Sheryl Garrett, CFP®, AIF®

Spring came early to many parts of the country. Our spring flowers peaked in mid-March!  We had a very mild winter and almost overnight the forest is green again. Although I’m not a fan of cold weather, I do appreciate living in a climate where we have all four seasons… in mild form.  Witnessing the seasonal evolution each year is a sight to behold.

We have another extra special seasonal phenomenon going on this year. Our annual Retreat is returning to early August. Our Retreat begins Sunday, August 5^th and concludes Wednesday, August 8^th.  For the previous two years we have held our conference in late October, but for our 12th annual Retreat we will return to our traditional time of year, and as last year, we’ll be at The Curtis Hotel in downtown Denver, Colorado.

The weather should be absolutely gorgeous at this time of year and I hope that many of you take the time to enjoy not only the Garrett Planning Network Retreat, but also the beauty of Denver and the surrounding area. Also, preceding our Retreat, Garrett Investment Advisors, LLC, a SEC-registered Fee-Only financial planning firm, will host their first conference for their Investment Advisor Representatives.

Although it seems like just a short while ago that we all gathered for our 2011 Retreat, which happened to be our largest event to date, the next Retreat is just over four months away.  This is a short conference year for us and our sponsors, but based on the feedback from last Retreat and all of the activities going on within the Garrett Planning Network, with our new Knowledge Bank, study groups and special events, I know the timing is perfect.

We have always had member participation on panels and individual presentations at our Retreats, but the breadth of subject matter expertise and sharing among practitioners continues to grow.  Volunteers for member contributions for this year’s Retreat are at an all-time high.

Based on member survey results, we have modified the program ever so slightly to continue to deliver more of what you want and need to build, develop and sustain a thriving financial planning practice or business.

I hope you’ll choose to join us and/or share the word with others.  In closing, I’ll leave you with some comments shared by attendees following the 2011 Garrett Planning Network Retreat.

Happy Spring!

Sheryl Garrett, CFP®, AIF®
Founder

“There are many reasons I’ve attended nine straight Retreats – they’re invaluable and they always recharge my battery, to name two.”

“I look forward to Retreat because it gives me inspiration, energy and ideas that carry me through the year.”

“I always gain great, practical ideas that I can take back and put to immediate use in my practice!”

“It’s so great to come to the Garrett Retreat each year!  So many amazing practitioners sharing the wisdom and a wonderful group of friends that give it a nice family reunion feel!”

“I have been fortunate to attend every Retreat, and always have a great experience.  I love catching up with old friends and making new ones.  I love learning from other members, and picking up new ideas that I can use.  I appreciate the opportunities to gain a new perspective on various issues.  And, the best part is the feeling of being part of a family of financial planners who share the same views of what financial planning is all about!”

“There are three key ways that the Garrett Retreat brings value: 1) we become aware of cutting edge new services that bring value to our practices and/or to our clients, 2) we have ample opportunities for continuing education in our ever-evolving field, and 3) (most importantly) we can network with experienced members who are incredibly open and willing to share tips to improve our practices.  It all adds up to a truly energizing experience!”

“Attending Retreat and networking with other Garrett advisors is one of the many benefits I get from belonging to the Network!”

“Retreat is the most cost-efficient business planning opportunity I’ve found in 6 years.  I take away more top-notch ideas than I can implement…”

“The annual Garrett Network Retreat is one of the most valuable benefits of membership.  It will connect you with the resources and support you need to advance your practice and make you a better planner.”

“The annual Retreat is a stellar benefit of Garrett membership.  No other industry event provides such opportunity for open sharing of ideas and practices, while building lasting friendships and peer support that you can call on throughout the year.”

“Having chosen to live in a small community and work in a small planning practice, the chance to network, learn and socialize with like-minded financial professionals is phenomenal!”

“The value of the annual Retreat grows each year I attend as I come to know more members and face challenges in my business that they can help me address.”

“The amount of sharing, camaraderie, excitement, energy, and knowledge from Network members and staff is amazing.  So glad I’m now part of the family.”

“The only conference I never miss.”

“Retreats are the best way to experience why Garrett makes it possible for me to do what I do.”

“New Garrett members should consider the thoroughly enjoyable, informative and educational retreat mandatory.  Only through meeting the diverse group of Garrett staff and professionals can one fully appreciate the value of the fees paid to join the Network.”

“Great to see all the planners from across the country!  The Garrett Network has been a terrific and value added organization for my practice.”

“Nothing better than hearing from those who have been there, done that.”

“An event not to be missed!”

New Member Open Discussion, Monday, April 9
Twice per month Garrett staff and select guest members facilitate an open discussion / Q&A open forum call for all new members who want to take advantage of the calls.

Practice Management Webinar, Wednesday, April 11
Learn ways to streamline operations and become more profitable. Hosted by Garrett Network Founder, Sheryl Garrett.

New Member Study Groups, Monday, April 16
New Member Study Groups offer a way to provide even more personal support and community building to our newer members. Study group webinars focus on a different topic each time and new groups can be formed at any time. A list of active study groups is maintained on the Garrett Knowledge Bank.

Lessons Learned Webinar by Shawn Koch, Tuesday, April 17
Garrett member Shawn Koch will be sharing the lessons she has learned in building her business thus far.

Business Planning Webinar, Thursday, April 19
Join the Garrett Small Business Coach, Mary Lacey Gibson, to learn business planning and development strategies to make your business the best it can be.

New Member Open Discussion, Monday, April 23
Twice per month Garrett staff and select guest members facilitate an open discussion / Q&A open forum call for all new members who want to take advantage of the calls.

Technology Webinar, Tuesday, April 24
Improve your productivity through technology.  Hosted by Garrett staff member, Justin Nichols. This month’s topic: TBD.

Town Hall Meeting Webinar – Wednesday, April 25
Open Discussion. Hear “the latest and the greatest” on these calls. Hosted by Sheryl Garrett.

NAPFA Northeast/Mid-Atlantic Symposium, April 25, Philadelphia, PA
The topics of study this year are risk-based asset allocation and estate planning under uncertainty. Click here for details.

FPA Retreat, May 5-8, Scottsdale, AZ
FPA Retreat 2012 provides opportunities to find your center – or voice – in meeting the challenging demands of an ever-changing market. Educational sessions with lively and uplifting conversations will be balanced by blending the art and science of financial planning with unique planner-focused events. Click here for more information.

NAPFA National Conference, May 8-11, Chicago, IL
This conference features the latest thinking on financial planning and investment strategy while providing insight into what is happening within the industry. NAPFA National helps Fee-Only financial planners build strong bridges with the industry, the organization, and with each other. Click here for more information.

NAPFA Northeast/Mid-Atlantic Symposium, June 5, Waltham, MA
The topics of study this year are risk-based asset allocation and estate planning under uncertainty. Click here for details.

CFP® Certification Exam, July 20-21 (Application Deadline: June 5)
The CFP® Certification Examination is designed to assess your ability to apply financial planning knowledge to real-life financial planning situations. By passing this exam, you demonstrate to the public that you are at the appropriate level of competency required to practice financial planning. Visit www.cfp.net for details.

12th Annual Garrett Retreat, August 5-8, Denver, CO
The Garrett Retreat is filled with fabulous educational sessions and valuable time to network with fellow members and loyal Garrett sponsors. Details coming soon.

Leisa Brown Aiken, CFP®, CPA

“The Garrett Planning Network does a great job fostering a sense of community that includes Garrett leadership and staff, resource partners and amazing members.”

Leisa Brown Aiken, CFP®, CPA is the founder of Veo Financial Counsel, LLC, a Fee-Only financial planning firm in Chicago, Illinois. After leaving the corporate world in 1998, Leisa’s goal was to draw on her analytical abilities, communications skills and financial expertise to make a difference in people’s lives. To pursue that goal, she began working in 2005 as a financial planner in a firm that offered hourly advice. She founded Veo Financial Counsel, LLC in 2009 to continue providing Fee-Only, hourly as-needed services to a broad range of clients. She continues to partner with her clients, providing specific analyses and recommendations tailored to their individual characteristics, needs, situations and goals.

We recently interviewed Leisa regarding her experiences as a Fee-Only financial planner and Garrett member since December 2009.

Why did you decide to open your firm under the hourly, Fee-Only business model and why did you decide to join the Network?

I chose to open my own firm as a Fee-Only, hourly practice because this model can accommodate the broadest range of client economic circumstances and I very much enjoy working with a diverse client group. Hourly planning and advice can make sense for clients who may later decide to select a comprehensive Fee-Only wealth manager who charges assets under management or retainer fees, or those who choose to hire a Fee-Only investment manager for all or a portion of their ongoing investment management.

Before joining the Network I worked in Fee-Only firms for several years and realized that continual learning would be required to serve clients well.   Garrett provides efficient access to new or unfamiliar information and client solutions.

How has your business startup been supported by the Garrett Planning Network?

The support I received from the information through the Garrett Knowledge Bank, initial training materials, resource partners and other Garrett members was invaluable.  I prefer not to reinvent the wheel and I’m not sure I would have tackled the administrative aspects (phones, technology etc.) without knowing there were resources for these things.   Also, during my startup I was the local coordinator for the Chicago NAPFA Money Bus stop so I was pretty busy with that project.  Finding information quickly helped me do both things during the same few weeks.

What are the 3 greatest benefits of membership?

I am a person who seeks community, so for me, as a sole-practitioner, this is the greatest benefit.  The Garrett Planning Network does a great job fostering a sense of community that includes Garrett leadership and staff, resource partners and amazing members.

Another great benefit is the exposure the Network gets through Sheryl, the founder, and others’ press exposure.

Finally, I have found trusted fellow members who have been willing to discuss challenging business and client related situations and decisions.

What are your short and long term goals for your business?

My short term goal is transitioning to the Garrett Investment Advisors (GIA) technology toolkit. For example, I was using NaviPlan Extended as my financial planning software and am now using Money Tree. My other major focus is regarding the changes that will result when I am living in Malmo, Sweden three-fourths of the time beginning in a couple of months (my husband accepted a position there for the next 3-5 years). Technology and my virtual assistant (found through a Garrett resource partner) will make this possible.

Leisa is active in her faith community by serving on the worship team and participating in activities in her community and abroad.  With her friends in the Progressive Pilgrims book group, Leisa reads writings from most of the major faith traditions.  Recently responding to a request from the American Heart Association to NAPFA, Leisa made a presentation in Spanish at the Mexican consulate in Chicago. Leisa and her husband Daniel (married 30 years) and their children Carmen Alicia ( age 24) and Mark (age 21) like to travel and experience other cultures and food. She and a long-term friend have a subscription for the Chicago Symphony Orchestra chamber series and the Grant Park summer orchestra series.  Leisa also likes leisurely bicycle rides (she recently rode down Pennsylvania Avenue in DC) and weather permitting, enjoys running errands and short trips on her bicycle.

Will Duncan

“With the hourly as-needed planning model, I am able to offer my services to many clients that would not otherwise be able to access a true fiduciary relationship.”

Will Duncan grew up in Oklahoma, but has lived in the Las Vegas area for over 15 years and has worked in the casino industry for over 12 years. While working full-time, he pursued and obtained a bachelor’s degree in accounting and went on to complete the financial planning program through Boston University’s Center for Professional Education. Will is now the founder of Duncan Financial Planning, LLC, a Fee-Only financial planning firm located in Las Vegas, Nevada.

We recently interviewed Will regarding his experiences as a Fee-Only financial planner and Garrett member since September 2009.

Why did you decide to offer planning services on an hourly as-needed basis and why did you decide to join the Network?

I was studying accounting in college and began to explore possible career paths. During this exploration, I read about financial planning and came across a survey about job satisfaction. Financial planning was at the top of the list and seemed to be a perfect fit for me. As I explored further, I read about Fee-Only financial planning and loved the concept. As I delved into research of Fee-Only financial planning, the Garrett Planning Network came up as a result of a Google search. I spent about an hour on the website and knew that I was home. After completing my degree, the financial planning program and passing the CFP® Certification Exam, I did additional research and found that no other organization had a business model comparable to what Garrett Planning offers. With the hourly as-needed planning model, I am able to offer my services to many clients that would not otherwise be able to access a true fiduciary relationship.

What are the top 3 reasons that you remain a member of the Garrett Planning Network today?

1. The people. The members of the Network are incredibly generous with their time, talent and skills. This, of course, includes Sheryl and her team and the fabulous coaches.
2. The mission of the Network very closely aligns to my own.
3. The near-religious experience of the Garrett Planning Network Retreats. The Retreats are packed with information and help to re-energize me. I’m looking forward to Denver 2012!

Looking back, what is the one thing you wish you had done sooner in your business building activities?

I am now developing solid professional relationships in the community. However, I feel that I’m behind the curve because I did not pursue this more aggressively when I first opened the business.

Do you have staff or outsource anything?

I have hired an answering service with receptionists that are specifically trained to be able to take appointments and answer simple questions about my company. The next step is to hire a virtual assistant. I expect to do that before the end of this year.

What are your current business challenges and how are you overcoming them?

I believe that I share many of the same business challenges as other Garrett members. I need to do everything that I can to market intelligently and promote an efficient process which will allow me to increase my billable hours and to spend more time in front of the clients. I am very fortunate that a good number of my fellow Network members have joined me in a study group / task force, which is creating workable solutions to some of these challenges.

In Will’s down time, he enjoys working in the yard, playing the piano, avidly reading and hanging out with friends and his partner of 14 years.

Justin Nichols, CFP® - Manager of Operations

The Garrett Planning Network’s Annual Retreat is always the highlight event of the year! Our 12th annual conference will be held August 5-8, 2012, in Denver, CO. The event is focused on “Sharing the Wisdom” through best practices panel discussions, practice management sessions, keynote presentations and networking events.

In addition, Garrett advisors know they will always learn about the latest and greatest products and services they can use to enhance their Fee-Only financial planning practices by visiting with our Garrett Retreat sponsors. We already have the following outstanding event sponsors signed up and we anticipate that we will add many more to this list:

Scottrade Advisor Services (Gold Sponsor)
Low Load Insurance Services (Silver Sponsor)
Markel Cambridge Alliance (Silver Sponsor)
Flat Fee Portfolios (Silver Sponsor)
Wells Fargo Home Mortgage (Bronze Sponsor)
MAGA LTD (Bronze Sponsor)
North American Professional Liability Insurance Agency (Bronze Sponsor)
MoneyGuidePro (Bronze Sponsor)
Jefferson National (Bronze Sponsor)

Our advisors love the Garrett Retreat for the camaraderie among members, the chance to meet new Garrett advisors, the ability to learn from panel discussions, the chance to hear new ideas from great hallway conversations and the opportunity to mingle with Garrett sponsors. Remember, the Garrett Retreat is a “Members-Only” event so if you are interested in attending please make application to join Garrett soon so you will be ready to join us in Denver in August. We hope to see you there!

Jamie Breeden, CFP® - Director of Member Services

The private Garrett Knowledge Bank site contains a wealth of information and resources for Garrett advisors. Below are a few highlights of recent discussions to give you a glimpse inside this wonderful resource and to remind members of postings they won’t want to miss!

Retirement Planning
This quarter the Retirement Planning folder included active discussions on topics such as social security analysis, the lump sum versus annuity option for public pensions and how to allocate a new 403b account for a client who already has a pension.

Overcoming Overspending
Do you have any clients struggling with overspending? A couple who is liquidating their retirement savings at a dangerous pace prompted this discussion on how to advise and motivate clients who need to reduce their expenses.

Home Office Advice
If you are just forming your planning practice or thinking about a location change, learn from Garrett members’ experiences regarding home offices and where it’s best to meet clients.

“I know your services are offered by the hour, but…”
Click here for a helpful discussion on how to set clear expectations for prospective clients and how to clearly describe the way you work with clients.

Initial Inquiry / Get Acquainted Communications and Documents
Do you need to create new meeting agendas, scripts, templates or email replies for the beginning phase of the planning process? Don’t reinvent the wheel! Click here for many examples provided by members.

Delivering the Plan
Need ideas for how best to present the financial plan deliverables to your clients? Click here for ideas and advice from Garrett members.

Yellow Page Ads
Visit the Marketing folder for a discussion on who the target audience is for Yellow Page ads and whether or not they add value to your advertisement efforts.

Working with a Hesitant Prospect
Do you really need a completed confidential questionnaire before the Get Acquainted meeting? Click here to see what Garrett members think regarding this topic and how to handle a prospective client who is not fully ready to begin the planning process.

Andrea Hargitt - Member Services Support

Here at the Garrett Planning Network, we are sure enjoying 2012 and are excited for spring to be here. As always we have many projects going to make the Garrett Planning Network the best it can be in helping our members be successful.

We have launched our new Knowledge Bank Intranet platform! We are enjoying all the wonderful new features and user-friendly options. We are also learning ways to improve it and make it as functional as possible.

We are getting close to launching a new and improved Garrett website. It will have a brand new look and many updated features and functions. Our goal is to have a website that visitors can use to find what they are looking for easily and quickly, as well as to learn more about our Network!

Another exciting event we are beginning to plan is the 12th Annual Garrett Retreat in Denver, CO, August 5th-8th, 2012. Retreat will be filled with fabulous educational sessions and valuable time to network with fellow members and loyal Garrett sponsors. Be sure to mark your calendars and make plans to attend!

Marie Swift - Marketing Communications Coach

Keeping your pipeline full is an art and a science, in-and-of itself. What can Garrett members do to prevent or work through “a dry spell”? Garrett’s marketing coach, Marie Swift, tells you what you should be doing now.

On the March Marketing Matters call, one of the things we discussed was how to avoid or work through a dry spell.  One of the Garrett members lamented that in the prior three or four months she had been so busy she could hardly see straight. Prospective clients were calling. New clients were signing on. She had plenty of meetings and phone calls with strategic allies. She’d purchased a mailing list and had sent out a series of introductory postcards and was expecting some calls from that effort – but, sadly, no calls came from the mailing and things were a little quieter than she’d like. We started brainstorming some things she – and you – can do when that inevitable dry spell hits.

Let’s assume you have already contacted all your clients to remind them to come in for their annual or semi-annual check-up. Just like seeing the dentist for good oral health, it’s important that clients adhere to a regular plan to meet with their financial planner for good financial health. You can use postcards, email or phone calls to remind your clients of the need to come back in for a check-up to ensure everything is on track and working as it should be.

I still like AmazingMail for postcards because you can actually pull up the desired image/message for the front, add your pre-planned message to the back, select one or more clients for the postcard mailing and then – and this is the cool part – select a date in the future for the card(s) to be produced and mailed. They go out like clockwork. As a routine part of your wrap-up in client meetings, I strongly encourage you to say, “I’d like to see you again in 6 months. Just like seeing a dentist for good oral health, it’s important that I see you for good financial health. How about I send you a postcard in 5 months to remind you to set up your appointment – or would you like to schedule it now and I’ll send you a postcard in 5 months to remind you of the day and time?”

Of course, you can also send emails or place phone calls. But you might want to consider automating the process and making it a bit more novel than a text email or a regular phone call. For phone calls that you need to do in bulk, consider VoiceShot; you upload your client information, record your message, select your time and day and the robo-calling service delivers your pre-recorded message at that time. Imagine you are a client hearing, “Hello, it’s Tom Smith from Smith Financial Planning. Spring is here and that means it’s time for you to come in for your financial check-up. Please call the office today to schedule your appointment. Much like seeing the dentist regularly for good oral health, I need to see you for good financial health. Hope to hear from you this week.”  You could also deliver the same message via video email. All you need is a web cam or a camcorder to record yourself reminding clients to come in for their spring cleaning (think of it like a mental and financial housekeeping ritual every spring). To learn more about an easy-to-use video email system that brands each video email message with your company’s template and can be set up to go out immediately or at some date in the future to one or more clients / prospects, visit www.impactproductionsgroup.com.

Let’s assume that you have already sent out your quarterly newsletter or e-newsletter (or an educational recap of what you have published on your blog), and that you have sent out some sort of special offer to prospective clients – maybe a spring housekeeping “special” via postcard, email, video email, etc. What else can you do? Here are a few ideas.

Tip #1: Fill your calendar with purpose-driven events and take a leadership role.

There’s an old saying in marketing circles that’s just as true today as ever: The best time to be marketing and prospecting is when you don’t need the business. So, tip #1 is to create a marketing plan that will serve as an annual blueprint, with dates for events and promotional activities that will keep your pipeline full.

While I always recommend that Garrett members have a good mix of marketing tactics going for them and to focus on serving and prospecting in 2-4 niches over time, it is important to realize that there are really just three main ways that financial professionals generate new business:

1. Event Marketing
2. Referral Marketing
3. Credibility Marketing

Events are a great way to create partnerships with strategic allies, to build buzz in the community and to share news with journalists. The trick is to keep a steady stream of events on your calendar and to give yourself lots of lead-time for promotions related to the event.

Just promoting the event can be as important as holding the event. It is also important that you fill your calendar with purpose-filled events – the more near-and-dear to your heart, the better.

Let’s take a look at how Garrett member Jean Keener is partnering with the local library to offer financial education classes once a month:

• March: Making the Most of Your Employer-Sponsored Retirement Plan
• April: Couples and Money: Harmonize your Finances and your Relationship – jointly presented with Marriage and Family Therapist, Maryellen Dabal
• May: Structuring your Retirement Income (designed for those in retirement or within 5 years)
• June: Social Security Planning for Baby Boomers

Tip #2: Find new and interesting ways to reach out to clients and strategic partners.

The most successful business builders in the Garrett Planning Network are continually thinking up new and interesting ways to have more and better conversations with their current clients and strategic partners. Holding purpose-driven events is one way to have something relevant and timely to talk about – and to ask for their partnership or participation.

Look at the calendar 3-6 months out. What are some of the seasonal events that occur every year? Here are a few ideas to get you going:

We’ll be just about past the tax season and number-crunching focus by the time you read this article, but it might not be too late for you to send out some last minute planning tips and reminders to your in-house email list (you could also send a last-minutes tips / list to your local newspapers, online outlets, television and radio stations).  Be sure to post the tips on your website or blog and post short bits of text and a link back to your blog or website on your social media networks. See how Garrett member Jean Keener does it here.

How about assembling a First Aid Kit and dropping it by your CPA colleagues’ offices? Just buy some white gift boxes that open from the top like the one you see here. Buy some white mailing labels that look similar to this. Create a fun label that says “Emergency First Aid Kit” “Open Only When Stressed” “Compliments of [your logo] and [your name]”. Fill the box with small packages of Tylenol, a bottle of 5-Hour Energy drink, a small package of coffee, 2-3 tea bags, a granola bar, an apple, a handful of Hersey’s Kisses and other snacks. Include your business card. Consider including a handwritten “sympathy card” or “hope you’re feeling better soon” type card with a note of encouragement. Time your visit so you are most apt to catch the CPA in person for hand delivery.

April is also Financial Literacy Month so you might be able to tag-team with fellow Garrett members or tie in with NAPFA and FPA activities in your locale. The Federal Reserve also promotes and is looking for reputable partners to participate in their Money Smart Week activities (see http://www.youtube.com/watch?v=Cr4UfdFQNGY and http://www.moneysmartweek.org). The Jump$tart Coalition and the Council on Economic Education are championing Financial Literacy Day on Capitol Hill (April 17 – http://www.jumpstart.org).  You might also look at Money Savvy Generation for ideas (be sure to “like” these organizations on Facebook, follow them on Twitter, etc.)

May is National Heritage Planning Month. If you or some of your strategic partners are interested in getting behind the idea that it’s not just valuables (financial assets and tangible items such as homes, cars and collectables) but values (stories, philosophies, personal passions) that create/demonstrate a full and rich life, then check out the agenda being developed and championed by The Heritage Planning Institute.  Most of the Certified Wealth Consultants associated with the institute are interested in working with complex situations and ultra-high-net-worth clients. It would be a good strategic move for more Garrett members to get to know these Certified Wealth Consultants and Heritage Planning Institute members as they will not be seeking the same types of clients that Garrett members hope to attract and there could be some good cross-referrals and synergy. Contact Lori Coonen, Director of Education, at info@theheritageinstitute.com to express an interest in helping with National Heritage Planning Month.

You might also be interested in What Matters, a novel that has just come out. Written by Heritage Planning member Cameron Thornton and founder Rodney Zeeb, the book makes the points about values and valuables in the form of a personal story. This novel would make for a good book discussion group or a webinar/seminar for clients. You might even consider asking the authors if they would be willing to call in for a virtual book discussion or presentation (I know and like these two high-character men and I think they would be very willing to co-lead a talk with you for your group). You can see what Financial Advisor magazine says here.

Tip #3: Promote your events and business philosophy through media relations and social media.

This tip ties in to the third way that financial professionals generate new business:

1. Event Marketing
2. Referral Marketing
3. Credibility Marketing

I’ve touched on how to do this above and will be talking more about this on our next Marketing Matters call (and in future issues of Garrett News and Views). It really deserves a thorough discussion… so… stay tuned and let’s keep the conversation going on the Garrett Knowledge Bank between now and then.

Hope spring has sprung wherever you are!

Your ever-lovin’ Marketing Coach,
Marie Swift

Mary Harris-King – Compliance Coach

One of the most frequent sources of misunderstanding we see among RIA firms is whether the services they provide meet the definition of investment management.  All too often we see firms confusing  “assets under advisement” with regulatory “assets under management.” Regulators are increasingly on the lookout for firms whose reported AUM numbers are inflated, so it is critical to understand whether, under regulatory definitions, you actually have AUM and to make sure your firm’s disclosures and marketing materials are accurate and consistent.

Item 5.F of the ADV Part 1 requires the advisor to report whether it provides continuous and regular supervisory or management services to client securities portfolios, and if the answer is yes, to state the amount managed under discretionary and non-discretionary agreements, and the number of accounts in each category.

The first step is determining whether, in fact, the advisor is providing continuous and regular supervisory or management services.  To make this determination, the SEC provides this guidance to advisors:

You provide continuous and regular supervisory or management services with the respect to an account if:

(a) you have discretionary authority over and provide ongoing supervisory or management services with respect to the account; or

(b) you do not have discretionary authority over the account, but you have ongoing responsibility to select or make recommendations, based upon the needs of the client, as to specific securities or other investments the account may purchase or sell, and, if such recommendations are accepted by the client, you are responsible for arranging or effecting the purchase or sale.

You should consider the following factors in evaluating whether you provide continuous and regular supervisory or management services to an account.

(a) Terms of the advisory contract.  If you agree in an advisory contract to provide ongoing management services, this suggests that you provide these services for the account…

(b) Forms of compensation.  If you are compensated based on the average value of the client’s assets you manage over a specified period of time, that suggests that you provide continuous and regular supervisory or management services.  If you receive compensation in a manner similar to either of the following, that suggests you do not provide continuous and regular supervisory or management services for the account –

(i) you are compensated based upon the time spent with a client during a client visit; or

(ii) you are paid a retainer based on a percentage of assets covered by a financial plan.

(c) Management practices.  The extent to which you actively manage assets or provide advice bears on whether the services you provide are continuous and regular supervisory or management services.  The fact that you make infrequent trades (e.g., based on a “buy and hold” strategy) does not mean your services are not “continuous and regular.”

Examples. You may provide continuous and regular supervisory or management services for an account if you:

(a) have discretionary authority to allocate client assets among various mutual funds;

(b) do not have discretionary authority, but provide the same allocation services, and satisfy the criteria under [the definition of continuous and regular supervisory services above];

(c) allocate assets among other managers (a “manager of managers”), but only if you have discretionary authority to hire and fire managers and reallocate assets among them; …

You do not provide continuous and regular supervisory or management services for an account if you:

(a) provide market timing recommendations (i.e., to buy or sell) but have no ongoing management responsibilities;

(b) provide only impersonal investment advice (e.g., market newsletters);

(c) make an initial asset allocation, without continuous and regular monitoring and reallocation; or

(d) provide advice on an intermittent or periodic basis (such as upon client request), in response to a market request, or on a specific date (e.g., the account is reviewed and adjusted quarterly).

For many advisors, after applying the criteria above, there is no need to go any further because the services they provide relate to assets under advisement, not assets under management.  In that case, the answer to Item 5.F should be “No” and they should not claim to have assets under management in their Part 2 or any other materials. Reporting assets under advisement as AUM is a material misstatement, and a firm can face severe sanctions for leading clients and potential clients to believe that it has more AUM than it really does.

If the advisor determines that the firm is providing supervisory or management services, then the next step would be determining the amount of “regulatory assets under management.”  This involves evaluating what portion of a client’s portfolio is being managed. The easiest way to determine this is to get a report from the custodian(s) of your AUM clients’ accounts on the accounts you manage.  This is what a regulator will want to see when they inspect your office and what they will use to verify the firm’s reported AUM numbers.  Advisors are sometimes surprised to find that regulators can, and often will, go straight to the custodian for this information – they do not have to rely on the RIA firm to provide this data.

More details on calculating AUM can be found on the SEC website in its instructions for completing the ADV Part 1: http://www.sec.gov/rules/final/2011/ia-3221-appb.pdf

If you have questions about whether your services are investment management or supervision, or have questions on correcting reporting that may have been inaccurate in the past, please feel free to contact us at 1-877-614-6075 or by email at info@cs2compliance.com.