FPA of MN Newsletter – August 2016

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President’s Message – August, 2016

Here in Minnesota, we are always talking about our volunteers and engaged members; recognizing that this involvement is really what makes us a great chapter. There is a special way for you to recognize an exceptional individual or organization by nominating them for the 2016 Distinguished Service Award.

The Minnesota Chapter is seeking nominations for our 12thAnnual Distinguished Service Award to be presented at the FPA of MN 2016 Symposium on October 10th.

If you know a chapter member, colleague, community leader,volunteer, non-profit organization or company within our Minnesota community that demonstrates a commitment to the highest standards of professional competence, integrity, relationships and stewardship;and whose extraordinary contributions advance the financial planning profession and promote financial literacy, consider nominating them for the 2016 FPA of MN Distinguished Service Award.

The 2016 FPA of MN Distinguished Service Award recipient will automatically be nominated the following year for the FPA Heart of Financial Planning presented at the FPA National Conference. (The FPA Heart of Financial Planning Award accepts other individual nominations as well.)

Your written nomination should be no longer than two pages, describing why you are recommending the nominee for the 2016 FPA of MN Distinguished Service Award. Or you can complete the Nomination Form. If you are nominating a non-profit organization or company, focus on the contributions of the organization/company,not an individual.

Send your nomination letter to office@fpamn.org or
FPA of MN, 3900 Main St NE, Minneapolis, MN 55421.
Deadline: September 13, 2016

Previous recipients

2005 Keith Loveland

2006 Buzz Moen Jr.

2007 Jeff Sessions

2008 Henry Montgomery

2009 BestPrep

2010 John Comer

2011 Janet Stanzak

2013 Steve Gilbertson

2015 Julieann Schroeder

Jeanna Fifer, CFP®
Cahill Financial Advisors

Recap: July Chapter Meeting & September Preview

Michael Kitces was out July speaker and gave us a fantastic breakdown of the Robo or digital advice landscape and why they are a tool to be embraced rather than a threat to be feared. In the second hour of the presentation Michael discussed Modern Portfolio theory and portfolio construction and how to create smarter client portfolios in the modern age. Michael is a great thought leader and speaker, and each visit provides a fascinating conversation. Look for him again next year.

September we are doing our second Annual joint meeting with members of Minnesota Planned Giving Council. This is an excellent opportunity to network with new faces and experts in estate planning, and social giving. We moved the meeting to September to better accommodate your year-end client planning needs. This will be a great meeting, and I look forward to seeing you there.

SYMPOSIUM SPEAKER - October 11, Heather Jarvis, What’s the deal with student loan interest rates?

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Presentations scheduled for Tuesday, 12:30 - 1:20 pm, 1:50 - 2:40 pm
Lunch Keynote - Educational Debt: Will Student Loans Be the Next Bubble to Burst?
Breakout – Advanced Student Debt Management: A Checklist Approach to Advising Young Professionals
Anticipated CEs for each session: 1 CFP, 1 MN, 1 WI, 1 NASBA/CPE, 1 CIMA, .75 CLE

What’s the deal with student loan interest rates?

Congress sets the interest rates on federal student loans by statute and has made significant changes to the statutory scheme over recent years. For this reason, financial advisors will encounter federal student loans at interest rates from a low of under 2 percent to a high of 8.5 percent. Private student loan interest rates are tied to the creditworthiness of the borrower and are typically more expensive than federal student loans.

Are federal student loans at fixed or variable interest rates?
Since 2006, new federal loans are issued at fixed interest rates that don’t change over the life of the loan, but some clients with older federal loans still have variable interest rate loans. Clients with variable interest rate federal loans should consider locking in a fixed rate with a Direct Consolidation Loan. Direct Consolidation Loans are at fixed interest rates based on the weighted average of the underlying loans, capped at 8.25 percent for consolidation loans. Advisors should carefully consider the pros and cons before recommending consolidation, as there are many details to consider. Learn more about evaluating consolidation at the annual symposium.

What interest rates are current borrowers getting?
Since 2013, new federal student loan interest rates are determined annually based on the 10-Year Treasury Yield (a benchmark economic indicator) as measured at auction each May. Since rates have been tied to the market, we’ve seen rates ranging from 3.76 percent to 7.21 percent. This May, the yield was set at 1.710 percent so that federal loans originated on or after July 1, 2016 and before July 1, 2017 will have the following interest rates:

  • The interest rate for subsidized loans and unsubsidized loans to undergraduate students will be 3.76 percent (the 10-year Treasury rate plus 2.05 percentage points capped at 8.25 percent).
  • The interest rate for unsubsidized loans to graduate students will be 5.31 percent (the 10-year Treasury rate plus 3.60 percentage points capped at 9.50 percent).
  • The interest rate for GradPLUS and Parent PLUS loans will be 6.31 percent (the 10-year rate plus 4.60 percentage points capped at 10.50 percent).

How can clients lower their student loan interest rates?
Borrowers with strong credit may be able to reduce interest rates by refinancing with a private lender; however, advisors should carefully inform clients of the risks of refinancing federal student loans with a private lender. For example, gederal student loans include uniquely valuable consumer protections including discharge provisions, flexible repayment options, and potential for forgiveness.

Interested in learning more about student loans? Join attorney and nationally recognized expert Heather Jarvis. View the detailed agenda for times and session descriptions.

SYMPOSIUM BREAKOUT - October 10, Anne Elizabeth Denny, Beyond Mere Checked Boxes

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Presentation Scheduled for Monday, 2:30-3:30 pm
Anticipated CE: 1 CFP, 1 MN insurance, 1 WI insurance, 1 NASBA/CPE, 1 CIMA, 1 CLE Stnd

Healthcare Directives: A Valuable Asset to Financial Advisors
If I were 20 years younger, I think I’d launch a financial advisory practice. Through my work as a healthcare directives coach, I’ve met dozens of financial advisors. Each has been kind, generous, and thoughtful. I’d love to be counted in your ranks.

I’m intrigued by each person’s story and how he or she came to serve as a financial advisor. Invariably, each one has shared his or her motivations: “I love people,” or, “I love serving my clients.” This is a profession that touches the heart.

Trust is core to the advisor-client relationship.
As an advisor, building trust with your clients is absolutely core to your business practice. In the crazy-busy culture in which we live, nurturing those client relationships can be tricky. For you and for many of your clients, the urgent supplants the important. Nudging your way into a client’s schedule requires clear, recognizable value. You and your clients want to know that your time together is purpose-driven.

The most successful advisors I know approach their advisory role from a broad perspective. They embrace PURPOSE by exploring their clients’ lives and hearts. Conversations focus on goals, values, dreams, and hopes. Money is just a mechanism—a means to living out these cherished dreams and values.

Talking about death and dying can invite deeper conversations about living.
That is precisely why the conversations regarding healthcare directives are an incredible asset to a financial advisor. Introducing questions about preparing for the end of life opens the door to deep questions about living life.

It’s not about the form.
Checking a few boxes on a pre-printed form won’t be enough. Invite your clients to write a truly meaningful healthcare directive instead of approaching this as a to-do. Then, encourage your clients to share their wishes with loved ones. You can even foster these important family conversations by facilitating a family meeting.

A couple of hours of effort will yield an enormous return.
For your clients, writing a meaningful directive requires an investment of the heart. The return on this loving investment is huge. Having thoughtfully expressed preferences for medical, emotional and spiritual care in a healthcare directive, your clients will:

  • Get the right care. Your client will receive all of the care—but only the care—he or she desires.
  • Experience peace of mind. Both clients and loved ones will feel less anxiety about future healthcare decisions.
  • Preserve family unity. Painful disagreements over healthcare decisions for a loved one can be avoided.

By inviting your clients to thoughtfully consider decisions about dying, you will establish a beautiful context for decisions about living. Those who face the certainty of mortality often discover unexpected, sacred gifts—a renewed commitment to living out their values and purpose, and an inspired vitality to embrace life.

Healthcare directives can help you to strengthen and grow your practice.
As an advisor, you will reap benefits as well. Your relationship with your clients will expand. Trust will deepen. You can forge relationships with their adult children or other family members. All of which can strengthen and grow your business practice.

See the opportunity.
Resist the tendency to side step this important work with clients. Instead of referring your clients to an attorney, embrace healthcare directives as a new arrow in your quiver. Seize the opportunity to engage your clients in meaningful dialogue by serving as your clients’ healthcare directive coach. You will hit a bull’s-eye with client retention.

Have you prepared for your future healthcare choices?
By the way, have YOU had that talk with your family? Have you written down your wishes? You're the right age, whatever age you are, and even if you are 100% healthy, this is a gift you give your family. And, you’ll set a marvelous example for your clients.

SYMPOSIUM BREAKOUT: October 11, Aaron Hasler, Generational Partnerships as Growth Strategy

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Presentation Scheduled for Tuesday, 2:55-3:45 pm
Anticipated CE: 1 CFP, 1 NASBA/CPE, 1 CIMA, .75 CLE Stnd

Generational Partnerships as Growth Strategy, Vision Setting, Business Legacy
Are you getting older? Do you have a growing client base in a practice that you enjoy? Have your clients asked you about your succession plan? Are you more than 10 years away from retirement?

If you can answer yes to any of the above questions, then you just may be right for a Generational Partnership.

Now you may be thinking, “No way. I don’t do partnerships.”

I hear you, and I get where you’re coming from. Now hear this:

In my work as a transition consultant, I encounter clients with businesses of every shape, size, and structure. One common theme is that very few like to face the inevitable questions that come from clients when asked about how they will be protected should something happen to you, their trusted financial advisor.

Generational Partnerships is a concept that, while not new, is one that takes careful planning to receive the reward. Sound familiar? It should, as planning is a value you provide to your clients on a daily basis.

In its simplest form, a Generational Partnership is a relationship that benefits two or more advisors by protecting the business from client attrition by ageism while allowing for marketing and growth opportunity throughout the life of the business. Generational Partnerships can work for advisors of many ages and sizes, but let’s look at one example and extrapolate the benefits to a variety of practices.

Advisors in their late 40s and 50s can experience a tremendous amount of growth. However, this is also atimeframe where their peers have reached a certain point—a point where planning questions become ever-present and more complicated to answer. Mid-career advisors may also experience a loss of enthusiasm for the business or just the inevitable reduction hours as they reap the benefits of the work done earlier in their career. In addition, and not to be understated, these advisors also have the means to really begin to enjoy life outside the office.

As advisors would come to me with questions, I began to see a familiar pattern. Most financial advisors work through this uncertainty by buckling down and driving towards an arbitrary objective. Once the advisors themselves reach their early 60s, theywould stick their head up and look around for succession opportunities—only after their clients begin to pester them about the long-term relationship and how their needs will be met after retirement.

To counter these common trends, I have been working with advisors to form Generational Partnerships that allow for a continuation of business growth, a renewed vigor for the mechanics of the practice, and the ability to enjoy life outside the office without hampering organic growth.

When forming a Generational Partnership, two or more advisors come together with an age gap of roughly 10-20 years to act as the buy-sell, marketing partner, and long-term buyer of a practice. So how does it work?

Senior Partner and Generational Partner discuss business growth and retirement vision. A discussion centers on client service philosophy, client acquisition practices, and staff utilization. Mutual respect and understanding, but not necessarily agreement, is reached around investment philosophy and financial planning specifics. Why? Like individuals, no two practices are exactly alike and it’s unlikely that two driven individuals can agree on everything.

After an intensive consulting process, two partners agree they have enough common interests to form a buy-sell. The next step is to agree on the marketing and growth. This allows an advisor to avoid the inevitable business attrition that happens in the late 50s and early 60s while also allowing a practice to sell clients as they experience top-end growth. The Generational Partner is working with Senior Partner on second-generation retention and the long-term viability of the enterprise.

Benefits to a Generational Partnership come in the form of increased business value because of client retention and greater overall size of the practice as compared to a solo or age-similar partnership. In addition, the succession plan is built into the mechanics and can be something that is experienced all at once or drawn out over a period of years.

So why don’t more advisors create Generational Partnerships? Many advisors don’t want to take the time to focus on the business itself (especially the time to consider the business as it will stand in 10-20 years). Other advisors have considered the idea but are spooked by the risk that the partnership won’t work out.

It is recommended that an outside party help you evaluate potential business partners and lend a voice for a smoother transition. Once the transition is complete, the benefits are astronomical. With a greater total practice growth, better work-life balance in your 50s and 60s, an increased business value, and a defined succession plan, the early investment is very handsomely rewarded.

SYMPOSIUM BREAKOUT - October 10, Bob Mauterstock - The 7 Steps to Protect Yourself, Your Practice and Your Clients Who Have Diminished Mental Capacity

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Presentation Scheduled for Monday, 1:10-2:10 pm
Anticipated CE: 1 CFP, 1 MN insurance, 1 WI insurance, 1 NASBA/CPE, 1 CIMA, 1 CLE Stnd

Connect with Families of Clients with Diminished Capacity
It isn’t an easy situation when your client starts losing their mental capacity.

Author and planner Robert B. Mauterstock, CFP®, CLU, ChFC, knows this all too well. Only it wasn’t his client, it was his late mother. She was in her early 80s when she was at a doctor’s appointment. Her longtime nurse greeted her only for her to ask, “Do I know you?”

She lived with Alzheimer’s ten years, so Mauterstock came to know the ins and outs of living and working with someone with the disease. Chances are you will be working with clients who are going through something similar as 46 percent of people over the age of 85 will develop dementia, Mauterstock said.

Mauterstock presented at the FPA Annual Conference—BE Boston 2015—a session titled “The Seven Steps to Protect Yourself, Your Practice and Your Clients Who Have Diminished Mental Capacity.” In it he said one of the steps to working successfully with clients facing diminished capacity is to connect and build trust with the families.

A Fidelity Investments Study Shows that 84 percent of planners want help with clients who have dementia and Alzheimer’s. The following are the seven steps Mauterstock said these planners can refer to:

1.) Recognize the Behavior Patterns. When your clients start calling your office asking for their accountant, chances are something is off.

2.) Develop a Diminished Capacity Checklist. This includes designating a client advocate and power of attorney—somebody who is privy to all your client’s details and will be able to make decisions for them. Client advocates and your client must fill out a “Third-Party Sharing of Information” document.

3.) Learn How to Protect Your Client’s Assets. Know the ins and outs of Medicare—for example it only covers three nights in a hospital—nothing less. Research and present the best long-term care insurance for your client.

4.) Build a Network of Professionals. This network should include an elder law attorney, a geriatric care manager, and an insurance agent.

5.) Build a Relationship with the Client’s Family. The entire family is going to be affected by this situation so call a family meeting, connect with them, and help them through it. A side benefit is that the family may want to continue working with you later on.

6.) Utilize a Single Source with All Relevant Records.
Mauterstock calls this the Lifefolio—a PDF document put on a flash drive that includes all medical insurance information, usernames and password for all accounts, and the like.

7.) Create an Investment Policy Statement.
This is to remind the client what your plan was and how it works. The client advocate should also have access to this.

SYMPOSIUM BREAKOUT - October 10, Gina Pellegrini - Are You a Control Freak?

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Presentation Scheduled for Monday, 1:10-2:10 pm
Anticipated CE: 1 NASBA/CPE, 1 CLE Stnd
NO CE: CFP, MN insurance, WI insurance, CIMA

Don’t be afraid to let go and grow!
Do you manage your practice — or are you a control freak, always trying to arrange, contain and maneuver people and events? Do you trust your employees or are you guilty of second-guessing and overriding their efforts?

If you’re afraid to let go of some responsibility (and details), you’re a micromanager, and your approach stems from emotion, not business sense. The fear of letting go can sabotage your progress, and instead of moving forward, you’ll remain stuck in the status quo. Isn’t it smarter to overcome your fear? Why not let go and grow?
I’ve asked financial advisors why they can’t let go, and their rationales are revealing:

  • "Employees might make mistakes”
  • “I can do everything better myself”
  • “Employees will never take the initiative”
  • “I just don’t think about delegating more often”
  • “Employees will embarrass me or tarnish my company’s reputation”
  • “How will I know if work is actually done?”
  • “Employees can’t read my mind, and it takes too long to explain things”
  • “Our systems aren’t defined; no one is accountable”
  • “My staff can’t keep up”

That kind of thinking is extremely shortsighted. A good staff, whether it’s one person or fifty, is a blessing, not a hindrance. Capable employees can build and enhance your business — you just need to let them.

How can you change?

Relax your grip! Yes, you should know what’s going on in your business, but don’t insist on unnecessary involvement. If you handle every little detail or transaction, you’ll never have time to explore new (and profitable) opportunities. You won’t do what you really enjoy or focus primarily on moneymaking activities.

Like most advisors, you have high professional standards and probably believe no one else can do the job as well. That may be true to an extent, but once you train your employees, they can handle the daily workflow and details. Remember, your employees are not you — and that’s a good thing. You need a balanced team to strengthen your business. Surround yourself with bright people who bring different talents and experience to the table.

Train your staff thoroughly. Training is often overlooked, but it is absolutely essential. Spell out your employees’ duties and teach them everything they need to know about the job. People deserve to know how they fit into the business and why their role is important. Remember, you had to learn the ropes and no doubt made a few mistakes along the way; be patient and arm your staff with complete information and directions.

Delegate early and often. Don’t wait until the last minute to assign a task. Delegate in advance so employees can do a good job. Also, get in the habit of delegating to the right person consistently. If you need someone to schedule your appointments, select a team member for the job and delegate to him or her only. Also, during the delegation process, establish priorities and deadlines. Sometimes employees don’t know what to do first. If they’re spending too much time on customer service, for example, let them know why appointment-scheduling is their first priority. In dealing with employees, follow Pellegrini’s Golden Rule of Business: “If you give them what they need, they’ll give you more of what you want.”

Trust your employees. Don’t give lip service to trust – act on it. Once employees are trained properly, step back and let them do their job. If you want an update on a project, say so, but otherwise, just assume the work will be done in a timely fashion.

Finally, be a leader. Not long ago I convinced a client to let go and grow. A former control freak, he is making a concerted (and successful) effort to lead, not micromanage. His assistant now describes her role this way: “I’m involved in the vision, he delegates freely and leaves me alone to get things done. Everything goes through me so I can get rid of things that don’t need his time and prioritize the rest.”

Are you ready to be that boss and let go?

Member Experience Update

At the July Chapter Meeting we played “Reverse BINGO” for a fund raiser event for Can Do Canines. The winner taking home 1/2 the pot was Pamela Heimdal. It was a battle right down to the end with two players needing 4 more numbers called before one was eliminated. Thank you to all who participated in the game. It raised $90 for the Can Do Canines.

Member Experience was contacted by a FPA of MN member inquiring about a notice he received regarding his renewal was due. These notices come from FPA National. He believed he had requested automatic renewal. After some research we found the Auto Renewal box was not checked. It got resolved. When selecting Auto Renewal you receive a $50 discount off your membership fee. Make sure to check the Auto-Renewal box when renewing your FPA membership.

If you have questions like this or want more info on membership benefits don’t hesitate to contact Member Experience Committee. We are here to help.

Countering Elder Exploitation

Submitted by Scott Nelson - Professional Issues Director

I would like to invite everyone to the FPA Professional Issues/NexGen K'Nex event on RIA formation and regulation on Tuesday, September 27th from 7:30 AM to 9 AM at 3300 Edinborough Way, Suite 350. RIA Regulations for Breakfast will cover the regulatory steps involved with becoming an RIA and what an RIA needs to do to satisfy state examiners.

On July 7th, Minnesota Department of Commerce Commissioner Rothman invited ‘stakeholders’ dealing with elder exploitation to meet and discuss possible solutions to this fast growing problem. Jason Kley, Keith Loveland and myself attended to represent FPA MN. Also in attendance were representatives from the Adult Protective Services division of the Department of Human Services, Hennepin County District Attorney’s Office, Minnesota Sherriff’s Association, Minnesota Bankers Association, Minnesota Credit Union Network, AARP, as well as non-profit social service organizations. Everyone knew of heart-breaking stories of elder fraud and exploitation but no one had a comprehensive solution for stopping it.

The closest that I can come to a comprehensive solution is that we as a society have to start being more accepting of the aging process. The American culture is so obsessed with searching for the fountain of youth that we avoid all the signs of physical and cognitive decline until a serious mishap leaves us scrambling to deal with our own or a family member’s diminished capacity.A national awareness campaign is needed to get everyone more accepting of their own limitations as they age and to seek out help particularly with financial matters. We need to get everyone over the age of 65 to find a couple people they can trust to help them keep track of their personal affairs.

I am not recommending that everyone with gray hair suddenly turnover all their affairs to someone else but rather that they become comfortable regularly discussing their financial matters with a couple different people. The goal is to develop a wider support system and deepen social bonds in order to avoid being at the mercy of one person. So much of elder abuse occurs because the victim is isolated, afraid or embarrassed to speak out and no one, other than the perpetrator, has knowledge of their financial situation.

We financial planners all need to develop our own proactive process for dealing with our clients’ aging by taking steps early on to:

  • Raise client awareness of elder abuse
  • Have clients identify a third-party emergency contact
  • Get to know the client’s family or trusted friends and involve them in client meetings
  • Help clients develop a system for safeguarding their assets and personal information
  • Become more observant for changes in client behavior and appearance
  • Create a communications process that involves more client contact on a regular basis
  • Train staff to recognize the warning signs of abuse and cognitive decline
  • Develop a review process that will signal suspicious activity in a client’s account

We all want to do right by our clients and serve them as long as we can. We also want to avoid the legal and regulatory hassle of a fraud occurrence plus have the opportunity to serve the client’s beneficiaries in the future. So consider the above steps as a way to create value of elder clients that will not only be appreciated by them but also by those who will be inheriting their assets. Like so many aspects of this business, looking out for our client’s best interest with these steps is also good way of looking out for our own as well.

Where are Financial Planners Investing Today…and Tomorrow?

The FPA Research and Practice Institute™ and the Journal of Financial Planning wrapped up the 2016 Trends in Investing survey, which shows planners today are heavily depending on ETFs as a preferred investment vehicle. Will this trend continue? Access the full report today to find out!

Why is it Important for Financial Planners to Make Their Voices Heard Through Advocacy?

If you missed the 3rd Annual FPA Advocacy Day on June 22 in Washington, D.C., you missed an important opportunity to gather with your peers to advocate for your profession. The event brought together 64 FPA members from across the country to help federally elected officials better understand financial planning, the role financial planners play in the lives of their clients, and the importance of a fiduciary standard. Check out this video to hear from participating members on why advocacy is imperative!