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What Good Planners Need to Do in the Digital Age

The future of finance is a mixture of robo advice and human advice, according to Charles Schwab’s 2018 Consumer Digital Demands survey.

Forty-five percent of those surveyed said they believe robo-advisers will have the biggest impact on the future of finance. The survey also found that Americans say financial planning is as hard as training for a marathon.

Clients will use technology, but they still need you to help them “train” in this digital age.

The Forbes article, “What You Should Expect from Your Financial Advisor in The Digital Age,” gave consumers tips on what their advisers should do for them when it comes to technology. It boils down to this: simplify their understanding of money by using and better explaining tech tools. If your clients are reading articles like the one in Forbes, they may expect you to provide the following:

Tech tools that easily do it all and have fewer steps. The Forbes article noted that advisers should offer technology that allows clients to check portfolios and their savings and checking accounts all in one spot.

Customizable technology. The Forbes article noted that clients should be able to customize their experience. “Don’t merely expect the proper customization—demand it,” wrote Forbes author Alex Chalekian, founder and CEO of Lake Avenue Financial.

A view of the big picture. Clients in the digital age will expect a picture of their total net worth and their progress toward retirement. This ties into having all their information, including all retirement, savings and checking information, easily accessible on a one-stop piece of technology.

Education on how to use the technology. Clients will expect you to show them how to use the software you provide. Take the time to ensure they understand how to use it and all the ins and outs and extra features.

“What a great adviser will do is use technology to be more connected to your life, to be able to comprehensively simplify your financial life and then interact at your convenience when you’re ready,” Joe Duran, founder and CEO of United Capital said in the CNBC article, “Here’s Why Robo-Advisors Won’t Replace Human Financial Advisors.”

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Ana Trujillo Limón is senior editor of the Journal of Financial Planning and the editor of the FPA Practice Management Blog. Email her at alimon@onefpa.org. Follow her on Twitter at @AnaT_Edits.


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Digital Assets 101: How to Account for Digital Assets in Estate Plans

Digital assets are a popular topic and an ever-important aspect of estate planning with today’s digital age. Even simple accounts such as Facebook and Twitter have tremendous transferable value to beneficiaries. However, beneficiaries and clients alike believe that merely sharing a password or access gives the beneficiaries the rights to the account. Ironically, this may constitute a violation of the law if this is how a digital asset is handled in an estate. It is important to understand the transferability, the value and how to provide instructions for transfer.

When planning for digital assets in an estate plan, it is important to help your clients identify their digital assets. Certainly, the best place to start is with an inventory. Try asking them if they have some of the popular digital assets and explaining the intrinsic value to the beneficiaries. Once they have a comprehension of the value, they are more likely to identify digital assets they own. While they may not initially see value in digital asset planning, photos, videos and stories go a long way in legacy planning. Helping clients realize the value of legacy planning can assist with digital asset planning.

After taking inventory, you will have to familiarize yourself with some of the policies of a particular digital asset. Digital assets can be transferred in similar ways to normal assets. Some will allow the account holder to appoint a legacy person and some need specific language in wills or trusts to transfer the digital asset. The only caveat is that some assets (unlike liquid and tangible assets) are not considered property and simply cannot be transferred. Most of this occurs in loyalty reward programs.

One of the most popular digital assets is Facebook. The reason for its popularity is because of the memories it holds. A user can appoint a legacy sponsor to handle the account once someone has passed. The user can also choose to delete the account. The challenge here is similar to that of a beneficiary designated account, someone must be chosen prior to death. Once someone dies and Facebook finds out they memorialize the account. This basically freezes the account and provides no access. Just like setting beneficiary designations (and revisiting them), digital assets that have legacy access should have those designations set and revisited periodically.

Loyalty reward programs are equally as popular. While most are not that friendly within an estate, some have clauses that can be accounted for in legal documents. Let’s take American Airlines. American Airlines has some language in its AAdvantage program terms and conditions which does not specifically allow transfer after death, but the airline gives itself a “loophole” to transfer the miles after approved legal documents have been submitted. Accounting for specific language in estate documents can be vital in transferring a specific digital asset with significant value. This is an excellent example accounting for digital assets within a will or trust document.

Digital assets can be tricky when accounting for them in an estate plan. The key is to take proper inventory, gather some familiarity or help and account for transfer. The great news is, this is an excellent conversation starter, a differentiator in practice and a way to provide great value to your clients. In the digital age we are in, digital assets are becoming more important in estate planning. Take the time to learn how to account for them in estate plans, it will be well worth it.

 

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Scott Huff is the CEO of Yourefolio.

 


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Two Ways Planners Can Increase Their Value Proposition

A recent study by Capgemini revealed that, despite robust portfolio returns, only 55.5 percent of high-net-worth investors feel a strong connection to their planners. If returns are on the rise, then where are planners falling flat?

We have recently experienced one of the longest bull markets in history (which despite recent market events, experts say is not yet at its end), and not only have investors been used to steady returns, they have continued to move toward indexing to get those returns at a lower cost. The reality is that investor satisfaction is less about market returns and more about the entire value the financial planner provides. The financial services profession is as impacted by technology, demographics and value provided as any other economic sector.

If you don’t continue to evolve your business model by creating more value for customers, you won’t sustain growth or even achieve the same level of success. However, some planners are resistant to making the changes necessary to enhance their business model and increase the loyalty of their clients because their existing model is what made them successful in the first place.

Our profession continues to be dominated by baby boomer planners, who are generally more resistant to adopting integrated technologies that can provide scale to their business and greater freedom to focus on client acquisition and relationships. Generation X and millennial planners, on the other hand, are proactively seeking out new technologies and ways to achieve stronger connections with their clients.

Planners who focus only on asset allocation as a core competency are most likely falling short of the broader value clients now expect and are willing to pay for. To improve their business models, planners should consider the following:

1.) Emphasize financial planning aimed at providing economic wellness, fulfillment and confidence—and the risk-adjusted strategies that can help clients get there.

While asset allocation is a key component of the wealth management process, it shouldn’t stand on its own as a planner’s core value proposition. Planners must shift their perspective and offer clients what they’re really looking for.

The need for value-add services, such as estate and tax planning, is being driven by the impending “Great Wealth Transfer,” as roughly $30 trillion is expected to switch hands from baby boomers to their heirs over the next 30 to 40 years, according to Accenture. Right now, most of these assets still rest with baby boomers but they are increasingly transitioning to spouses, Generation X and millennials.

Getting younger investors in the doors of your business starts with understanding how they view money. Remember that since many newer investors acutely felt the impact of the Great Recession at a formative period in their lives, they may have a greater emotional attachment to money than their parents. This has manifested as a strong tendency toward risk avoidance and a desire to focus on maintaining wealth rather than growing it.

Planners should therefore offer services and counsel that cater to this mindset, relating to clients on a personal level rather than just finding an appropriate asset allocation.

2.) Adopt and implement the types of financial technologies that investors are demanding in order to track their wealth.

As predicted, the advent of robo-advisers did not put financial planners out of business, but this technology has opened an important dialogue about the value a planner provides to the modern investor.

We live in an age when on-demand services like Amazon Prime and Uber have become the new normal, and financial services are no exception. Investors today want constant access to their accounts, so planners risk extinction if they continue to manage client relationships with a yellow pad and quarterly phone calls. Modern clients demand a digital portal where they can easily access their money and your advice 24-7.

Many planners are hesitant to adopt this technology because they fear it will diminish the need for their role, but that couldn’t be further from the truth. Clients might enjoy the ease of access a portal provides for quickly updating beneficiary designations, but when faced with a significant event like a death in the family, they will turn to you for professional guidance. No computer will ever be able to provide trusted counsel for complicated personal scenarios.

As a planner, understand that your greatest value-add may not be having a hand in every single touchpoint of your business. In fact, planners who focus on listening and serving the overall financial well-being of their clients, while delegating non-essential tasks to technology, will build the stronger connections necessary to increase client satisfaction.

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As president and chief executive officer of Kestra Financial, James Poer is dedicated to helping independent financial advisers fulfill client goals through a unique integration of technology and service. Kestra Financial serves independent financial advisory firms with varying business affiliations, including independent registered investment advisers (RIAs) and hybrid advisers.