Caleb's Blog

Classic mistakes made by entrepreneurs during hiring

February 2012

I’ve written and spoken at length about the mistakes new planners make when trying to find their right fit including hearing only what they want to hear, thinking every opening is a good fit, assuming if something isn’t addressed in negotiations it will mysteriously work out as they had envisioned, etc. However firm owners are not blameless and make mistakes, too, which is why I want to share April Joyner’s article in the November 2011 issue of Inc. magazine entitled “Hiring traps: Why is it so hard to find good people - the problem might be you!” It’s a well done piece that captures some of the most common pitfalls entrepreneurs fall prey to when hiring.

The four main hiring mistakes described include:

The narcissistic boss – Trying to hire mini me’s. I have cautioned firm owners against this in the past as well; it may seem like a match made in heaven at first, but can turn into a major pain later.

The perfectionist boss – Unrealistic qualification expectations for potential candidates pre-hire as well as unclear and unrealistic expectations of candidates post-hire is a common folly among financial planning firms. Setting the position qualifications too stringent can cause candidates with “mostly” the right skills… and all of the right interpersonal skills, passion, and vision you are seeking… to possibly not apply.

Overthinking your hires – Taking an inordinate amount of time to make a hiring decision, based on being burned by past hiring blunders, can cause you to lose some candidates, and doesn’t exactly instill confidence in the remaining candidates, which may complicate the situation once someone comes on board. Sure, there is a risk in everything, but if you are confident in your recruiting process, trust yourself, make a decision, and move forward.

Frantic hiring – Waiting until the last minute to make hires is not an industry best practice. When you are beyond overloaded and are in a “just get me somebody” type mindset, the process gets rushed and oftentimes candidates are not fully vetted. Take Mark Tibergien’s advice and add staff if you are at 80% of capacity and growing. Or, if you are at 100% of capacity and growth is flat.*

Firm owners would be well suited to think through and acknowledge some of these issues if they are planning hires and/or have faced difficulties hiring. I also encourage you to read the full article here http://bit.ly/hiringmistakes.

Announcements/Upcoming Events

• Caleb will be visiting five CFP Board Registered Programs in five days the week of February 13^th. Stay tuned for details from his trip.
• Michael will be teaching retirement planning for the IMCA Certified Private Wealth Advisor certification in Chicago on March 7^th.
• Caleb will be speaking to the FPA of Northeast New York in Albany on March 15^th in Albany, NY http://bit.ly/FPANENYevents

New planner educational requirement

January 2012

By now you surely have been blitzed with a myriad of resolutions, time management tips, to do lists, etc. so I’m going to spare you from the typical new year pep talk and instead highlight a change you should be aware of, regarding the educational requirements for new financial planners in CFP Board registered programs.  

In the past, it has been possible for a new financial planner to graduate with an undergraduate/graduate degree or certificate in financial planning without ever having created a financial plan. For all students who matriculate from this month forward, though, the situation has changed; they will be required to take a Financial Plan Preparation course.  The course requirements include both developing a written financial plan, and presenting it orally.

Some institutions long ago saw the absurdity of graduating financial planners who had never prepared a plan, and have had a financial plan preparation course, commonly known as Capstone, included in their core curriculum prior to it becoming a requirement. It will be business as usual at these institutions, such as Virginia Tech however other schools have now been required to come up to speed.  Since current students (those who had already started their financial planning program prior to 2012) are grandfathered in from this requirement, there will still be graduates in the next few years who have never gone through the task of completing a financial plan.  But in the long run, we think this is a good change by the CFP Board, and will better prepare new planners for adding value to planning firms.

Here is the link to the press release announcing the requirement: http://bit.ly/CFPBoardPlanDevelopment

As part of our commitment to helping you find the best new planner fit for your organization, I will be visiting many of these schools across the country over the coming year to monitor these programs’ process in developing their new planners and integrating the new Capstone requirement. 

Announcements/Upcoming Events

• Michael will be speaking at the AICPA Advanced Planners Conference Jan 16-18^th in Las Vegas  http://bit.ly/AICPAAdvPlnrConf
• Caleb will be speaking to the FPA of Northeast New York in Albany on March 15^th in Albany, NY http://bit.ly/FPANENYevents

Is Your New Planner Meeting Expectations?

December 2011

In an effort to strengthen your year-end employee reviews, this month’s post will address evaluating your new planner’s performance.  Simply put, did they fall short, meet, or exceed the expectations both of you set, together, at the beginning of the year?  Once you and your new planner know where he/she stands on this, then you can have a more detailed discussion about if and how compensation should be adjusted, and what he/she needs to be striving for over the next year. When we help firm owners hire advisors we work with them to set reasonable and measurable expectations so the new planner’s progress can be captured.  If you don’t do this currently, you should with all of your employees – just as you would set expectations for yourself and your business performance. 

Setting expectations for your new planner can be a bit tricky, since many newer planners do not know where they need to be at certain stages in their career – this is why developing the expectations must be a joint process. Firm owners have the responsibility to develop the framework and guide the discussion, but both parties have to ultimately sign off on them.  It is imperative that you have buy-in from your new planner by involving him/her in the process; if you don’t, the planner may say what has been proposed is unreasonable, especially if the planner underperforms.

The expectations you set for your new planner are going to depend a great deal on their skill set, role within your firm, career aspirations, education, experience level, etc. However here are just a few examples that can help you get the thought process started (preferably, with target completion dates or timelines):

• Obtain required licenses (Series 7 & 66, etc.) and designations (CFP, CPA, CFA, EA, etc.)
• Become self sufficient in the various software systems employed by the firm
• Oversee full conversion from software system X to software system Y
• Develop X number of new Strategic Alliance relationships
• Complete X number of new financial plans and X number of plan updates
• Bring in X amount of assets to the firm
• Generate X number of new media contacts
• Become primary contact for X number of clients

Once you have the mutually agreed-upon expectations clearly articulated and documented, you can create a simple worksheet to rank the level of achievement in each one by the specified time frame. Some of the expectations might be more affective in nature and thus harder to quantify, so some subjectivity is bound to remain. However, following this process gives a new planner a clearer understanding of what you want from them, so they have defined targets, and there is at least less subjectivity around the compensation discussion.

Don’t go another year with your new planner wondering if he/she is meeting your expectations for performance and career track progress, and you wondering why your new planner isn’t doing more and seems to be falling short of your expectations.  Implement these concepts to avoid unhappy and unproductive employees, so you can spend less time managing staff and more time growing your firm.  

What New Planners Seek in Positions

November 2011

Recently a well known financial planner, who has experienced some frustration in trying to hire, asked an interesting question. ‘What do new planners really want in a position?’  The question needs to be addressed because during the hiring process often times, one (or even both) parties cannot clearly articulate what they are seeking in an employment arrangement.

What new planners are seeking is a position where they can learn and experience the business (how to’s) of financial planning because they don’t get that in a degree or a certificate program. In a nutshell, they want to observe first-hand how financial planning is done. The educational institutions often don’t fully focus on the practical applications part, although to some extent this is changing. Degree programs typically focus on providing students with a baseline knowledge in the required technical areas as well as exposure to some practice management topics so they have a building block for the firm owners to teach new planners how to be become effective practitioners. Certificate programs  differ from a traditional degree program in that the primary focus is to get students, usually career changers, through the five class educational requirement (Soon to be six classes *) as quickly as possible so they can sit for the CFP® examination.  

In an effort to provide more clarity around this issue, see the below summary memo developed from my numerous discussions with new planners over the last decade.

To: Experienced Planners/Financial planning firm business owners

From: New Planners/Future of the profession

Re: What I am seeking in a position

• To work alongside an experienced advisor in direct support of financial planning for clients
• To be given the opportunity to showcase my knowledge and any skills I have picked up through my education and internships  
• To be mentored to improve my existing knowledge and skill base so I can eventually do what you do so you can focus on other things if you want to
• The chance to correspond with real live clients through email, phone, and face to face to refine my communication and soft skills
• Work with industry software and create financial plans for clients
• Research investments and allocate portfolios for clients
• To be exposed to all aspects of a financial planning business: operations, IT, investments, planning, and client service, etc.
• To work in a warm and friendly environment where employees and their families come first
• An environment where I am compensated fairly, even somewhat unfairly, if you make up for it with increased mentoring
• An environment where I know exactly what I have to do and the firm has to do to move up another level in my career responsibilities
• An environment where I know exactly what I have to do and the firm has to do to move up another level in compensation
• The CFP® designation, professional organization involvement, and a culture where advisors act in the client’s best interest are championed
• Where you challenge me, but treat me fairly and have a genuine interest in my career
• The true freedom and flexibility to come to you with anything that is on my mind
• For my ideas to be taken seriously and at least considered

This list is not meant to be all inclusive and it obviously isn’t, but these tend to be the most common items that come up in my discussions with individuals looking to enter financial planning. Firm owners should strive for this type of atmosphere to attract the best and brightest of the next generation.

Announcements/Upcoming Events

• Michael has several speaking events scheduled for November. Find out more here: http://www.kitces.com/outandabout.php
• Caleb will be on a recruiting trip the week of the 14th

*Beginning January 1 2012, students will be required to take an additional Capstone course to be eligible to sit for the CFP® examination

Compensating New Planners

October 2011

One of the more popular questions that I am asked when traveling around the country speaking to firm owners is: “How much should I pay my new planner?” I liken this scenario to a prospective client walking up to a firm owner asking, “How much will I need to retire?”  There are obviously a lot of factors that impact both of these situations.  I am going to try to avoid the typical financial planner blanket answer of “it depends” to report on some averages/trends I am seeing nationally and recommendations I give to my clients. Keep in mind that factors such as firm geographic location, number of employees, revenue, AUM, experience, designations/licenses, and education can cause significant fluctuations in compensation.  

There are three main components of compensation:

• Base compensation – remuneration paid to employee to complete the tasks required for the job.  This is individual based compensation. I have a seen new planners being paid as little as $24k/yr. all the way up to $75k/yr. However, the majority are in the $38k – $55k/yr. range with the average around $52k/yr. though*. Keep in mind, this is assumes an entry level Associate Advisor type support position that is usually salaried, with little to no business development requirements.
• Incentive compensation – additional compensation that allows the employee to participate financially in the successes of the overall firm.  This can be set up a number of different ways including overall firm revenue, number of financial plans written, client satisfaction survey results, or new business development, etc. Whatever you come up with, make sure the metrics to achieve it are clearly laid out and attainable so your new employee can have realistic targets to strive for and you have something to point back to if achievability is questioned. It’s important for firm owners to remember to refrain from handing out incentive bonuses at an employee’s annual review just because it has always been done that way. Incentive bonuses should only be earned when an employee goes above and beyond their stated job duties. Use the incentive compensation to motivate your employees to get the results you really want.  In most cases, I think an incentive target of ~10% of base compensation is a good place to start. How this area is structured is currently all over the board, but I am a proponent of tying it to firm revenue.
• Employee Benefits – additional benefits provided by employers to enhance the two prior areas and sometimes referred to as non-financial compensation (although they still have financial costs).  Items such as access to (and at least some contribution towards) health insurance, access to (and/or contributions to) retirement plans, and paid vacation are standard. Benefits that other firms are providing that you might want to consider include: continuing education program and travel budget, clothing allowance, cell phone/data plans, industry association annual membership dues, professional certification renewal fees, additional education reimbursement, professional sporting event tickets, personal financial planning, parking allowance, group disability, dental, and life insurance.  Others that may be particularly popular with the Gen Y cohort include: Gym memberships, movie ticket subscriptions/concert tickets, flex time, dual computer monitors, cell phones and tablets (they even use them to stay in touch with the office!), and a solid supply of energy drinks and healthy snack foods. :)

Investment News recently had a webcast to discuss their most recent Compensation and Staffing Study Survey results.  Here are some of the highlights:

• On average, employee benefits make up 9-12% of total employee compensation cost
• Firms are spending on average $4,500 per year per employee on benefits
• 67% of firms are providing 401k matching contributions of up to 3-4% of employee’s salary

The webcast is full of useful information and can be found at http://bit.ly/qbYRRM

There is also some additional worthwhile data being put forth by industry providers such as:

Quantuvis Consulting - http://bit.ly/nPrNb7

The Financial Planning Association (FPA) - http://bit.ly/qSpy7o

FA Insight - http://bit.ly/nUBkiy

Many firms are looking to hire new planners right now so it’s not uncommon for top candidates to have multiple employment offers. Great care must be taken to develop a competitive compensation package or firm owners will risk losing out to their competitors in the pursuit for this new in-demand talent.

Announcements/Upcoming Events

• Michael will be speaking at the Business & Wealth Management conference on “MPT 2.0” and particiapting in their Leadership Forum on October 13^th-15^th.
• View Caleb’s recent article on How to Hire Right the First Time at http://bit.ly/mWTeBT

*2010-2011 FPA salary survey

Positioning your New Hire

September 2011

One of the primary reasons for hiring new planners is to free up time for firm owners to perform the higher level revenue producing tasks their more experienced skill set is suited for, such as working with higher net worth clients and/or securing additional clients.

If your goal for your new planner is to truly help free you up for your best or new clients, it’s imperative you get them working with your existing clients as soon as possible. In last month’s post, I discussed ways to facilitate your new planner’s skill development to close the gap and prepare for guiding clients at a high level, but putting that training to practice with regular client interaction is a key component as well.  If you eventually want your new planner to be able to handle client relationships on their own, here are some ideas on how to introduce, integrate, and position them correctly with clients now:

• Send welcome letter - Introducing your new hire to your clients, colleagues and strategic alliances is one of the first things you should do after you hire a new planner.  This can be part of one of your regular client touches, but preferably the new hire announcement would be a stand- alone communication to promote its importance. Make sure you highlight your new planner’s credentials, education and experience (if applicable), why you hired them, and what they will be doing to help the clients. Also include the new planner’s business card so clients will have another reminder that it is official. We now provide a version of this letter as part of the deliverable package we provide to clients who engage us for recruiting services. If you would like a copy, email me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it    
• Add to website and phone tree – Post your new planner’s picture and bio on your website to reinforce to clients and prospects that they are an integral part of the team. Make sure you do this before you send out the introduction letter above. :)
• Visible office – You don’t necessarily want the client viewing the new planner as a back office employee nor a front office admin type even though they may very well be performing some of both of those job functions.  If your office space allows, try having your new planner sit towards the front though so clients and prospects can see them in an actual office space.  Some of this may seem silly, but clients tend to place emphasis in these items. I had a corner office at one point during my career and the clients noticed it and saw me differently.
• Return voicemails and/or correspondence - Have your new planner respond wherever they can, when appropriate, to refine their communication skills and train the clients that they don’t have to contact you for everything! At first you will have to work with your new planner, but as they build confidence they will be able to handle more advanced questions and requests.  The clients will slowly be trained to go to the new planner first for most things and they should feel comfortable that the new planner will escalate to you when necessary.  
• Participate in client meetings –In the beginning, it is going to be primarily up to you to position (build up) your new planner in the clients’ eyes. Then eventually the client will realize they can trust your new planner if you trusted them enough to hire them.  Consider having them in all meetings, but a great place to start is in the initial meeting: you focus on the client, and let your new planner take the notes. The next best thing is to bring your new planner in during the data gathering/discovery meeting so they can help analyze, organize and ask questions about the client’s situation and be in a better position to create a more accurate financial plan.

Facilitating these activities will further your new planner’s development and help you reach your goals. Furthermore, the benefits you can derive from this are more than you might be able to imagine. When firm owners take these steps, new planners tend to develop a tremendous amount of loyalty, helping to solidify in their minds that the choice they made to join your firm was indeed the correct one.

Announcements/Upcoming Events

• Caleb will be moderating two panel discussions on "The Future of the Profession: Integrating the Talent of Today into the Firms of Tomorrow" at FPA Experience 2011 in San Diego on September 15- 18  

• Michael will be presenting to the Society of Financial Service Professionals on what Clients Need to Know about Managing Retirement Savings and Income on September 1 http://www.financialpro.org/public/LBC_index.cfm

• Caleb will be at a Kolbe training conference on September 19-22

Closing the Gap

August 2011

I sometimes get requests from firm owners, as well as other managers, for tips on how to get their new hire up to speed more quickly. Since financial planning currently has no formal apprenticeship program in place, newly minted CFP board registered program graduates have to close the gap between book knowledge and practical application to successfully make the transition from student to client facing advisor.  Here are some things you can encourage or require to get your new planner to where you want them to be faster:

National, regional and local association involvement – when I got started in the industry I was part of a small firm so I was encouraged to join my local association chapters to increase my business contacts and knowledge. Through my involvement, I was able to increase my network exponentially which provided many different voices who gave me lots of great practice management advice over the years to bring back to my firm.  

FPA Nexgen – this is a national FPA community of new planners who are under 36 years of age. If you are a member of FPA, your new planner should be as well so they can join Nexgen. More information about the group can be found here: http://www.fpanet.org/professionals/Connect/CommunitiesofInterest/NexGen/Home/

NAPFA Genesis – this is a national group for new planners similar to Nexgen, except it is for NAPFA members, and is limited to those under 33 years of age. If you are fee-only, you should consider joining NAPFA and getting your new planner involved in Genesis. More information can be found here: http://www.napfa.org/UserFiles/File/PressRoom/NAPFAGenesisIntroRelease.pdf

AICPA – the PFP (Personal Financial Planning) section of AICPA is a great resource for new CPA/PFS planners in financial planning firms that have a tax emphasis.  More info can be found here: http://www.aicpa.org/INTERESTAREAS/PERSONALFINANCIALPLANNING/Pages/default.aspx

SFSP -  the (Society of Financial Service Professionals) is a good resource for new planners in financial planning firms that may focus on insurance or employee benefits. More info can be found here: https://www.financialpro.org/public/yp_com.cfm

FPA & NAPFA residencies – week long intensive programs focusing on client relationship skills and communication strategies. New planners just starting out can gain a tremendous amount of experience and confidence by practicing with live clients (deans and mentors) during these programs.  CFP board also grants 3 months of CFP® certification work experience for the 1 week programs.

FPA: http://www.fpanet.org/professionals/EventsConferences/ResidencyProgram/

NAPFA: http://www.napfa.org/conferences/conference.asp?CONFERENCE_ID=127

Both of these programs will help your new planner grow their client facing skills and get them closer to being able to use the CFP® designation.

 Online software user groups – many software vendors already have these in place so you need to make sure your new planner is connected to the other users nationally. This will help empower them to figure out the program earlier on without having to come to you as often with questions that lots of people have had before.

Create their own or become a part of a national study group – national study groups are positive because the relationships and sharing of information tends to be more open. You want your new planner out there talking to different planners with varying businesses so they can bring that information back to you. Plus it gives them a sounding board (testing ground per se) before implementing anything in your firm. Here’s a recent article discussing study groups in more detail: http://www.fpanet.org/professionals/PracticeManagement/PracticeSolutionsMagazine/JulyAugust2011/12TipsforaSuccessfulStudyGroup/

Additional education – what education and or additional designations, other than the CFP® certification, your new planner will need to acquire will largely be dictated by the type of business you have and the clients you serve. For example, extra tax knowledge is always good, but even more so possibly if your niche is corporate executives with stock options and small business owners.  If you work with retirees, long term care and other areas such as Medicare, social security might be something they target. The American College and College for Financial Planning have a plethora of specialized designations available for various areas of study beyond the CFP® certification. Additionally, look into local community colleges as well since there are lots of options from toastmaster/public speaking type courses to basic IT networking.

Announcements/Upcoming Events

Ø  Michael will be delivering the keynote presentation on Modern Portfolio Design for the Brillient Portfolio Construction Forum in Sydney, Australia on August 24th  http://brillient.com.au/

Ø  Caleb will be presenting a live webinar on “How to hire and keep new advisers” for AICPA on Wednesday August 31^st at 1pm ET.

Ø   Caleb will be moderating two panel discussions on “The Future of the Profession: Integrating the Talent of Today into the Firms of Tomorrow” at FPA Experience 2011 in San Diego on September 15- 18  http://www.fpaannualconference.org/

Projects for interns

 July 2011

Last month’s article discussed the benefits of intern programs for financial planning firms. This month we will look at specific projects your intern can do to help alleviate some of your workload. Here are some project ideas that you might consider having your intern work on to maximize your time and their experience:

·         Document processes, sequences, procedures, etc. This is a no brainer if you have someone new come aboard and they are talking to everyone trying to figure out what everyone does - have them simply write it all down for future interns and other employees’ job descriptions. This is the first step in transforming a practice into a business.

·         Compare various software packages. Depending how far the student is through their CFP Board registered program coursework, they often have a lot of exposure to various financial planning software packages. Have them show you what they know if you are considering adding financial planning software or are looking to make a change. Consider their input on your decision by having them write up a recommendation on which program they would choose. I did this with an intern many years ago when I was looking at implementing Junxure CRM and it was a big time saver.

·         Develop newsletter and/or add to existing content. For firms that don’t subscribe to newsletter content services, this can be a good way for your intern to add value since searching for content is rarely a good use of a senior planner’s time.  Tell the intern to review your past newsletters so they can see the content, style and flow then have them go out and find relevant content. If they are a Gen Y’r, remember they are the “internet generation” and extremely tech savvy. Let them do what they are good at so you can do what you are good at!

·         Participate in client meetings. It is much easier for senior advisors to run a client meeting and focus on the client when they don’t have to worry about taking notes. Have your intern sit in on client meetings with you. Yes, both new and existing clients.  I was given the opportunity to participate in client meetings in my internship when I was still learning what financial planning was all about. This helped solidify my choice of and passion for financial planning as well as the confidence my intern sponsor had in me.  If you are open to the idea but still a little uncomfortable, don’t shutter, make sure the intern knows that their role is simply to take notes and observe. Many firms are doing this currently and you would be surprised at how receptive most clients are to it.

·         Help with quarterly reporting. Sending out quarterly reports is a time intensive process. There are many tools now that automate most of this function, but if firms are not utilizing those - having an extra pair of hands can be helpful here. It’s fine to have your intern print, staple, and mail the reports. If they turn their nose up at this, let that be a sign to you that they may not be a good fit long term because in most small offices, everyone has to have a “no job is beneath me” attitude.  However, make sure you take the time to explain what the data on the report means and how it is generated, the report’s purpose, and overall impact on the firm.

·         What everyone else does not want to do. Interns should be exposed to all aspects of the firm. That means the good, the bad and the ugly. It is imperative that they understand that client meetings are not the only function at an advisory firm. This is why it is so important for firms to keep a running list of the tasks that no one wants to do. The right intern will attack that list with gazelle like intensity! (thanks Dave Ramsey J)

P.S. here is an article that points out the requirements for an internship based on the Fair Labor Standards Act that also discusses the issue of not paying interns.

http://www.dentonrc.com/sharedcontent/dws/bus/stories/DN-smalltalk_05bus.ART.State.Edition1.36dc49f.html#

Announcements/Upcoming Events

Ø  Caleb will be presenting a live webinar on “How to hire an Advisor” for the BackOffice Advisor Practice Management Study Group on July 6^th at 2pm ET.

Ø  Look for Caleb and Michael at the Nexgen Gathering July 15^th-17^th in Minnesota

Ø  Caleb will be presenting a live webinar on “How to hire and keep new advisers” for AICPA on Wednesday August 31^st at 1pm ET.