Archives Of Weekend Reading For Financial Planners

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the recent "Fiduciary Leadership Summit" in Washington DC, hosted by TD Ameritrade and the Institute for the Fiduciary Standard, highlighting "war stories" of consumers injured by gaps in the fiduciary duty for brokers and an interesting response by former regulator Robert Plaze that perhaps the best outcome is not a uniform fiduciary standard for all but simply that the brokerage industry needs its own standalone regulatory reforms. Also in the news this week is a new NASAA working group that will look at revising broker-dealer fee disclosures for consumers after acknowledging that today's fee disclosure documents are too long and confusing, and a recent survey by Gallup that finds "creating a financial plan" is one of the few financial issues that consumers consistently do rely on professional advice more than friends and family.

From there, we have several practice management articles this week, including one from United Capital CEO Joe Duran that the golden age for (small independent) RIAs may soon be ending with rising competitive forces putting the big squeeze on profits and margins, a response to Duran's bleak outlook from RIABiz's Brooke Southall who suggests that many of these competitors (from robo-advisors to Vanguard's Personal Advisor Services) are still ultimately just a drop in the bucket compared to the sheer size of the consumer investor marketplace, and a discussion from Mark Tibergien about whether some advisors actually need to get better at having the conversation with clients about raising fees instead.

We also have several more technical articles this week, including: a discussion of what the "true diversifiers" in a portfolio really are, and whether they're even necessary if there's a risk-managed approach to the equities themselves; a review of a recent T. Rowe Price survey suggesting that retirees may actually be more flexible and adaptable in their retirement spending than is commonly believed; and the last looking at the current use of Monte Carlo analysis, suggesting that perhaps one of our greatest problems is not the limitations of the tool itself but that many of today's Monte Carlo software tools do not provide a sufficient range of reporting on the outcomes beyond just the (insufficient) probability of success/failure alone.

We wrap up with three interesting articles: the first looks at how much of the disagreement amongst even the true finance experts may stem from the fact that our experience with investing and the markets can be dramatically impacted by the year in which we happen to be born (and therefore the investment returns and volatility we witness during our early formative years), and that many finance disputes may simply be a representation of two experts whose views are heavily biased and colored by their own (birth-year-sensitive) personal history and experience; the second looks at how the real significance of the robo-advisor trend may not be their actual competitive threat, but simply that they highlight what quality technology and a great client user experience looks like, and how lacking today's tools for advisors really are; and the last is an analysis from Wealthfront about the behavior of investors in active mutual funds versus index funds during market volatility, finding that passive investors are less prone to portfolio turnover during market volatility and suggesting that despite their lack of human advisors to hand-hold clients, many of today's (passively-based) robo-advisors may experience witness less client churn during the next bear market, not more.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including a summary of the first (Orion-Advisor-Services-sponsored) "hackathon" which brought together programmers from numerous advisor tech companies to try and build the best new useful relevant technology tools and integrations for advisors in just 48 hours! Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with a call for better regulation of financial planning as a distinct calling unto itself, recognizing that in Massachusetts it's harder to get a license to be a cosmetologist than it is to become a financial planner! There's also an article discussing the recent rumored-to-be-on-a-fast-track NASAA regulatory proposal (now in comment period) that may require state-registered RIAs to adopt more substantive business continuity and succession plans for the protection of their clients.

From there, we have a few interesting new studies and articles on the so-called "robo-advisor" trend, including a Gallup poll that finds investors still prefer dedicated human advisors to financial website solutions by a 2:1 margin (and more affluent individuals favor the human solutions even more), a Spectrem Group study that finds for consumers who do plan to work in an online environment that the robo-advisors may actually be slightly preferable to human advisors engaged virtually (though there may be enough interest for both to succeed), and an interesting discussion from Mark Hurley about how ultimately the technology-will-replace-advisors threat isn't really any more dangerous today than it was in 1999 (when similar comments were made) and that ultimately much of the technology that backs today's robo-advisors will likely end out being used by the rest of the financial services industry (rather than continue to compete with it).

We also have several investment articles this week, including: a look at how some advisors are starting to adopt small allocations of Bitcoin into client portfolios; how Bitcoin does not really function (yet?) as a true currency but as a non-liquid investment asset may still improve risk-adjusted returns for portfolios (at least based on the historical track record for the virtual currency, which may or may not persist in the future); a fascinating look from Howard Marks of Oaktree at how true risk is more about the possibility of permanent loss of capital than about volatility, but that the truer measure of risk is also surprisingly difficult to quantify and apply effectively; and a discussion from Jason Zweig of the Wall Street Journal at the behavioral finance phenomenon of "shared attention" and the fact that who you choose to listen to and follow and get your information from can have a surprisingly powerful effect (good or bad) on your (investment) results.

We wrap up with three interesting articles: the first looks at how the only real way to stay competitive in today's environment is to be a continual learner, or else face stagnation and boredom that can undermine yourself and your company; the second discusses the five essential skills that planners must learn (as distinguished from the technical knowledge we must have to be competent) if we truly want clients to implement our financial advice (hint: it's all about the key skills that create true rapport and trust); and the last is a piece by industry commentator Bob Veres that takes an interesting look at the current regulatory environment and suggests that the real problem is not that we need to apply a new fiduciary standard to brokers but simply that the SEC has allowed the brokerage industry to drift too far from where it once was and should just do a better job enforcing the rules that were originally written which require a clear(er) separation of brokerage firms and investment/financial advice in the first place. Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the announcement of a series of events by the Institute for the Fiduciary Standard and TD Ameritrade to celebrate (and build awareness for) "Fiduciary September" this month, along with news of the latest in the Camarda vs CFP Board case (including a much-discussed request by the CFP Board for the Camardas' entire client list even though they have not been accused of client mistreatment), and a study from Pershing suggesting that the "fee only" label may not have as much cache as believed and for consumers is analogous to just saying "no commission" instead.

From there, we have a few retirement-related articles this week, including the latest from Wade Pfau and David Blanchett about the use of Monte Carlo analysis and the relevance (or not) of the 4% rule in today's environment, a review of some of the proposals to "fix" Social Security and how it might change in the next 20 years (when the trust fund is scheduled to run out and force at least some change), and a look at how researchers are suggesting that the ideal retirement vehicle of the future really might be a variable annuity (albeit not quite the types available in the marketplace today).

We also have a few practice management and marketing articles, from a look at how the evolution of Google's search algorithms are favoring specialists over generalists in search results, to ways you can actually try to become a "thought leader" (and not just abuse the increasingly overused term) to enhance your firm's appeal to prospective clients and potential referrers, and some marketing tips for those who are specifically trying to reach a younger Gen Y clientele (for whom many "traditional" marketing methods don't necessarily work).

We wrap up with three interesting articles: the first takes a harsh look at what it really means to be client-centric, suggesting that most advisory firms can't possibly be truly client-centric because they're trying too hard to be everything to everyone (which means they can't really center their focus on any particular type of client); the second suggests that financial services firms and software vendors need to stop focusing on individual client products/accounts and come up with a "household" identifier to make it easier to understand and group a client household's entire balance sheet and cash flow activity; and the last is a look from Bob Veres at the ways that advisors are trying to differentiate themselves in an environment where it seems increasingly difficult for many to do so.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including a look at the changing landscape of technology from the major RIA custodians and tips to stay safe online after this week's "Celebgate" hack of private photos! Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with an interesting lawsuit that has been filed by "whistleblower" David Danon against Vanguard, suggesting that it is abusing its unique corporate structure to avoid any Federal and state income taxes that should be paid (to the tune of $1B of foregone Federal taxes in the past decade), in addition to implicitly giving it an unfair competitive advantage as a result.

From there, we have a few investment-related articles this week, including a discussion of whether the era of the stockpicker may be definitively coming to an end as Vanguard approaches $3 trillion of AUM and the expansive march of investment tools and technology makes "everyone" such a capable investor that there's not enough alpha left to go around, the emerging price war between established financial services companies (and financial advisors) and technology companies (e.g., robo-advisors) who are driving down the cost of a pure passive strategic portfolio that is regularly rebalanced, and a fascinating article finding that low-cost active managers really may be providing value (including Vanguard's own active funds) and that the real issue is not about active vs passive but simply high-cost versus low-cost.

We also have several technical financial planning pieces, from a great discussion by David Blanchett and Wade Pfau about how most of the criticisms of Monte Carlo are not actually faults of Monte Carlo but simply flaws in how our typical Monte Carlo tools are designed and used (and could be solved with better software tools and assumptions), to a look at the re-emergence of "jumbo" reverse mortgage loans after "smaller" HECM reverse mortgages have dominated the landscape for 5 years (though the new loans may still be too expensive to be competitive). There's also a good summary of the recent Social Security Trustees' Report, highlighting that Social Security is not as bad off as most suggest!

There are a couple of practice management articles as well, including how advisors can take advantage of the "small data" opportunities in their practices along with the "big data" solutions that are being built for them, some tips about processes/procedures to implement to avoid HR headaches as an advisory firm owner, and a nice guide on how to onboard a new employee in an advisory board.

We wrap up with three interesting articles: the first looks at whether the financial services industry needs to get better about communicating more visually and putting some "glamour" into solutions (without being abusive); the second is written by a so-called "0.01%er" about the problems with income inequality and making an interesting case for why a significant increase in the minimum wage could be good for both the middle class and capitalism; and the last paints a sad but disturbingly accurate picture of just how "strange" the financial services industry really is, in a country where doctors must attend medical school and lawyers must pass the bar - and even becoming a taxi driver in London requires passing a test that can take years of practice - but in financial services, "managing money requires little more than a desire to manage money" (and a very rudimentary licensing test)!

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including big changes for online data storage for users of Dropbox and a look at whether the latest Google Apps are making Microsoft Office less necessary than ever! Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the interesting announcement that TD Ameritrade has launched a program that will refund advisory fees for clients in their Amerivest managed account if their portfolio is down for two consecutive quarters, following on a similar "accountability guarantee" program launched by Schwab late last year, and raising the question of whether such fee rebates may be an emerging trend and/or competitive threat against advisors or just a lightweight marketing promise that few clients will actually ever exercise.

From there, we have several practice management articles this week, including: tips and techniques for better growing referrals from Centers of Influence (hint: make it about just serving current clients better first, and referrals second); why the industry needs to back off its urgent pleas to advisors about succession planning and recognize that it's simply not what most want to do; a look at the consequences of "dithering" about engaging in continuity planning as an advisor; and a review of two new designation programs recently launched to help advisors bone up on their Social Security planning techniques.

We also have several investment articles, from a Rob Arnott discussion about what "smart beta" should mean (and how to better distinguish the legitimate smart beta strategies), to a discussion from Robert Shiller about the sustained elevation of cyclically-adjusted P/E ratios over the past 20 years and whether it's a permanent or temporary phenomenon, to the recent announcement that Vanguard is now closing in on a whopping $3 trillion of AUM (and its Total Stock Market Index recently become the world's largest mutual fund as well). There's also an article about how "expensive" it actually is to pay insurance premiums on a monthly or quarterly basis rather than annually, with markups equivalent to APRs in the (sometimes high) double digits!

We wrap up with three interesting articles: the first looks at how many financial planners fail to engage prospective clients by appealing too much to their rational side alone and not recognizing that many buying decisions - including the selection of a financial advisor - has a significant emotional component; the second explores how a simple "client service calendar" can become a tool to help communicate an advisor's ongoing value to current (and even prospective) clients; and the last provides a nice reminder about all the ways that financial planners can add "alpha" to a client's life beyond just adding to portfolio returns.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including the explosive growth of Laser App which now has 115,000 advisors using 32,000 "paperless" online forms! Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition starts out with some new research from the CFP Board about why it is that so many students who go through financial planning programs don't sit for the CFP exam... and find that the sheer cost of both the exam itself (at $595) and the typical exam review class along with it, may be a key impediment, especially given that so many young planners still have limited income and may be digging out from their student loans; students who ended out at firms that paid for the test on their behalf were significantly more likely to follow through on the exam and become CFP certificants.

From there, we have a few practice management articles this week, including: an overview of the latest results from the FA Insight practice management study showing that advisory firms are enjoying record productivity and profit margins but may be too complacent about future growth challenges; a good overview of the challenges to consider for advisors who are thinking about "breaking away" from a broker-dealer (considering everything from needing access to capital, to complying with the Broker Protocol); and a good overview about how to get started in building a social media following once you've set up your initial accounts.

We also have several investment research articles this week, from a look at the value of continuous tax loss harvesting (which may be far less valuable than commonly believed, over just executing loss harvesting transactions once a year when rebalancing), to a discussion from Vanguard about whether indexing is getting "too big", and a look from Morningstar's fund flows finding that actively managed funds are only seeing inflows in a few specialized areas (international funds, allocation and target-date funds, and alternatives) with 2/3rds of all net flows going to index funds.

There's a trio of retirement-related articles too, including the upcoming launch of a big Federal government program to encourage phased retirement (which could become a template for the private sector as well), some tips for advising clients on Medicare decisions, and a good discussion by retirement researcher Wade Pfau about the circumstances in which the "4% rule" may be too high, or too low.

We wrap up with three interesting articles: the first raises the question of what it means to fulfill an investment adviser's fiduciary duty when there is no human advisor relationship and the portfolio is implemented by a "robo-advisor"; the second looks at the various threats that have been a danger to advisors over the decades (including most recently, the robo-advisors) and concludes that the natural outcome of these threats is not the 'death' of advisors but their forced evolution to continue higher up the value chain; and the last is an in-depth article looking at the severe racial diversity problem in the world of financial planning, and some of the efforts that are slowly getting underway to try to tackle the issue.

Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the upcoming "Fiduciary September" events being facilitated by the Institute for the Fiduciary Standard, as both the SEC and the Department of Labor continue their fiduciary rulemaking considerations. Also this week was the CFP Board's Program Directors conference, which highlights the latest successes (registered programs are up 13% in the past 4 years, with bachelor's programs up 40%) and also the ongoing challenges (schools are still struggling with improving student enrollment, retention through the program, and follow-thru to taking the exam); the CFP Board is exploring new initiatives to try to support programs and shore up these shortfalls.

From there, we have a few retirement articles this week, including the latest research from Morningstar's David Blanchett on weighing immediate annuities against the new breed of longevity annuities, a discussion of an emerging trend for states to consider launching automatic-enrollment IRAs after Federal legislation continues to stall, and a deep look at the various enrollment periods that must be considered for clients who are either enrollment in Medicare now or plan to delay but want to enroll in the future without incurring a financial penalty.

We also have several practice management articles, from a look at a new bank that is lending to advisors to facilitate acquisitions and internal succession plans (to the tune of $100M in loans in just the past 18 months!), to some tips for associate advisors who feel like they've hit a wall and can't figure out how to advance themselves to a lead advisor position, to how our psychological tendency to want to reciprocate and repay debts can be used to grow a business. There's also an article on the crucial importance for advisors to have not just a succession plan for the long run, but a continuity plan in the short run, to avoid leaving clients in the lurch if there is an unexpected health event - told from the perspective of Dan Candura, a financial planner who recently found out at age 64 that he has inoperable prostate cancer and had no continuity plan in place.

We wrap up with three interesting articles: the first is a discussion from advisor tech guru Joel Bruckenstein about the challenges in the advisor tech industry that "keep him up at night", including complacent advisors underinvesting in technology and vendors that are still doing a poor job at integration amidst a lack of industry data standards; the second is a look from the Wall Street Journal at an increasing number of advisors who charge "termination fees", raising the question of whether such practices are appropriate, or even legal for fiduciary advisors that may be putting an undue burden on unhappy clients; and the last is from industry commentator Bob Veres, exploring how "unusual" advisory firms really are from most "normal" types of small businesses, and the unique challenges that advisors face in navigating and growing their businesses successfully.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including the latest offering from yet another robo-platform-for-human-advisors solution! Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition starts out with reports emerging that Scottrade Advisor Services appears to be strategically shifting away from its position as one of the more startup-friendly custodians, imposing a new asset minimum of $7M, or a potential $12,000 custodial fee for advisors who don't meet the minimum; dozens of advisors who don't meet the minimum are now shifting away to the leading startup-friendly alternatives, SSG and TradePMR instead. In a related story, the latest data on RIAs suggests that notwithstanding industry consolidation and the push towards larger advisory firms, there is still a lot of growth with new RIAs being formed every year (though a significant number of other firms appear to be closing their doors at the same time, leading to a smaller level of net growth in RIAs).

From there, we have several articles on practice management and advisor technology this week, including: how advisory firms need to shift away from revenue-sharing-based compensation to build enduring businesses; a look at some less expensive rebalancing software tools for advisors including RedBlack, Trade Warrior, and TRX; the re-emergence of consumer-targeted BloombergBlack as an advisor-targeted account aggregation and analysis/reporting platform called CircleBlack; and a look at the ongoing aggravation many advisors still face with account aggregation tools, and a new entrant (Quovo) that's attempting to solve the issues.

We also have a few more technical financial planning articles, from an analysis via Morningstar that finds tactically-based target-date funds are outperforming purely strategic TDFs, to a discussion of the various options for long-term care insurance (and alternatives to "traditional" coverage), and a look at how the line-of-credit borrowing limits are determined for clients who want to obtain a standby reverse mortgage to support their retirement income needs.

We wrap up with three interesting articles: the first gives a credit list of important lessons from the research in social psychology, some of which have significant implications for us as financial planners and how we build a business; the second is a fascinating look at how the pricing of your services dramatically impacts the long-term growth of the business, when you take into account the potential of reinvesting profits back into the business to get new clients in the future and how it compounds over time; and the last reports on a recent research study finding that financial knowledge/acumen is a poor predictor of making good financial decisions, and that the better predictor is whether the individual tends to focus more on the past, present, or future... and notably, the best results are not from those who focus on the future, but those who focus on the past!

Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition starts out with the news that another planner is threatening to sue the CFP Board over its compensation disclosure rules, after being told that the relationship between his "fee-only" advisory firm and commission-based family real estate firm meant that his advisory firm must describe itself as "commission and fee" instead. Also in the news this week was the latest study from the CFP Board that the public awareness campaign continues to have a material impact on consumer awareness of the CFP marks, and a decision from the SEC on new rules for money market funds that may introduce a floating-NAV to institutional funds and the potential for "gating" on redemptions and potential 2% exit fees on retail money market funds during times of financial distress.

From there, we have a few articles on technical planning issues this week, including a look at how sometimes Social Security beneficiaries should actually claim early to take advantage of dependents' benefits, an overview of the current landscape for annuities of all types (including which have been more popular lately, and which are declining), and some fresh analysis comparing systematic withdrawal strategies in retirement to partial annuitization approaches.

We also have several practice management articles, from a discussion of whether we need to start teaching personal finance in high schools not just for financial literacy but to encourage young people to aspire to become financial advisors when they go off to college, to a look at the recent failed effort by Savant Capital Management to launch an e-platform for their advisory firm and what they learned from the experience, to the highlights of the latest RIA industry study from Financial Advisor magazine.

We wrap up with three interesting articles: the first raises the interesting idea that perhaps we should focus less on "time management" and more on energy management like athletes, recognizing that one highly energized hour can be far more productive than several tired ones; the second article looks at some of the ongoing discussions about changing the accredited investor rules and the challenging reality that income- and wealth-based tests may simply not be the best measure of determining whether someone is "savvy" enough to select complex investments; and the last provides a valuable reminder that there are a lot of great questions we ask our clients about how they vision their retirement and their future that we might consider asking inwardly of ourselves sometime as well...

Enjoy the reading!

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Enjoy the current installment of "weekend reading for financial planners" - this week's edition starts out with the news that Republican Spencer Bachus has signed on as a co-sponsor to Democrat Maxine Waters' proposed legislation to establish SEC user fees that would help fund increased investor adviser oversight; while there still isn't likely to be anything passed into law in the immediate future, the announcement suggests that there may be some traction building for the user fee approach to close the examination gap as the SEC remains underfunded. Also in the news this week was an announcement that the SEC is considering whether to update the definitions for Accredited Investors (which still haven't been updated, or even adjusted for inflation, in more than 30 years since they were first established in 1982!), and a new round of fighting between the American College and the CFP Board as the American College announced updates to its ChFC curriculum to 'compete' with the CFP certification and the CFP Board responded by noting that the ChFC still doesn't require a comprehensive exam (amongst other differences).

From there, we have a firm retirement planning articles this week, including some recent research suggesting how a focus on combining partial annuitization with portfolios may be a better way to frame annuities than the typical all-or-none discussion, a look at how cash balance plans are exploding forth in popularity and are already approach $1 trillion in retirement assets (compared to about $4 trillion in 401(k) plans), and a powerful discussion of how retirement is a joy for many but also a time where the depression and suicide rate for men doubles and advisors may be one of the few in a position to intervene and encourage a client to get help.

We also have several practice management articles this week, including a look at the FA Insight "People and Pay" study that finds team-based firms are growing more rapidly than firms that run in silos, a discussion from Angie Herbers about how the real challenge for existing advisory firms to grow is not about "making rain" and generating new prospects but about improving the closing ratios the prospective clients firms are already getting via referrals, and the last reporting on a recent industry survey that finds - despite all the discussion of the coming wave of retiring advisors - that there are still twice as many buyers as sellers in the next 1-5 years, suggesting that it's actually still very much a seller's market for the few firm owners that are willing to sell at all.

We wrap up with three interesting articles: the first looks at the challenges of businesses that have "co-founders" who struggle to keep their business and personal interests aligned as the business grows (while written in the context of co-founded startup tech firms, the challenge seems equally relevant for advisory firm partnerships as well!); the second examines some of the latest research on motivation, which finds that not only is internal motivation better than "external" factors like incentivizing with money and fame, but that offering too much in external incentives can actually damage the outcomes of otherwise-internally-motivated people (so think through your compensation structures carefully!); and the last is a discussion of the so-called "End of History Illusion" and recent research that finds we're actually terrible at predicting our personality, values, and preferences more than a decade into the future... which raises interesting questions about how to effectively save for retirement in the long run when you really may not have any idea what you'll want to do in retirement until you're almost there!

Enjoy the reading!

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