Published May 9, 2018
At our 2018 Annual Conference just a few weeks ago, we had the incredible opportunity to hear from financial expert Ed Slott, named the “best source for IRA advice” by The Wall Street Journal. His entertaining delivery and gift of humor had us chuckling and taking copious notes while hanging onto his every word. A nationally recognized public speaker and self-proclaimed “recovering accountant,” Mr. Slott imparted his wisdom for financial advisors in 2018.
Kicking off with a note of encouragement, Slott clings to the belief that now is the best time in history to be a financial advisor. He just may be right, citing two reasons. First of all, by the year 2030, every baby boomer will be over 65. What an opportunity coming through the pipeline in the next few years. There is one major factor setting this generation apart from those before: this is the first group of people responsible for their own retirement. In years past pension plans were the norm and “planning for retirement,” was not a common phrase. Today’s workforce is seeking a true advisor – the right advisor – someone who can go beyond managing stocks and bonds to truly make a difference.
Secondly, taxes are lower than they’ve ever been, and probably will be, in our lifetime.
“Don’t take your knowledge for granted.” – Ed Slott
So how do today’s advisors take advantage of this environment ripe for growth? Instead of being frustrated that you can’t compete with the financial giants of the world, he recommends advisors focus on what they bring to the table: knowledge. Many of us are of the opinion that if we know something, then everyone must know it, but this isn’t necessarily the case. Advisors who can connect with their audience by providing value, especially where taxes are concerned, have much more opportunity for growth.
Tax advice is something people are willing to pay for and need more than anything, regardless of the disclaimers advisors put up. Your job as an advisor is to make taxes efficient, so clients can keep more of their money. The very nature of opening and managing 401k accounts or IRA’s holds tax implications. How advisors choose to navigate and advise as consumers make these decisions can have significant impact years down the road. Even concepts that seem simple to advisors, like the difference between tax-deferred and tax-free, should be part of the conversation.
He explained that advisors are in a unique position to manage all of the risks consumers face today. Running out of money is the number one fear in America. Tax risks and investment risks are the key threats, and financial advisors can deal with both of them by offering strategic solutions and taking advantage of the products available to them. The third risk is longevity, in which a client outlasts their money, but this risk only applies if you ignore the first two!
Slott imparted several of his “always rules” with advisors. Two of his non-negotiable rules were these:
Tax-free is always better. There is an enormous difference between tax-deferred and tax-free. Tax-free money grows the fastest and is not susceptible to growing rates in the future.
Always pay taxes at the lowest rates. (Hint: they’re low right now!) Encourage clients to pay taxes now while rates are low. While it seems counterintuitive, especially for an accountant conditioned to defer, again and again, history shows us that today’s tax environment is one of the most favorable.
Financial advisors should be focused on making a client’s money last, but have you ever thought about your own personal situation? Do you have a financial plan using some of the same products or solutions you recommend to your clients? Slott suggests building credibility by taking care of yourself first, for several reasons. Not only will you be taking care of your own family so you can focus on your advisory practice, you’ll have a unique perspective when building relationships with your clients. Show you believe in what you sell by investing in your own product.
“The history of failure in war, or in any other human endeavor, can be summed up in two words: ‘too late.’” – General Douglas MacArthur
In closing, Slott encouraged advisors to act now. Get out there and talk to your prospects and clients. Educate yourself. Get creative. The big financial firms are order takers, but as an independent financial advisor you can provide things that other advisors cannot. There are opportunities for you to provide real planning value now. Don’t stay focused on transactions; bring value to the table.
A video of Ed Slott’s presentation can be viewed on the PAG YouTube page.