Tag: Financial Consulting’

The Virtue Of The Weekly Advisory Team Staff Meeting

The Virtue Of The Weekly Advisory Team Staff Meeting

Anyone in a growing business has had the displeasure of being stuck in an unproductive meeting. At best, they happen from time to time. At worst, the day is so filled with unproductive meetings that it seems like there’s no time left to actually get anything done… leading many to want to just eschew internal team meetings altogether.

Yet the reality is that done well, meetings can be a mechanism to keep your team on the same page, working towards the right priorities, accountable on a weekly basis to getting things done, and provide a crucial opportunity for everyone to work together on solving the business’s biggest challenges from week to week.

Accordingly, the real problem is not that “(team) meetings are bad”, but that “bad (team) meetings are bad”, and that the remedy is to formulate a better structure to the weekly team staff meeting in the first place, with time to review key business data, evaluate the tasks that need to be done, prioritize for the coming week, and then take more than half the meeting time to actually solve problems that are occurring in the business!

Bad Team Staff Meetings Are Bad

In a growing business, meetings are an inevitable reality. Whether it’s the coming together of an entire leadership team, the gathering of the key players in a particular department, or simply a two-person meeting with an advisor and his/her planning associate, meetings happen. And the larger the business, the more plentiful the meetings tend to be, as there are more people to coordinate amongst and maintain communication with. Throw in some meetings for outside activities and volunteer efforts, and you may reach the point where it feels like you spend more time in meetings aboutwhat to do, than actually getting anything done!

Yet while many financial advisors ultimately push back on this “Death By Meeting” feeling by trying to eschew meetings altogether, arguably the real problem is not that there are so many meetings, but the fact that they’re sounproductive. In other words, the problem isn’t necessarily having meetings. It’s having bad meetings.

After all, meetings at their most basic level are simply about facilitating communication and problem-solving, which are clearly relevant for any business that has more than one person in the first place. And the added virtue of regular meetings is that they can actually become a concrete deadline for ongoing projects, and a point of accountability to ensure that things really are getting done. In addition to being a means of keeping everyone on the same page about the key metrics of the business, and whether it’s growing and moving forward.

In fact, leading entrepreneur expert Gino Wickman makes the case in his book “Traction” that one of the most common problems for businesses is their lack of effective weekly team/staff meetings. The end result is at best wasted time, and at worst a business that literally can’t get the “traction” to move forward on its goals. Because it’s actually the pulse of the weekly meeting, and the shared vision, problem-solving, and accountability that it creates, which helps ensure a team is moving forward on its goals!

Setting A Weekly Staff Meeting Agenda

As a starting template, Wickman suggests a structured 90-minute weekly staff meeting agenda to provide the key aspects of both problem-solving, and accountability. The 7-item standing agenda is shown to the right.

In this process, the segue is simply the quick kick-off to the meeting, to get everyone mentally focused. It might include a quick check-in – “how’s everyone doing today?” – and ideally includes giving all participants a moment to share something positive to get the meeting started on a good note.

Sample Weekly Staff Meeting Agenda - Wickman's Traction

From there, the next step is to review the scorecard, a summary of the key data or metrics for the business. It’s literally meant to be the “scorecard” of how the business is performing. In an advisory firm context, this might include key metrics like the number of new and lost clients (or assets, or revenue) for the month or quarter, the number of client meetings you’ve had, the number of client financial plans you’re working on, the number of prospects in your sales pipeline, or the number of transfers your staff are processing. Whatever the Key Performance Indicator (KPI) metrics are that help you know as a financial advisor where the business stands. (And if you aren’t tracking this data, now’s the time to start building out your KPI dashboard!) You might even come up with a basic color coding system – green, yellow, and red – to highlight metrics that are good and healthy, in the warning zone, or that are concerning and need attention.

The third step in Wickman’s weekly meeting is the rocks review. In this context, “rocks” is a reference to the famous Stephen Covey analogy that in order to effectively fill your time, you need to place the big “rocks” (major priorities) first, then fill in the pebbles (small tasks), and finally the sand (daily drumbeat of minutia). Because if you place the rocks in your bucket first, there’s room to fill in the pebbles and sand around them. If you fill the bucket with pebbles and sand first – and let the business get buried in the minutia – the bucket is already full and there’s no way to get the rocks in. Accordingly, for an effective team meeting, everyone should know what their “rocks” are for the week/month/quarter, and be able to quickly report out whether they’re on track to complete (or not).

Next is the time to review any client/employee headlines – notable news that anyone on the team wishes to share, either about interactions with the firm’s clients, or other staff members. This could be pointing out something good (a client had a good service experience), a problem to be aware of (a staff member is unhappy with the new vacation policy), or simply something noteworthy (a key employee is having a 10-year anniversary!).

The To-Do list section of the meeting is the chance to review the status of the prior week’s action items. Because these are intended to be reviewed (and usually completed) weekly, they should be small and bite-sized. (A large project that could take a month or quarter to complete should be treated as a Rock, not a to-do.) The primary purpose of this section of the meeting is not to re-hash the details of each To-Do list item, but simply to affirm whether they’re done or not. If not, they should get done the following week. If it can’t be done because there’s a bigger issue, that can be discussed later (in the next section of the meeting). This is the essence of holding everyone on the team accountable to the team for completing what they committed to complete in the prior week’s meeting! (Think about how much more effective your organization would be if everyone simply got done every week the stuff they said they would do every week!)

Once all of these “minor” sections of the meeting have been completed, Wickman suggests that the focus should be on IDS, an acronym for Identify, Discuss, and Solve problems. In other words, this is the part of the meeting where everyone on the team comes together to actually resolve any issues that have arisen in the prior stages of the meeting. Notably, the first step to the IDS phase is simply identifying, not just what the issues are, but which are the most important, given that a growing business may easily have more issues to resolve than there is time in the meeting to solve. By prioritizing which are the most crucial to tackle first, by definition the team will be solving the most important problems first (and often solving big problems makes other problems go away altogether, as small issues often turn out to have been byproducts of the big issue). This may lead to more To-Do list items to be tackled for the following week, and some Issues that get carried forward to the following week’s IDS phase (but only those that weren’t deemed important enough to be resolved in the current week!). In the advisory context, this could be figuring out a problem in some new software, onboarding a new employee, handling a complex client problem, or brainstorming how to fix a process that isn’t working.

The conclusion of the weekly meeting should recap the To-Do list items that were assigned for the following week, any unresolved Issues that may carry over to the following week’s IDS phase, and a brief discussion about whether anything needs to be communicated coming out of the meeting (e.g., a message to a particular client, a new initiative to all clients, a new policy to be communicated to staff members).

Notably, the total breakdown of Wickman’s weekly meeting template includes a mere 30 minutes on 6 of the 7 phases of the meeting, and 60 minutes for the IDS phase, where the team problem-solving actually occurs. In other words, the meeting is 1/3rd communication and accountability, and 2/3rds problem-solving. And this balance is deliberate, as the number one failing for most meetings is the feeling that nothing is actually getting done, while this approach is designed to allocate the bulk of the time to getting things done!

My Journey Of Starting A Weekly Team Meeting Process

Personally, I will admit that I long resisted adopting a formal weekly meeting process myself. Having sat in on an incalculable number of unproductive meetings, to say the least I was not eager to voluntarily institute yet another regular meeting upon myself (and my team)!

Yet ultimately, having finally made the transition myself, I will have to confess I see the power of having a standing weekly team meeting. Although I personally haven’t adopted quite the weekly meeting template that Wickman advocates, my own standing team meeting agenda is:

– Review Weekly (and Monthly) Business Data

– Review Task List

– Weekly To-Dos (clients, internal business projects, etc.)

– Monthly Projects (my “Rocks”)

– Reprioritize for the upcoming week

– Other Business/Staff Issues

The meetings are scheduled for an hour, and although I don’t specifically articulate it in my staff meeting agenda, the bulk of the time is really spent not just reviewing the task list per se but actually digging into ‘problematic’ To-Do items (or Monthly Projects) and figuring out how to solve them. Thus, it seems I unwittingly evolved my own weekly meeting agenda to have the heavy component of problem solving that Wickman advocates (and is perhaps why I’ve felt like the meetings have been very productive!). In fact, the whole experience – and Wickman’s book – has made me realize in retrospect that the primary problem with most meetings is that they leave no time for actual problem-solving, usually because the whole meeting is spent on just communication and reporting… or simply because no one actually brought a substantive issue to the meeting with the intention of getting it solved! (Ever gotten to the end of a meeting and felt like the meeting was a waste because there was nothing substantive to actually talk about at the meeting? Exactly!)

Notably, the data tracking comes directly from our business software (and some light massaging of the data in an Excel spreadsheet), and the weekly To-Dos and prioritizing comes from our team’s task management software (e.g., CRM or project management tools). As the weekly meeting process has become habit, some meetings we’ll actually take a few minutes just to focus on how to make it easier to prepare the standard reporting for the meeting. We’ve also been working on automating the reporting of some of our key business metrics.

In addition, I would point out that personally, I’ve found the process of “re-prioritizing” for the upcoming week to be one of the most essential and valuable parts of the weekly team meeting, to stay on target. For a rapidly growing and iterating business – and a bit of a strategic thinker always seeing new ideas and business opportunities – the reality is that sometimes, new opportunities supplant ‘old’ action items and initiatives lingering on our weekly or monthly to-do list. By taking a few minutes every week (usually no more than 5 minutes total) to redirect the team on what they should be prioritizing this week, I can ensure that we’re always working on whatever I truly believe is the highest and best use of the team’s time every week.

Tips For Adopting Your Own Weekly Meeting Process

Ultimately, you may decide to precisely adopt Wickman’s Weekly Meeting Agenda, or instead may decide to craft your own. Whatever your path, I would make the case that the four core areas that have to be covered are:

Data Reporting. What are the Key Performance Indicators for your advisory business? And if you’re not sure, start tracking a few (e.g., new clients, new AUM/revenue, lost clients, prospect meetings, etc.) and adjust based on whether you’re finding them meaningful to regularly report for a period of time. Having a regular weekly meeting process to look at this data will help quickly accentuate whether it’s relevant, or if not what may actuallybe relevant, and will drive you to refine a process to get the data easily.

To-Dos. This is crucial for accountability and ensuring things are actually getting done. What were the tasks from last week, which ones are getting checked off (most of them hopefully!), which are getting carried over, and what are the new ones to add. Ideally this comes directly from the assigned tasks in the task management/workflows from your CRM, but at a minimum, keep track of key To-Dos separately, just so you can report on them at the weekly team meeting!

Prioritize. For me, this is about ensuring that the team is working on whatever is truly most important for the week (which varies from week to week as some projects are paused and revisited later). From Wickman’s perspective, this is where you renew your focus on the Rocks that have to get done in the current month or quarter, to ensure the business is moving forward on its big objectives.

Problem-Solve. Leave time – a lot of time – in each weekly meeting to actually solve whatever issues have cropped up in trying to execute last week’s To-Dos, and preparing for the upcoming week’s priorities items, as well as responding to any data tracking that was concerning. If you follow Wickman’s rule, this should be 2/3rds of your total meeting time!

In addition, one of the biggest keys to the success of the weekly team meeting is scheduling it at a fixed time, and making it a commitment for everyone on the team to honor that team meeting time every week. Our weekly meetings are at 10:30AM on Monday mornings – enough time for everyone to get oriented at the beginning of the day (including preparing the meeting agenda and the weekly data reporting), before diving in to discuss the upcoming week’s activity and obligations. In my case, this was part of my broader personal initiative to regain better control of my time and schedule by crafting a more rigorously structured “standard” weekly meeting schedule.

Beyond just helping for scheduling and time management purposes, though, the real value of having a standing weekly meeting is that it forms the basis for your team’s accountability in the first place. When “everyone knows” that the weekly meeting is coming, and required, and that everyone will be held accountable to their To-Do items in the meeting, it becomes a crucial mechanism for accountability. In other words, the weekly meeting becomes the weekly deadline for weekly tasks… and there’s nothing like a deadline to ensure that things get done!

In the meantime, if you’re looking for more ideas about how to gain momentum in your business, especially if you’ve reached the point of multiple team members (and especially multiple partners) and feel like the business is spinning its wheels with effort but not making much traction, I highly recommend Wickman’s entire “Traction” book, which provides a whole “Entrepreneurial Operating System” (EOS) blueprint to give your business more structure and help it gain some traction.


How to attract the next wave of clients

How to attract the next wave of clients

This was before my time, but they tell me that cold calling was once a very effective marketing strategy — until, of course, it wasn’t. I remember when advisory firms routinely attracted dozens and sometimes hundreds of prospects to cheesy prepackaged seminars, until attendance gradually began to slip away.

Now I’m hearing that the most recent marketing innovation, client appreciation events where clients are invited to bring along their friends, is starting to lose its effectiveness, either because clients are no longer bringing their friends, or because their guests are too far outside the advisory firm’s target market.

Early adopters of high-tech marketing will reap the most benefits, Bob Veres says.

Marketing trends come in and go out with the inevitability of sunrise and sunset. The question is: what’s next on the marketing horizon? How will advisory firms reach beyond referrals to attract the next wave of clients?

To find out, I talked with three marketing experts who work with financial planning firms: Kristin Luke of Kaleido in San Diego, Megan Carpenter of FiComm Partners in Los Angeles, and Lauren Hong of Out & About Communications in Pacific Beach, California.

Marketing today is about finding clients at the moment when they’re experiencing a pain point.

Luke says that marketing today is about finding clients at the moment when they’re experiencing a pain point — either money in motion like an inheritance or a settlement, or a life event like a career change, divorce or imminent retirement.

“If you’ve identified what those pain points are,” she says, “[you can] focus on really targeted campaigns using online channels.”

Carpenter recommends that you start by defining your target audience, and then craft a message that talks directly to that audience. “If you don’t have those core foundational pieces to your marketing plan, I think you’re going to struggle,” she says.

You can research your niche on a website called AYTM Market Research, which allows advisers to create a precise definition of the type of people they want to reach, and then pose questions that will be sent only to people who fit that description, such as: “What is your greatest financial challenge?” Or: “What service would you be most interested in getting from a financial planner?”

Armed with this information, you could create (or have your marketing consultant create) what Luke calls a “freemium:” an e-book or video on, for example, the best ways clients can maximize charitable activities or insights into retirement. Interested parties can download the freemium simply by giving their email address.

The conversations you have with new clients are one good source of content. Hong recommends that you create a Q&A freemium which is regularly updated with answers to questions clients have posed to you over the last few months. “What they ask you is probably on the mind of prospects coming to your site as well,” she says.

To let prospective clients in your target niche know about the freemium, buy advertising on social media sites. “The sites,” Luke says, “let you pinpoint, for example, people who are charitably inclined, living within 25 miles of San Diego with at least $1 million of investable assets over the age of 55, that have shown an interest in charitable endeavors.” She estimates that the cost per click to get someone to your site will fall somewhere between $1 and $2.

The more data you demand before clients get to the download, the less likely they will fill it out.

That doesn’t, of course, guarantee that the prospect will download your freemium. So instead of sending people to your website home page, create a specific landing page for the freemium, Luke recommends. That landing page should have a catchy headline and bullet points that describe what prospects can expect to receive when they download the resource. Ask just for name and email address, since the more data you demand before they get to the download, the less likely that people will fill it out.

That list of interested parties is what Carpenter calls the “mouth of the funnel.” In the middle of the funnel, you want to gradually develop an online relationship with these people, so they trust you enough to call you.

Since the prospect is likely experiencing a pain point when he or she downloaded the freemium, the first two months can be crucial; you want to send out additional materials on the subject.

Carpenter recommends “snackable” content; short pieces of information that are easy to read, focusing on different angles of the same core problem.

In addition, says Luke, you want to have a call to action at the bottom: “If you want more information or advice on this issue, please go to our website and schedule an appointment at your convenience.”

Whenever prospects click on an email with a link, you should ask them an additional question, like: “what is your biggest financial concern?” “Get them to interact a little bit on your website before they get to the content,” Carpenter says, “so you can learn more about your prospective client.”

She adds that the so-called smart web has opened up a lot of opportunities in the middle of the funnel.

“You can tell who is clicking on your emails, and what else they’re looking at on your website,” she says. “You can tell where they go when they leave. This prospect keeps clicking on the market commentaries. Another person bounces off the marketing commentaries and lingers on the retirement planning articles.” The next time they go back to the page, the website is going to recognize their IP address and send them into a preferred content funnel, so they continue to get content on their subjects of interest.

Carpenter says that her adviser clients have been surprised to discover that prospects and clients aren’t as fascinated by their market commentaries as they thought. “Advisers are spending most of their time writing about investments,” she says, “but we’re finding that case studies and pieces that talk about client situations and solutions are outperforming their market commentaries by a good margin.”

Adviser clients have been surprised to discover that prospects and clients aren’t as fascinated by their market commentaries as they thought.

Hong says that even after they’ve downloaded the freemium and other content, prospects won’t call until they’ve checked out your website with a critical eye. Carpenter estimates, based on a variety of studies, that you have anywhere from six to nine seconds to make an impression. If you don’t, the prospect will leave and might never come back.

The solution? Hong recommends that instead of a site that talks about your years in the business, find a way to communicate the benefits you provide to clients — in the language and idiom of your target niche. If you do talk about yourself, share personal details. “One of the first places prospects will go is your bio, and I think you have to be vulnerable there,” she says. “It helps them establish a relationship with a human being, not just a professional.”

Carpenter says that personalization is the new differentiator. An advisory firm she works with now creates personalized video performance statements, which start with, “Bob, we’re going to talk a little bit about how the markets performed in the last quarter, and what we’re looking for ahead in the market. We want to start by talking specifically about how your portfolio has performed.”

The interesting thing, Carpenter says, is that this firm didn’t have to record a thousand videos to make this happen. “They were able to use technology to overlay each client’s actual account balance onto the video,” she explains, “so there was only one video, with different intros.”

This is just a quick look at the new high-tech marketing reality that the planning profession is going to have to learn to navigate. As always, the early adopters will reap the most benefits. Those who come late to the table risk arriving just as targeted ads on social media, freemiums and snackable content have become as ineffective as cold calling is today.


DoL Sends Final Fiduciary Rule Delay To Office Of Management And Budget (Greg Iacurci, Investment News)

DoL Sends Final Fiduciary Rule Delay To Office Of Management And Budget (Greg Iacurci, Investment News)

This week, the Department of Labor sent the final version of its delay proposal to OMB for review, following its brief 15-day comment period. If approved, the rule delay will come back to the DoL to publish in the Federal Register in the coming weeks. However, given that there were over 1,100 comments submitted about the proposed delay, fiduciary rule supporters are questioning whether the DoL could have possibly read and incorporated all the feedback in the barely-2-week time period between when the comment period closed, and when the final delay proposal was submitted this week to OMB. As a result, there is still a possibility that OMB could decline the DoL’s proposed delay upon review, and/or that fiduciary supporters could sue the DoL for a hasty multi-week rulemaking process, especially in light of the fact that fiduciary opponents have already sued the DoL for claiming its multi-year process of formulating the rule was too hasty in the first place. In the meantime, the public comment period for proposed changes to the DoL fiduciary rule is also open, until April 17th; if/when the fiduciary rule delay is made final, pushing out the applicability date to June 9th, there will still likely be another proposal to come forth that may further delay or modify the rule, based on the second comment period closing next month.

What Is Financial Coaching, And Best Practices For Becoming One

What Is Financial Coaching, And Best Practices For Becoming One

While the number of business models for financial advisors continues to grow, from its commission-based roots, to the AUM model, and more recently to hourly and retainer models, the fundamental challenge is that virtually all of those models are still focused on the “traditional” domains of financial planning, including retirement, insurance, estate, taxes, and investments. When the reality is that for a huge swath of Americans, their needs for financial advice are focused on issues like credit card debt, building an emergency fund, or just getting their head around their budget for the first time. The problems are half about financial literacy, and half about behavior change and forming good financial habits around spending and cash flow… neither of which are part of the typical engagement with a financial advisor.

But what’s the alternative? Increasingly, it’s a new domain being called “financial coaching” instead. And in this guest post, Garrett Philbin of Be Awesome Not Broke (a financial life coach who helps people get out of debt and save towards their goals!) shares some of his own thoughts, tips, and processes, and guidance for those who want to try running a financial coaching practice instead of a traditional advisory firm. From the regulatory and compliance issues, to the business model and how to charge clients (because yes, there are people who really do pay for this kind of help!), the software and tools that can help, to the actual services and deliverables provided to coaching clients.

Ultimately, the key point is to recognize that financial coaching is emerging as a distinct service from what we traditionally do as financial advisors, and one that reaches a distinct clientele (who have been grossly underserved by the financial advisor marketplace so far!). For some, that means coaching is an appealing way to expand an advisory firm to reach a new type of clientele. For others, it might even be a preferable alternative to the “traditional” path as a financial advisor, with what is still a $100k+ income potential. In fact, as Garrett notes, financial advisors and financial coaches can be an excellent professional relationship to cross-refer clients who need the services of one or the other!

So whether you’ve heard of financial coaching but don’t know what it is, have been thinking about adding financial coaching services as an offering, want to become a financial coach instead of a financial advisor, or are simply interested in how your clients may benefit from working with a financial coach… I hope that you find this guest post from Garrett to be helpful!

How Do You Know It’s Time To Leave Your Advisory Firm?

How Do You Know It’s Time To Leave Your Advisory Firm?

Start By Trying To Create The Change

First and foremost, if you’re concerned about how your firm implements investments or long-term career opportunities at the firm, I encourage you to see if you can solve the problem within the firm first. In other words, the starting point would be to fix the situation where you are, not leave it or just run away from the problem.

Let’s start with investment philosophy. Now, you didn’t say in your message exactly what the investment philosophy is. I’m going to guess, in some way, shape, or form, that it probably relates to the firm being more active in its investments in some manner that is not leading to good results, because that’s the most common problem or situation I see. Maybe the firm actively manages clients, but it’s having trouble doing it well because each of your clients’ portfolios is different. Maybe they’re using mutual funds or separate account managers that aren’t performing well.

The reality is, if you go to your firm owner and say, “Hey, I’m not comfortable with how we’re managing investments for clients,” or, “I think we’re doing it wrong,” this is not going to go well, because you’re putting your firm owner on the defensive. If you suggest what they’re doing is wrong or bad (even if it is!), pushing the point that way is just going to make them want to defend themselves because that’s what any rational person does. You feel attacked, so you defend yourself. And the reality is, you’re the employee and they’re the firm owner, which means they have the power in the relationship. I think you can see how this is going to turn out if you make it antagonistic.

My recommendation here is to try coming up with a better alternative. Come up with a better way to execute some of the client portfolios, and suggest it to the firm. Perhaps if the firm keeps using some managers that don’t perform well and you’ve just come out of a client meeting where the client was complaining about the results, you can suggest, “Hey, the clients are clearly unhappy with a couple of these large cap funds that haven’t done well. What if we tried using a Core and Satellite approach where you can use some low-cost ETFs for the core and then just use our better funds in the satellites?” The advantage of this approach is that now you aren’t challenging the firm owner. You’re responding to a client issue. It is something a client pointed out and you’re providing a solution that would be a win for everyone.

Alternatively, if the reality is that the firm manages each client’s portfolio differently and is struggling to keep up with it all, you might suggest like, “What if we have rebalancing software to help us track and manage all the client models more effectively. Can I research some of the rebalancing software solutions, and I’ll bring to you the best two that I find, and we can look and see if they might help?”

Again, with this approach, you’re not criticizing the way portfolios are managed. You’re offering to do some of the work to help find what should be a better solution for clients and for the firm, which perhaps implicitly recognizes the firm is currently not doing good, but without saying it, and focuses on a proactive solution. And most firm owners I know will be happy if you come and say, “I want to do some work to bring a better solution to the table.” And you know what? If they adopt your solution, you’re going to get the firm to change the better outcome that you wanted.

Simply put, there’s a lot a good that can be accomplished by starting a conversation with your firm owner using the words “what if”… “What if we did this?”, or, “What if we tried it this way?”, and not “Why do we do it this way?” Because the latter usually makes the other person want to defend themselves. There’s nothing wrong with a true why question, like “I really want to understand why we’re doing something.” But the problem so often is that when we say, “Why do we do it this way?”, it’s pretty much a veiled way of saying “I think it’s dumb we do it this way.” And that does not lead to a positive conversation to change. It leads to defensiveness. If you want to bring about change, start with “What if we did it this other way?” and not “Why do we do it the way that we do?”

You Want A Career Path? Ask For It.

Similarly, when it comes to career opportunities, the best way to clarify what the long-term career opportunity is with the firm is to ask what the long-term career opportunity is with the firm. Start the conversation.

I’m constantly amazed how often I hear advisors complain that the firm owner where they work hasn’t given them a career track. When I say, “Well, what happened when you raised this conversation with the firm owner?” crickets chirp. It’s silent. Like, “Oh, well, we’ve never had that conversation.” So, look, if you have the conversation and you don’t like the answer, that’s one thing. If you’ve never taken upon yourself to initiate the conversation, that’s on you. So initiate the conversation!

The reality at most smaller advisory firms (under 10 employees, which is almost all advisory firms…), the truth is that the firm owner has no idea what the career track is. They don’t know. They’ve never had a firm as large as what they’re hoping to grow it to in the coming years. You know, it’s one thing when you’re at a large firm that has 50 people, and 10 of them have already gone through a career track, and the 11th person comes in and says, “What’s the career track?” You say, “Well, here’s how it works around here. Here’s how we’ve done it with all the rest.” When you’re the first one going down this track and if you’re a paraplanner or an associate planner in a firm with as many as 5 to 10 employees, you may be the first person that ever actually is going to move up the line in a career track, and they literally don’t know what the track is because they’ve never gone down this path! You have to recognize it’s a first time for the firm owner as much as it may be a first time for you.

My suggestion, again, is to start the conversation with your boss or firm owner and tell him or her that you like to understand the opportunities within the firm as it continues to grow. And the “continues to grow” part is really important because it’s emphasizing that this isn’t about getting more of your share from a fixed pie. This is about the opportunities as the firm gets bigger and more opportunities abound, because trying to get more from a pie that isn’t growing is hard. When you’re trying to get a small slice of a growing pie, then everyone benefits. It works much better.

I’d suggest that you schedule some time to talk about long-term opportunities with the firm as it continues to grow and explore what might be possible.

Though again, recognize that because your firm owner probably has no idea what the opportunity is because they haven’t fully fleshed it out because the growth hasn’t happened yet, and they may have never run a firm of that size, so realize there’s probably not going to be an answer at first. Don’t make this a win-lose situation, For example, “I need an answer now, or I’m leaving.” Tell them you’d like to know what the opportunities can be with continued growth and that you want to revisit it at your next review. And that gives the firm owner some time to think about possibilities as well, start moving towards the vision of the firm, and figure out how you fit into it.

When It’s Time To Leave – Philosophy Mismatches And Career Opportunities

Unfortunately, sometimes you would try to start these conversations, they really don’t go anywhere. The firm owner really does not want to change or improve on an investment process. Maybe it’s problematic, but they’re comfortable. They’re used to it. It’s worked decently so far. (Remember, they could afford to hire you!) It’s not completely broken, no matter how negative you think it is. And maybe they really can’t articulate a career path or an opportunity for you.

Even worse, perhaps there really is no growth, and there aren’t going to be opportunities because the truth is, at a firm that isn’t growing, there’s very little chance there will ever be a career track! If the firm is not growing, every additional dollar for you is a dollar less for the owner, which is not appealing from the owner’s perspective.

When the firm is growing, it means there are more dollars for you. Suddenly you may hear, “Hey, we grew a bunch. I’m going to make a little more and I’m going to pay you a little more. You’re going to get a promotion and we’re going to hire more people.” Everyone feels like they’re winning. That’s one of the primary reasons why I suggested, if you want to find a firm with career opportunities, find a firm that’s growing. Because it’s literally the growth that brings the career opportunities.

But what do you do when it’s really a dead end? First, I think you have to clarify what the problem is, because there’s a big difference between a firm that just doesn’t have good long-term career track opportunities and a firm where you are not comfortable with how clients are invested or taken care of.

If you’re really uncomfortable with how the firm handles its recommendations to clients and they’re not willing to budge, I think you need to leave (like, “start looking now” leave). Life is too short to live in a firm that doesn’t do right by its clients. And, sadly, those advisors are out there that don’t do good work for their clients.

On the other hand, if the reality is it’s a fine firm and they’re good people but you just don’t think there’s a good long-term fit or any long-term opportunity, then eventually you’re going to need to leave for the next opportunity, but there’s no hurry. I’d actually encourage you to take your time and prepare yourself so that the next job really is a good one. Finish your experience requirement on your CFP. If you haven’t already, start studying for your CFP. Build up your savings so that you can afford to make a transition if there is maybe a little gap in income or saving up so that you even have a fallback where you can go launch your own advisory firm if you want to.

That’s actually one of the biggest cautions we give to advisors that come to XYPN to start their own firm. Build up your savings and a financial cushion first. It gives you more choices. And, you know, we talk about this as fiscal prudence for our clients, but it applies to us in our career tracks as well. Don’t quit your job sooner than you need to because you’re not sure it’s going to work out well in 5 or 10 years. It’s one thing if you are dealing with ethical issues. But it’s another if you’re just saying, “I’m not sure what my long-term opportunity is.” With the latter, you have some time to figure this out.

Looking For A Job Discreetly When You Already Have One

I know, for some of you, the challenge at this point is literally how do you search for a new job while you’re at your current one, because you usually don’t want your current firm owner to find out since they may or may not push you out if they find out you’re getting ready to leave?

A couple of tips here: Number one, clarify what you’re actually legally allowed to do. This means double-check. You have an employment contract, so what does it say? Does it have a non-compete? Does it have a non-solicit? Non-compete means you literally can’t work for another competitor. Non-solicit means you can work for another firm, but you can’t solicit any other existing clients to come with you.

The good news from the employee perspective is that a lot of non-competes are unenforceable. Many states just outright don’t allow them. Sadly, a lot of firms still make employees sign them even if they’re not enforceable because not everybody looks into it and figures it out. If you’ve got one or you’re not sure, find a lawyer in your state. You need one in your state that knows employment law in your state. Pay them a couple hundred bucks to review the agreement and find out if it’s an option for you and what your legal choices are. Don’t get yourself in trouble.

Number two, update that resumé and start sending it out. Clearly, you don’t want to post it to open job sites for employers to come findyou because then it’s out there and that could come back to your boss as well. You’re going to have to be a little bit more proactive about looking for the job opportunities. You can go to the relevant job boards in our industry:CFP Board’s job boardFPA has oneNAPFA has one. We have job opportunities listings at New Planner Recruiting as well.

Find jobs that are of interest and apply to those jobs. Just note in your cover letter your current firm is not aware that you’re looking to make a change and that you would appreciate discretion. People who are hiring understand what that means. If they’re interested in you, they don’t want to screw up the deal by screwing the relationship with you by accidentally outing you to your boss while they’re evaluating you, so they will do their best to be discreet.

But, also, make sure you don’t out yourself, which means don’t apply from your work email address. Make sure your resumé has your cell phone or personal number and your personal email address. You’d be amazed the number of people that I get. They’ll say, like, “Hey, I’m looking for a job, but my boss doesn’t know. Let me know if there’s interest.” And they send it from their work email address. What am I supposed to do? Hit reply and say, “I found three great jobs for you” and just hope your boss doesn’t look at the email at the time? Do try to be discreet, but if you go put your firm’s phone number on your resumé and the potential hirer calls your firm, that’s on you, not them. Do your own diligence to make sure that you’re not putting yourself out there in a way that’s likely to bring it to light for everyone.

Number three, join a professional association. It can be FPA, NAPFA,IMCA, AICPA PFP Section, whatever is a good fit for your firm and your role. But be in an association. Be involved and volunteer. It’s not just about giving back to your profession, which is important, but the reality is, being involved in professional associations is a great place to find a job. The relationships you’re going to build with people at other firms and with people you work with as volunteers on committees are the ones you can network through to find the next opportunity. And they’re likely to want to help you because you’ve got a relationship with them. And the good news is that you don’t even have to explain to your boss why you’re going out to something. It’s an association, and that’s what you do! You just might happen to find your future boss there as well.

I’m certainly not saying this is the only reason to join an association, but it’s a powerful opportunity to network and find future opportunities that I find a lot of planners tend to overlook. And that means investing yourself. If your firm won’t pay for your joining FPA or NAFPA, then pay for yourself. It’s an investment in your network and in your long-term future.

Getting back to Jeremy’s original question, is this short-stint job going to label you as a “job-hopper” and hurt your ability to get a future job? The good news is I don’t think it has to or at least not when it happens once. And here’s how I would explain it. When you’re interviewing for a new job, I would just say, “When I got my first job, I didn’t really understand the industry that well. And I didn’t even know what questions to ask really about the firm’s philosophy and its opportunities. But now I know.” You are sending the message that lesson learned here is on you. You picked a bad firm out of the gate, but now you’re looking for a new opportunity.

The reality, again, is that most advisors out there know there are other advisors that do some bad stuff. No one’s going to begrudge you because you got hired into a bad firm and you didn’t realize it until you got there. Those firms are out there. And, unfortunately, sometimes they’re pretty good at sales, and you don’t realize it until it’s too late. No one’s going to hold a grudge against you for that. However, that excuse only works once, because, in your next job, you better do your due diligence on the firm and their investment/planning philosophy. That means figure out what they do and ask the questions you need to ask to make sure you don’t do this to yourself again.

And remember, an interview is a two-way conversation. They interview you and you interview them. So ask the questions you need to ask so that you don’t end up with this problem again. Because, if it happens repeatedly, it is going to be an issue. At that point you’re either a job-hopper who isn’t serious about any particular job in the industry or, worse, you’re not a candidate who’s serious enough to do basic research and due diligence on your firm. And you know what I would worry about at that point as a business owner? If you can’t take the time to ask questions and research your next job opportunity for yourself and look out for yourself, how confident can I be that you’re going to pay attention to details that matter for our clients?

So, Jeremy, if you need to make a change because you didn’t get the right fit the first time out, that’s okay. I wouldn’t freak out about it. Make a change. But use it as a learning opportunity about how to do better due diligence so that you get a better fit the next time. And be candid with the new firm that’s why you left. It’s an okay reason, at least once, maybe twice, but at some point, you’ve got to take responsibility for yourself for making that interview two-way conversation and making sure you really ask the questions you need to ask to find the right fit.

I hope that helps and provides some food for thought about what to do if it’s time to leave your advisory firm and find a new job. Always start with trying to resolve it in your current firm first. I know sometimes they’re hard conversations and it can feel awkward, but start there. See if you can make it work there. And if it doesn’t work, then it’s time to look.


Is Mr. Market Playing the Role of Pavlov’s Dog?

Is Mr. Market Playing the Role of Pavlov’s Dog?

If you mix your politics with your investment decisions, you’re making a big mistake. 

– Warren Buffett, February 27th, 2017

These are wise words indeed.

After all, Herbert Hoover had the biggest honeymoon of all and look what happened later on.

The markets tripled under President Clinton and Obama which later slid 35% under the “pro-business” George W. Bush administration.

Even with President Reagan’s first two years in Office were affected by a 25% plunge in the stock market after a brief high upswing following the November 1980 election.

What you see isn’t always what you get, and it is likely a mistake in speculating this present market performance for the future.

Today things in the the market place seem to be positive (U.S. equity exchange-traded funds took in a huge $22 billion of net inflows last month).

However, but some aspects of the technical picture have become muddled – the share of NYSE stocks trading above their 200-day moving average is at the highest level in nearly four years (a sign of overextension).

Sentiment is wildly bullish, and while it has been such for weeks now, we have hit some pretty extreme levels.

The Investors Intelligence poll now shows there to be 63.2% bulls, up from 61.2% a week ago, and the highest since January 1987 (i.e. when we last saw the Dow on a 12-day winning streak).

The bear share fell a point to 16.5%, the lowest since July 2015 (and the correction camp is down to 20% – one in five see at least a 5% correction coming even though the declines roughly of this magnitude have happened at least once per year for 88 of the last 89).

The bull-to-bear spread is now in proverbial danger-zone at 46.6 percentage points, up from 43.7 and just took out the 45.5 nearby high in February 2015. That is an ominous sign, even if not yet apparent amidst the euphoria.

As per Bob Farrell’s Rule #9, in reference to the herd mentality:

When all the experts and forecasts agree – something else is going to happen.

Just because it hasn’t happened yet, doesn’t mean it is not going to.

And of course, that then leads to Rule #4, which also has to do with excessive manic behavior:

Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.

They do not correct by going sideways!

And lurking in the background is the Federal Reserve, which is poised to raise rates sooner rather than later.

Monetary policy is profoundly more important to the markets and the economy than is the case with fiscal policy, though all the Fed is doing now is removing accommodation.

A little bit of history – there have been 13 Fed rate hike cycles in the post-WWII era, and 10 landed the economy in recession.

Soft landings are rare and when they have occurred, they have come in the third year of the expansion, not the eighth.

And valuations don’t matter until they do matter, and we have a market priced for perfection right now – the S&P 500 is trading at 18.5x forward earnings per share, up a full point since Inauguration Day, and only 20% in the past were valuations as expensive as is the case today.

So momentum, charts and fund flows are positives; valuation, technicals and sentiment are warning signs.

Take your pick, but as you do, take some profits as well.

While Warren Buffet likely is prescient, this continues to be labelled the “Trump Rally”.

Once again, the headlines are filled with the same old thing – tax cuts, deregulation, and infrastructure.

These were the Trump campaign planks and so when he got elected, the S&P 500 rallied 6.2% right through to Inauguration Day.

He then talked about these same themes, and investors (more likely algorithmic traders), thinking they were hearing something new, bid up the stock market by 4.1% right through to the State of the Union speech the other night.

And then, one day past the address to Congress, the S&P 500 tacks on an extra 1.4%.

It is amazing, I have to say, to see Mr. Market respond to the same language over and over and over. It is a present-day version of Pavlov’s Dog.

More discussion of tax cuts, deregulation and infrastructure, and again, the market soars on what really is old news by now. Or should be.

The fact that this is all still rhetoric, with no details or timetable provided, should be a bit worrisome.

What if all this wonderful stuff doesn’t take place until 2018 (or later)?

Tax reform is no easy task; it took Reagan four years.

Relying on private-public funding for infrastructure has all sorts of question marks in front of it logistically, and take Canada as an example of how long the gestation period is – long.

And Trump did seem to tip his hat in favor of the border-adjustment tax, which would benefit exporters to be sure and over time incentivize production to relocate to the U.S., but the initial impact will be to boost import prices, impair household spending power, and risk a consumer-led recession as was the case in Canada when the goods & services tax (GST) was introduced in 1991.

The good news is that the speech was less sinister and dark than on Trump’s Inauguration address, though the protectionist themes were still quite evident even if emphasized less in this latest go-around.

The ISM manufacturing index really whipped up the markets even more yesterday which is almost like a case of double-counting since the one thing they both have in common is being measures of confidence.

The headline ISM manufacturing index spiked 1.7 points to 57.7 in February, with 17 of 18 industries reporting growth, and most components rising smartly (like new orders jumping 4.7 points to 65.1, the best since December 2013; backlogs jumping 7.5 points to 57.0; supplier delivery delays up 1.2 point to 54.8 – these are old Greenspan favourites and he may well have tightened intermeeting in the old days based on numbers like these).

The prices-paid component also was elevated at 68.0, though off from 69.0 in January, it compares to 65.5 in December and 53.0 in September.

The pre-“Great Recession” Fed would have had little trouble tightening policy right away based on this set of data.

But there are just a few nagging concerns.

The first is that the rival Markit manufacturing PMI did not corroborate these ISM results. That diffusion measure actually dipped to 54.2 in February from 55.0 in January.

Second, all these recent juicy ISM manufacturing releases have only managed to squeeze a string of 0.2% MoM gains in manufacturing output. Okay, but short of stellar.

Third, we know that the last time we had such a strong ISM manufacturing print (back in the summer of 2014), it actually coincided with a 5% annualized growth rate in real GDP.

We also know that this is hardly the case this time around, as an epic gap has opened up between the survey data and the actual hard data. Sentiment is nice, but it does not feed into GDP.

And so despite all the exuberance, the Atlanta Fed just cut its estimate for Q1 real GDP growth to 1.8% from the 2.5% projection it had with near consistency since the middle of February.

[Note from John: The Atlanta Fed relowered its Q1 GDP estimate to 0.9% from 1.2% after seeing the BLS report Friday and consumer spending and CPI today. Hat tip: Peter Boockvar.]

I see many forecasters as low as 1.5% and my old shop (BAML) is calling for 1.3% current quarter growth.

There was a time this cycle when such stall-speed was met with investor euphoria because it meant the Fed was going to ease policy further and liquidity is like a drug for the stock market.

But here we have the Fed poised to tighten into an actual economic slowdown.

The fiscal stimulus hope is just that – hope. Size, details and timing are still open for debate, but what is not, is that growth is slipping again.

As in:

  • Real consumer spending declining nearly 0.3% MoM in January (baking into the cake little better than 1% real PCE growth for this quarter; and this follows the soft tone to core capital goods shipments in January which has led to downwardly revised capex estimates).
  • Real disposable income slipping 0.2% MoM. The vagaries of a 0.4% spike in consumer prices cutting into real spending power.
  • Construction spending falling 1.0% MoM in January after a flattish December.

We know that the consumer is tapped out and there is no more such thing as pent-up demand.

Autos and housing have peaked and spending intentions for both have rolled off their cycle highs.

Not even another month of blowout incentives and discounting could manage to take auto sales north of 17½ million annualized units in February (actually a tad below the 18 million annualized units in Q4, even in the face of the widespread price breaks – one sure sign of a market suffering from consumer fatigue).

The dollar will constrain exports, to be sure.

Government is not a factor.

Commercial real estate is in its own mini-bubble and rising vacancy rates suggest that the impetus from this sector will wane.

So we are left with capital spending as the necessary lynchpin which is why Congress and the White House should be in a hurry to pass tax reform and engage in pro-growth deregulation.

Standing in the way of a boom, mind you, is the ample spare capacity underscored by a 75% industry capacity utilization rate.

Plus, with there already being $3 trillion of liquid assets sitting on the balance sheets of U.S. businesses, it’s not as if Corporate America was ever that cash-constrained to embark on at least a mild capital spending cycle.

The arithmetic is daunting.

Between net exports, consumer spending, government, housing and commercial construction, together they are unlikely to add more than 1% to growth this year and next.

This means that to get to the Trump vision of 3% growth, arithmetically we would need capital spending to begin to surge at a 20% annual rate or more, the sort of thing we have never seen happen before (at least over the past 70 years).

So good luck with that.

At best, look for 10% capex growth and that will then give us a 2% GDP trend, in line with what we have already seen this cycle (and believe me, I am being very generous here because even seeing 10% growth in capital spending in any given year is less than a one-in-five event).

In other words, nothing will really change.

It’s one thing to have fiscal stimulus when there is pent-up demand, we are early in the cycle, and the Fed is accommodating the largesse (as it did with FDR, with Reagan and with Obama, and did not with Eisenhower and Bush Sr.).

It is quite another story at this late stage of the cycle, following another debt-financed consumer spending expansion (as in sub-prime autos, credit cards), and with the Fed openly signalling its intent to lean against the wind.

So we may get stimulus and a lot of it on the fiscal side, but much will be saved, not spent, as economic agents (us!) look into the future and realize that at a near-80% starting point on the net federal debt-to-GDP ratio, today’s largesse equals tomorrow’s tax liability. As I have recommended before, look up “Ricardian Equivalence”.

With headline PCE inflation gapping up from 1.6% YoY in December to 1.9% in January (as well as the 0.3% MoM bump in the core PCE index, which was the largest monthly increase in a decade), it is reasonably safe to say that we are starting to see some late-cycle inflation pressures emerge (while the core inflation rate remained at 1.7% YoY, the three and six month trends are quickly heading towards 2%).

This, however, remains in the context of secular disinflation, and inflation is a classic lagging indicator.

But it is creating a slowdown in the real (price-adjusted) data and undoubtedly will raise eyebrows among the FOMC hawks who are looking at this in the context of a prolonged sub-5% unemployment rate backdrop.

Fed Chair Janet Yellen herself is probably not too fussed by the inflation numbers, but her recent commentary has been “hawkish” for her (what happened to running a “high pressure” economy?) as she ostensibly fears the Fed is behind the curve and may have to do more tightening down the road (having waited so long to rekindle the rate-raising process that was started 15 months ago).

Just wait to see what happens if we get the fiscal boost and the Fed raises its growth projections, keeping in mind that as a group, it sees 3% in the fed funds rate as neutral (and we are still 225 basis points away from that mark).

But take it from me, even getting to 2% this cycle is going to end up feeling a lot like 5.25% did in 2007 and 6.5% back in 2000.

In poker parlance, we have a pair of twos on hand to contend with by year-end – 2% growth (stuck) and a 2% fed funds rate (five hikes is not out of the realm of possibilities).

I started with Warren Buffett so it is probably appropriate that I leave you with three of his most pertinent pieces of advice, all the more relevant given today’s runaway market valuation:

Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.

Long ago, Ben Graham taught me that “price is what you pay; value is what you get.” Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.

Be fearful when others are greedy and greedy only when others are fearful.

Anti-Money Laundering (AML) Rule Looms For Advisers

Anti-Money Laundering (AML) Rule Looms For Advisers

While most regulatory focus over the past year has been on the Department of Labor’s fiduciary rule, back in mid-2015 the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) proposed that anti-money-laundering (AML) provisions be extended to cover independent RIAs, which would include a requirement for RIAs to establish policies and procedures to identify “suspicious activity” and designate a compliance officer to oversee the program… along with conducting employee training, and even obtaining an independent audit to affirm the process is being executed appropriately. And while much of President’s Trump focus so far has been on rolling back regulations, the administration’s regulatory freeze memo had an exception for areas implicating national security or financial matters, which would leave the way clear for FinCEN to proceed with a new rule (given that money laundering can otherwise potentially be used to finance terrorism). At this point, the public comment period on the AML proposals has already closed, and FinCEN is ostensibly working on a proposed rule that might be issued in the year or two (there is no concrete timeline yet). As a result, it remains to be seen how the AML procedures might actually apply to RIAs, and whether there may be exceptions for smaller RIAs and/or those relying primarily on third-party custodians. Nonetheless, given that broker-dealers and banks have long been subject to AML regulations, it seems increasingly likely that something will ultimately apply to RIAs as well, and become part of what the SEC reviews when examiners visit an RIA firm in the future.