When hiring new planners for associate planner positions, many firm owners say they want to find someone just like them; in the words of Peter Lynch, they “buy what [they] know.” It is human nature after all – we prefer staying in our comfort zone and don’t operate as well with the unknown. However, in practice this is often exactly what a firm does NOT need; if the firm owner skill set is strategic visionary, relationship manager, and primary rainmaker, then the firm should strive to find candidates with complementary skill sets to fill in gaps. Especially in a small organization, too much overlap will lead to inefficiencies. Nonetheless, some business owners choose to go this route anyway. So if you are going to hire a 'mini-me', what should you be aware of?
Has The Financial Planning Profession Bet Its Future On The Stock Market?
If there's one staple of financial planning wisdom that virtually everyone will agree upon, it's stocks for the long run. Sure, we all acknowledge that markets can be volatile in the short term, but we all seem to still agree that in the long run, stocks are still where it's at. So as long as you have a long enough time horizon - whether you're a young person still accumulating, or a retiree looking at a multi-decade spending phase - stocks are still a material portion of the portfolio. But within the past hundred years alone, there was nearly an entire generation - who grew up during the Great Depression - that gave up on stocks for their entire lives. What if that happened again? Has the financial planning profession hitched itself to the stocks-for-the-long-run wagon so tightly that if stocks fall off a cliff, so too will the profession?Read More...
Are We Being Too Forward With Our Clients?
In the dating world, being "too forward" generally means trying to advance a relationship at a pace that is too fast for comfort; being too confident and direct in what is said, to a point that may not be socially acceptable. The general remedy in the dating world, then, is to "take it slow" and allow the relationship to build trust before trying to advance a relationship to the next stage. Of course, building a trusting relationship is not unique to the dating world; many of the exact same dynamics apply in building the planner-client relationship. Yet in practice, because financial planning relationships must move to an implementation stage after “relatively” few meetings, planners often must be very forward during the sensitive relationship-building phase. But how far is too far? Have you been asking your clients to get naked on the first date?
Should Planners Have A More Active Role in Setting Reasonable Spending Policies For Clients?
Some financial planners consider budgeting and cash flow the cornerstone of a client's financial plan; for others, the focus is on long-term planning, and they let client cash flow sort itself out. In many situations, planners seem to be uncomfortable in giving spending guidance to clients; as the saying goes, "It's their money; who am I to tell them how to spend it?" Yet at the same time, most would probably agree that clients can't just save their way out of their fiscal woes; you only free up money to save by first determining what to NOT spend it on.
So does that mean in the end, planners can't have a broader impact until they are more active in helping clients actually set spending policies?Read More...
Why Is It ALWAYS Bad To Get Out Of The Markets In Times Of Risk?
The prevailing wisdom in financial planning is that clients should stay the course... always. It's "never" appropriate for clients to get out of stocks (even a little bit), and the eternal chiding to any so-called market timer is that even if you can figure out when to get out, you'll never figure out when to get back in again, and you'll miss any rally that might follow a market decline. But does this miss the point? If you actually sell BEFORE a severe market decline (as opposed to after), you don't even NEED to get back in until the market recovers anyway!Read More...
Why Financial Services MUST Figure Out How To Allow Social Media – And Fast
The explosion of social media as a means of communication has been stunning. And while those in professional services are just trying to keep up with the change, today's younger generation (and frankly, more "older" people that you might suspect) has already fully embraced the change. What this means, though, is that social media is not just about some new way to do marketing and develop new clients. Instead, it means that financial services needs to figure out how to handle social media - and fast - to even remain relevant and appealing to the future generation of financial planners themselves!Read More...
What Happens If You Outlive Your Safe Withdrawal Rate Time Horizon?
Although the research on safe withdrawal rates has been replicated many times by various researchers to substantiate a safe, sustainable spending level that can withstand at least anything that history has thrown at a retiree, one significant challenge has always lingered: a safe withdrawal rate recommendation is only as good as the time horizon it's associated with. In other words, while the research may support a 4.5% safe withdrawal rate, it's predicated on a 30-year time horizon. If the client planned to retire over a 35- or 40-year time horizon, the safe withdrawal rate would be different. Unfortunately, though, the client may not know that a 35-year time horizon is needed until it's year 31 and there are still a few years left to go! So what's the outlook for a safe withdrawal rate approach if the client outlives the original time horizon?Read More...
Are You Going To "The Most Interesting Conference In The World" With FPA This Fall?
The FPA Annual Convention every fall is arguably the biggest event in financial planning each year. Typically drawing upwards of 3,000 attendees, it is certainly by numbers one of the largest conferences by far; although some of the custodial conferences (e.g., Schwab Impact) are competitive, FPA's is focused more directly on financial planning. This year, though, the FPA has rebranded the conference as FPA Experience, and conference chair Evelyn Zohlen is trying to take the event to a whole new level, with a huge focus on building community, and an effort to make it "the most interesting conference in the world" starting with a phenomenal promotional video!
Are Annuities Really Expensive, Or Could They Actually A Cheaper Option?
There is way too much dogma surrounding annuity commissions. The commission argument against annuities is most often posed by registered reps, or investment advisor reps who stand to gain by keeping money out of annuities. In the spirit of fairness, I compared the commissions for annuities in general against the fees that would be earned by an advisor charging an AUM fee and came to a simple conclusion: the "annuities are bad because they pay high commission" argument simply needs to be retired.
Does Financial Planning HAVE To Be A Relationship?
As is often said, "financial planning is a process, not an event" and therefore is predicated on an ongoing relationship between the planner and the client. Yet the in-depth nature of a financial planning relationship presents challenges as well; it takes more time, it costs more money, and it becomes less accessible to many who either can't afford or don't want such a 'deep' relationship. But does it have to be this way? Could financial planning still deliver value even if it's NOT an ongoing relationship with an individual financial planner?Read More...
