Shopping Cart
Your Cart is Empty
There was an error with PayPalClick here to try again
CelebrateThank you for your business!You should be receiving an order confirmation from Paypal shortly.Exit Shopping Cart

Mentor RIA Consulting

Allowing you to focus on what you do best

My Blog


Major Hurricane: Business as Usual?

Posted on September 14, 2018 at 4:31 PM Comments comments (0)
Whether it is wildfires on the West Coast, ice and snow in the Middle West, or tropical storms in the Southeast, one common thread is the questionable nature of business continuity in the face of nature’s force. Regulators, seeing the potential disruption of the financial industry and harm to its clients in such cases, have made it a priority to require advisory firms to put in place comprehensive plans for disaster recovery and business continuity.
Leaving aside for the moment the question of how many clients, caught in the throes of a natural disaster, would be focused on the details of an aspect of their financial plans or desirous of making a specific trade, the pertinent question may be how would one ensure that any such client requests could be handled promptly and effectively whatever the weather.
The good news is that advances in technology and particularly the availability of data, applications and access through the cloud have made it far easier and more effective for advisers to provide service in the face of natural and other disasters. The need for access to a physical office or a particular computer is no longer essential as simply having access to the internet may allow the adviser to place trades, modify plans, send reports and otherwise communicate with and for the clients.
Now when a storm threatens, an adviser can notify clients of the best way to communicate as well as to shift location to ensure that business will continue despite the reach and effects of the disruption.  With their finances in good hands, clients will have at least one burden lifted from them as they, in turn, prepare for the storm and handle their own issues and preparations. What better way for an adviser to reassure clients and reinforce the adviser’s value to them.

Best Interest and Bureaucracy

Posted on August 10, 2018 at 10:54 AM Comments comments (0)
Amidst the plethora of bureaucratic rule making, it is common to hear the regulated complaining about the burdensome nature of the seemingly endless rules. The amount of time and energy – and so expense – which goes into compliance seems to increase almost daily. The public, the pundits and of course the regulators themselves all seem to shrug off those complaints as if they were merely sour grapes and without any real meaning. Meanwhile, those in the industry continue to seek clarity and simplicity.
The recent release of the SEC’s proposed best interest rule seems to put the lie to any claim of sour grapes and provides support for claims of over-regulation and excessive bureaucratic burdens. The rule itself – almost four pages in length – pales next to the accompanying “preamble” of some 400 pages more. That is crazy.
As you might well imagine, there is little of value in those four hundred pages but they need to be examined to ensure that no surprises slip in. This document is tailor made for lawyers who will look for any lever in those four hundred pages to allow them a basis for suing the industry deep pockets and make some money for themselves while saying it is for the investors. It sure is not about the investors – the consumers that are supposedly to be protected. They (wisely?) won’t take the time to dig through all that drivel the bureaucrats have written.
[In one person’s view] there should simply be a short and clear rule that says the purveyors of investment advice must act in the best interest of their clients. The rule should also say that disclosure of actual or likely conflicts does not cure any practice that is not going to result in the best interest of clients being served. Just because you tell someone that your business incentivizes behavior that is in the perceived best interest of the business and its employees (and not necessarily in the best interest of its clients) cannot excuse or protect the behavior. That type of safe harbor only leads to abuse.

Advisers and Social Media

Posted on July 29, 2018 at 10:01 AM Comments comments (0)
For some time now, advisers have been exhorted to make use and more use of social media. If they don’t, they are told, they will fail and lose clients and potential clients. In response, we have seen an increasing use of social media by advisers, including the recent “authorization” to use Twitter media. All to the good, perhaps, but it may be wise for advisers to exercise a bit of restraint and caution.
First, think about the headlines of late and the increasing number of persons whose statements on Twitter have gotten them fired from a job, deprived of opportunities and castigated by the responses of others on Twitter and other social media. You will want to be careful what you say and Twitter is not set up to force you to take your time and think about what you are saying (or potentially to whom). In most cases, you will want to keep your business comments for your business Twitter account and personal comments – including all of your very smart opinions – for your personal account only.
Related to this is the second point which is to remember that what you put out there is in some fashion permanent. Not only are you required to maintain a complete record of all Twitter (and other social media) activity for your business account, but the regulators will want to be able to examine it at any point in time. So once that easily typed message goes out into the everywhere, you can’t pull it back.
Which brings us to the third point – certain types of statements are forbidden or very limited by regulation of advisers. For example, as an investment adviser, you need to avoid saying anything that resembles a recommendation for someone to purchase a particular security. On the flip side (for example), some regulators consider a Facebook like to be the equivalent of an endorsement of the adviser and so, again, forbidden.
More food for thought might be the understanding that what you put out on social media can reach all kinds of folks, including some you would never have expected or intended to communicate with at all. It may flatter the ego to know that some number of folks are “following” what you say but you might want to remember to be careful about what you do say and make sure statements are clear and not capable of more than one interpretation. Down that road lies more potential for misunderstanding and trouble.
Bottom line: social media can be a good tool for advisers but only if used sensibly.

Time for Spring Cleaning

Posted on April 13, 2018 at 3:43 PM Comments comments (0)
Here we are at mid-April. The annual disclosure update has been submitted, quarter-end reports and billing are done, taxes have been prepared, reviewed and filed. Nothing to do, right? Well, some of us are likely going on vacation next week, like my accountant likes to do. That is something to do, though not actually work. But if you have cleared the decks of all these tasks that seem to hit at one time, there are a few things that likely would benefit from some attention.
There are things that should be done regularly in your firm which make things easier, particularly when it comes time for an audit or some other unexpected event. A review of trading, including best execution, trade errors, personal trading by advisers in the firm and more will pay dividends in ensuring that operations are running smoothly and compliance is satisfied. Changes in client situations which may affect billing and fees should be addressed as well.
And, speaking of unexpected events, how about a disaster recovery test which could run the gamut from a major weather event to loss of an advisor to death, disability or other cause or perhaps a loss of services due to an EMP attack or other means? A documented test not only will please your compliance folks and the regulators but will give you confidence that your firm is in a position to keep up and running even when a negative event takes place.
Finally, and not least in importance, a review and update of your online or web presence is a great idea now that the dust of all the March and April deadlines has settled. Ensuring that content is both fresh and accurate is a great benefit for your firm. Keeping clients engaged, prospects interested and business partners linked is critical to long term success.
Though the beach sounds nice, you will enjoy your vacation more if some of these tasks are done. 

When Your Client Lies to You

Posted on January 27, 2018 at 10:31 AM Comments comments (0)
One of the trickiest areas in an advisory relationship is how to deal with clients who do not tell the whole story or outright lie about relevant information. Obviously, this makes it difficult for an adviser to do the best job for the client since the advice is based on something other than the actual situation. It is made worse by the fact that the adviser cannot always tell what exaggerations, lies or omissions have occurred.
Among the indications that a client is being less than forthcoming are the failure to answer direct questions about goals, investments and income. The failure to provide requested documents and failing to complete a questionnaire are other common indicators. References to working with other advisers or limiting statements such as this is all I want you to consider also suggest you are not getting the full story.
What to do when you suspect a client is not giving you the whole story? Start with very specific requests concerning the client’s financial situation. Vague or incomplete answers can be pursued in hopes of obtaining clarification. If the client persists, it seems likely this is not a client you will want to work with over the long run. A history of changing advisers is another warning which supports your withdrawing from any advisory relationship.
The best clients fully share the necessary information, even if that means they have investments with someone else. They understand that the advisory relationship is built on mutual trust and that without that trust they will not receive the full benefit of the advice and services of the adviser. Those clients who will not participate in the process will likely only bring trouble to the relationship, particularly since you will not be able to give valid advice due to their approach. You do not need these clients.

Year End Is No Vacation

Posted on December 28, 2017 at 5:00 PM Comments comments (0)
It is that long, quiet week between Christmas and New Year’s Day when everything has slowed down and everyone seems to be on vacation. However, with the end of the year closing in, you may find things much busier than you may have expected. Clients may be making decisions and moves in their finances – such as taking RMDs, planning for taxes, pre-paying deductible items – where they need your expertise and assistance. This kind of help you provide may well be much more valuable than holiday cards, gifts or parties.
The end of the year can be critical to a client’s financial situation and well-being and satisfying client needs at this time is important to your success and your retention of clients. At the same time, between those urgent client calls, you may work on some of those year-end tasks that are so necessary to your firm and which need to be completed for budgetary and compliance reasons.
And, if you have not already been thinking about and planning for the new year, putting those plans and goals in place and ensuring that your firm is ready to go with the start of the new year is very important. A successful year begins with a plan and schedule in place with goals to meet and readiness in the firm to get it done. So maybe it is not such a quiet time – and not really the right time to relax – given what lies ahead.

Adviser-Client Relationships following Repeal of Deductions

Posted on December 22, 2017 at 12:52 PM Comments comments (0)
The tax law overhaul just passed by Congress appears to affect how we do business with our clients in some interesting ways. It will be important for us to consider the law changes and what steps we might want to take in response.
For example, the changes in allowable deductions mean that investment clients will no longer be able to deduct investment advisory fees from their taxable income. This will make a real difference for those clients who pay substantial fees for services on their large accounts. Such clients may seek out low fee or no fee investments for a portion of their portfolio or may seek to renegotiate the adviser’s fees. Advisers may look at their fee and service arrangements and change their approach to charging for financial advice and investment recommendations. Showing the value of services will grow even more important for advisers.
On the other side of the client adviser relationship is the practice of advisers entertaining clients and other persons such as vendors and providers of third-party services. The new law provides for the non-deductibility going forward of business entertainment expenses. Many advisers currently provide business entertainment and deduct the allowable portion of such expenses. Without that deduction, the effective cost of those activities will be increased and may cause some advisers to reduce their expenditures or otherwise change their approach to business entertainment.
Of course, by taking consideration of tax savings out of the equation, a person’s choice to provide business entertainment to clients or to invest with a particular firm is a clearer showing of interest and confidence in the recipient and the relationship. Perhaps the simplification resulting from the repeal of these deductions will make tax return preparation and record keeping a bit easier for both advisers and clients; another benefit of the law change.

Client Education Promotes Retention

Posted on December 7, 2017 at 2:21 PM Comments comments (0)
Certainly, client retention and succession planning are two hot topics in the investment advisory business as well as other businesses. When the two come together, it provides an interesting and challenging opportunity for an adviser to prove his or her worth. Recently a client and one of her adult children came into the office for a review of the client’s plan as well as the financial situation of the child. The child was being groomed to take over the successful family business as the client, in her late fifties, sought a reduced workload and more opportunity to pursue lifestyle goals with her spouse.
Not surprisingly, the child was full of questions about the comprehensive financial plans we had prepared for the parents as well as concerning the proper investment allocation for that plan and, of course, tax planning.  It is always encouraging for a parent to see that the child is interested and engaged in the family business as well as the overall financial and estate plan in place.
Following a lengthy discussion of the parents’ goals and estate plan and how the plan was tested against a variety of possible market results using Monte Carlo simulations, we found the child’s major focus was on the anticipated estate value. The child asked why we did not increase the exposure to equities in the investment allocation since that would provide a larger estate value upon the death of the client and her spouse. If we eliminate the child’s self-interest as a possible motivation, this question is an interesting one and provides a great opportunity not only to educate the child about making choices in financial planning but also about how our firm works and we add value for clients.
In this case, the focus of the client’s financial plan was naturally upon the client’s lifetime needs as well as those of her spouse. The estate goal was a nice to have and likely to be substantial, but first and foremost the client wished to have high confidence in achieving her lifetime goals whether the markets cooperated or not. Understanding this approach helped the child to understand why chasing returns and taking unnecessary additional risk was not the primary goal of the client, our firm, or the plan in place.
Although our primary focus was to serve the client and provide the best advice possible for her situation, we also wanted to work with the next generation child to ensure proper succession in the client’s family as well as to continue to work with the family going forward. Here we engaged in one of the important aspects of this service – education – to help achieve everyone’s goals.

Giving Thanks to Our Clients

Posted on November 29, 2017 at 4:43 PM Comments comments (0)
If you are in business, the most important thing to keep in mind, next to attracting customers is how to keep the customers – clients – you have. The year-end holiday season, in particular, lends itself to this project of client retention in some useful ways. A time of gift giving for many of us, something for our clients makes sense.
Where your clients are local, hosting an event may be a great way to show your appreciation for them.  Whether you provide an activity, entertainment or a meal of some kind, getting your clients together for something special certainly shows your respect for and interest in them. Clients may be long distance as well, especially in this digital age, and a virtual event may not be exactly the best way to reach them. However, a gift of something useful (and not about you and your business) might be welcomed by clients as a token of your appreciation of them. If you can avoid the perils of allergies, religious or ethnic beliefs, or some other item that offends or irritates, then such a gift could be effective.
Another suggestion used by some businesses is to make a donation in a client’s name to a charity and this can be very successful where the choice is either made by the client or is in keeping with the client’s preferences. This might be gleaned through working with your clients and understanding what motivates and interests them.
Underlying any of these approaches is the thoughtfulness an appropriate gift can show a client which, in turn, is a strong indicator of your appreciation of the client and his or her business with you. Since it is your business, one additional benefit of this giving thanks is the ability of your business to take an appropriate tax deduction for the cost of the giving. That is good business, too. 

New Disclosures for a New Year

Posted on November 16, 2017 at 1:13 PM Comments comments (0)
Each year as we approach the annual update of disclosure documents for investment advisory firms, there seem to be more requirements and new questions to answer. The annual update due by March, 2018, is no exception.
One of the biggest changes is the level of detail required to report the client assets we manage. In the past, Form ADV Part 1 asked for the total of assets under management as of year-end and a general description of the types of clients served by showing a percentage range for clients in various categories. This coming spring, we will need to state the precise number of clients in each applicable category together with the amount of assets under management for each client category.
Although this information should be readily available to each firm, reporting those actual breakdowns will almost certainly require firms to set up a new process for ensuring we have those numbers and that they are correct. It will take a bit more time and likely also require a quick review or cross-check of the numbers to ensure we have it right for the filing.
Other expanded asset related requirements include reporting information about managed assets – requiring firms to report how much they manage in specific categories of investments, whether they use derivatives or other borrowings and more. Where firms have multiple locations, additional information will be required and, not surprisingly, specific information about social media platforms used by a firm and its investment adviser representatives.
Finally, copies of advisor communications – specifically those to clients with investment recommendations or “marketing” information such as calculation of rates of return or performance – must ALL be archived and available to the regulators for review on audit or other activity.
These changes all seem to be an expansion of the requirements already in place and will make much more data available to the regulatory bodies for a variety of uses. The burden on advisory firms will be noticeable because of the changes and additions of information required. It is time now to begin thinking about preparing for that annual update.