Nerd's Eye View blog

Charging Separately For Planning Can Make Clients Value It Less, Not More

October 17, 2011 01:02 pm 21 Comments CATEGORY: Practice Management

As planners continue to seek ways to make their businesses more stable, successful, and profitable, it has become increasingly popular lately to talk about including separate fees for financial planning services, often in the form of a retainer. As the general view goes, doing so allows you to stabilize your income with a steady retainer base, and simultaneously helps you to better reinforce the value of your financial planning by setting a clear price tag on it.

There's just one problem: When you look at business models outside of our industry, we see the reality is that setting a separate price tag on standalone services does NOT help consumers value and appreciate the service more. In fact, it helps them to minimize use of the service, and absorb the cost only reluctantly (and sometimes even resentfully) when absolutely necessary.

So does that mean by charging separately for financial planning, we're proactively DISCOURAGING clients from utilizing our financial planning services and encouraging them to think more investment-only!?Read More...

Weekend Reading for Financial Planners (Oct 15-16)

October 15, 2011 02:33 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - highlights this week include a number of articles on new investment vehicles coming down the pike, some interesting investment discussions from two of my favorite investment writers, John Hussman and John Mauldin, an interesting article suggesting perhaps we need to give clients MORE performance reporting information instead of less, and a white paper on implementing internships. Happy reading!Read More...

What Would Financial Planning Be Like If It Was Simple And Intuitive Like Steve Jobs’ Creations?

October 10, 2011 07:58 pm 10 Comments CATEGORY: Planning Profession

The legacy that Steve Jobs left behind last week as he passed away has been truly astounding; an outpouring of emotion and tribute from the world that is rarely seen outside of the death of beloved religious or political figures, as so many were touched by the technology that he created. And at the same time, criticisms have emerged as well - painting Jobs as a relentless micromanager with an obsession for ensuring that everything was exactly as he envisioned it. Yet the outcome of his process seems clear - a melding of incredible vision, and the execution of that vision which created tools we didn't even know we wanted or needed and made them an irreplaceable part of our lives. Perhaps the most amazing part, though, was the sheer simplicity and intuitive nature of the technology; although the design of Apple devices pushed the limits of what we can build and create and were based on incredible complexity, the customer experience was unparalleled in its simplicity. Which leads me to wonder... what would financial planning look like if we were as obsessed about the client experience as Steve Jobs was?Read More...

Weekend Reading for Financial Planners (Oct 8-9)

October 7, 2011 10:04 pm 2 Comments CATEGORY: Weekend Reading

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!Read More...

Managed Futures May Be A Decent Investment, But They Are NOT A New Asset Class!

October 3, 2011 02:35 pm 3 Comments CATEGORY: Investments

In the ongoing search for more diversification - and especially, low correlations as a potential for stabilizing returns in a difficult stock environment - advisors have increasingly shifted in recent years towards "alternative" investments. From real estate and REITs to gold and other commodities to more, a recent FPA survey on Alternative Investments found that 91% of advisors are using some form of alternative investments. Sadly, though, the focus on finding investments that have a low correlation - according to FPA's survey, the number one criteria for choosing an alternative investment - has grown to such an obsession, that we're willing to name anything that has a low correlation as "a new asset class." But the reality is that while some alternatives really are investments that truly have their own investment characteristics unique from stocks and bonds as asset classes, others alternatives - like managed futures - simply represent an active manager buying and selling existing asset classes. Which means it's about time for us to start distinguishing between a real alternative asset classes (e.g., commodities or real estate), and the real value of managed futures.

Weekend Reading for Financial Planners (Oct 1-2)

September 30, 2011 09:35 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - highlights this week including news on the regulatory front, a number of practice management articles, a few articles about the current difficult investment environment (and whether we may be tipping, or have already tipped, into a recession) and an interesting piece about how the mere gender of the advisor can impact client responses about risk tolerance. Happy reading!Read More...

Should You Ever Take Out A Loan To Make A 401(k) Contribution?

September 26, 2011 06:44 pm 12 Comments CATEGORY: Debt & Liabilities

Borrowing money to invest is a risky thing for individuals to do. While it's a common path for businesses - borrowing money to plow into investments, infrastructure, staff, expansion, etc. - it is done in part because business structures allow for limited liability; in other words, we often borrow in business specifically because the debts cannot track back to business owners the way individual borrowing can. Accordingly, for most individuals, the only major debt that is taken at all is a mortgage to purchase a house, and only because that's a "long term" investment (and because we couldn't afford a house any other way); most other forms of individual debt are considered "bad" debt and only used as a necessity to be paid off quickly (e.g., credit cards or auto loans). As a result of these attitudes about debt, I'm not certain I have ever seen a financial planner tell a client "since you're low on cash flow right now, you should take out a loan so you can have money to buy stocks in your 401(k) this year." Tax deferral on retirement contributions aside, it's just viewed as too risky by most to borrow money just to invest in equities in a typical investment account. There's just one problem... by telling clients to keep their mortgages as long as possible while building their retirement accounts, we're doing the exact the same thing: telling clients to invest in the stock market by borrowing. Read More...

Weekend Reading for Financial Planners (Sep 24-25)

September 23, 2011 05:17 pm 8 Comments CATEGORY: Weekend Reading

With the never-ending onslaught of information in today's world, I am often asked what I am reading, as someone who consumes perhaps an abnormally large amount of financial planning content. Accordingly, I've decided to start a new column for this blog, called "Weekend Reading" - where I'll share a few of the more interesting articles I've read in the current week. The goal is to keep it to no more than an hour's worth of reading; something you can do in a single sitting when you're taking a rest over the weekend and trying to keep up with the financial planning world. Here I offer up the first week's articles. I hope you find it helpful! Read More...

How’s That Hedging For Your Revenue Working Out?

September 22, 2011 09:29 pm 2 Comments CATEGORY: Practice Management

Market volatility is a stressful time, not only for clients, but often for planners as well. Not only does client activity rise, with more phone calls, meetings, and some hand holding, but at the same time revenues come under pressure, as new (and sometimes existing) clients often become less willing to implement, and firms with revenue is tied to the markets can actually see an outright decline in income. But the latter part, at least, is not something you have to just accept; there are ways to hedge the revenue and profit risk in your practice, and so far, those strategies are doing exactly what they're supposed to!Read More...

Support And Criticism Of The CFP Board’s Proposed Changes To The Experience Requirement

September 19, 2011 03:23 am 1 Comment CATEGORY: Planning Profession

Last month, the CFP Board released proposed changes to the CFP certification experience requirement in order to earn the CFP marks. This weekend the comment period closed; in this blog post, I share the feedback that I submitted. What do you think about the proposed changes?