Archives Of Weekend Reading For Financial Planners

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a new survey finding that, despite the turmoil of the pandemic and its disruption for the business activities (including the marketing) of advisory firms, 71% of advisors are now reporting that they have more clients than they did before the coronavirus pandemic broke out... a remarkably fast recovery and turnaround (coinciding with the sharp V-shaped recovery of the markets themselves in March), and far different from the more protracted decline and recovery that the typical advisory firm faced after the 2008-2009 financial crisis.

Also in the news this week is the latest Putnam Social Advisor study that, not surprisingly, shows a significant uptick in the advisor use of social media as traditional marketing channels have struggled (with the average advisor in the survey who uses social media reporting $7M of new assets from social media channels in 2020, up from just $2.4M on average in 2019), and the latest Schwab benchmarking survey finding that despite all the hand-wringing that small RIAs are 'doomed' and cannot compete without consolidation, that in practice the average RIA with <$100M of AUM saw slightly more revenue and client growth than larger RIAs (at 7.7% and 4.6%/year, respectively, for smaller firms, compared to 7.4% and 4.4% for larger RIAs) and had better retention (at 97.5% for small RIAs, compared to 96.5% retention rates for larger firms).

From there, we have several articles on broader industry trends, including a look at the ongoing consolidation of TAMPs (which unlike advisory firms themselves, really do appear to be in need of mergers for greater size and better economies of scale to survive), the shift in broker-dealer approaches to advisor grid compensation as advisory firms focus less on just new client production but also on the quality of service and relationships of existing clients as well (which grid payouts historically did not compensate as well), and the extent to which permanent life insurance has actually declined over the past 25 years (with insurers holding nearly 10% of household wealth in 1995, but only 4% today, while the use of mutual funds and retirement accounts have exploded upwards).

We've also included a number of tax and retirement-related articles on new government guidance, including an update on the 'simplified' forgiveness application process for small businesses that took out less than $50,000 in PPP loans, new SECURE Act guidance on everything from coordinating post-age-70-1/2 contributions and QCDs to exactly what it takes to qualify for the new "Qualified Birth Or Adoption" exception to the early withdrawal penalty, and new guidance on Pooled Employer Plans (PEPs) that may soon become available as a tool in the toolbox for advisory firms with a large number of small business owner clients.

We wrap up with three interesting articles, all around the theme of finding more energy and feeling fulfilled in our own work as advisors: the first examines why it's so important to take breaks every day (and how to structure your breaks to best maximize replenishing your energy); the second looks at the challenges of keeping up social connections in the workplace when you're in a position of leadership (i.e., "why it's so lonely at the top"!); and the last explores recent new research on financial advisors themselves and what makes us feel fulfilled (or not) at the firms we work for, where technology is now the leading frustration while growth opportunities and like-minded leadership are the biggest drivers of retention.

Enjoy the 'light' reading!

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that barely 2 months after Charles Schwab made waves by offering (MoneyGuidePro) financial planning software directly to their consumer clients for free, Bank of America is launching a similar solution, dubbed "Life Plan", that will be made available to their clients directly and provide them the opportunity to create and track progress towards their own goals (and then contact a Bank of America/Merrill Lynch human financial advisor if they want further advice).

Also in the news this week is the official closing of the "Schwabitrade" merger of Charles Schwab and TD Ameritrade (but only the beginning of what is anticipated to be an 18 - 36 month integration process, and many open questions about exactly what TDA software and systems will remain, or not), and the revelation that Goldman Sachs has been quietly recruiting talent for what appears to be its own soon-to-be-launched RIA custody offering on the back of its recent Folio Financial RIA custodial acquisition earlier this summer.

From there, we have several investment articles this week, including the news that Morgan Stanley is acquiring mutual fund manager Eaton Vance as the consolidation of asset managers continues (though the real story may be the fact that more than half of Eaton Vance assets are in Parametric's 'direct indexing' and ESG-customized portfolios as the 'next big thing' after mutual funds?), a recent industry survey finding that while only a small segment of clients are focused on ESG investing the ones who are appear to be far more likely to refer their financial advisor (who delivers well on social investing) to their own friends and family, and a recent investing poll finding that while new investing apps like Robinhood and Acorns have been highly controversial they may be single-handedly cutting the racial and age gaps in individual stock ownership (albeit with a concerning about of leverage and margin investing!).

We've also included a number of articles on the challenging theme of customization and personalization in the digitally based pandemic era, including a fresh look at how you scale the "special" of your advisory firm while maintaining personalization (hint: instead of providing customized advice for each different client, create a customized advice process for a unique type of client and then focus on serving that differentiated clientele), what it takes to create intimacy in a digital world (hint: it's all about personal connection), and the real-world challenges that remain in trying to create intimacy in a virtual environment (and why the future of the financial advice business may be all about the things that we can uniquely only do in an in-person relationship).

We wrap up with three interesting articles, all around the theme of learning and new ideas: the first looks at how new ideas and innovation occur within a business, where it's not enough to have a visionary or 'genius' who can create new ideas, but also the social 'butterflies' who help propagate new ideas across the company so they're actually implemented; the second explores a new research study finding that we're far more likely to learn lessons from our experiences when we control the decision about which path to pursue in the first place; and the last examines the awkwardness of feeling like a "noob" (newbie) when trying something out for the first time, and why even though it's natural to want to avoid those feelings of awkward "noobness", that in the end the only way we ever improve is to create (and then push through) those feelings of awkwardness on the path to learning something new!

Enjoy the 'light' reading!

 

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the announcement that the CFP Board is 'updating and modernizing' its governance structure as an organization, including a revision to its Board terms, and more significantly, an expansion of the Board's role in both enterprise risk management (after the CFP Board's recent PR woes with Wall Street Journal exposes) and enforcement of the new Code and Standards (a further signal the CFP Board intends to further its enforcement efforts of its new standards in the years to come, and perhaps finally begin to clean up its own bad apples?).

Also in the news this week is the announcement that the "Schwabitrade" merger has received its final clearance (from the Federal Reserve, given the sheer size of its affiliated-bank business) with the deal anticipated to close in the coming week (but will still take until as late as 2023 to actually complete the merger integration process), and the revelation that, while most RIAs have been in "wait-and-see" mode about the outcome of the merger, that mega-RIA Edelman Financial has already begun an RFP process to solicit competing RIA custodians to bid for its $30B AUM business (for which the rumored leading contender is lesser-known-but-more-tech-savvy Apex Clearing).

From there, we have several articles on recent regulatory issues for advisors, including the rise of "credential stuffing" where hackers don't try to brute force their way through advisors' passwords but instead find already-exposed passwords from other website hacks and try to use them on the advisor's business websites (which makes it all the more important to regularly change passwords, use different passwords for different websites, and/or enable multi-factor authentication so a compromised password alone is no longer enough for hackers to get through), how the rise of fee-based annuities and advisors extracting AUM fees to manage them may now be permitted by the IRS for tax purposes but could still require an additional (and often not obtained) insurance consultant's license from the state, and why advisors who are managing clients' 529 college savings accounts need to be certain to check the right boxes (literally, on Form ADV) but in most cases still should not be claiming their clients' 529 plans as part of their "Assets Under Management" for regulatory reporting purposes.

We've also included a number of articles on the theme of how advisory firms name and market themselves, including a small study that analyzed how often RIAs today are still marketing with the "fiduciary" label now that Regulation Best Interest has obscured the difference between fiduciary RIAs and broker-dealers (answer: less than 1/3rd of RIAs studied even note that they're fiduciaries on their homepage now), a second that looks at how advisory firms are overwhelmingly using 'generic' names (e.g., "Capital Management", "Wealth Management", "Partners", etc.) and may be amplifying their differentiation challenges, and some tips for advisory firms that are looking to establish a new firm name (either for the first time or as a name change) about what to consider.

We wrap up with three interesting articles, all around the theme of financial planning's pathway to finally becoming a bona fide recognized profession: the first explores what are the 'traditional' hallmarks of a distinct profession; the second examines whether the industry currently has the right regulatory and oversight structure to become a profession; and the last explores the CFP Board's recent efforts to begin developing a "roadmap to profession" for financial planning, and why it may still take a long time to truly achieve recognized "profession" status (and what we collectively must do to get there!).

Enjoy the 'light' reading!

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a striking new study from state regulators finding that broker-dealers are drastically more likely to recommend 'complex' investment products than RIAs (from being 2X more likely to use leveraged and inverse ETFs, to 8X more likely to recommend variable annuities, and 9X more likely to use non-traded REITs), raising questions of whether or how the newly implemented Regulation Best Interest will actually change such tendencies or not (which NASAA is preparing to measure with a follow-up study in early 2021).

Also in the news this week is news that FINRA is preparing new Regulation Best Interest guidance as initial broker-dealer exams reveal where firms are doing well and where they're still struggling to implement, and a new industry study that finds the Department of Labor's 2015 fiduciary rule really was reducing the cost of annuity products for consumers while not limiting access to financial advice for small investors (at least for the limited time window it was in effect before the product manufacturing and distribution companies successfully sued to have it vacated anyway).

From there, we have several articles on the ongoing rise of new lower-cost annuity solutions, including a fresh look at how Single Premium Immediate Annuities compare to bonds in today's low-interest-rate environment, when it pays to wait to buy an annuity to avoid 'locking in' today's low interest rates (and how far and fast rates must rise to actually benefit), and how a new wave of no-commission annuities are being developed by annuity companies after a major new Private Letter Ruling last year that allows RIAs to bill their AUM fees from the products directly (but are still struggling with the technology integrations necessary for RIAs to execute annuities in their client portfolios at scale).

We've also included a number of client communication articles this week, from a reminder that helping panicking clients starts with first acknowledging that it's normal to panic during turbulent times (rather than telling clients to 'calm down'), to a look at how Financial Therapy is gaining more and more attention as a complement to (and facilitator for implementing) financial advice in the pandemic environment, and a look at how clients will rarely change their behavior until their advisor understands and helps them to change their own financial stories first.

We wrap up with three interesting articles, all around the theme of how to maintain a cohesive work environment in the midst of what is now becoming a long-term work-from-home world: the first looks at how introducing a "virtual commute" can help us to more effectively transition from our home life to our work life (and back again); the second looks at the techniques that companies are implementing to maintain their office cultures in an online/virtual world (from internal video podcasts to virtual team-building exercises); and the last looks at how technology tools themselves are being reshaped in how they are used to maintain a strong office culture in a world where it's unclear when we'll be returning to our offices (or if we ever will for at least some firms!?).

Enjoy the 'light' reading!

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the news that despite concerns from fiduciary advocates that the Department of Labor's new "fiduciary" rule will undermine consumer protections by allowing "fiduciary commissions", the annuity industry is mounting a challenge to the rule out of a concern that it is still too stringent in attaching a higher standard of care to sales of annuities into IRA rollovers, raising the question of whether a final rule will be issued in the coming months or not (and if it is, whether it will again be challenged and struck down as the last DoL fiduciary rule was).

Also in the news this week are some interesting new industry studies, including a look at the growing interest from industry providers to gain adoption of Health Savings Accounts amongst financial advisors to use as a supplemental retirement savings account for more affluent clientele, and another study finding that 44% of investors (and 68% of Millennials) would consider switching away from an advisor who did not align with their political views (stoking fears amongst some advisors that political discussions will cause lost clients, but signaling an opportunity for others that being more upfront about the advisor's politics can actually better bind clients who share similar political views).

From there, we have a few articles on industry trends around advisor platforms, including a veritable explosion of new recruiting efforts from broker-dealers that have transitioned to virtual recruiting (as it's now easier to vet a new platform from the comfort of your home office!?), the ongoing tension that RIAs face in choosing which RIA custodian on whom they both depend and may compete with (as the Schwab-TD Ameritrade merger creates a veritable oligopoly of mega providers), and the options for advisors to consider if they don't have enough in assets under management to affiliate with one of the mega RIA custodians.

We've also included a number of marketing articles this week, from a look at how anticipated SEC revisions to the advertising and (anti-)testimonial rules could create an upheaval in advisor marketing in 2021, how "expertise marketing" is different than traditional advisor marketing and is all about finding synergies that build compounding marketing momentum over time, and why it's so important to consider the Client's "Lifetime Value" and not just the top-line revenue growth of the firm to understand the health of an advisory firm and its marketing efforts.

We wrap up with three interesting articles, all around the theme of what clients really want from the advisor-client relationship: the first explores a recent Spectrem Group study that finds, despite the rise of robo-advisors and more and more online technology, that more consumers are relying on financial advisors now than in the aftermath of the financial crisis a decade ago (though at the same time, there has also been an uptick in self-directed investors relying on increasingly sophisticated technology solutions); the second provides an interesting perspective from the client's point of view (literally, written by a client who has had many financial advisors over the years) on what really matters when it comes to client retention; and the last recaps a keynote session from this week's Morningstar conference about how the future of the financial advice industry is changing, where the AUM model and in-person meetings won't vanish, but a growing range of virtual meetings and non-AUM fee-for-service business models are opening new doors of opportunity to grow advisory businesses!

Enjoy the 'light' reading!

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the buzzing industry news that Merrill Lynch is barring its brokers from receiving gifts, meals, or entertainment from its wholesalers, in what some see as a shift of even large brokerage firms to begin stamping out more conflicts of interest in the new era of Regulation Best Interest, and critics suggest is simply the new path of brokerage firms to require asset managers and product companies to go through (and revenue share to) the home office instead of its brokers directly (payments which must be disclosed, but are not against the rules for broker-dealers under Regulation Best Interest).

Also in the news this week are some notable new industry studies, including one that looks at what clients actually want to talk about in advisory meetings beyond their portfolios (from protecting against identity theft to new housing decisions), the latest data on which types of consumers are actually using robo-advisors (only 10% of Millennials with <$50,000 of assets but almost 50% of those with >$500,000!), and the latest trends in how advisory firms are investing (showing the continued dominance of ETFs, an ongoing decline in the use of individual stocks, bonds, and REITs, but what is still, at best, just a small minority of advisors who are actually 'passive' as most advisors appear to be using ETFs as their own active management portfolio building blocks).

From there, we have several more interesting investment-related articles, including the launch of the new Long Term Stock Exchange by Lean Startup founder Eric Ries, the growing turmoil in prime money markets as interest rates appear to be pegged near the zero-bound for a long time to come and 'gates' implemented to prevent a 2008-style run on money markets may actually be exacerbating one this time around, growing questions about the long-term viability of the 60/40 portfolio in a persistent low-yield environment and what the future alternatives may be, and a look at how no-commission annuities may be emerging as a bond alternative for advisory accounts.

We wrap up with three interesting articles, all around the theme of being (and feeling) wealthy and what helps us get there: the first is a review of the recent Morgan Housel book "The Psychology Of Money" which explores the differences between being rich and being wealthy; the second examines what it takes to not feel 'rushed' (hint: it's all about delegation to focus on the biggest and most important tasks); and the last explores recent research finding that those who work with financial advisors don't just do better with their money... they're also happier with it, too!

Enjoy the 'light' reading!

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with a big expose from the Wall Street Journal on the SEC's new Form CRS, which found that amongst 8,100 firms that had filed Form CRS, 3,100 of them had a legal or disciplinary history they were required to disclose... and 40% of them failed to do so, raising serious concerns about whether the "transparency and disclosure" lynchpin of the SEC's new Regulation Best Interest rules is already coming up short.

Also in the news this week is an announcement that the state of Massachusetts will begin to enforce its own state fiduciary rule on both investment advisers and broker-dealers (in response to its view that the SEC's Regulation Best Interest came up short in regulating brokers giving advice), criticism of the Department of Labor's new fiduciary rule from both fiduciary advocates who say it doesn't go far enough and industry participants who fear it will already impose 'too much' fiduciary obligation on brokerage firms and insurance companies, and news that the SEC is finalizing changes to its Advertising and Anti-Testimonial rules with updates due to be announced next month!

From there, we have several interesting investment articles on retirement planning, including a look at how to reframe retirement as an 8,000 day period that clients can plan around (recognizing that 'play golf' may be a good start to retirement, but probably is not something you want to do for 8,000 straight days!), new research from Morningstar's David Blanchett about how to set a reasonable life expectancy estimate for retirees, a discussion of how to craft a 'Retirement Policy Statement' to complement a client's Investment Policy statement, an exploration of how retirement is really more a 'state of mind' than a state of being, and a look at the origins of FIRE as a movement around Financial Independence and not just 'extreme Early Retirement'.

We wrap up with three interesting articles, all around the theme of the new Work-From-Home era: the first explores how firms are testing out new 'hub-and-spoke' models of work environments with limited central office space and decentralized home office work environments; the second looks at the new rise of 'tiny office' spaces (e.g., 'tiny homes' custom-built as an office space!); and the last looks at how work from home may be challenging for many jobs and types of workers but especially conducive to knowledge-based workers (including financial advisors!?)!

Enjoy the 'light' reading!

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the big industry news that the SEC has updated the Accredited Investor rules, declining to increase the income and net worth thresholds but expanding the definition of who constitutes a "sophisticated" investor to include financial advisors themselves... allowing anyone with a Series 7, 65, or 82 license to be able to participate in private market investments themselves (though still not necessarily on behalf of their clients, unless their clients still qualify under the more 'traditional' measures).

Also in the news this week is an announcement that insurance companies expanding into the world of fee-based annuities for the no-commission RIA channel are now starting to develop life and disability insurance products for RIAs, as insurance distribution continues to be reinvented, and a study finding that advisors unwittingly tend to engage the men more than the women of their heterosexual couples, resulting in a gender bias that is associated with women not only being more likely to terminate their advisor after a bad experience but being less likely to complain or give the advisor a chance to correct the issue before being fired from the relationship.

From there, we have several interesting investment articles, including a new Morningstar analysis finding that actively managed funds did not actually outperform their passive peers during the recent market volatility (though notably, they didn't underperform either), a look at how market valuation measures aren't very predictive in the short term but that measures like Shiller CAPE are very predictive in the long run (which has significant implications for what return assumptions advisors are using in their retirement planning projections), and a review of SPACs that are suddenly becoming the hot new alternative to IPOs.

We also have a few articles around selling an advisory firm, including what it takes for advisory firms to get a double-digit multiple of earnings for their seller valuation, a look at recent M&A trends for advisory firms that are rebounding quickly after a brief pandemic slowdown, and some guidance on what it takes to sell your advisory firm on the open market (for sellers who have never been through the process before and only get one chance to get it right!).

We wrap up with three interesting articles, all around the theme of building a practice that fits your personal goals (rather than simply one that is solely focused on growth): the first explores the rise of the 'lifestyle' practice as an alternative to the 'traditional' work-hard-play-hard approach (of intensive hours of growing the firm and vacations to recover and then returning to the grind of building again); the second examines one 37-year-old advisor's decision to turn his practice into a lifestyle firm focused on profits and personal time efficiency over growth; and the last explores the 'curse of the overachiever' and how to think about the balancing point and finding the sweet spot between wanting to succeed as a high achiever and when you've got 'enough' to focus your energy elsewhere, instead!

Enjoy the 'light' reading!

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the big industry news that Schwab is launching a free MoneyGuide-like financial planning software solution for all of their (retail) clients to use, emphasizing both Schwab's own increasing focus on financial planning as part of its retail advice to consumers, and undermining financial advisors who view their own value proposition as 'just' delivering the comprehensive financial planning software output as a financial plan that more and more consumers will be able to get for free from Schwab directly.

Also in the news this week are several interesting industry studies, including one that finds despite the hype around model marketplaces from asset managers looking for adoption and technology companies offering them in the hopes of getting a piece of the pie, actual advisor adoption is barely around 10% as advisors fear making a third-party money manager too much of their own value proposition with clients, and a look at how the tech snafus of many advisor platforms are leading a majority of advisors under age 40 to look for new platforms that are more tech savvy.

From there, we have several interesting articles about advisory fee models, including the latest research from Bob Veres showing that, while the AUM model remains dominant with more than 70% of firms being "AUM-dominant", only a minority of those are AUM-only and instead blended fee models of AUM and hourly or subscription/retainer fees are becoming increasingly common, a look at one advisor who decided to stop offering hourly financial planning options for clients (out of frustration that they didn't always follow through on the advice properly on their own), and a discussion of what happened when one advisor decided to raise his minimum fee to $10,000 per client (and the conversations he had with a subset of clients who didn't want to stick around for the fee increase).

We also have a few articles around client communication, including a look at how the pandemic may have changed the style of communication but the demand for client communication is only increasing, how adopting more digital tools (if only 'forced' by the pandemic) is ending out reducing paperwork errors and increasing client trust, and an exploration of what it means to go 'full curbside' service in an advisory firm the way more and more retail businesses have had to transition

We wrap up with three interesting articles, all around the theme of productivity and the digital world: the first looks at how team meetings may actually be more productive virtually than in-person by adopting digital collaboration tools (e.g., Google Docs); the second explores how it's often 'easy' to quickly delegate by email but leads to such poor delegation habits that a "no delegating by email" rule may actually improve the business; and the last explores how technology has made it easier and easier to maintain an ever-longer to-do list but just results in more frustration when we can't get to everything on the digital to-do list, and why it's better to keep a shorter and simpler to-do list by paper (if only to force yourself not to try to task with more than can really be done and focus instead on the few things that really matter most!).

Enjoy the 'light' reading!

Read More...

Enjoy the current installment of "Weekend Reading For Financial Planners" – this week's edition kicks off with the latest updates from the SEC on Regulation Best Interest, acknowledging a growing confusion for hybrid broker-dealers (and the consumers that work with their representatives) in trying to delineate when it's permissible to advertise as a financial advisor (or not), when a representative's fiduciary duty applies (or not), and when and what disclosures must be made when an advisor takes off their advisor hat and puts on their broker hat instead.

Also in the news this week are a number of big announcements on industry diversity efforts, including a series of 25 new scholarships from the American College for Historically Black Colleges and Universities (HBCUs), a new $500,000 donation to the AAAA (Association of African American Financial Advisors) Foundation to support next-generation Black CFP professionals coming through CFP Board-registered programs at HBCUs, a look at how sustaining improved diversity in the industry is about not just improving the pipeline of diversity but also the entry-level job opportunities (to go beyond sales-based jobs that have a disproportionately high failure rate), and a powerful reminder that being 'blind' to the color of an advisor's skin can still hinder diversity because doing so implicit ignores the positive value of the differences in thinking and perspectives that come from a diverse team.

From there, we have a number of marketing-related articles as well, from a look at the difference between "blanket" (broad-based) and "target" (focused) marketing, how to choose a prospective target market when you're already a generalist with a broader client base, how to refine your marketing once you've selected a more focused target market, and why it's so important to think about the audience you really want to reach when marketing (and recognizing that in the end, you can go deeper with them or broader to reach more of them, but it's very difficult to do both at the same time and periodically it may be best to switch from one to the other!).

We wrap up with three interesting articles, all around the theme of pricing and the value of an advisor's services: the first explores how to handle prospective clients who try to negotiate and haggle down the advisor's fee; the second explores how pricing your time by the hour can change your own thinking, in ways that may be good for growing your business or career but risk over-focusing on income growth at the cost of sacrificing the happiness that in theory more income was supposed to bring; and the last explores the concept of Value-Based Pricing and the power of pricing, not based on what your time is worth as an advisor, but what the time and value being delivered is worth to the client instead!

Enjoy the 'light' reading!

Read More...