Tag:

Financial Advisor Advice

How to Find a Financial Advisor if You’re Not Rich

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

If you think about it, the people who need a financial advisor are the ones who can't afford one. If you're impoverished or firmly in the middle class and can't seem to make it to the next level, you're the one who could really use financial advice. If you're wealthy, you know what you're doing.Yet many financial advisors simply aren't interested in working with the middle class. Many firms in recent years have stopped paying commissions to brokers for accounts that are considered small, including accounts ranging from $100,000 to $500,000 in assets. Firms that do take less than those minimums sometimes charge as much as 2 percent in annual fees, though 1 percent is more typical.So what should a middle-class investor do to find a good financial advisor? Experts recommend following these tactics.Know Where to LookAt the beginning of the process, you should think about what type of financial advisor you want to meet with: fee-based or commission-based. Think about what you're looking for. Are you seeking help with investments and retirement planning, or simply someone to go to when you have questions? Some advisors include financial planning in their fees for managing your investments, while others charge a separate fee or hourly rate for advice.As for where to find a financial advisor, there are several places, from the obvious to the unexpected: Ask friends, family or colleagues for recommendations. Obviously, you'll be more likely to find somebody who will work with you if your friends, family members or colleagues are in a similar tax bracket as you are. The Garrett Planning Network. GarrettPlanningNetwork.com offers a map of the United States where users can click on a state and find a listing of financial advisors who cater to the middle class. The National Association of Personal Financial Advisors. The association's website, NAPFA.org, allows you to find a financial advisor near you. It isn't for financial advisors who generally cater to the middle class, however. Still, you may want to take a look and see who shows up near your home. Robo advisors. You may want to consider an automated portfolio management service as a cost-effective option. For example, Schwab Intelligent Portfolios does not require advisory fees, account service fees or commissions, though you will need $5,000 to get started with them. Meanwhile, Wealthfront, another popular robo advisor, has a $500 minimum account requirement, and only charges an annual advisory fee of 0.25 percent on all assets under management deducted monthly. The Accredited Financial Counselor website. "I would strongly encourage true middle-income people to look (at Afcpe.org) for an accredited financial counselor," says Justin Chidester, who is both an accredited financial counselor and a certified financial planner – as well as the owner of Wealth Mode Financial Planning in Logan, Utah. Search engines. This one may seem like a no-brainer, but the power of search engines can't be overlooked. Chances are a search engine is how you found your way here. So if none of the above prove fruitful, consider a quick Google search for "financial advisor near me" or "financial advisor for the middle class." You've probably heard of certified financial planners, but accredited financial counselors have been around for a while too, according to Chidester."They often have a focus on helping low- and middle-income people, at affordable prices, with topics relevant to everyone – saving, budgeting, paying debt, improving credit, preparing to buy a home and working through poor habits with money," Chidester says.He adds that they can't legally provide investment or insurance advice, but they can provide great education about any financial topic and point you in the right direction for those things.Know What Questions to AskAre you looking for help with investments and retirement planning, or simply for someone to go to when you have questions? Knowing what you're looking for in a financial advisor is the first step to finding the right advisor for you. Knowing how to match an advisor to your needs is the second step. Ask any potential financial advisors these questions: What services do you provide? What type of clients do you typically work with? How will we communicate with each other? How often will I hear from you? Are you a fiduciary? How are you compensated? And how much will I be charged for your services? Some advisors include financial planning in their fees for managing your investments, while others charge a separate fee for advice. As for how much you'll pay, it will vary depending on where you live and the scope of the work you're asking for. Some advisors may charge a couple thousand dollars for a comprehensive plan; others may charge around $200 to $400 an hour to dispense financial advice.Stephanie Genkin, a certified financial planner in Brooklyn, New York, charges hourly – as opposed to what's known as "assets under management." Most fee-only advisors charge according to assets and therefore have minimum thresholds an individual needs to have in their bank account before they'll even consider the person as a client. How much is the minimum? It varies, of course, but often you'll need at least $50,000 before many advisors will consider working with you."That means most middle-class people are automatically excluded from service as they don't have enough in investments to manage," Genkin says. Genkin, who charges $200 an hour for her services, is also a fiduciary. That's important to know because there are two standards that financial advisors adhere to. If you're working with a fiduciary financial advisor, they are legally bound to put your needs before their own. A financial professional who has a suitability requirement is legally bound to provide products that are suitable for your needs, but which may not be the very best for you. That doesn't mean somebody who upholds the suitability standard isn't going to look out for you – but it does mean that the rules for those advisors are less stringent.Registered investment advisors, investment advisor representatives and certified financial planners all carry fiduciary-level responsibility. You can easily spot these titles on business cards, websites and email signatures, if you look after the person's name. Chartered retirement planning counselor and accredited investment fiduciary are other designations that indicate a fiduciary responsibility. Keep in mind, your financial advisor will likely carry a Series 65 license or a Series 7.As for what you might discuss with a financial advisor, it can run the gamut. In Genkin's case, she says, "I work with students to help them create realistic debt repayment plans, self-employed individuals who need help figuring out what they can do to save for retirement and new families who have limited resources and would like to save for a down payment on a home and start a college savings plan for their baby at the same time."She also points out that you may not need many hours, at first, with a financial advisor. If you're just starting this journey, you probably have fewer assets, and you just need that initial guidance. By the time you need more help to manage your assets, well, you'll presumably have more money, and paying for more financial advice won't be as challenging.Stick Up for YourselfTo avoid getting scammed, make sure to get references and check out everything you can find on the financial advisor online first. And keep in mind, everyone pays something when they hire a financial advisor – and not everyone is out to get you.But after you find a financial advisor, you do want to make sure you're in sync. You'll want to get a sense of whether your advisor has a financial philosophy that lines up with yours.And the most important question of all? "Ask how can they help you reach your goals," says Brett Anderson, a certified financial planner and president of St. Croix Advisors, an investment advisory firm in Hudson, Wisconsin.And if you're anxious that you don't make enough money for a financial advisor to work with you, just tell the advisor upfront what you earn, Anderson says."Established advisors will want to have a dialogue even before they schedule an initial meeting with you," he says. "Be honest. Just lay it all out. You'll save everyone time."And the more time you save in looking for a financial advisor, the faster you can get started making your money work for you.

February 21, 2020 0 comment

Financial Advisors

11 Things to Know Before Becoming a Financial Advisor

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

What to know before becoming a financial advisor.
The financial advisor career is among the best business jobs and best-paying jobs, according to U.S. News & World Report’s career rankings. It’s evolved “from a sales and product-driven profession to one centered on providing meaningful financial advice,” says Michael Purpura, president of Wealth Management at D.A. Davidson. “It is incredibly rewarding to help people navigate a series of challenging issues and achieve a variety of substantial end goals,” from college planning to funding a comfortable retirement to leaving a legacy to the next generation. But the financial advisor career isn’t right for everyone. Here are 11 things to know before becoming a financial advisor.

It’s an industry entrenched in tradition.
While the financial industry is evolving, it’s still one steeped in tradition and traditionalists. The average age of financial advisors is over 50 and the industry as a whole is dominated by long-standing names. As such, it can be frustrating to be the new person with new ideas in the room. “Younger advisors need to understand that there are many ideas, processes and people in the industry that have been around for a long time,” says Patrick Brewer, founder of SurePath Wealth and co-founder of Brewer Consulting, a marketing agency for financial advisors. “If you are the kind of person who wants to buck tradition, then financial services may not be for you — unless you are willing to be patient and save your entrepreneurial drive until you are a few years into your career.”

Must love people.
It’s a misperception that the financial services industry is for numbers-people. Financial advisors spend as much time, if not more, managing people than they do crunching numbers. “This is a career based on relationships, and advice tailored to each person’s unique needs, situation and objectives,” Purpura says. “Being genuinely curious about people and their stories is crucial to forging trusted, long-term relationships with clients.” So before you start looking at how to become a financial advisor, ask yourself if you have a genuine curiosity about and affinity for people. Do you like helping people and giving advice? Are you willing to spend the majority of your days in conversation with others?

You should be success-driven, not dollar-driven.
Before becoming a financial advisor, ask yourself what your motivation is for starting a financial advisor career. “If you’re interested in becoming an advisor to make money, you’re doing it for the wrong reason,” says Jeff Cashman, principal partner and lead advisor at Cashman Consulting. “Aspiring advisors should genuinely want to help people and serve as a trusted counselor.” He tells aspiring FAs to be “success-driven, not dollar-driven.” Those who are success-driven want to be the best they can for their clients. “Frequently, young professionals get so attracted to the potential for high commissions that they forget the purpose of their role in the first place,” he says. A lot more goes into your work as an advisor beyond just hunting the big-dollar clients, primarily with building client relationships.

You’ll make less than your college friends initially.
The reason having a motivation to become a financial advisor beyond making money is so important is that you probably won’t be making much money in the early years. “In the first three to five years of your career as a financial advisor, you will probably be making less money than many of the people you went to college with,” Brewer says. “Even if you do everything right and learn quickly, your revenue in the early years will be slow to build.” He advises aspiring financial advisors to set reasonable expectations before becoming a financial advisor. “You will make money if you build your relational capital first, but that won’t happen overnight,” he says. “Your work will pay off if you manage to build a practice, (but) not every brand-new advisor makes it that far.”

Problem-solvers preferred.
“At the end of the day, a great financial advisor is a problem solver,” Brewer says. Your days will be spent helping people solve their problems, which could be financial or personal. Sometimes “money trouble is merely a symptom,” he says, “and you have to connect your clients with professionals or resources to solve deeper issues.” You may come across clients struggling with addiction, communication problems or past trauma. “Solving those problems will allow clients to view you as credible and reliable,” he says. “If you don’t enjoy solving problems or aren’t good at doing it, you will be missing key ingredients for building long-term trust and a successful financial advisory practice.”

There are different types of financial advisors.
Many people mistakenly think all financial advisors do the same thing, but that’s not the case. There are many different types of financial advisors from planning advisors to investment advisors. There are rainmaker advisors who are focused on business development and servicing advisors who focus on existing client service rather than finding new clients, says Paul West, managing partner of Carson Wealth. For aspiring advisors this means two things: First, becoming a financial advisor does not mean you’re stuck in the same role forever. And second, your role will likely involve more than picking investments. “The best advisors are ones who focus on comprehensive, strategic planning and providing sage advice,” West says. “Investments are just a portion of the overall plan.”

A willingness to sell is required.
Like it or not, sales is an integral part of the financial advisor career. “This industry can be unforgiving for those who are unwilling to develop their ability to sell,” Brewer says. Even if you steer clear of the transactional side of product sales, you’ll still have to sell your advice; no amount of degrees or certifications will sell it for you. “Many professionals mistakenly believe that by simply being a fiduciary advisor, their expertise will magically sell itself,” Brewer says. “Selling financial advice means building trust, listening, creating a sense of curiosity and inspiring commitment.”

Self-starters thrive best.
In addition to a willingness to market your services to others, financial advisors need to be self-starters. “This is a profession in which you need to rely heavily upon your own motivation and ability to reach out to your clients,” Purpura says. “You are the driver of your clients’ successes and your own.” Regardless of the type of firm you work for – be it a large broker or on your own as a registered investment advisor – you will need a healthy dose of the entrepreneurial spirit to succeed. “While some individuals thrive on this entrepreneurial aspect of serving as an advisor, this style of working is not for everyone,” Purpura says. Do a little soul searching as you’re researching how to become a financial advisor to determine if sales and being an entrepreneur appeal to you.

You’ll need a niche.
The Bureau of Labor Statistics estimates there are more than 200,000 personal financial advisors in the U.S. Cerulli Associates puts that number at over 300,000. Either way, this means that as a financial advisor you will be competing with hundreds of thousands of others for clients, not to mention the robo advisors. “In a competitive environment, getting very good at helping people with a specific set of needs and gearing your financial advisory practice toward them could help you establish a unique value proposition,” says Bill McManus, director of Strategic Markets at Hartford Funds. Before planning how to become a financial advisor, think about where you’ll find your niche. McManus suggests looking to your network for inspiration: Is it weighted toward any one professional field? Is there an opportunity to work with a set of people you’re already connected to?

You’ll probably want a CFP and to work for a fiduciary.
There are a couple different frequented routes into the financial advisor career path: You could get your FINRA securities licenses, which will allow you to advise on and sell investments, or you could go the purely planning route by getting your CFP. While you don’t need your CFP to take the first path, many advisors recommend obtaining it anyway. “Investing in yourself and achieving the CFP designation will not only make you credible but also allow you to be thorough in your planning capabilities with your client,” West says. He also advises working for a fiduciary: “Don’t put yourself in a situation where you have to choose sales versus doing what is right for your clients.”

The financial advisor career is open to everyone.
The beauty of the financial advisor career is that it’s open and welcoming to anyone. “As a highly-entrepreneurial profession that offers flexibility and the opportunity to build lifelong relationships with clients,” Katherine Mauzy, principal and head of financial advisor talent acquisition for Edward Jones in St. Louis, Missouri, says that “a variety of professionals, including women, millennials and culturally diverse individuals” should consider becoming a financial advisor. In fact, being of a minority group could make it easier to find your niche. Likewise, the financial advisor career needn’t be your first stop: “Backed by excellent financial advisor training programs, many professionals are successfully transitioning mid-career and discovering a rewarding and meaningful career,” Mauzy says.

Things to know before becoming a financial advisor:
It’s an industry entrenched in tradition.You must love people.You should be success-driven, not dollar-driven.You’ll make less than your college friends initially.Problem-solvers are preferred.There are different types of financial advisors.A willingness to sell is required.Self-starters thrive best.You’ll need a niche.You’ll probably want a CFP and to work for a fiduciary.The financial advisor career is open to everyone.

February 21, 2020 0 comment

Financial Advisors

How Women Are Creating Success in Financial Services

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

When she wanted to start Ellevest, a digital investment platform for women, Sallie Krawcheck approached several large banks for funding. She presented the concept, demonstrated the need and how large the market was, but nobody got it. After one such meeting, the CEO of the bank looked at her and said, "Well, don't their husbands manage their money for them?"In one comment, he encapsulated much of what is behind the lack of gender diversity in the financial industry. Women face stereotypes, doubt and biases from both within and outside the industry. But despite these psychological and financial hurdles, women are creating success in the financial industry. And they're teaching other women how to do it, too.Women Face Higher Hurdles Into the Industry When Catherine Berman and Yuliya Tarasava had the idea for CNote, an investment platform that uses technology to help people invest in a more inclusive economy, they entered in the 2017 SXSW Super Accelerator Pitch Competition. From hundreds of thousands of applicants, the judges whittled it down to 10 finalists. Standing alongside the other finalists onstage, Berman realized something: "Out of a global competition of fintech founders, we were the only women. Every other founding team was 100% male."CNote beat the boys to win the 2017 Best Startup Pitch Company award, but too often women in finance find themselves climbing an uphill battle to success. Women represent less than one-third of financial advisors and less than 20% of leadership roles in financial services firms globally. Women-owned businesses receive only 2% of venture capital in the U.S. The Ripple Effect of More Women in FinanceAs the gatekeeper to wealth, the financial industry is in a unique position to improve diversity by supporting women inside the industry and investing in women-owned businesses outside of it. Such efforts can have a wide-reaching impact."I've found again and again (that) when you support a woman entrepreneur, the effect of that goes far beyond just supporting her and her family," Berman says. "She ends up producing a series of positive network effects that also benefit the community, the local economy and the entrepreneur ecosystem."Berman and Tarasva are is proof of this: Since founding CNote they created The Wisdom Fund, a fixed-income vehicle that enables individual and institutional investors to invest their dollars in women-owned businesses. Likewise with Krawcheck and Ellevest, which is tackling not only gender diversity within the company but also the global gender wealth gap.Women have long been criticized for keeping more of their money in cash than men, thus missing out on investing returns, but "that research doesn't hold up," Krawcheck says.It's not a coincidence that an industry with fewer women does a poor job for women, Krawcheck says. She poses the question: Do you really think if instead of being 95% men, the industry had been 90% women, there'd be a CNBC?"CNBC was fashioned off of ESPN, (turning) investing into a sport," she says. "So the ripple effect here is tremendously important for our society."The Knight Foundation commissioned Harvard University and Bella Research Group to look into the diversity of the asset management industry. They found that women mutual fund managers represent less than 10% of the industry and manage less than 1% of total industry assets under management (AUM)."If we do the math, that means men are choosing the companies for 98% of our economy and look where we are," says Kristin Hull, founder, CEO and CIO of Nia Impact Capital. "The mess we're in was literally man-made, and until we can shift that lens to bring in more diversity, we're not going to get out of the problems we're in."How to Bring More Women Into the Financial IndustryImproving greater gender diversity in the asset management space isn't hard: It starts with choosing female-managed funds and investments that support women. To improve gender diversity in the financial industry more broadly, society needs to change the way it thinks. People have been socialized to view white men as leaders and everyone else as not, Krawcheck says. For gender equality to happen, inclinations to homogeneity need to change, she adds."There's an overwhelming draw to familiarity, to working with people like yourself," Krawcheck says. "Even people who are benefiting from the change can fight it because the drive to status quo is so powerful."She puts the onus for change on CEOs. If a CEO isn't committed to diversity, diversity won't happen. To that end, Krawcheck calls a full-stop on hiring if Ellevest becomes too homogeneous. They won't hire until they find someone who brings a different perspective and background. And before you ask: Yes, she upholds this policy even if the company becomes female-dominated.Hull takes a similarly firm view of diversity at Nia Impact Capital. The company is the first U.S. firm to be Gender Equity Now (GEN) Certified, which recognizes businesses that meet a standard of excellence across five areas of workplace culture including the gender perception gap, a certification Hull recommends all companies undertake."Even if you don't get full certification, you learn so many things that can improve your company practices," she says.But even the most committed CEOs can't hire people who don't apply. "Men are quicker to throw in their resumes than women are," Hull says. "Women are much more likely to apply when the hiring process is transparent."To encourage female applicants, companies should improve transparency, she says. Make the salary window available, let people know how many other applicants there are and, "of course, have women on hiring committees."Not only do women hire more women, but having a female role model when interviewing can be invaluable to women applicants.When Chrissy Lee, co-president and COO of Kalos Financial, interviewed for an operations position at Kalos 13 years ago, one of the first people she met was the company's co-founder and then-COO Carol Wildermuth."She blew me away," Lee says. "She presented herself with such confidence… Even in the interview, she was so open to sharing her background, her challenges, what she had to go through."Lee walked out of that interview thinking, "I want her job."As co-president and COO today, Lee is constantly trying to lift other women up in the field. "If I'm winning at something, I want other people to have that experience as well," she says.How to Be a Successful Woman in FinanceWomen must help other women rise, but you can't lift someone who isn't reaching up. If Lee had never applied to Kalos, if Krawcheck had never set her mind on creating Ellevest or Burman on CNote or Hull Nia Impact Capital, they never would have become the beacons of female success in the financial industry that they are today."It's not easy as women to be in this space right now," Berman says. "But the challenges can spark new thinking – and it's a battle worth fighting."Women shouldn't see the lack of diversity in the financial industry as a deterrent, but rather as an opportunity to pave the way for a better future for everyone.

February 21, 2020 0 comment

Financial Advisors

AI is Improving Investing

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

AI is changing the financial industry for the better.
Artificial intelligence isn’t coming; it’s here. AI is behind almost every activity people undertake today, from Google’s traffic data to the filters in your email, from Facebook’s face recognition software to Amazon’s product recommendations. AI is even revolutionizing your finances. What began as enabling mobile check deposit has evolved into new ways to monitor, make and communicate investment decisions. Financial firms and investment managers alike are employing AI to invest smarter, faster, cheaper and easier. Here are 11 ways artificial intelligence is improving investing.

Better predictions lead to better investing decisions.
AI and machine learning are enabling asset managers to “assimilate new information more quickly and accurately into their portfolio construction processes,” says Bryan Kelly, professor of finance at the Yale School of Management and head of machine learning at AQR Capital Management. As computing power has increased, so has the financial industry’s ability to capture and analyze data with increasingly rich statistical models. This “translates into better prediction of future economic outcomes, which helps investors better allocate wealth to the most productive opportunities and better manage the risks of their portfolios,” he says. In short, smarter computers make for smarter investors.

Defense against emotional biases.
Behavioral finance has shown that try as they might, human investors are not rational. Investors of all types, from retail to institutional investors, are susceptible to behavioral bias, says Michael Cicero, director of portfolio research and management at High Probability Advisors. You need look no further than the University of Chicago’s sale of equity in 2008 for an example of loss aversion bias, or the emotional bias caused by investors feeling more pain from a loss than pleasure for a gain, by a sophisticated investment committee responsible for the endowment, he says. Irrational decisions such as those prompted by loss aversion “can be as detrimental to long-term expected return as poorly designed investment strategies,” Cicero says. AI can help investors eliminate these biases, thus increasing “the odds of investment success.”

Voice activated investing and research.
Investors don’t even need keyboards to invest anymore thanks to artificial intelligence. Firms like TD Ameritrade are rolling out voice activated investing that lets you place trades, research the markets and check on your portfolio using Amazon.com's (ticker: AMZN) cloud-based voice service, Alexa. With an Alexa-enabled device, you can now stay on top of your investments and financial education from virtually anywhere – even while driving in the car. In-vehicle features let investors query Alexa about the stock market or check account balances and investment performance while on the go. It’s an example of multi-tasking portfolio management, compliments of AI.

Stronger advisor-client relationships.
AI is making it possible for financial advisors to automate certain aspects of client relationships, from initial communications to risk profiling and all the legal documentation that goes with the client-advisor relationship, says Gopal Appuswami, lead of payments, fintech, analytics, products and innovation at LatentView Analytics. “Additionally, by using intelligent information management solutions, staff has the means to simplify how they access, secure, process and collaborate on documentation,” he says. This increases productivity as advisors and their staff are able to find and access information much faster.

Higher quality financial advice at a lower cost.
Behind these stronger financial advisor-client relationships is higher quality advice at a significantly lower cost to firms, Appuswami says. By “offload(ing) routine tasks such as preliminary data collection, research and compliance adherence to robo advisors,” advisors and asset managers can focus their time on “preparing premium strategies and packages for each client,” he says. In essence, it’s computers doing what computers do best so humans can do what they do best. “AI services also allow firms to offer a broader range of financial services for audiences in different income brackets,” Appuswami adds. Advisors can provide better advice to more people at a lower cost thanks to artificial intelligence.

Faster investor communication.
The last time you contacted a financial services firm, chances are your first line of communication was with a form of artificial intelligence. “AI chat bots now serve as the first line of support for retail clients,” says Phil Andriyevsky, a data and analytics leader at EY. While chat bots may not always be able to answer your question, every question a bot answers is one less question that needs to pass across a human’s desk. As a result, AI communication is bringing down the cost of investing for firms and investors. It’s also making communication faster and, for those who prefer digital communication, more pleasant. Unlike human advisors, chat bots can be available 24/7 and don’t necessarily require you to pick up a phone to reach them – unless it’s to chat via a mobile app.

Financial firms give investors what they want.
As digital communication becomes more effective and powerful, financial services firms can use it to create a two-way channel between advisors and investors. “Advisory firms can incorporate preemptive communication, transparent fee structures and even channels for customer feedback on product development,” Appuswami says. This can help firms guide their future product decisions. “By addressing client concerns and incorporating their ideas, firms can efficiently appropriate spending toward products and services that meet client needs,” he says. So just as your feedback helped Oreo pick its next flavor, AI is enabling investors to shape the future of the financial services industry.

Optimized portfolios and faster investor reaction times.
Before AI, “portfolio optimization relied only on human effort, which is time consuming and can’t guarantee a complete compilation and impact of all sources,” Appuswami says. With firms going increasingly digital, more information about indicators that necessitate a portfolio shift is available. Algorithmic programs allow money management systems to track these indicators and automatically adjust portfolios. Faster response times to economic, global and market trends leads to optimized returns for investors, Appuswami says. Likewise, automated portfolio optimization means less strain on financial firms’ human staff to monitor and react to these changing events.

Proactive portfolio management.
Artificial intelligence isn’t just improving investors’ and money managers’ reaction times; it’s also helping them be proactive. It’s not possible for human beings to evaluate all of the market factors that impact a portfolio’s performance, Appuswami says. But artificial intelligence can: “AI services, together with predictive analytics, can track multiple macro- and micro-economic indicators, regulatory trends and social sentiments,” he says. This enables them “to produce insights and timely advice, which financial advisors can leverage to make proactive portfolio rebalancing recommendations or help customers build the right financial management solutions based on the current phase of their life and lifestyles.”

Better risk/reward ratios.
Asset managers are using artificial intelligence and machine learning to broaden their understanding of investment risk. At Alpha Innovations, they’ve “found that in the analysis of financial risk, historical and live time series data provide subtle clues and autonomous patterns that can be used to predict future patterns with strikingly high accuracy,” says Mark Antonio Awada, chief risk officer and data analytics officer at Alpha Innovations. “This affords our asset managers with opportunities for significant improvement in performance and risk/reward ratio.” As a result, a major disruption to conventional investment portfolio construction is under way. “For investors who are seeking rejuvenated streams of returns on their investments, this is amazing news," he says.

Greater access to cost-effective investment solutions.
Thanks to the recent launch of ETFs managed by AI, artificial intelligence is easier than ever to leverage in your portfolio. That said, it will come at a slightly higher cost. The fee investors pay for an enhanced index strategy “will be slightly higher than its passive brethren,” Cicero says. But he predicts this will change: “While partially automated now, we believe artificial intelligence will add significantly to scale and efficiency, driving down price while improving the long term probability of success.” Increased competition as industries outside of financial services make advances in artificial intelligence will force the cost bar down, he says. Who knows, maybe Google (GOOGL/GOOG)will operate the next largest asset manager of the future.

How AI is improving investing.
Better predictions lead to better investing decisions.Defense against emotional biases.Voice-activated investing and research.Stronger advisor-client relationships.Higher quality financial advice at a lower cost.Faster investor communication.Financial firms give investors what they want.Optimized portfolios and faster investor reaction times.Proactive portfolio management.Better risk/reward ratios.Greater access to cost-effective investment solutions.

February 21, 2020 0 comment

Financial Advisors

Becoming an Independent Financial Advisor

by sshrx_ns3li1 February 21, 2020

written by sshrx_ns3li1

Starting your own business is scary business (pun wholly intended). When you work for yourself, everything depends on you: when you work, where you work; when you eat, if you eat. It can be a great psychological and caloric burden.The first year after financial planner Meg Bartelt started Flow Financial Planning was hard – "like, not-diagnosed-but-I-swear-it-was-a-nervous-breakdown hard," she says. Now three-and-a-half years in she reports that while becoming an independent financial advisor was stressful, it was also gratifying."One thing that became obvious very quickly was that being an advisor at another person's firm is entirely different from being the advisor in my own firm, where I am in charge of not only being the lead advisor, but also running the business," she says. "I now had two full time jobs: financial planner and business owner, and I'd only been trained in one."There's a lot of on-the-ground learning involved in becoming an independent financial advisor, but preparation can help minimize the stress and maximize the gratification.Steps to Become an Independent Financial Advisor: Have a financial cushion. Create a financial advisor business plan. Contact custodians and get legal counsel. Figure out where you'll get your clients. Recruit staff members. Build a support network.Have a Financial CushionBefore you take the leap to independence, "plan out how much revenue you need to live on and how much 'ramp time' you have with what you've saved so far," says Katie Burke, co-founder of Equita Financial Network.Bartelt suggests having two to three years' worth of living expenses covered, either through savings or a partner who also has an income. Even if you don't need all of it, just knowing it's there can be "a tremendous stress relief," she says. Financial Advisor Business Plan"Having a business plan is critical to your success as an independent advisor," says Eric Clarke, CEO of Orion. "A good business plan will really hone in on your value proposition and identify your specific niche."A financial advisor business plan may not resemble a traditional business plan, given the number of moving parts involved in the transition, says Rob Bartenstein, CEO of Kestra Private Wealth Services. According to Bartenstein, a financial advisor business plan should include: Mapping of assets from one platform to another. The infrastructure elements related to opening the office. Systems training for the entire team. Tech installation. Integration and testing. Review of the team's personal finances and preparation for income interruption. Acquisition of health care. Clarke suggests putting hard math into if you have the scale to go out on your own, too, before becoming an independent advisor. If you have less than $100 million in assets, his advice is to join an existing firm. "You need $100 million in terms of sustaining your business, and that level of assets lets you qualify as an SEC investment advisor, bypassing the hassle of registering in each state where your clients reside," he says."Make sure to think through how you plan to serve your clients while also running the business," says Bridget Venus Grimes, co-founder of Equita Financial Network. "It's also important to know that having your own RIA is not only expensive, but it also takes up a lot of your time — time away from clients, and time away from your family."Contact Custodians and Get Legal Counsel"Process wise, advisors should contact custodians right away to see what resources they can provide," Clarke says. You'll also want "competent legal counsel who has done this before." Experienced legal counsel can help you with your Form ADV to register with the SEC and state securities authorities, get your investment advisory agreements in place and navigate the transition to independence without violating your current firm's rules, he says.Finding and Retaining ClientsOne of the biggest pitfalls Bartenstein sees for financial advisors starting their own business is not pursuing their existing clients enough during the transition. "As a departing advisor, you have to be prepared to share your vision, help clients understand what's in it for them, and diligently work to communicate," he says. To do this, "work with partners who have experience with moves like yours, from firms like yours, and who have a demonstrated track record of helping people succeed."That said, maintaining client relationships from your old firm isn't the only way forward. Bartelt started from scratch when she began Flow Financial Planning because she knew she wanted to target a different demographic, namely women in their early-to-mid career in tech. It made the first year slow but "ultimately was a blessing because I could grow a refined group of clients from the start," she says.Staffing Your Financial Planning FirmStaffing can also be a challenge for advisors starting their own financial planning firm. The problem the team at TD Ameritrade Institutional uncovered in a recent survey of more than 2,000 advisors, students, career-changers and university program directors was that many job seekers don't even know the RIA career exists. "Only 37% of students and 44% of career changers (surveyed) knew what an RIA job was, which demonstrates how crucial it is to increase visibility," says Kate Healy, managing director of Generation Next at TD Ameritrade Institutional. "Some of the ways to do this include becoming an ambassador, connecting with local university program directors, signing up to be an adjunct professor, joining networking groups and introducing the profession to students early on."She also suggests offering internships, diversifying your hiring program and encouraging candidates from different educational backgrounds to apply. "Some of the best RIAs didn't study finance so try to think outside the box and consider candidates with majors like sociology and education," she says.Independent but Not AloneBecoming an independent advisor can be the most rewarding career move you make, but it can also be the most daunting. The good news is you needn't do it alone.Many advisors feel "they need to stay at their firms to preserve their network of clients and peers," Clarke says. But there's a whole other network of support available to independent financial advisors through industry associations and conferences.For Bartelt, joining the XY Planning Network (XYPN), an organization of fee-only financial advisors specializing in Generation X and Generation Y clients, was essential. "I never considered myself an entrepreneur so starting my own business didn't particularly appeal to me, and when I decided to do it anyways, it scared the pants off of me," she says. "XYPN stepped in to mostly fill in the holes of what I needed to do, and to help me do it."Your support network can be industry associations or individual coaches and friends who allow you to share best practices."When you decide to go solo, you likely won't have the daily comradery you may be used to at a larger firm, at least not right away," Burke says. "So, having other like-minded planners to reach out to is important for your sanity; you can tap into their expertise for advice on everything from client cases, to running your business, to managing family and business."

February 21, 2020 0 comment