Enjoy the current installment of "weekend reading for financial planners" - the major highlight this week is the release of the Financial-Planning-Coalition-sponsored study on the costs of various regulatory oversight options, with some pretty shocking costs for FINRA or a new SRO to take over. Other articles include a discussion of Schwab's first franchise branch opening, the emerging field of financial therapy, an analysis of annuity guaranteed withdrawal riders and their limitations due to ongoing inflation, and two great investment pieces on last week's European Summit by John Mauldin and GaveKal, along with a somewhat disturbing warning by John Hussman that the market may be in significant near-term danger. We wrap up with a brief article that was written for entrepreneurs, but translates in my opinion to virtually anyone in professional services, taking a hard look at what your time's really worth, and what you should - and shouldn't - be doing yourself versus outsourcing to others. Enjoy the reading!
What’s The Real Difference Between Financial Planning And Private Wealth Management?
In the nebulous space where financial services firms decide what to call themselves and how to hold themselves out to the public, there's not necessarily a very clear distinction between a "financial planning" firm and a "private wealth management" advisor. Often, the difference is little more than the perceived marketing distinction of the labels to certain target clients.
Nonetheless, there is some evidence to suggest that the services delivered to very high net worth clients can be quite different than those provided to the average American, and accordingly may require a different set of knowledge and skills to deliver effectively.
As a result, there is an effort underway to try to study the real differences between what it takes to be a successful financial planner versus a private wealth management advisor, in order to develop certification that is unique and appropriate to the distinct specialization.Read More...
Weekend Reading for Financial Planners (Dec 10-11)
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include two great year-end wrap-up articles on technology, including an overview of Financial Planning magazine's huge annual tech survey, and technology highlights from consultant Bill Winterberg in MorningstarAdvisor. Also included in a striking interview with research and planning pioneer Bill Bengen, who suggests that safe withdrawal rates are still valid, but that buy and hold isn't, and an interesting article from Angie Herbers in Investment Advisor about some owners who may be experiencing "owner's guilt" over the profitability of their business, and making some bad decisions as a result. Then there's a quick look at some thoughts about the new cost basis reporting rules that are being implemented by the IRS, and two somewhat non-traditional investment and economic pieces from some industry stalwarts, Howard Marks of Oaktree Capital and Jeremy Grantham of GMO. Enjoy the reading!Read More...
Has Financial Planning Limited Itself To Appeal Only To Risk-Takers?
Notwithstanding its risk and the painful volatility of the past decade, stock investing is still a cornerstone of financial planning advice. However, investing in equities - even just a little bit - is not for everyone. Some aren't interested in the risk; the trade-off just isn't worth it to them.
Of course, financial planning advice has much value to offer beyond just how to allocate an equity-centric portfolio. There's just one problem... financial planning advice may still be so equity-centric, that people who don't want to take investment risk just don't use a financial planner at all, as a recent Journal of Personal Finance revealed!Read More...
Is "Spend Less, Save More" Ineffective Financial Advice?
As a country, our national savings rate is among the lowest in the world, and in practice the average American struggles to save much of anything. A recent survey by the National Foundation for Credit Counseling indicated that 64% of Americans don't even have enough cash on hand to handle a $1,000 emergency expense. The standard advice of financial health to address these problems is to "Spend Less, and Save More" or its extended version, "Spend Less Than You Make, And Save The Rest." Yet notwithstanding the nearly universal nature of this advice, it doesn't seem to be having much of an impact. Perhaps the problem is because in reality, the advice just isn't specific enough to be actionable, and as a result it's ineffective. In other words, if we really want people to spend less and have more money left at the end of the month, what we need to do is not just tell people to "Spend Less, and Save More" - we actually need to tell them HOW to spend! We need to create the "food pyramid" of recommended spending!
Weekend Reading for Financial Planners (Dec 3-4)
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include a new pieces about tactical asset allocation by yours-truly in the Journal of Financial Planning, an interesting article about the correlation between use of financial planners and willingness to invest in risky assets, a number of great articles about the unfolding debt crisis in Europe and its economic and investment implications, and a nice discussion about the importance of establishing a work environment that's right for you. We also look at a great piece from Angie Herbers discussing how different today's new financial planners are compared to those of 10, 20, or 30 years ago - and the ways firms need to adjust to maximize on the opportunity. Enjoy the reading!Read More...
Simple Steps For Better Buy-In From Financial Planning Clients To Help Follow-Through On Recommendations
It's a common financial planning challenge - the planner provides recommended action items for the client to implement, but the client struggles to follow through on them. In some cases, it may be because the client doesn't really believe the recommendations are best; in others, it's a matter of trust; but in most, it may simply be a matter of "buy-in" to the action items (or a lack thereof!) in the first place. After all, it's easy for a client to procrastinate about implementing recommendations if the client isn't really committed to them in the first place.
But as it turns out, just a few small changes to the process of delivering action item recommendations by inviting clients to physically write down part of their commitment can potentially increase client buy-in and follow through.Read More...
Weekend Reading for Financial Planners (Nov 26-27)
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include two recent pieces about the FPA (one positive and one negative), some articles about how behavioral finance is starting to change how we look at various financial and economics problems, a few technical articles on health care and non-spouse beneficiaries of inherited IRAs, and another great piece from John Hussman about the current economic environment. We also look at two pieces highlighting new ways to look at the value and power of blogging and starting a Twitter account. Enjoy the reading!Read More...
Is FPA Membership Declining Because Of Its Fiduciary Views, Or In Spite Of Them?
The membership of the Financial Planning Association has been declining for several years. After a peak of over 28,400 members in late 2002, the organization was largely flat for many years, still hailing at 27,805 members by the end of 2007. But the membership tumbled almost 15% from the end of 2007 through the end of 2009, and it is been largely flat at a base of approximately 23,600 members since then.
The FPA has suggested that its declining membership count is a result of its strong and passionate advocacy positions - in particular, its high Standard of Care and its positions on fiduciary financial planning - which have perhaps alienated some current/former/prospective members, but defends its positions (and their membership-limiting consequences) as being a necessary result of its mission to advance the financial planning profession.
Yet the question arises - if high standards of care and fiduciary financial planning are really at the heart of FPA's membership problem, then why is FPA membership declining even while the number of CFP certificants who are already committed to a comparable standard of care and fiduciary duty continues to rise!?Read More...
Is Financial Planning Already Winning The Fiduciary War – From The Inside Out?
In recent years, the Financial Planning Coalition - comprised of representatives from the CFP Board, NAPFA, and the FPA - have been advocating together for a fiduciary standard in the delivery of financial services. Success, thus far, has been limited - their efforts for financial planning fiduciary regulation to be integrated into the Dodd-Frank legislation led to some mandated studies that do something to move the conversation forward, but the follow-up fiduciary standard that was to be implemented pursuant to those studies continues to lag. In the meantime, the Dodd-Frank results certainly fell far short of bona fide recognition of financial planning as a standalone profession.
Yet at the same time, the Certified Financial Planner designation continues to expand its base at the grass roots level, even while the total number of participants in financial services remains flat (or declining slightly) over the past decade.
Which raises the question: As an increasing number of financial advisors become CFP certificants voluntarily, is the CFP Board winning the fiduciary fight already, from the inside out?
