Archives Of Weekend Reading For Financial Planners

Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with several recent industry tracking studies, including one showing that RIA assets continue to grow (but those serving individual investors continue to be dominated by a large volume of "small" advisory firms with less than $1B of AUM and fewer than 10 non-clerical employees), and another examining fund flows data and finding that advisors are not eschewing actively managed funds altogether, just high-cost funds - as both ETFs, and low-cost active funds (with expense ratios under 20bps) are experiencing positive inflows!

From there, we have a few technical articles, including: strategies to plan around the Medicare Part B and Part D surcharges for those with high income; how the growth rate of college tuition has actually been in steady decline for a decade (and last year was actually in-line with the general level of inflation); ways to use trusts to shelter (and tax-manage, and asset-protect) investment real estate; and a primer on how annuity mortality credits really work.

We also feature several practice management articles this week, from a look at how to develop the "other" career track in advisory firms (for administrative and operational employees), to why it's crucial to develop career tracks and provide promotions based on performance and skill attainment (and not just based on tenure), and why businesses (both advisory firms and in other industries) often start to "break" as they cross 25 employees, and have to adjust to the dynamics of being a larger business.

We wrap up with three interesting articles, all looking at mindset issues in what it takes to be financially successful: the first looks at a recent Journal of Financial Planning study, which finds that more affluent households tend to take more financial risks, but only because they also tend to better understand those risks (and take them prudently) in the first place; the second discusses some of the "habits" of the affluent that appear to bolster their wealth accumulation and financial success; and the last examines Warren Buffett's recent statement that his future successor must not only be smart, but have a "money mind", and explores what it really means to have a money mind.

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the announcement that Golden Gate University has launched the first Master's in Financial Planning with a concentration in financial life planning, as financial planning education providers increasingly shift to focus on training new financial advisors in the communication and empathy skills needed for future success. Also in the news this week was the announcement that the Treasury is shutting down the MyRA program (after it failed to blossom into a full-blown automatic IRA enrollment solution, and only a lackluster 20,000 households have signed up in the past two years), and for the first time an independent RIA successfully sued a large broker-dealer (for $1.5M!) for poaching one of its advisors who improperly took client information when he left (signaling a new escalation in the growing battle between broker-dealers and RIAs, as in the past it was only broker-dealers suing RIAs for poaching advisors, not the other way around!).

From there, we have a few practice management articles this week, including one about the importance of becoming an "emotionally intelligent CEO" for advisory firm founders who must transition from "just" being the lead advisor into being a leader and executive of the firm, another about what to do if an employee declines a promotion or opportunity for partnership, and why advisors need to be wary of asking "platitude" questions like "What keeps you up at night" when talking to prospects, and instead reframe question to get more concrete responses that help the advisor really understand how he/she can help.

We also feature several more technical articles, from a review of the rules on deducting long-term care expenses (not just LTC insurance, but the underlying expenses themselves for those who aren't fully insured!), to issues to consider when choosing a (family or corporate) trustee as part of the estate plan, and the rules for Medicaid recovery (where the state files a claim against a decedent's probate estate to recover state Medicaid expenses against any of the decedent's remaining assets at death that weren't already spent down).

We wrap up with three interesting articles, all looking at the connections between happiness, fulfillment, and how we spend our dollars: the first is a review of a recent study finding that spending money on timesaving tasks (e.g., hiring a maid, or ordering takeout for dinner) provides a greater happiness boost than spending on material goods; the second looks at the decline of conspicuous consumption amongst the affluent, and the rise of "inconspicuous consumption" amongst the upper-middle-class (spending on things like services and education), in a manner that doesn't overtly display social status, but may reduce social mobility; and the third is a fascinating interview about the latest research on positive psychology and what leads us to really feel fulfilled in our lives.

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the news that robo-advisor Betterment has raised yet another $70M round of venture capital funding, and boosted its valuation up to $800 million... though the company intends to use the dollars primarily to hire more human financial advisors, and launch new products, suggesting that even the leading pure robo-advisor is pivoting away from its roots to try to become a broader wealth management platform and brand.

From there, we have several more articles around the theme of advisor technology, including a fascinating look at how Morgan Stanley is planning to use big data and AI to augment the productivity of its financial advisors (with everything from tools that automatically monitor and provide updated portfolio recommendations to clients, to solutions that pre-draft relevant emails to clients and allow advisors to more easily customize and then send), a review of the advisor technology platforms of some of the smaller RIA custodians (including RBC Advisor Services, TradePMR, and SSG), a new advisor technology solution called "BizEquity" that helps advisors to do business valuations for their small business owner clients (either as a value-add, or a prospecting tool), and some tips on how to run an effective internal cybersecurity training session for your advisory firm.

We also feature a few practice management articles this week, from the reason why advisory firms should do less customization of their financial advice as the firm grows and adds more advisors, to how the rise of back-office custodians and technology has powered a growth of independent advisors and made it possible for even small "solo" advisory firms to be very successful (without the resources of a traditional wirehouse), why advisory firms need to focus on building a firm foundation before executing new growth initiatives, and a look at the relative dearth of internship opportunities in the independent advisory community (and some steps to take to fill that void).

We wrap up with three interesting articles, all looking at the ongoing evolution of investment theory: the first looks at how, even with the rise of passive index funds at an ever-lower cost, the fact that retail investors can't effectively own a market-cap-weighted index of global wealth means all investors ultimately have to make some "active" decision when it comes to asset allocation across the available indices and asset classes; the second is an in-depth look at the Adaptive Markets Hypothesis, and how it aims to explain the behavior of markets better than the Efficient Markets Hypothesis; and the last is a good discussion about the fundamental purpose of investing itself, and how a true goals-based approach to investing may entail different kinds of investment choices than asset allocations than the classic diversified equity portfolio (although for very long-term goals, even goals-based portfolios still end up being rather equity-centric!).

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with a new Schwab RIA Benchmarking study, that finds despite the hubbub of robo- and other competitive threats, the independent RIA community has continued to grow assets at 10%/year over the past 5 years, although the fastest-growing firms are increasingly combining referral-based marketing with other forms of marketing and business development beyond referrals alone. Also in the news this week is a Boston Consulting Group study finding that in the aggregate, gross revenues of the asset management industry declined in 2016 (for the first time since 2008), even though total industry assets were up by 7% to $69 trillion, as the shift to low-cost products continues to take its toll. And the SEC has approved the FINRA proposal to revamp its traditional "Series" licensing exams, and roll out a new Securities Industry Essentials (SIA) exam that prospective new brokers can take, even if they're not yet sponsored with a broker-dealer.

From there, we have several articles on the theme of health insurance and Medicare, including a look at how uncertainty over health care policy in Washington is making it harder for advisors to craft effective recommendations for clients considering early retirement (who are uncertain whether they will still be able to access cost-effective health insurance without being limited for pre-existing conditions in the future), how the Social Security COLA is likely to be 2% this year but will be mostly consumed by the unwind of 2015's "Hold Harmless" provisions on Medicare Part B premiums, and proactive planning strategies and talking points for (prospective or current) retirees who are approaching age 65 and need to make decisions about Medicare.

We also feature several articles specifically focused on financial advisor marketing, from advice on how to sharpen up your core marketing messages to prospective clients (without needing to spend money on a marketing expert), to a series of marketing tips from a wide-ranging interview of advisor marketing experts, and a look at the concept of a "marketing nest" and how it differs from a "marketing niche" as a way to accelerate near-term growth for the firm (though while the nest may be best in the short term, the niche is still best strategically in the long run).

We wrap up with three interesting articles, all looking at the ongoing evolution of the "soft skills" of financial planners, and what it takes to be successful: the first is a Journal of Financial Planning study, looking at how "behavioral finance" and financial therapy techniques can be incorporated into the 6-step financial planning process; the second is a discussion of "active listening" and how developing the skill (yes, it is a skill) can improve your communication (with clients, and even with your spouse!); and the last is a look at what it takes to gain more confidence as a financial advisor, recognizing that if you don't truly believe in what you do and that you can help your clients, that lack of confidence means your clients probably won't believe in your value, either, so building personal confidence is crucial for business success (whether that means finding support at home, joining a study group, gaining education or experience, or whatever else it takes!)!

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the latest of DoL fiduciary news, including the revelation that the Justice Department does not intend to defend the "class action lawsuit" provision of the fiduciary rule in the current Appeals lawsuit that fiduciary opponents have filed, a memo from LPL that indicates it expects the DoL fiduciary rule to stick and will be limiting the ability of its brokers (but not those on its RIA platform) to solicit 401(k) rollovers (suggesting that LPL may be pivoting its entire business to be more RIA-centric), and an announcement from Raymond James that it will be converting the payout grid for its independent channel to be entirely "product-neutral" with just a straight revenue-based payout (starting at 81% and rising as high as 90% for top producers).

From there, we have a few practice management articles this week, including a look at when to think about using debt proactively as a business management tool in advisory firms (especially since private equity investors often demand more in dividend payments than lenders demand in interest payments!), when you consider soliciting input from clients when making a potentially significant business decision, and how to create a "Client Retreat" event to deepen the relationship (and the breadth of solutions) for your clients.

We also feature several articles specifically focused on finding work-life balance, whether as an advisory firm owner or an advisor employee, including how to approach the work-life balance question as an employer (it's all about setting clear expectations of what it takes to succeed in the firm), how to change your situation if you're an employee unhappy with your balance (it's all about starting the conversation with your firm/supervisor about what you want to change, and discussing ways to make it work for both parties), and how financially successful "lifestyle practices" can actually be (the idea that a lifestyle practice with good work/life balance can't also be profitable is a myth... at least when done right!).

We wrap up with three interesting articles, all from people who have experienced early retirement or extended sabbaticals, talking about what they learned that surprised them about retirement (or a "faux retirement" sabbatical) in their first year. Key points included that more time at home makes it far easier to eat healthy and exercise more, but that the "best" days are still the ones where there's something to "do" when you wake up, that you may find even more opportunities coming to you once you're retired (which means you need to be careful to figure out what filters you will use to decide whether to say "yes" or "no" when they come along!), and that while you'll have more time to deepen spousal and other family relationships, don't underestimate how much you may miss the social environment and camaraderie of your "work family" as well!

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the news that, as predicted previously on this blog, the DoL fiduciary debate is open once again, as the Department of Labor has issued a new Request For Information (RFI) about potential modifications to the DoL fiduciary rule (including whether full applicability and enforcement should be delayed even further past January 1st of 2018, and whether a new streamlined exemption should be added for the use of clean shares). Also in the news this week were several notable industry studies, including one from PriceMetrix showing the rapid growth of fee-based accounts in brokerage firms (which in the near term are generating lower fees and less revenue as firms switch from upfront commissions to ongoing AUM fees), and a Fidelity white paper showing how tech-savvy "eAdvisors" continue to outpace all other advisors in everything from AUM to success getting HNW clients, and even take-home profits and job satisfaction!

From there, we have a few technical articles on retirement strategies, including Wade Pfau on what he calls the "Four Ls" of retirement planning goals (Longevity, Lifestyle, Legacy, and Liquidity), a look at how the HEART Act of 2008 allows widow(ers) of military servicemembers to roll over up to $500,000 of SGLI and related death benefits into a Roth IRA (but with a limited 1-year time window), and how managing retirement liquidations from a blend of traditional and Roth IRA accounts is superior to the "traditional" approach of simply liquidating all pre-tax retirement accounts first and the Roth accounts last.

We also feature several articles specifically on wirehouse trends this week, from a look at what wirehouse advisors should consider when thinking about whether to break away, the intense flurry of phone calls (150 client calls in 48 hours!) it takes to successfully break away, and how wirehouses are now reinvesting into new-advisor training programs as wirehouse-to-wirehouse recruiting continues to slow.

We wrap up with three interesting articles, all focused around personal productivity and business success: the first examines the concept of a "Mastermind Group", what it takes to form one, and best practices for running one; the second explores the research on what it takes to have moments of inspiration and creativity (either artistic, or for your business), and that the key is finding time to relax and step away; and the last looks at the growing base of personal productivity research finding that the best way to increase your results is to say "no" more often... recognizing that whenever you say "yes", you're just closer to running out of time and being forced to say "no" to something else later anyway, so you may as well be more proactive about saying "no" so that you still have the room to say "yes" to the right and best opportunities when they come along!

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the release of the CFP Board's newly proposed Code of Ethics and Standards of Conduct for CFP professionals, which would further expand their scope of fiduciary duty to virtually all forms of financial advice.

Also in the regulatory news this week was an interesting public comment letter from the CFA Institute about the SEC's potential consideration of fiduciary rulemaking, suggesting that the starting point would simply be to regain control of advisor titles and labels (and require anyone who even holds out as a financial advisor to be subject to the Investment Advisers Act of 1940). And in the meantime, the state of Nevada just passed a "surprise" piece of legislation that, in just over a week, will suddenly require all financial advisors in Nevada - including those at RIAs and broker-dealers - to be subject to a fiduciary duty when working with clients, regardless of whether it's a retirement account or not.

From there, we have a few practice management articles this week, including: how developing "Core Values" for your firm can help you figure out how to filter out who are the right clients, the right employees, and the right opportunities for the business to pursue; why it's so crucial to have a personal support network as a financial advisor that can keep you positive and motivated when the inevitable business challenges come; and why it's crucial for advisory firm owners and the entire leadership team to establish a clear and consistent vision for where the business is going (and then work to keep aligned on that vision).

We also cover a few articles about the intersection of financial planning and cash flow/spending behavior, from why it's important to not just analyze a client's household cash flow but examine the underlying financial habits they represent (e.g., how the client makes decisions about large purchases, and whether they save intermittently or automatically), to the reason why behavioral biases mean in practice consumers tend to fare better contributing to a Roth 401(k) than a traditional 401(k), and how the tendency for one member of a couple to be a "spender" can trigger marital strife (though notably, being married to a "tightwad" does not typically trigger marital conflict!).

We wrap up with three interesting articles, all focused around broader industry trends: the first looks at how the rise of no-load funds and increased transparency were associated with an explosion in the adoption of mutual funds (and ETFs), while the still-commission-based and still-transparent insurance industry has seen its sales drop by almost 50% in the past 30 years, and whether a new company called Assurance (which aims to be the Morningstar of life insurance policies) can help to change the trend; the second examines how, despite an incredible 8-year bull market, most of the financial services industry is not very exuberant, or is outright gloomy, which appears to be a result of the fact that almost all the gains of the bull market have gone to just Vanguard, while the rest of the asset management industry has failed to participate in the rally; and the last is an investigative report from Reuters, which finds that FINRA is struggling to rein in a subset of broker-dealers who continue to actively hire brokers with problematic disciplinary records, raising the question of whether FINRA is even capable of fully executing on its investor-protection mandate, and whether state securities regulators may try to expand their oversight of broker-dealers to fill the void.

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with several stories on the initial aftermath of the DoL fiduciary rule becoming applicable on June 9th, including the growing number of annuity agents who are opting in to using the Best Interests Contract Exemption (instead of PTE 84-24), state insurance regulators considering whether to change the annuity suitability rules to a more fiduciary-like standard, and a look at the latest Schwab Independent Advisor survey that finds as DoL fiduciary shifts more advisors towards the AUM model and increases competition, that more advisors are feeling compelled to offer more  services and spend more time with clients to justify their advisory fees (but without being able to charge more for the extra effort and offerings).

From there, we have a few technical articles this week, from Ed Slott discussing how HSAs can be used not just for ongoing health costs but as a supplemental tax-preferenced savings account for future retiree health care costs, the rise of 81-100 group trusts as a lower cost alternative for small business employer retirement plans (in a world where it's still difficult to offer a Multiple Employer Plan [MEP]), and a discussion of what Private Placement Life Insurance (PPLI) is and where it fits for certain ultra-high-net-worth clientele.

We also have several practice management articles, focusing on hiring and building our your advisory team, including: a roadmap on how to hire top talent (by first determining core values and core competencies, and using those to screen out candidates first); why it's better to look for "cultural add" than just "cultural fit" to improve diversity (and how hard that really is, given our tendencies to hire people like ourselves); and guidance from Julie Littlechild on how to establish a mentoring program to aid in the personal development of your team.

We wrap up with three interesting articles, all focused around homeownership, housing policy, and the country's growing challenges with affordable housing: the first looks at how the trend of Millennials to live in the urban core of cities (instead of the suburbs) is exacerbating the housing crisis, as there simply isn't as much room to build housing in already-densely-populated urban areas (and the high cost of land in urban centers tends to lead developers to build more expensive housing to generate a return on their own real estate investment, which just makes the problem worse); the second explores how the shift of the economy from manufacturing to knowledge workers is leading to a growing concentration of workers in urban areas (where "smart people" can meet and gather and form businesses together), which suggests the housing challenges created by urban concentration will just get worse (even as it provides an unexpected windfall for existing homeowners in major cities); and the last explores how the emerging affordable housing crisis is bringing newfound scrutiny on the popular mortgage interest deduction, which over the years has shifted to disproportionately become a tax subsidy for upper-income individuals (who can actually afford houses, and have mortgages that charge enough interest to exceed the standard deduction, and benefit the most from the deduction at their higher tax rates), and whether it's time to reform the program into at least an alternative 15% mortgage interest credit (which would reduce the benefit for upper-income individuals, and make it more accessible for lower-income individuals, even and including those who don't itemize their deductions at all).

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the implementation of the Department of Labor's fiduciary rule, with the previously-delayed Impartial Conduct Standards taking effect today, June 9th... even as the DoL begins the public comment process of modifying the rule, and Congress proposes further legislation to potentially kill it, suggesting that the fiduciary battle is far from over, especially given that full enforcement is still not scheduled to take effect until 2018 (allowing room for further debate and at least modifications to the rule and its requirements).

From there, we have several articles around marketing and business development, including some very practical ideas on how to improve your client onboarding process to improve trust (and generate referrals), marketing ideas on how financial advisors can build the business (hint: it's more about persistency of the marketing strategy than a super-creative idea to do something completely new!), and a look at the latest research on how we determine who to trust in the first place (in the context of both employees trusting company leadership, and prospective clients trusting a new advisor).

We also have a few technology-related articles this week, from suggestions on what financial advisor websites need to do to actually generate real prospects, to the new technology solutions coming forth (from financial planning software enhances to online risk tolerance assessment tools) to help aid in advisor digital marketing, a new kind of risk tolerance solution that uses facial recognition to detect when clients become financially stressed, a new digital 401(k) solution for financial advisors, and a look at the proliferating number of "client portals" that financial advisors can offer (none of which really do everything that a financial advisor actually needs!).

We wrap up with three interesting articles, all focused around crafting and improving the financial advisor value proposition: the first is a fascinating look at "The Elements Of Value" from a recent study published in the Harvard Business Review, finding that the key components of value break down into a series of 30 categories, organized around four categories of Functional, Emotional, Life-Changing, and Social Impact (where businesses don't need to offer all 30, but can excel but thinking about how to be especially good at 5-10 of them); the second looks at the way one financial advisor describes his value proposition to clients, emphasizing that while most people can do it themselves with available technology tools today, few have the time, knowledge, inclination, and behavioral focus to do it well (whereas the value of the financial advisor is knowing and ensuring that it will be done right!); and the last is a look at how the rise of a fiduciary duty, coupled with the rise of technology, is leading financial advisors around the world to struggle in articulating their value proposition going forward, and suggesting that ultimately the way forward will be a shift from helping clients with the "hows" (which they can just look up online), and instead work with them on their financial "whys" instead.

Enjoy the "light" reading!

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Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the big news that the SEC has issued a new request for public comment on standards of conduct for brokers and investment advisers, raising the question of whether the SEC will finally act on a fiduciary rule, just as the Department of Labor's version takes effect on June 9th... and whether a new SEC fiduciary standard would help level the playing field for investment advice, or risk just watering down the fiduciary standard instead.

From there, we have a series of articles looking in particular at the broker-dealer industry as the DoL fiduciary rule rollout looms in the coming week, from a discussion of UBS's new compensation changes for retirement accounts (eliminating commissions and production payments in lieu of a simpler asset-based compensation system), to a look at how Merrill Lynch's commission ban and step away from wirehouse recruiting makes it look as though the company might be pivoting itself to become a giant national RIA, how Morgan Stanley is developing new technology to make its fiduciary advisors more proactive with clients, an industry survey of broker-dealer presidents finding that concerns about adapting to the DoL fiduciary rule have become all-consuming for most (to the point that they may be neglecting key investments into advisor technology tools), a look at the ongoing plight of the small broker-dealer, and whether the ongoing diminishment of the broker-dealer community may lead to the diminishment of FINRA itself (unless, perhaps, the organization reinvents itself as the new overseer of a uniform fiduciary standard?).

We also have a few more technical articles, including strategies to (legally) delay or minimize the impact of RMDs, the benefits of using a trusteed IRA (as an alternative to the typical custodial IRA arrangement), and how tolerance-band rebalancing strategies can increase returns (by helping to leverage market momentum, though not necessarily as much as just engaging in an actual momentum strategy!).

We wrap up with three interesting articles, all focused around the brain and how we think and learn: the first looks at how our brains actually take in and interpret information, driven primarily by a small section of the brain's left hemisphere whose job is to interpret what is happening around us (but given its limited information, the interpretation isn't always accurate or correct in its assessments!); the second explores the difference between "long-term" and "expiring" knowledge, recognizing that most people spend their time consuming the latter (e.g., news headlines and cable TV), and not enough on the former (obtained through reading books, and perhaps the occasional long-form blog post!); and the last looks at how, if you really want to make progress, the key is not just to set goals for yourself, but to establish systems that you can execute to get there... recognizing that if you're really good at creating effective systems for yourself, you may not even need to set goals in the first place!

Enjoy the "light" reading!

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