Displaying items by tag: advisors

Being a financial advisor certainly has its challenges due to the unique nature of the industry. One aspect of this is the difficulty of differentiating your offerings and services from your competitors especially when it comes to attracting new clients. 

This means that an effective marketing strategy is essential to long-term success. It can help in building a solid pipeline of prospects and increasing your conversion rate. There are many well-trodden templates that advisors can follow such as building a website or a newsletter. However, your marketing strategy can be more creative and go beyond these generic ideas.

Additionally, it can result in more chances of success if it’s something you enjoy, can be consistent with, and reflect your personality which will lead to a more authentic connection with prospects. 

Some of the more outside-of-the-box ideas include sharing ideas on online forums or message boards. Here, the key is not to make a hard sell but instead show your expertise. It can be valuable in building SEO visibility while creating a more genuine connection than other marketing channels.

Some other ideas to consider are direct mail marketing, hosting a client appreciation event, or sharing quizzes or polls on social media. The commonality of these marketing ideas is that you can experiment with different approaches, show off what makes you unique, and target your ideal clients. 

Finsum: Marketing is more important for financial advisors than most industries given that it can be difficult to easily differentiate services and offerings. Here are some out-of-the-box ideas to consider. 

At the DeVoe and Company annual M&A+ Succession Summit, LPL Financial announced an expansion of its liquidity and succession offerings for unaffiliated advisors. The program was initially started last year for LPL advisors who are eyeing retirement but still a decade away from actual retirement.

In essence, the program is designed to allow advisors to receive market value for their firm immediately, but they are required to commit for a period of time to support the next generation of advisors who would be groomed to take over the business. As an intermediary, LPL would buy 100% of the practice while the chosen successors would run the firm while participating in a 10-year ‘successor advisor’ program before fully taking over. 

This strikes a balance as it gives the current generation liquidity and full value for their business, while also setting up the next generation of advisors who may not necessarily have the capital to acquire a practice. According to LPL Executive VP of Strategic Business Development Jeremy Holly, “They’re not having to come out of pocket or take down a bunch of debt to take over. And the principal seller doesn’t have to take a steep discount to sell their practice to that next generation.”

Finsum: LPL Financial introduced a new program for succession planning. Current advisors would be able to sell to LPL but remain with the firm while the next generation is trained to takeover. 

The outlook for the financial markets and economy is quite murky given several uncertainties such as a slowing economy, high interest rates, inflation, trouble in the banking sector, and geopolitical risk. Adding to these woes has been the poor performance of bonds. Typically, they are a safe haven during periods of uncertainty and volatility. Yet, they have suffered losses and failed to provide sufficient diversification over the last couple of years.

Thus, many are looking at other asset classes to meet these needs such as fixed-indexed annuities. The rates on these annuities are tied to the performance of an index such as the S&P 500 with much less risk. They combine the security of a fixed annuity while having some upside like an index annuity.

Most fixed-indexed annuities are structured to provide 100% protection of the principal which is especially advantageous during a market downturn. In some ways, these are more secure than bank deposits given that there is a 100% financial reserve requirement for annuity issuers while banks have much lower reserve requirements on deposits.

However, there are some downsides to fixed-indexed annuities. Relative to bonds, there is much less liquidity, as most have some sort of limits on how much of the principal can be withdrawn without incurring a penalty. There are also higher fees than simply investing in a fixed income fund. 

Finsum: Fixed-indexed annuities may be a better fit for many investors than traditional bonds especially in the current environment. 

Choosing the right broker-dealer is a pivotal decision for any advisor, and while the three P's — payouts, products, and platforms — often take precedence, overlooking cultural fit could be a critical mistake. Cultural fit transcends the more tangible aspects of a broker-dealer, offering a sustainable competitive edge that cannot be easily replicated.

Compensation differences and the allure of superior products or platforms might seem enticing initially, but they tend to level out over time. Culture, on the other hand, is ingrained. It's the ethos of the company, the collective behavior, and the beliefs that characterize the organization. According to James L. Heskett, Professor Emeritus at Harvard Business School, culture is not just a peripheral factor; it can "account for 20-30% of the differential in corporate performance when compared with 'culturally unremarkable' competitors."

The disruption caused by moving broker-dealers can be significant. It affects relationships, routines, and can even impact client perception. That's why ensuring a broker-dealer aligns with your values, work style, and vision for client service is vital. A broker-dealer with a compatible culture can provide a supportive environment, fostering growth and satisfaction that pure financial incentives cannot match.

Finsum: Ensuring cultural fit is essential when selecting a broker-dealer for advisors— it's the strategic edge that impacts performance and satisfaction.

One of the major benefits of direct indexing is that tax losses can be harvested during up and down years. This option is not available to clients who are invested in indices. This is because clients will own the actual components of an index in their account rather than an ETF or a mutual fund. With regular scans, losing positions can be sold to harvest tax losses which can then be used to offset gains in the future or other parts of the portfolio.

This is because some components of the index will be in the red even in up years. These positions are sold and then other stocks with similar factor scores are added to ensure the benchmark continues to be tracked. 

According to Vanguard, “Because investors directly own the individual securities in their direct indexing portfolios, you can harvest losses for them even in years when the index is up. You can use these losses to offset your clients’ capital gains, and help them keep more of what their portfolios earn.” Overall, it believes that the strategy can add between 1% and 2% in annual returns in after-tax alpha for clients with large capital gains in addition to helping optimize short and long-term holding periods to minimize capital gains taxes. 

Finsum: Direct indexing has several benefits for investors such as tax-loss harvesting. While many are familiar with its application during down years, less are aware that it can be used to add alpha even in up years.