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In Practice

My Top Takeaways from Schwab IMPACT®

Sheryl Rowling shares ideas she brought back from the conference

After three days at the Schwab IMPACT® conference, my brain is spinning from overload. As an attendee, I split time between sessions, explored the exhibit hall, networked with both new and familiar peers, and participated in evening activities—it’s nonstop. It takes time to wind down and process it all.

I tried to pick up on investment trends, get ideas for improving practice management, find out what others are thinking about tax reform, check out the latest technology offerings, and get tips on better marketing to current and potential clients. My conference goal is always to take back at least a few actionable items.

So, here are 5 tidbits I'm bringing to the office:

  1. Investment Trends: Sustainable investing is becoming more mainstream. In addition to current clients that have an interest, offering portfolios that incorporate environmental, social, or governance—or ESG—factors can attract millennials, nonprofit organizations, and retirement funds. Breckinridge Capital Advisors specifically targeted ESG bond investing. Tools are coming out to help advisors screen these investments, and Morningstar's ESG ratings are a good place to start.
  2. Practice Management: As founding advisors are nearing retirement, many conference sessions were focused on transition and transactional planning. There were some especially relevant points made about succession planning and valuation. For succession planning, DeVoe & Company emphasized that ownership and management succession are likely not the same thing. Unlike founding advisors, multiple successors will need to fill various roles at the firm going forward. According to The Colony Group, a firm with true continuity should be able to function even if the top people suddenly disappear. This type of nonreliance on the firm's principals also can contribute to a higher valuation number. Advisor Growth Strategies noted that the formula approach to valuation is not always accurate. Other factors that must be considered include the structure of the deal as well as the firm's growth rate, profit margin, workflows, diversification of client base, and ability to function without the selling owner(s).
  3. Tax Reform: Tax law changes are a moving target right now. The House passed its bill, but the Senate bill has not yet been brought to a vote. The two measures are different. So, even if a Senate version is passed, reconciliation will be required as well as another vote. And the new laws are supposed to have an effective date of Jan. 1, 2018. Oy! This is a major headache for any advisor attempting year-end tax planning. Advisors could take the position that, more likely than not, nothing will happen. But, what if it does? As advisors, we need to tell our clients to be ready to prepay medical expenses (if those deductions are truly disallowed) as well as state income and property taxes and miscellaneous itemized deductions (only clients who are not subject to Alternative Minimum Tax in 2017). We also must inform the vast majority of our clients that tax reform will likely increase their taxes. As my colleague Bob Kuchner, partner at Marks Paneth LLP, points out, "The big tax breaks don't apply to earned income." High earners, including those that receive pass-through distributions from professional practices, will continue to pay tax at the highest rates, but without the benefit of deducting state income or property taxes.
  4. Technology Offerings: Now is the time to review clients' risk tolerances and prepare them for volatility. Analytical software can assist in assessing clients' feelings as well as quantifying risk/reward characteristics for various allocations. In addition to the current offerings from Riskalyze, HiddenLevers, AdvisoryWorld, and FinaMetrica, Schwab has introduced its own Biagnostics™ assessment tool. Portfolio construction tools will soon be part of the new Morningstar Office SM Cloud, which brings all aspects of an advisor's practice to a single system. Behavioral research tools will also be included.
  5. Marketing: Perhaps the most unique form of advisor marketing ideas came from Susan Kay of MFS Fund Distributors. Noting that investors are increasingly interested in charitable causes, this session advocated for combining charitable activities with advisor marketing (i.e. doing good for yourself, while doing good for others). One suggestion that I thought warranted consideration included offering to plan and host a charitable event for an organization that’s close to a good client's heart. By asking them to invite their friends, you will be introduced to a new pool of potential clients. Another idea was to donate an auction item for a charitable event in a creative way. For instance, offering a wine-pairing and chef's dinner at your home for 10 people can bring in good money for the charity, while providing you with a low-cost opportunity to meet wealthy prospects.

Of course, each conference attendee came away with his or her own revelations and ideas. Likely all of us also met and interacted with knowledgeable and interesting people. And, isn't that what conferences should be all about?

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