technology-driven world with an ever-growing number of webinars and reading opportunities – including in the Members Section of this blog! – it’s still important at least once a year to take a break from the office and get away from it all. Both to give yourself the opportunity to really immerse in your education without the inevitable drumbeat of distractions in the office. And because mentally, you really can better focus on your education and thinking about steps to improve your business when you get away from it for a few days.

The caveat, however, is that these days, there is an overwhelming number of financial advisor conferences to choose from. Because, while the good news is that for most successful advisory firms, it just takes one good takeaway from a conference that can be implemented in the business to make the whole trip worthwhile… the bad news is if you don’t find a conference that’s the right fit for your needs and business, you aren’t likely to find even that one good takeaway. Which makes both the expense of the conference and the lost time out of the office very costly indeed.

As someone that has been speaking at nearly 70 conferences a year for almost a decade myself, I’ve seen the good and bad of our various industry events, which are spread across membership associations, broker-dealers and insurance companies and RIA custodians, product manufacturers, trade publications, private events, and more. And as a result, I’m often asked for my own suggestions of what, really, are the industry’s “Best” conferences to attend.

Yet the reality is that what conference is “best” really depends on what you, personally, are looking for. Some advisors are focused more on broad-based technical educational content, while others want to go deep into a niche. Some advisors want practice management advice as business owners, while others need help with their personal career development as employee advisors instead. Some want to talk about innovating technology, while others want to innovate new business models.

Accordingly, back in 2012 I started to craft my own annual list of “best-in-class” top conferences for financial advisors in various categories (to allow advisors to match the available conference specialties to their own needs) and have updated it every year since in what has become one of our most popular annual articles.

And so now, I’m excited to present my newest list of “Top Financial Advisor Conferences” for the upcoming 2019 year, from practice management to technology to career development and deep-dive educational content, and a special focus on the rise of “niche” financial advisor conferences aiming to serve the growing number of financial advisors who themselves are focusing more and more into niches to differentiate themselves in today’s competitive environment.

So, I hope you find this year’s 2019 conferences list to be helpful as a guide in planning your own conference budget and schedule for next year, and be certain to take advantage of the special discount codes that several conferences have offered to all of you as Nerd’s Eye View readers!

Sunday, 14 October 2018

Financial Planning Month: Tax Edition

October is Financial Planning Month, and what better way to plan than to take a look at your taxes! You thought you didn’t have to do that until January, right? Not true, because now is the time to do everything...

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source https://blog.turbotax.intuit.com/tax-planning-2/financial-planning-month-tax-edition-32220/

Friday, 12 October 2018

Weekend Reading for Financial Planners (Oct 13-14)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that New Jersey is about to launch its own version of a fiduciary rule for advisors, driven not by New Jersey legislators but directly from the New Jersey state regulators, as a state-level fiduciary movement appears poised to surge again in the face of Federal regulators failing to address the fiduciary gap.

From there, we have a number of additional articles of notable industry news, including: the SEC’s ongoing hiring freeze is threatening to reverse its recent increase in the examination rate, as by 2019 it’s projected there will only be 1 SEC staff member for every 20 RIAs the regulator oversees; state securities regulators continue to step up on regulation and enforcement, with actions against unregistered individuals reaching a new record in past year (likely as a result of the surge of fraudulent cryptocurrency offerings); the College for Financial Planning has partnered with US SIF to launch a new sustainable, responsible, and impact investing designation (the Chartered SRI Counselor, or CSRIC); and the CFP Board’s Center for Financial Planning is partnering with Wharton on a new course in Client Psychology.

We also have several practice management articles this week, from a look at how hybrid robo-advisors and their salaried employee advisor jobs are providing a new career track alternative for financial advisors, to the importance of getting good at retention of existing advisor employees (given the incredibly high cost of turnover for experienced employees), a deep-dive look at what it really means to “manage” a client relationship, and an exploration of whether financial advisors should be learning more “conflict resolution” skills to help clients (especially couples and families) navigate their money conflicts.

We wrap up with three interesting articles, all around the theme of recognizing that we must sometimes embrace imperfection: the first is a powerful reminder that going beyond about 80% of the way on “surface shine” is rarely about actually improving the outcome and more about just satisfying ourselves; the second discusses how we often look to experts and their habits to figure out an optimal approach to something new when the truth is that we really need to just get started (because the “optimal” is rarely necessary to start!); and the last explores how the key to improving over time is to recognize that failures will happen, and those who improve the most are the ones who are willing to actually talk about them, and avoid the natural tendency to just sweep the embarrassment under the rug and move on before we have a chance to actually learn from the experience.

Enjoy the “light” reading!

Hispanic Heritage Month Features

This post can be found en Español here. We conclude our Hispanic Heritage Month features with five stories from our employees who candidly shared their experience being Latino, while growing up in the U.S. As they reflect on the role...

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source https://blog.turbotax.intuit.com/announcements/hispanic-heritage-month-features-41813/

Thursday, 11 October 2018

Qualifying For The Section 199A Deduction As A Hybrid Insurance Producer

Included with the passage of the Tax Cuts and Jobs Act, was a new 20% tax deduction for “Qualified Business Income” (QBI) for pass-through entities, which was intended to give a tax break to small business owners and encourage them to hire more employees. The caveat, however, was that Congress also made sure that the deduction didn’t extend to high-income professionals whose primary source of income was from their own personal labors.

Accordingly, Congress carved out a new group of professionals in certain “Specified Service Trade or Businesses” (SSTB) whose qualification for the QBI deduction would be phased out above certain income levels.

Unfortunately, businesses in the financial services industry were included in the definition of SSTBs, particularly financial services, brokerage services, as well as “any trade or business which involves the performance of services that consist of investing and investment management, trading, or dealing in securities.”

Interestingly, however, Congress seems to have gone out of their way to specifically exclude from that list insurance producers, brokers, and agents, who are treated as being in the business of selling their company’s products, rather than their personal services.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1 PM EST broadcast via Periscope and guest hosted this week by Jeff Levine, we examine questions surrounding the QBI deduction for professionals who sell insurance products and want to retain the benefits of the QBI deduction, but are also involved in brokerage services and/or are RIA owners with SSTB income not eligible, and explore when/whether it’s better to run multiple businesses to preserve the deduction where permitted… and if so, at what cost?

The strategy of separating out QBI-eligible insurance business from non-QBI-eligible brokerage commissions and advisory fees is complicated by the fact that, in recent proposed regulations on the QBI deduction, the IRS declared that single businesses with multiple business lines and total revenues under $25 million, the entire business is considered to be a specified service trade or business if more than 10% of their income results from investment-related activities. Which means, for instance, that for someone with 89% of their income from their insurance-related activities and the rest from investment-related activities, their entire business will be considered an SSTB if they operate it as a single business (which means none of their 89%-of-revenue insurance commissions would be eligible for the deduction)!

Accordingly, the question then becomes: “When/how would it be better to split out the insurance production into a different business line, and effectively run multiple businesses?” Unfortunately, there’s no easy answer, because not only does running multiple businesses create a whole new layer of complexity and expense due to the potential need to keep separate books and records, but it also requires the business owner to allocate how much of their overhead costs apply to both the QBI-eligible insurance revenue and non-QBI-eligible other revenue. Which in turn raises the specter of potential IRS audits, since the business owner might be tempted to attribute as much expense as possible to the (not-QBI-eligible) financial services business income (which is SSTB income), while trying to minimize the expenses (and maximize the income) derived from the non-SSTB (QBI-eligible) insurance business line.

Ultimately, the good news is that it is theoretically possible to separate out and preserve the QBI deduction for insurance commissions, even for advisory firm business owners with a mixture of insurance and non-insurance business. But the aggregation rules of the recent QBI regulations mean that doing so will require a whole new layer of complexity for financial advisors to actually run two bona fide separate businesses, one for their insurance income (and expenses), and a second one for everything else. Which is a challenge because in the process of splitting up the business lines in order to qualify for the QBI deduction, the reality is that, after you factor in all the added expense and work involved, it just may not be worth it in the end unless there is a substantial amount of insurance commissions on the table!

Wednesday, 10 October 2018

The PATH Act and What You Need to Know About Expiring ITINs

The Protecting Americans from Tax Hikes (PATH) Act of 2015, which was passed by Congress and signed into law in December 2015 requires taxpayers to renew expired ITINs in order to file their taxes. The IRS announced that more than...

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source https://blog.turbotax.intuit.com/tax-news/the-path-act-and-what-you-need-to-know-about-expiring-itins-24751/

Using Qualified Opportunity (Zone) Funds To Minimize Capital Gains

Although there’s been plenty of coverage of many of the provisions in the Tax Cuts and Jobs Act – most notably the lower tax rates and the IRC Section 199A QBI deduction – there are other changes that will have significant implications for certain taxpayers. One such provision is the Qualified Opportunity Fund (QOF), which was created by the TCJA in order to encourage investment in certain low-income areas designated as “Qualified Opportunity Zones.”

Specifically, investing into a QOF can provide taxpayers substantial benefits, including the ability to defer tax on capital gains from the sale property (including soft assets like stocks) that are reinvested in a QOF, basis increases on deferred gains reinvested into a QOF after five years (and again after seven years), and the complete elimination of capital gains tax on growth attributable to gain reinvested in a QOF (if the QOF is held for at least 10 years).

The caveat, however, is that, in order to receive the full array of QOF benefits, the latest date (according to the current tax code) that gains on the sale of assets can be invested into a QOF is December 31, 2019. Past that date, investors will begin to lose out on basis increases and, thanks to what’s widely assumed to be poor drafting, potentially other benefits as well. Furthermore, the deferral of the gains on the funds used in the initial investment isn’t perpetual. Gains timely reinvested into a QOF will become taxable (except for any basis increases received after years 5 and 7) at the end of 2026 (or when the QOF is sold, if sooner).

Meanwhile, despite the attractive tax benefits, advisors should exercise caution and perform their normal investment due diligence before jumping in with both feet. Bad investments with good tax attributes are, at the end of the day, still bad investments. Questions such as “What are the management team’s qualifications?”, “What are the expenses to investors of the fund?” and “What sort of assets (which, by their very nature, are illiquid) will the fund be targeting?” are all essential to answer.

Nonetheless, investors who have sold appreciated assets within the past 180 days, or plan to do so in the near future, should evaluate the merits of investing into a QOF. However, the reality is that many investors’ tax planning needs will be better served by using existing strategies, including 1031 exchanges, charitable trusts, and simply holding on to existing assets – all of which may provide tax benefits, including indefinite tax deferral.

Tuesday, 9 October 2018

#FASuccess Ep 093: Building A High-Income Lifestyle Practice Efficiently By Running It Like A Real Business with Sunit Bhalla

Welcome back to the 91st episode of the Financial Advisor Success podcast.

This week’s guest is Sunit Bhalla. Sunit is the founder of OakTree Financial Planning, a highly efficient solo advisory firm based in Colorado that oversees more than 40 million in assets under management.

What’s unique about Sunit though is the way he’s been able to build to nearly $300,000 in revenue with a whopping 85% profit margin as a career changer who works with just 17 affluent clients in a hyper-targeted niche of engineers, as a former engineer himself. In this episode we talk in-depth about how Sunit has built his hyper-efficient solo practice with the relentless focus on staying focused: The technology tools he uses to stay efficient in delivering services to clients, his simple fee structure to keep even his billing process simple and efficient, and why he offers all of his prospective clients one and only one comprehensive financial planning and investment management service that they can either take or leave.

We also talk about Sunit’s unique financial planning process with clients, the key questions he asks at the beginning of each client relationship to really understand their needs, the six meaning process he uses that starts with a discussion about goals and exploring possibilities, even before gathering all the client’s data. And how he ultimately delivers the financial planning results to his sophisticated engineer clients, not by producing and printing out detailed financial projections for them, but using his planning software interactively to model their various what-if scenarios live on the spot.

And be certain to listen to the end, where Sunit talks about how he went about building his unique lifestyle practice the way that he did, the way he very deliberately manages his lifestyle practice as a business, and why he isn’t concerned at all that his advisory firm may not necessarily have any salable value at the end.

So whether you’re interested in learning about building a lifestyle practice, how to make sure you’re only working with your ideal clients, or about maintaing a healthy work-life balance, then we hope you enjoy this episode of the Financial Advisor Success podcast.

Monday, 8 October 2018

Staying Connected

This post can be found en Español here. For the past 30 years brands have leveraged music, art, food, festivals, etc. to celebrate and recognize the accomplishments and contributions of Latinos to U.S. culture. While it’s a great opportunity to...

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source https://blog.turbotax.intuit.com/announcements/staying-connected-2-41792/

Student Loan Planning Software Solutions: Comparing The 8 Leading Tools For Financial Advisors

As a wave of next-generation clients starts to seek out help managing their finances, one of the most common challenges that they face is a high level of student loan debt. Unfortunately, advisors are generally ill-equipped to provide student loan analysis and planning, because, unlike traditional debt, student loans – and federal loans in particular – are subject to a dizzying array of repayment options (each of which can result in significantly different outcomes for borrowers) and forgiveness programs, which in and of themselves, are stunningly difficult to navigate. And, in a world where interest rates are rising quickly, the “easy” solution of refinancing older loans at a lower rate isn’t providing the same bang for the buck it once did, not to mention the fact that refinancing won’t make any sense for borrowers that recently took out loans while rates were at historic lows. Which means that a strong working knowledge of the various options for repaying federal student loans will increasingly be an important tool for advisors in coming years.

Fortunately, there is a growing number of tools to help advisors analyze their clients’ student loans, and in this guest post from Ryan Frailich, founder of Deliberate Finances, (a fee-only financial planning practice that specializes in working with couples in their 30’s, as well as educators and nonprofit workers) provides comprehensive reviews and ratings for 8 student loan planning tools, including offerings from CSLA, RightCapital, the VIN Foundation, Loan Buddy, and Pay For ED (among others), and shares his thoughts on everything from features and flexibility, to their ease of use and usefulness of output.

Because the fact is that, often, those clients who come in with the highest level of debt, including doctors and lawyers who are just starting out, also happen to be ideal long-term clients, and having the knowledge and ability to potentially help them save a significant amount of money over the life of their loans is a great way to build long-term loyalty. And even for advisors who work primarily with Baby Boomers, the ability to help their children navigate the student loan landscape can assist in introducing you to your next generation of clients.

While not all the solutions that Ryan examines are targeted specifically at advisors and there’s still plenty of room for improvement with all of them, the good news is that FinTech developers are recognizing the importance of putting tools in advisors’ hands that will help clients with student debt navigate what is often the first (and most challenging!) aspect of their young financial lives. So, whether you have clients with questions about how best to manage and repay their student loans, are looking for ways to gain and develop expertise in this important area, or are simply interested in staying up-to-date on this rapidly evolving area of financial planning and FinTech, then we hope you find this amazingly comprehensive guest post from Ryan to be helpful!

Saturday, 6 October 2018

Six Tips to Beat the October 15th Extended Tax Deadline

The final extension deadline is just days away, October 15, but you still have plenty of time to meet the tax deadline and avoid a late-filing penalty if you file online and follow these 6 tips

source https://blog.turbotax.intuit.com/tax-planning-2/six-tips-to-beat-the-october-15th-extended-tax-deadline-15484/

Last Call on These Popular Tax Deductions

For people who haven’t filed your 2017 taxes yet, make sure to take advantage of these tax deductions while you still can before the October 15th extended tax deadline! The new tax reform law eliminated several popular tax breaks starting...

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source https://blog.turbotax.intuit.com/tax-reform/last-call-on-these-popular-tax-deductions-33675/

Friday, 5 October 2018

Weekend Reading for Financial Planners (Oct 6-7)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with a beautiful write-up of the winners of the Invest In Others foundation awards, which recognizes financial advisors who have not only been successful in their advisory firms but also in giving back to their communities in various charitable and non-profit endeavors… an inspiration to any/all advisors that the helping profession of financial planning can extend beyond just the work we do directly with clients (and in fact, many financial advisors’ community giving efforts extend far beyond the financial services industry altogether).

From there, we have several articles around spending and savings advice, from a study that shows the popular “spend money on experiences, not goods” happiness research may only apply for those with above-average socioeconomic status (and that for the rest, there really is happiness to be derived from spending on good solid useful material goods), to another study that finds our tendencies with money towards being either a tightwad or a spendthrift may be evident as early as age 5 (when, in theory, new/healthier habits can still be learned), a discussion of how some of the most successful wealth creators ostensibly begin the process as a means to provide for their families (during life and as an inheritance after death) but then never stop to re-assess their motives once their wealth compounds beyond a “prudent” inheritance, and an interesting look at some of the most “undervalued” financial advice (which is less about spending tips like being frugal and cutting back on lattes, and more about getting off the hedonic treadmill and simply learning better gratitude for what we already have).

We also have a number of practice management articles this week, including: the “wobble” theory of growing an advisory firm (that advisory firms grow in stages, and the key to success is not navigating each phase, but the transition moments when the firm begins to “wobble” and has to evolve to the next stage); how despite the “uncertainty” about smaller advisory firms in today’s environment, a look at the established professions of law and accounting suggests that small firms will survive and thrive far longer than commonly believed; a study on the benefits of outsourcing back-office tasks to more easily scale an advisory firm; and the rise of “virtual” advisory firms that leverage technology (especially screen-sharing and video conferencing tools) to build a location-independent advisory firm.

We wrap up with three interesting articles, all around the theme of leveraging the benefits of compounding (not just in a portfolio, but in your personal/business life as well): the first explores how long-term compounding takes a strong base, but once the foundation is laid, it’s most a function of compounding (as evidenced by the fact that $80.7B of Warren Buffett’s $81B net worth came after he was 50 years old!); the second raises the simple question of considering what, exactly, you’re doing (even in a tiny way) to contribute to the compounding growth of an asset every day; and the last provides a powerful reminder that while we tend to celebrate the business leaders who are “consistently heroic” in taking big bold leaps to move their firms forward, for most the key to success is being “heroically consistent” instead, making small efforts every day and week and simply allowing time to compounding them in your favor!

Enjoy the “light” reading!

Thursday, 4 October 2018

Transitioning Part-Time Into Financial Planning As A Career Changer

Notwithstanding all the the talk in recent years about the challenges facing the financial planning industry, from including rising competition to “robo” fee compression, the financial advisor career path remains quite appealing. Not only can advisors make meaningful, life-changing impacts on their clients’ lives, but with experienced advisors making 2-3X or more than the median household income in the US, it’s also a potentially lucrative career choice as well. And, with a possible shortage of new talent to replace the wave of ageing advisors who are expected to start retiring in droves in the next decade or so, it’s little wonder why the profession holds so much appeal, particularly for those who are mid-career and looking for a more rewarding opportunity. The caveat, however, is that it still takes a lot of time to succeed and grow your income as a financial advisor, which presents a major roadblock for those who want to career-change into the industry and just don’t have a lot of “income flexibility” to take a pay cut in order to get their proverbial foot in the door. Which leads many to wonder if it’s possible to transition into a career as a financial advisor on a part-time basis.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we look at the challenges facing the part-time transition for career changers, discuss why many consider simply opening their own RIA given the lack of part-time job opportunities, and offer some practical ideas for transitioning into the industry as a career-changer without going the (not-actually-recommended) part-time route.

Notably, the challenge of finding good part-time work to grow and develop as a financial advisor is a relatively recent phenomenon. Historically, there wasn’t much need for new “advisors” to have much professional knowledge or experience because, in reality, they weren’t providing actual advice, but were rather being paid to sell insurance or investment products (which simply requires some product and sales training). For career changers, it was often quite feasible to make the transition into such a sales role on a part-time basis, soliciting their existing friends and family and former co-workers for product sales for a few hours a week. However, for those who want to provide comprehensive advice, and get paid for it on an ongoing basis, the reality is that it’s really hard to gain the requisite experience in anything but a full-time setting.

Which is why there just aren’t many part-time job opportunities with real financial planning firms in the first place. As an alternative, some career-changers explore the option of simply launching their own RIA, which on the surface makes sense, because the raw startup costs to create your own advisory firm are very low, and it’s very possible to be up and running in a few months’ time on a shoestring budget. Unfortunately, the problem remains that giving people advice about how to handle their life savings is a sacred duty, so just because you can hang your shingle and open your own financial planning practice doesn’t mean that it’s the responsible thing to do! Not to mention the fact that it’s really hard to gain credibility as a professional, to be paid for your advice services, if you’re part-time anyway.

Accordingly, for career-changers who are looking for a practical (and responsible) path to a career as a financial advisor, the best thing to do on a part-time basis is start your education to become a CFP certificant. Because, by taking and passing the CFP exam, you’ll be in a much better position to get a better paying full-time job at a real financial planning firm. The next best thing to do is to take the Series 65, because while most states offer a waiver for the Series 65 exam for CFP certificants, the reality is that you’ll still need to meet the experience requirement before you can earn your marks. Also, start building your professional network by joining your local FPA chapter or NAPFA study group, because at some point, you’ll be looking for a full-time opportunity, and it’s a good idea to get in front of the folks who might someday hire you. Finally, simply recognize the fact that you are changing careers and that it’s just not realistic to think that you can do that without taking a step down in salary in order to (literally) pay your dues. So make yourself your first financial planning client, and figure out how to build up the savings necessary to take one step back in the short-term, so you can take two big steps forward in your new financial advisor career in the long run.

The bottom line, though, is simply that there are some very real challenges when transitioning into a career as a financial advisor on a part-time basis. However, those who are willing to do hard work of studying for (and passing!) the CFP exam, getting the Series 65 license, and building a professional network will have the best options. But rather than trying to be a financial advisor on a part-time basis, do those things on a part-time basis instead… which also allows you to stay in your current job a little longer in order to save up enough so that, when the time is right, you can make the transition to a full-time role as a financial advisor in a way that makes sense financially and professionally!Read More…

source https://www.kitces.com/blog/transitioning-part-time-into-financial-planning-as-a-career-changer/

Are Your Political Campaign Contributions Tax Deductible?

The presidential election is here and political ads were jamming the airwaves, and your email and voice mail may have been filled with pleas from candidates for money to help them get elected. We all know that donations to charities are deductible. But if you contributed to a candidate or political party or a PAC (Political Action Committee), is your contribution deductible? In a word, NO

source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/are-your-political-campaign-contributions-tax-deductible-11380/

Wednesday, 3 October 2018

Student Loan Options When You’re Self-Employed

Student loans can be a huge financial burden when you first start working, especially if you are self-employed. As if the challenges of self-employment weren’t enough, you have student loan payments on top of it! Paying off your student loans is...

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source https://blog.turbotax.intuit.com/self-employed/student-loan-options-when-youre-self-employed-24079/

I Only Received One Paycheck from My Summer Side-Gig. Am I Self-Employed?

During college, I had a job every summer. After my freshman and sophomore years, there were full-time internships with companies that issued me a Form W-2 and offered benefits, and in those years I reported my income from my W-2...

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source https://blog.turbotax.intuit.com/self-employed/i-only-received-one-paycheck-from-my-summer-side-gig-am-i-self-employed-41533/

How Birth Year Shapes A Generational Experience In Stock Market Investing

One of the fundamental principles of long-term investing is the recognition that, while markets may go up and down and be volatile in the short-term, eventually the volatility tends to average out into favorable long-term growth rates. Accordingly, the conventional wisdom in the face of market volatility is simply to keep invested and stay the course. Of course, those who are approaching or transitioning into retirement need to be cognizant not to draw down the portfolio too much waiting for those returns to average out – a phenomenon known as sequence of return risk – but as long as investors stay a little flexible on their retirement goals, and spend reasonably conservatively, that sequence of return risk can generally be managed.

However, the fact that investors will for the most part simply have to accept whatever returns the market gives – and in whatever sequence it provides them – means that different generations of investors may have substantively different experiences with long-term investing, simply based on whatever happens to occur during their particular investment sequence, and the ‘investment cards’ they’re dealt.

In turn, this effect is further amplified by the fact that early investment experiences often shape a lifetime of investment behavior – from Baby Boomers that experienced favorable market returns coinciding with the rise of the 401(k) and have stuck with markets during their difficult years, to late Gen X’ers and Millennials who have had to wait as much as a decade or more simply to see the markets recover to where they started when they first begin investing (hearkening back to the experience of a Lost Generation of investors after the Great Depression who never returned to stocks after the scarring experience of the crash of 1929 and its slow recovery during the Great Depression). And in fact, a growing volume of data on investor behavior is suggesting that younger investors are indeed far more skeptical of stock markets and long-term investing… a challenge that may not necessarily reverse itself even as the market improves (just as the bull market of the 1950s and 60s didn’t necessarily win back Depression-era investors).

The fact that the generational timing of young adulthood – and the market returns that coincide with it – may have such a long-term behavioral influence notably also extends to financial advisors themselves, as Baby Boomer advisors in their early 60s today saw a raging bull market for the first 20 years of building their careers, while younger Gen X and older Millennial advisors have had to wait 10-15 years just to see the markets recover to where they invested their first clients! Which raises the question of whether advisor attitudes about the value of providing investment management, and the active vs. passive debate, may also be heavily shaped by the advisor’s generational experience and the timing of when they happened to launch their advisor career?

Ultimately, though, the key point is simply to recognize that mere birth year may actually be responsible for a far more outsized portion of our lifetime investment behavior and experience than is commonly acknowledged. As even if a long-term portfolio can mathematically recover from almost any sequence of returns, it doesn’t mean that certain generations of investors – and advisors – will behaviorally do so themselves, based on whatever early-years’ experience the market happens to give them during their formative years?

Tuesday, 2 October 2018

#FASuccess Ep 092: Taking More Vacation Time By Standardizing Workflows And Processes In Your Advisor CRM with Jennifer Goldman

Welcome back to the 91st episode of the Financial Advisor Success podcast.

This week’s guest is Jennifer Goldman.

Jennifer runs an eponymous practice management consulting firm based in Boston that works intimately with half a dozen advisory firms at a time on their operations, technology, workflows, and processes. What’s unique about Jennifer, though, is that, before she began working as a practice management consultant on operations issues, she had a career as a financial advisor herself and then transitioned to operations leadership roles at two more advisory firms before eventually deciding to go out on her own as a consultant to work with even more advisory firms and operations.

In this episode, we talk in depth about what it really means to adopt and implement workflows and processes in your advisory firm. Why an advisor CRM system should operate as the central hub of the advisory business, the 100-client capacity and 5 employee capacity in multi-advisory firms that eventually forces every growing advisory business to start formally adopting standardized processes and procedures, and why exactly it’s so important to do so in order to sustainably grow and scale an advisory business, or simply to finally find the time to take a vacation as an advisory firm founder.

We also talk about Jennifer’s operation consulting process with firms, that starts with formalizing the roles and responsibilities of everyone in the firm, and then goes to a technology audit of all the tools the advisory firm already has, and only then begins to focus on how to better integrate the available technology tools, recognizing that in today’s environment, the real blocking point for most firms on technology is not a need to get better tech tools, but simply a need to adopt better systems and processes to use the technology the firm already has.

And be certain to listen to the end, where Jennifer shares her own journey of building a consulting practice into a multi-consultant business, and why she ultimately decided to scale the business back to his solo consulting firm, not because it wasn’t feasible to scale the consulting business, but simply because in the end, she wanted to right-size the business to let her spend less time managing people and more time working with the advisory firm clients that she wanted to work with in the first place. A lesson I think that is particularly relevant for any advisor who finds themselves unhappy in a successful business because they’re spending more time in management and less time with clients than they ever expected when they first launched the firm.
Read More…

source https://www.kitces.com/blog/jennifer-goldman-consulting-operations-practice-management-workflow-process-advisor-crm-tech-consultant/

Monday, 1 October 2018

Breast Cancer Awareness Month: Donations and Tax Deductions

October is Breast Cancer Awareness month. And because it’s the most common cancer among women in America, getting involved in the effort to fight breast cancer can have a tremendous impact and becoming more informed about breast cancer is easier than...

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source https://blog.turbotax.intuit.com/tax-deductions-and-credits-2/breast-cancer-awareness-month-donations-and-tax-deductions-20335/

Celebrating Our Intuit and TurboTax Employees During Hispanic Heritage Month

This post can be found en Español here. We continue celebrating Hispanic Heritage Month at Intuit TurboTax! This week we spoke with three team members about the role and impact of family in their lives. Many Latinos define their identity...

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source https://blog.turbotax.intuit.com/announcements/celebrating-our-intuit-and-turbotax-employees-during-hispanic-heritage-month-41716/

The Latest In Financial Advisor #FinTech (October 2018)

Welcome to the October 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 big news that private equity firm Warburg Pincus is investing a whopping $33M into Facet Wealth, a new advisory firm upstart that aims not to build “robo” tools to compete with advisory firms, but a tech-savvy advisor platform to service “smaller” mass affluent clientele that they buy from existing advisory firms who may want to sell a portion of their book of clients to free up space (and/or to generate additional capital) to grow further upmarket. At least, if the clients will actually be willing to convert from an in-person advisor to one of Facet’s virtual CFP professionals, and from an industry-standard AUM fee to Facet’s complexity-based monthly retainer fee instead.

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

Zoe Financial raises a $2M seed round to create a new lead generation platform for (a subset of highly vetted) advisors to reach more affluent clients;
SmartAsset reinvents the next generation of BrightScope’s controversial Advisor Pages as it aims to scale up interest in its SmartAdvisor lead generation service;
Mineral Interactive wins the XYPN FinTech competition as one of three finalists all focused on making the holistic data-gathering and onboarding process for financial planners more efficient;
ScratchWorks announces “Season 2” of its FinTech accelerator program replete with Shark-Tank-style pitch sessions to its founders (and funders).

Read the analysis about these announcements in this month’s column and a discussion of more trends in advisor technology, including the launch of MoneyGuidePro’s new G5 platform (which goes even deeper into retirement income planning but conspicuously skips out on building its own PFM portal to compete with eMoney Advisor), Personal Capital’s launch of its own tax-savvy retirement income planning tool for its advisors and clients, the rise of student loan repayment planning software tools for advisors, and a look at whether Schwab’s recent launch of new Digital Account Opening tools may signal the beginning of the end of independent digital advice platforms as RIA custodians themselves finally upgrade their technology and expand to encompass more and more digital onboarding capabilities themselves.

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

I hope you’re continuing to find this 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!