This week’s roundup of must-read news for advisors:
Robo-advisors, low-cost index fund investing, and other factors are proving to be challenging to wealth management firms, as evidenced by a recent PriceMetrix report that shows that advisors in North America earned less revenue from clients and experienced a drop in average fees in 2016. According to a Bloomberg article, the report also noted that advisors aren’t reaching prospective Gen X and millennial clients. See the full story below. Also, consultant Angie Herbers notes that in order to grow, firms need to take a step back and “build a pre-foundation,” otherwise they’ll be working on old problems as well as new ones. In a column at Investment Advisor magazine, Herbers outlines four steps to take before embarking on a growth plan: Recognize where your firm is today, manage risk, be sure you’re delivering what clients truly want, and focus on growing from your client base. See the link to her column below.
Wealth Management Industry Hit by Lower Fees, Fewer New Clients
By Ivan Levingston
Wealth management firms are struggling with a drop in fees, scarcity of new clients and little prospect for growth as young investors shun full-service retail firms. Even as the bull market pushed industry assets under management to a record in 2016, advisers in North America earned less from clients last year and saw a decline in average fees, according to a report issued Wednesday by PriceMetrix, a unit of McKinsey & Co.
Not So Fast, Tortoise
By Angie Herbers
Source: Investment Advisor magazine
I’ve been working with the owners of independent advisory businesses for more years than I care to think about. Yet I’m still continually surprised that most firm owners resist building a solid foundation for their businesses before implementing new strategies to grow their firms. I’m surprised because this is essentially the same conversation that financial planners and other financial advisors have with their clients — who are usually all too eager to implement a new investment strategy before creating a sound financial plan to base it on.
Interns at advisory firms are performing a wide range of duties this summer, from client prep work to business analysis, to get on-the-job experience in the industry. InvestmentNews talked with several firms about the roles their interns take on and the value of the experience for firms and interns alike. See the link below. Also, advisors who decide to strike out on their own “need to foster a healthy culture from day one,” writes Carolyn McClanahan, president of Life Planning Partners, in a column at Financial Planning. How? She suggests “corporate engagement standards” that spell out how everyone at the firm conducts him/herself. Read the details below.
Interns will take on several roles at advisory firms this summer
By Liz Skinner
Tens of thousands of college students will be toiling away this summer at financial advice internships around the nation, taking on projects like exploring new software and helping firms go paperless to planning office celebrations and client events. Interns do not usually sit in on client meetings, mostly because of concerns about privacy, but they often prepare the materials advisers depend on for their presentations. Interns do interact with clients in other ways, such as answering phones or greeting them when they come into the office.
Is your job a calling? Explaining the breakaway movement
By Carolyn McClanahan
Source: Financial Planning
Work is either a job or a calling. Most people would love to have a calling, and the financial planning profession readily fits the bill for many. Advisers have an opportunity to make a significant difference in clients’ lives and this can be emotionally rewarding. Financial services firms that focus on actually helping people while making a decent profit can create an incredible work culture. Yet in recent years, there has been a large cadre of advisers leaving the wirehouse and broker-dealer world and going to independent RIAs.
Advisors who work with military clients – or plan to – need to know about the Heroes Earning Assistance and Relief Tax Act, which allows a military widow to contribute up to $500,000 to a Roth IRA at one time, as long as it’s done within a year of the payout. InvestmentNews talked with advisors who have helped clients take advantage of this little-known benefit. See the full story below. Also, Morningstar recently evaluated 10 HSA plans from two perspectives: as a spending vehicle and as an investment vehicle. The conclusion? “The industry has a lot of room for improvement,” writes the author of the report. Only one provider received a positive assessment in both regards. See the link below.
Military benefit allows widows to put $500K into Roth IRA at once
By Jeff Benjamin
Financial advisers working with members of the military often need military-like precision and knowledge of the special circumstances facing service members to help them avoid costly missteps. Last year, Christy Raines, owner of Azimuth Wealth Management, a $40 million AUM advisory firm, faced the challenge of helping a military widow invest part of a $400,000 life insurance death benefit in a Roth IRA, which she described as a little-known military benefit.
How Does Your Health Savings Account Stack Up?
By Leo Acheson
Health Savings Accounts are growing rapidly, but the general public is just getting up to speed on how they work. HSAs, which are offered in conjunction with high-deductible health plans, are tax-sheltered accounts for individuals to save for medical expenses that aren’t covered by the HDHP. Despite the increased interest in HSAs, they remain a very under-researched corner of the market. Investors have few resources available to navigate the hundreds of plan providers that exist. The lack of resources has likely contributed to these plans’ underutilization as savings vehicles despite their valuable tax benefits.