Executive Summary
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include a number of practice management articles, some interesting investment discussions from PIMCO, and the latest Michael Lewis piece from Vanity Fair about the state of municipal finance. Happy reading!
Weekend reading for October 8th/9th:
Wishy-Washy Won't Work - This article by financial planner and practice management consultant Kristin Harad in the FPA's Practice Management Center blog discusses how to better position yourself with the media to get better marketing exposure. The article emphasizes that financial planners tend to try too hard to single-handedly convey all sides of a story, resulting in a wishy-washy equivocating mess that leaves the reporter with little to go on. Instead, Harad recommends that you take a clear stand; let the reporter balance out your view with an opposing opinion if desirable. Be comfortable in your views and make declarative statements that makes it clear what you believe.
Unchecked Growth - This article by Joni Youngwirth, managing principal of practice management at Commonwealth, in the September issue of Investment Advisor magazine (and on the AdvisorOne.com platform) highlights the value of using checklists as a practice management efficiency tool. Yes, yes, I know most advisors have long since heard that they're supposed to document everything that is done in their practice (but who's got the time!?), but the article makes a compelling point that checklists are the answer, in part because they're a lot faster and easier to create than a long, comprehensive, drawn-out written procedures manual your practice ("who needs lengthy paragraphs in complete sentences when a checklist... can convey the necessary information in a matter of seconds?"). And as a tool to ensure quality of care, they're being adopted by professions from pilots to doctors; is it time to add financial planners to that list? If you're really interested, you can also take the next step and buy The Checklist Manifesto: How to Get Things Right by Atul Gawande.
Winning Over Gen Y - This article from Financial Planning magazine explores how a number of financial planners are serving Generation Y (at least the older ones in their 20s and early 30s). The article serves as a good highlight to how the next generation of planners may serve their peers with new business models (not just hourly, but credit-card-monthly-billed retainers) and new marketing (blogs and social media). It's about making less money per client than traditional models, and making it up on volume; as a by-product, the profession reaches a dramatically underserved demographic, too.
Fiduciary Matters - This article by senior editor Kenneth Silber came out earlier in the year in Research magazine and the AdvisorOne.com platform, discussing the ongoing regulatory debate about fiduciary. Not only does the article cover the issues of the current debate (at least as of July when it was published), but more interestingly it delves into the history of fiduciary over the millenia, and gives some good insights about key turning points over the centuries. A nice read to keep some perspective on how old the fiduciary debate really is.
Why Good Companies May Get Even Cheaper For Awhile - This article by Mohamed El-Erian of PIMCO fame - reproduced on Advisor Perspectives - is a brief piece that raises some compelling questions about investing in today's markets. "...Before acting on conventional wisdom, investors should ask themselves why so many unthinkables have turned into reality over the last few months..." and "...in such a world, markets are driven by top-down economic and policy factors ('macro') rather than company earnings and balance sheets." The bottom line from the article "This is not a call on companies. It is about policymaking in Athens, Berlin, Frankfurt, Rome, and Washington DC."
The Fed's 'Twist' Turns Into A Problem For Pension, Insurers, and Households - This article by James Moore, also of PIMCO and also reproduced on Advisor Perspectives, highlights the secondary effects of the Fed's Operation Twist as it filters through the economic system. Highlights include lower interest rate assumptions in pension plans, which increases the present value of their funding commitments and forces them to direct even more badly-needed cash flow into retirement plans instead of hiring and growth, and insurance companies that have to raise prices on various forms of coverage and guarantees to make up for how little they are making on the assets they hold. And of course, there's the impact to households and savers, but that part probably isn't news to us as financial planners.
The Creative Brain on Exercise - This article by author Jonathan Fields (Uncertainty: Turning Fear and Doubt into Fuel for Brilliance) from the Fast Company magazine blog explores how exercise has a material impact on creativity, inspiration, as well as reducing anxiety and stress. Although the article is written in the context of artistic creativity, it applies equally well to the creativity professionals rely upon in their practice and entrepreneurs rely upon in their businesses. Just in case you needed another nudge about why it's so important to get regular exercise!
California and Bust - This somewhat-long-but-worth-it article in Vanity Fair by famed writer Michael Lewis discusses a fascinating new perspective on the economic outlook for the U.S. - that the country may fracture into regions of lesser and greater financial strength, with the winning states attracting businesses (and even population), and the losers being left with only those who can't afford to leave. The case in point example of a disaster: California, with a focus on cities like San Jose and Vallejo, whose commitments to public workers are arguably beyond repair. But the story is not just about the state of state finances, but even bigger questions that may reshape our world in the future, such as "...What is a city? Why do we bother to live together?... [what happens when a] city is nothing more than a vehicle to pay the retirement costs of its former workers?" A good question, indeed.
I hope you enjoy the reading! Let me know what you think, and if there are any articles you think I should highlight in a future column!
Thanks for sharing some great reads with us this weekend and congrats on your first born. The article from Pimco by James Moore particualrly resonated with me, and this will be a topic to explore in more depth as we take a wait and see approach on how our government responds to the developed world’s labor crisis, banking crisis and unstable financial markets. Bill Gross’comemntary “Six Pac(k)in” from last week is a good compliment to the one your shared here. The dismal economic situation in the developed world and the even more dismal returns that we can expect to see on investments over the next 10 years could be a strong catalyst for new business models to emerge in our indsutry.
A perfect illustration of this change that is already starting to take place is found in the article you shared “Winning Over Gen Y”. Gen Y is producing a new type of financial planning client with different expectations about employment, the workforce, and their overall quality of life in terms of work-life balance. The next 10 years are going to shape these expectation even further, and our industry will have to adapt. Service offerings will be weighted more heaviliy towards assisting families and young professionals with budgeting, lowering insurance premiums, business coaching and proper tax planning. The added value will come from saving clients more money in the long run and, like you tweeted earlier today, providing clients with an enjoyable experience that helps motivate them to change negative financial behavior. Advisors like me who are going after this middle market will benefit from adapting their fees and increasing their volume goals.
Thanks for the eclectic list, Michael. I look forward to your sifting-through of the innumerable publications every week.