Summer Reading List of “Best Books” For Financial Planners – 2014 Edition

Author: Michael Kitces

Team Kitces

Michael Kitces is Head of Planning Strategy at Buckingham Strategic Wealth, which provides an evidence-based approach to private wealth management for near- and current retirees, and Buckingham Strategic Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors through the scaling phase of growth.

In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Read all of Michael’s articles here.

(Michael's Note: Be certain to also check out our latest 2015 Summer Reading List for Financial Advisors!)

Start With Why - This book by Simon Sinek was by far the most inspirational business book I read over the past year. The basic premise of the book is that in business, most of us focus far too much on what we do and how we do it, and don't spend nearly enough time sharing why we do what we do, despite the fact that in the end, especially in a people-relationship business like financial planning, people don't buy what you do, they buy why you do it (or as the old saying goes, people do business with people they know, like, and trust... and the "why" is foundation for know/like/trust). Though the phenomenon isn't limited to relationship businesses; in fact, Sinek notes Apple as a good example of a company that effectively embodies its "why" to think differently, and over time has attracted many people who share their why and are passionate advocates for their brand (ever tried to argue with an Apple fan about Apple products!?)! Conversely, the railroad companies of the late 1900s are a good example of an industry that failed because it didn't understand its why; they thought they were in the railroad business, when in fact they were in the long-distance mass transportation business, and consequently they were blind-sided by the next long-distance mass transportation innovation (the airline). As you read through the book, the stories are inspiring and will likely stimulate you to think about your own why, the purpose of your business and your own reason for being. For those who want the 'shorter' version, check out Sinek's TED video on his Start With Why concept (which now has a whopping 17 million views!). But it's really worth reading the book all the way through.

Unmarketing - The concept of this book is that "marketing" isn't really about marketing; it's about connecting with and engaging people, forming a connection to them that makes them want to do business with you. This "stop marketing and start engaging" approach is what the author Scott Stratten has done to build his own business, and the book mixes together short real world stories that illustrates the points and concepts, and some of Stratten's own personal and business experiences along the way. Stratten's engagement-marketing approach is built heavily around social media, and as a result most of the concepts of the book will resonate most with those who are active with social media or looking to build there. However, the concepts have equal relevance for virtually any advisory firm looking to grow - especially given recent research suggesting that client engagement is the best way to drive referrals as well - though advisors not active with social media may have to stretch a bit further to apply some of the book's concepts.

Gen-Savvy Financial Advisor - This book by Cam Marston (a speaker and researcher on generational trends with a focus in financial services) examines how to apply some of the research on the three biggest generations (Baby Boomers, Gen X, and Gen Y) in the context of financial advisory firms. While many books on generations and demographics just talk about broad differences across the generations, Marston's book focuses in much greater detail on how the concepts can be applied; for instance, Boomers prefer that you tell the story of where you and your firm came from, and prefer tried-and-true well-established businesses and brands, while X'ers are much less patient with background stories and want you to get to the point and be transparent, and Millenials demand instant communication and the latest technology but often prefer to work in groups (and it may be easier to meet with them if you invite them as a group!). This book is a relatively short read (less than 100 pages), and will probably be most relevant to firms that are trying to target clientele outside of their 'traditional' demographic of their existing clients (and/or of a different generation than the primary firm owner) who are looking for perspective on how to better communicate with and connect with a generation different than their own or what they're currently used to.

Decisive: How To Make Better Choices In Life And Work - This book by the Heath brothers takes a deep dive into how our brains make decisions, the ways we make mistakes in our decisions, and how to fix these issues. While to some extent you might frame this as a "behavioral finance" book, the reality is that "Decisive" is not just a bunch of theory and research about the dumb mistakes we make because of how our brains are wired, but a remarkably practical look at how we might actually do things differently to combat these challenges. As a result, the book has relevance for everything from how we implement investment decisions (as I've written in the past), to understanding the value a financial planner brings to the table for clients (an outside perspective helps to put distance between our decisions and our emotions), to just making better decisions on practical day-to-day challenges. For instance, the authors note that choosing between two alternatives is far better than just a 'take-it-or-leave-it' decision, so consider "multi-tracking" decisions and creating an opportunity for better side-by-side comparisons (e.g., if you're hiring someone, always have at least two candidates to compare, don't just make a yes-or-no decision on a single candidate). The bottom line: whether you want help making better decisions, or some ideas about how to help clients do so, this book is worth reading.

The Power Of Habit - This is a book I'll confess I haven't read yet myself; but after reading several other behavioral-finance-related books, including "Thinking, Fast & Slow" (from last year's Summer Reading list), the aforementioned "Decisive", and Prochaska's "Changing For Good", this book has come highly recommended to me and is already downloaded onto my Kindle as my next read! The core concept is that our habits are a loop that consists of three parts: a cue that prompts us, a routine that we engage in, and a reward at the end. Yet sometimes, habits can have unintended consequences, such as the 'afternoon cookie' routine that turned out to be more about taking a break from work and socializing with peers in the cafeteria than actually doing the eating - which means a solution that captures the reward (a break and some socializing) without the routine (buying a cookie) can change the habit (no more afternoon cookies, and perhaps now a little weight loss!). Accordingly, the focus of this book is on not only what habits are, but how to try to understand them, change them (if necessary or desirable), and how these concepts play out in various contexts from our individual lives to companies to social movements.

Signal and the Noise - From statistics wunderkind Nate Silver, now famous for his 538 blog that used statistics to successfully predict the Presidential outcomes of 50 out of 50 states in the last election (and embarrassing the predictions of many pundits along the way), this book is Silver's discussion of the world of statistics and how statistical techniques can be applied to a wide range of real world problems (with a particular focus on Bayesian techniques). Accordingly, the book looks at how statistics has been applied to everything from weather (where we're actually getting a lot more accurate as statistical techniques improve) to predicting earthquakes (where we've basically made no progress in decades), to sports and Poker and even how statistical techniques apply to concepts like whether markets are efficient. Ultimately, the underlying principle to all of these issues - and statistical analysis itself - is trying to separate out the real signals from the underlying noise (thus the name of the book). For those who want some perspective on what we do and don't know about statistics as it's applied to real-world problems, this book is an interesting read, though I'll grant that it really provides much information of direct relevance to advisors (though some of the points Silver makes about the efficiency of markets or lack thereof are notable).

Keynes's Way To Wealth - Another recent addition to my own still-to-read-this-summer list (after recently covering a review of the book in Weekend Reading), this book provides an interesting look at the investment experiences of the famous economist John Maynard Keynes. While Keynes ultimately died a rather wealthy man (a net worth of approximately $22 million in today's dollars) as a result of his investment success, his path was not without challenges. His first investment syndicate speculated in currencies, in an attempt to leverage his expertise in international finance, but ultimately went bust after an unexpected surge against his short currency positions. His second attempt in the 1920s focusing on commodity speculation based on predictions of supply and demand, yet after a few years of success Keynes was nearly wiped out again when the Great Depression struck. Ultimately, Keynes further adapted his investment approach to focus on long-term deep-value stock picking, which fared far better than his currency and commodities speculation, though I suspect the path of how the greater economic thinker's own investment philosophy developed and evolved may be the most fascinating of all.

Capital In The Twenty-First Century - The hot book in economic circles right now, French economist Thomas Piketty's "Capital in the Twenty-First Century" is a deep dive analysis into the history of income inequality, and comes to the somewhat troubling conclusion that significant income inequality may be an inevitable conclusion in a capitalist economy without government interventions to prevent it. The fundamental problem is that over time, the return on capital (r) tends to be greater than a country's rate of economic growth (g), and as long as r > g the wealth of the wealthy will inevitably compound upwards towards an ever-rising income inequality gap. Piketty suggests that the problem was already underway in the 19th century, but that two World Wars and the Great Depression in the early 20th century (along with extremely high levels of taxation and/or inflation in many countries) broke the trend for a period of time, but it is now underway again. Ultimately, Piketty suggests that the best solution is a concerted globally-coordinated effort to tax (extreme) wealth, and that ignoring the problem will just lead to ever greater compounding of inequality (as long as the r > g dynamic holds). This book is not a light read - weighing in at a whopping 696 pages - but if you want to be up to speed on the latest thinking about income inequality and the potential solutions that may be proposed in the future (as Piketty has been on a "rock star" world tour with world leaders and policy influencers), you can't do better than go right to the source.

E-Myth Revisited - This book is actually not new (it's a 2009 update of the original 1986 "E-Myth"), but was by far one of the most impactful books on my thinking as a business owner, and is one of the books I recommend highly to any and every financial advisor who's starting/building a practice. The premise of the book is that most businesses are not actually started by entrepreneurs who set out to build a business; instead, businesses are started by technicians who enjoy doing the work of the business, and decided to create a business around what they do. Yet as a result, most small businesses fail, because the technicians have skills at working in the business but no skillset to work on the business. Gerber illustrates this concept with a piemaker who's great at making pies but doesn't really have any ability to run or manage a piemaking business, though the analogy is arguably quite apt to most financial advisory firms as well, which are often run by technicians who may be great financial planners but spend most/all of their time working in their businesses and not working on the business itself. The book then proceeds to provide a wealth of ideas and concepts for how technicians can try to work around these challenges and change their thinking to really figure out how to grow and build their business. If you're trying to build your own advisory practice and you've never read this book, do yourself a favor this summer and read it!

Succession Planning for Financial Advisors: Building an Enduring Business - This book was just released two weeks ago, and as a result I've only just been able to start reading it. Written by David Grau, founder of FP Transitions (which has facilitated more than 5,000 valuations of advisory firms and over 1,200 transactions), this book details Grau's accumulated views, wisdom, and experience about how best to execute a succession plan in an advisory firm - a notable topic given the demographics of today's financial advisors, especially there is still a remarkable dearth of books and content on best practices in succession planning. In the book, Grau digs into everything from when a formal succession plan should begin, how to structure it to incentivize the next generation and provide a comfortable financial transition for the founder, and how to restructure key aspects of a practice to make it more transition-able in the first place. Notably, though, the book is not "just" for advisory firm owners, but may also have relevance for 'junior' advisors who want to start the ownership and succession planning discussion with the principal(s) of their firm.

So what do you think? Will you be reading any of these books over the summer? Do you have any suggestions of your own that you're willing to share? Please speak up in the comments below!