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?
Weekend Reading for Financial Planners (Nov 19-20)
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include several recent pieces about behavioral finance (both by, and about, research luminary and Nobel prize winner Daniel Kahneman), some interesting glimpses of how social media and the online world is shifting the process of finding a financial advisor and delivering financial advice, and a few investment pieces about the unraveling European (and now especially, Italian) sovereign debt situation and a growing likelihood the ECB will be compelled to "start the presses" to address it. We also look at two pieces highlighting trends in the industry, especially the RIA space. Enjoy the reading!Read More...
Which Is More Important In Your Trust Equation: Credibility, Or Authenticity?
Trust. It lies at the heart of what we do as financial planners. Without a trusting relationship with clients, we cannot work constructively to advise them and help them to achieve their goals. At a broader level, if the public does not trust financial planners, they will be unwilling to work with us in the first place.
Yet at the same time, there is not necessarily a clear agreement amongst financial planners about what exactly it is that best inculcates that trust relationship. It is about establishing the credibility as an expert to become a trusted advisor for the client? Or the intimacy and authenticity necessary to ensure that the client feels safe and comfortable to share with you in the first place, and be willing to act on your recommendations?
If you had to pick one factor as the primary one leading to trustworthiness, which is more important to you: credibility, or authenticity?Read More...
