Nerd's Eye View blog

Does Making A Planning Firm Saleable Reduce The Desire To Actually Sell It?

January 23, 2012 03:11 pm 12 Comments CATEGORY: Practice Management

Over the past decade, an increasing number of financial planner baby boomers have reached the point that they would like to retire out of their practices; as a result, the 2000s saw a dramatic increase in the focus on succession planning, including how to prepare a financial planning firm for sale and steps to make the business more saleable and valuable.

Yet the reality is that once a financial planning firm is saleable and able to function effectively without the daily involvement of the founding principal, it's simply an investment holding like any other one; except it has an incredible cash dividend yield on top of significant appreciation potential.

Consequently, as the process of transitioning firms to saleability continues, a new challenge is beginning to emerge: planners who are successful in making their planning firm saleable and valuable are suddenly finding that once that point is reached, they no longer necessarily want to sell (all of) their business after all, which would force them to reinvest the proceeds into lower-return investments that could diminish their own retirement!

Weekend Reading for Financial Planners (Jan 21-22)

January 20, 2012 08:39 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights a number of recent studies on trends in the financial services industry, including the tendency of investment advisors to claim they're financial planners without really having the expertise or providing the comprehensive planning services, to the rapidly growing market share of RIAs (and the shrinking share of wirehouses). We also look at an article about the dramatic shift underway towards tactical asset allocation, some new research about how to adapt safe withdrawal rates to more customized investment and time horizon assumptions, and two investment pieces about the economic outlook in Europe and here in the US for 2012. At the end is a good reminder that the specific choice of words we speak in meetings can really matter to clients, and a profile of Texas Tech University as a leader in providing financial planning education... even though many firms still seem more interested in hiring based on "Who You Know" than "What You Know" these days. Enjoy the reading!

How Soon Will States Close Their Estate Tax Loopholes?

January 19, 2012 02:32 pm 1 Comment CATEGORY: Estate Planning

The implementation of the Economic Growth and Tax Relief Reconciliation Act of 2001, which both increased the Federal estate tax exemption and more importantly eliminated the state estate tax credit, started the process of "decoupling" between the Federal estate tax and various states. As the years moved forward, many states retained a $1 million estate tax exemption amount, decoupling their exemption from the Federal amount that has ultimately risen to its current $5 million level. However, the reality is that a second decoupling just occurred in 2011 - the decoupling of state estate tax exemptions from the Federal gift tax exemption. As a result, a new state estate tax planning "loophole" has opened up, creating a planning opportunity for many clients... but only until the states close the loophole.Read More...

Your Clients Don’t Care THAT you do Financial Planning; It’s About WHY You Do It

January 19, 2012 02:48 am 2 Comments CATEGORY: Client Trust & Communication

In the early years of my career, I genuinely hated the concept of marketing. I had learned about the powers of persuasion in school. I was taught during an internship that the success rate of closing a client was x times greater if you can stir up emotions like fear and uncertainty. I understood the role of marketing in the world of widget makers as a way to introduce their commodity to the market, but struggled to reconcile the use of these forces when dealing with individuals and families, many of which have little to no education around money and investing.

In recent years, however, I have made a few discoveries that have completely reshaped my viewpoint on marketing. And while I may still not have all of this figured out, it has become painfully clear to me over the last several years that marketing our services and our value is something we, as a profession, are absolutely horrible at doing.

Why I Still Ask Firms About Their AUM

January 17, 2012 01:05 am 11 Comments CATEGORY: Practice Management

In recent years, as more and more planners have shifted their businesses to an AUM model, it has become increasingly popular for the media, when quoting planners, to note the firm's AUM. In response, a backlash has also begun to emerge, as many planners justly point out that the magnitude of the firm's AUM does not necessarily correlate with the quality of the firm's financial planning advice or how "good" the planner really is, and consequently suggest that the media stop quoting AUM statistics in articles. Yet while I agree with the criticism - AUM is not likely a very effective measure of how good a planner's advice might be - I still think it's highly relevant. Not because I'm trying to understand the quality of the planner's financial advice, but because it provides immediate insight into the nature of their financial planning practice and the relevance of the challenges the planner may face.Read More...

Weekend Reading for Financial Planners (Jan 14-15)

January 13, 2012 09:54 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights a recent development on the regulatory front regarding the SEC's implementation of a fiduciary standard for brokers, and some sharp criticism of FINRA and whether it should even exist from the Journal of Financial Planning. We also look at a few technology pieces, on the rise of Salesforce for CRM, and the emerging use of online scheduling programs to set up client meetings. There's also a great piece from the Journal of Financial Planning on the next generation of Modern Portfolio Theory and portfolio design, and two good investment pieces by John and John (Hussman and Mauldin). We wrap up with an interesting article from Advisor Perspectives on how much of the financial press is misinterpreting and misapplying the Reinhart and Rogoff research about the implications of high debt-to-GDP levels. Enjoy the reading!

Adjusting Portfolios Based On Valuation – Are We Expecting Too Much?

January 12, 2012 04:00 pm 15 Comments CATEGORY: Investments

As the popularity of tactical asset allocation and using market valuation to inform investment decisions rises, so too do the criticisms to such methodologies. In the long run, this is part of a healthy dialogue that shapes the ongoing evolution of how we invest. But much of the recent criticism to being tactical in particular seems to suggest that if we can't get the timing exactly right, or calculate a valuation that works precisely to predict returns in all environments, that it should be rejected. In reality, though, even just participating in a few booms, or avoiding a handle of extreme busts, can still create significant long-term benefits for achieving client goals. Which raises the question - if we're really focused on the long term for clients, are we expecting too much from market valuation in the short term?Read More...

Financial Planning Leaders Suggest The One Skill That Has The Biggest Impact On Success (Guest Post)

January 11, 2012 03:21 pm 4 Comments CATEGORY: Client Trust & Communication

What one skill (above all others), if you developed and did it in an excellent fashion, would have the biggest impact on you as a financial planner?

This is the question that was posed to the leaders in the financial planning profession. Initially, the plan was to elicit feedback as to where to focus energy in the new year to become a better advisor, but after receiving so many excellent responses I wanted to share the common themes. What is the most important skill? There is always a big focus on the technical side of planning (which is obviously very important), but is it that the most important? Or is it empathy, communication, or relationship building?

The answers varied by the leaders that responded, but the common theme was clearly that in the end, the interpersonal trumps the technical.Read More...

Where Is The Voice Of Financial Planning In The Public Policy Discussions?

January 9, 2012 03:13 pm 2 Comments CATEGORY: Planning Profession

While financial planning has been increasingly engaged in public policy discussions through the Financial Planning Coalition, those interactions have still been largely "selfish" - i.e., pertaining to the regulation of financial planning and financial planners - and have not been regarding broader public policy issues, such as the general fiscal health of the country. On the one hand, it can be difficult for membership associations to take part in difficult public policy conversations when the common bond of membership is professional, and not political; in other words, there are both Republicans and Democrats amongst financial planners, and even if we all agree on the nature of the problem, we may strongly disagree about the appropriate solution, and advocating one path over another can alienate members. Nonetheless, it still seems to me that we could play a more active role, especially in today's environment, by utilizing the unique perspective of financial planning to help make major issues relevant at the personal level. Read More...

Weekend Reading for Financial Planners (Jan 7 -Jan 8)

January 6, 2012 09:50 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights a nice technology article for the new year, a great summary of recent retirement research, two notable regulatory actions this week, and some interesting investment and economic discussions for the coming year. We finish with a striking blog post that puts a good perspective on what the Occupy Wall Street movement is about - not resenting the wealthy and successful, but "just" those who profit at the expense of others. Enjoy the reading!Read More...