News About IRS And Tax

Monday, 20 August 2018

The Appeal Of Working At Independent Advisory Firms In The Eyes Of A Millennial

In a recent study, Cerulli Associates points out that about 28% of financial advisors who say that they plan on retiring in the next 10 years have yet to settle on a succession plan. On aggregate, the financial services industry understands the need to attract, groom, and retain the next generation of talent if they want to ensure the longevity of their firms, but accomplishing that goal remains elusive.

There’s been plenty of discussion from a more senior perspective about how to address this problem, but little has been written from the Millennial viewpoint – about what they’re looking for in a career, why they desire a sense of purpose and not just a job, and what the financial advisory industry looks like through their eyes.

In this guest post, Janki Patel from The Ensemble Practice (a consulting firm serving the financial advisory industry) discusses why independent financial advisory firms are a great fit for Millennials, the challenges many Millennials face when trying to understand (and differentiate between) the varying service models within the industry, why advisory firms are having such a hard time attracting next-generation talent, and the specific steps advisory firms can take in order to bridge that gap.

Unfortunately, the financial services industry is competing with a myriad of other industries who are also trying to hire Millennial talent. What’s worse is that the industry is small, outrageously complex, and doesn’t exactly have the best reputation. It just isn’t easy for young people to figure out who’s wearing the “white hats” when all they see are (very) negative headlines and job postings that are misleading at best.

Meanwhile, Millennials have been unfairly labeled as a spoiled and entitled generation that’s only interested in taking selfies and communicating with emojis. Instead, Millennials are driven and passionate, and desperately want their careers to matter. They care less about perks and benefits, and more about a company’s mission, having a well-defined career path, and being challenged and mentored.

Because the reality is that good financial advice can make deep and meaningful impacts on people’s lives, and that resonates with Millennials. And by focusing on doing a better job of honing their mission, communicating how they make the world a better place, and creating well-defined career paths, advisory firms can better position themselves to attract and retain the next generation of talent.

Friday, 17 August 2018

Weekend Reading for Financial Planners (August 18-19)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the interesting news that a growing number of states are trying to limit the use of the terms “certified” or “registered” to only those who are actually certified or registered by a state agency or certifying body… raising the concern that “Certified” Financial Planning professionals might someday be prevented from using the term, and leading the FPA and CFP Board to join a multi-organization coalition called the “Professional Certification Coalition” fighting to differentiate bona fide certification credentials from the rest of the specious designations (in financial services and other industries) that state legislators are really trying to crack down on.

Also in the news this week is a brief look at the recent “FINRA Industry Snapshot” (a first-ever report from FINRA on the state of the brokerage industry, which finds that the number of broker-dealer firms and registered representatives has been declining steadily for 10 years… but revenue and profits continue to grow and hit record highs!), and a discussion of some of the public comment letters that came out earlier this month against the SEC’s Regulation Best Interest and new Form CRS proposals (including a stringent objection from a group of 17 state attorneys general that could form the basis of a legal challenge against the rule if the SEC decides to move forward).

From there, we have several advisor technology articles this week, from a look at how “robo” tools aren’t replacing advisory firms but instead are allowing smaller advisory firms to run more efficiently than ever with the use of technology to automate away expensive back-office staff and administrative tasks, to tips on how to conduct third-party vendor due diligence for cybersecurity purposes, and why both advisors and their clients should be talking more about using Password Managers.

We also have a few retirement articles, including: the role that uncertainty (especially sequence of return risk, but also simply the changing nature of our lives over time) has in determining whether portfolios are depleted in retirement or not (which goes far beyond just investing for a sufficient long-term return); perspective on how economists that study lifecycle finance view traditional financial planning topics and strategies differently; and why a goals-based retirement planning approach is very problematic because in the real world, most people don’t actually know what their goals are, and even if they think they do, the goals often change by the time the client gets closer to achieving it!

We wrap up with three interesting articles, all around the importance of habits (both breaking bad habits and improving good ones): the first looks at a number of recent books that highlight the latest research in how we form habits, change habits, and improve our willpower and self control; the second is a fascinating study at how we can improve our own self-confidence in our ability to control our behavior and break our bad habits (by adopting seemingly mindless rituals); and the last is a fascinating look at how even the most brilliant creatives still struggle, often for years, with a vision of what they want to achieve and knowing that their current work isn’t up to their own tastes, but that the key is maintaining the habit of continuing to do the work anyway with a focus on self-improvement, and its the repeated habit of practice combined with the vision of what your work can be that ultimately makes it great and successful!

Enjoy the “light” reading!

Thursday, 16 August 2018

Leveraging A Mini-Specialization To Gain Experience And Get More Client Referrals

Finding a good way to differentiate yourself amid a sea of people who call themselves financial advisors has never been easy task, but it’s become all the more difficult in recent years as the ranks of advisors who offer “comprehensive financial planning” continue to grow. The problem is only compounded for newer advisors trying to find a way, not to get new clients, but just to get noticed within their firms (and get opportunities for client face time) as they launch their own careers.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss why niches and mini-specializations are a great way for advisors to differentiate themselves, the differences between the two, and cover specific and actionable ways to market yourself and grow your exposure in your mini-specialization of choice.

At the start of their careers, most advisors are generalists – having just completed the comprehensive CFP certification educational curriculum – and haven’t yet had the time, opportunity, and experience to develop a specific target niche audience. However, one way that newer advisors can start to differentiate their expertise is simply to dive deep into a particular subject area and make themselves more referable and top-of-mind by becoming the go-to expert for that topic in their firm or within their community – a form of “mini” specialization.

Because the reality is that early on, in particular, you don’t need to be an expert on everything to succeed. You just need to become really good at only one thing and be known for doing it well… and that can happen in a relatively short period of time!

Of course, just because you become an expert on something with a (mini-)specialization doesn’t mean that the masses will automatically beat a path to your door. You still have to get the word out, and that’s where a good inbound marketing strategy comes into play, from building a website that showcases your expertise, to starting a growing an email list and a social media presence to get the word out about your expertise, and creating “lead magnets” like ebooks (or even self-publishing a real book) to establish your “authority”, which you can then leverage further to teach and speak on the topic.

Ultimately, by going through the mini-specialization process, you’ll learn more about the things that matter most to your target clientele, and where they spend their time gathering such information, which makes the process of getting new clients even more efficient over time. But at the most basic level, developing a mini-specialization is the most straightforward path to being more than just another advisor who offers “comprehensive financial planning and investment management to affluent individuals and families”, and can be the key to making you the one that lead advisors choose to bring into their client meetings to gain more real-world experience!

Wednesday, 15 August 2018

What is a Tax Bracket?

Did you know not everyone or every dollar earned is taxed the exact same amount? This is because the United States tax system aims to be progressive. A progressive tax system tries to collect more tax from those who earn...

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source https://blog.turbotax.intuit.com/tax-planning-2/what-is-a-tax-bracket-24007/

Why The Best P&C Insurance Deductible Is Driven By The Pseudo-Deductible Threshold For Filing A Claim

The concept behind property and casualty (P&C) insurance is straight forward. Consumers pay a premium for insurance coverage and, should they incur a loss greater than their deductible, they can file a claim for the balance. However, when we consider the fact that insurance companies operating in bonus-malus systems typically raise a customer’s premium after they submit a claim, the question of whether the insured should submit a claim versus paying for the loss out of pocket becomes substantially more complex.

This internal tension when deciding whether to file a claim or not leads to what is known as a “pseudo-deductible” – referring to the true dollar amount of a loss one would need to experience before deciding to actually make a claim (above and beyond just the stated deductible itself). In this guest post, Dr. Derek Tharp – a Kitces.com Researcher, and a recent Ph.D. graduate from the financial planning program at Kansas State University – takes a closer look at this underexamined phenomena, including why the conventional wisdom to take as large of a deductible as one can afford may not be quite right (and why consumers should actually identify their ideal pseudo-deductible first).

The decision of how large of a pseudo-deductible to adopt is naturally influenced by many factors unique to an individual (e.g., our aversion to risk and uncertainty, as well as our ability to withstand loss in the first place). Though we cannot “solve” for an ideal pseudo-deductible in an algebraic sense, one method we can use to inform the question of how large of a pseudo-deductible may be ideal is Monte Carlo simulation based on real-world assumptions. Using national claims figures combined with peril-specific premium increases (as the premium increase for a loss which could indicate negligence or risky behavior is often higher than one that is completely out of an insured’s control, such as a natural disaster), the results of this analysis indicate that, in isolation, an ideal pseudo-deductible for homeowners insurance policy could be somewhere in the range of $500 to $1,500.

Of course, this amount is by no means fixed and is everchanging as both consumers and insurers adjust to the behavior of one another. But the key point is that by adopting some non-trivial pseudo-deductible above and beyond one’s deductible, it is possible to reduce both long-term average costs and outcome variability. Yet, if those adhering to conventional wisdom truly adopt deductibles “as high as they can afford”, this may not put them in a position to strategically forgo claims that may increase long-term costs. Instead, consumers may wish to first identify the maximum pseudo-deductible they can afford to adopt (or wish to adopt given their risk preferences) and then select a lower deductible which allows them to strategically forgo claims that may result in higher costs in the long run.

Financial advisors can lend a hand by helping clients understand these dynamics, as well as helping clients develop a better understanding of the actual odds that they will incur a loss (versus their preconceived notions of those odds). In fact, when participants in an experimental study were given information about the likelihood of a hypothetical loss reoccurring, they increased their pseudo-deductibles (but not their deductibles!) to levels which more effectively balanced the long-term costs and benefits of filing a claim – suggesting that this type of assistance can truly be beneficial to clients. Ultimately, the reality is that “the highest deductible you can afford” is not necessarily best. Instead, the best deductible for a client is likely one that better allows for the long-term balancing of the costs and benefits of filing a claim.

Tuesday, 14 August 2018

Take Note On How to Save! It’s National #FinancialAwarenessDay

Have you ever wanted to not stress over your credit cards, car and student loans, or even your mortgage because they were all paid off? Can you imagine what it would be like to have the freedom in your schedule...

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source https://blog.turbotax.intuit.com/income-and-investments/take-note-on-how-to-save-its-national-financialawarenessday-41507/

#FASuccess Ep 085: Boosting Firm Productivity With A Financial Planning Resident Program With Elissa Buie

Welcome, everyone. Welcome to the 85th episode of the “Financial Advisor Success” podcast. My guest on today’s podcast is Elissa Buie. Elissa is the CEO of Yeske Buie, an independent RIA with offices in San Francisco and Washington, D.C. that manages nearly $750 million of assets under management for 240 clients with a team of 13. What’s unique about Elissa, though, is the way that she and her firm have figured out how to leverage next-generation talent through a financial planning resident program that trains and develops advisors, with the expectation that they will graduate and leave the firm after three years to be replaced by another financial planning resident.

In this episode, we talk in depth about YeBu’s Financial Planning Resident Program. How the firm developed an intensive boot camp process to train new advisors in just eight weeks in how to produce the core deliverables the firm provides to clients, the way their financial planning residents gain experience in client meetings while boosting the firm’s productivity, and why the firm prefers hiring financial planning residents to a more traditional approach of hiring and developing paraplanners instead.

We also talk about the evolution of how advisors are trained and educate as professionals. The rise of master’s degree programs to increase the technical competency of today’s advisors, the importance of programs like the FPA Residency program to teach the so-called soft skills of effective client communication, and why Elissa believes that all advisors should at least know how to create a comprehensive plan for clients with only a yellow pad and a financial calculator to ensure that today’s financial planning software will then be used as a tool instead of a crutch with clients.

And be certain to listen to the end, where Elissa shares why the financial crisis of 2008 and 2009 was the hardest moment for the firm, not simply because revenues turned down with the market decline, though, why the firm has decided to remain on the AUM model despite being a financial planning-centric business, and Elissa’s advice to new advisors in how best to find clients you will actually enjoy working with in the long run.

So whether you are interested in hearing about Yeske Buie’s unique structured financial planning residency program, about the ongoing financial planning work Elissa’s firm does for its clients, or why every financial advisor should know how to create a comprehensive plan by hand, then I hope you enjoy this episode of the Financial Advisor Success Podcast!