Nerd's Eye View blog

Should Planners Have A More Active Role in Setting Reasonable Spending Policies For Clients?

June 27, 2011 12:54 pm 16 Comments CATEGORY: General Planning

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?

June 24, 2011 12:23 pm 22 Comments CATEGORY: Investments

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

June 23, 2011 03:41 pm 11 Comments CATEGORY: Planning Profession

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?

June 20, 2011 01:17 pm 14 Comments CATEGORY: Retirement Planning

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?

June 17, 2011 04:12 pm 2 Comments CATEGORY: Conferences

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?

June 15, 2011 12:43 pm 11 Comments CATEGORY: Annuities

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?

June 14, 2011 03:04 pm 10 Comments CATEGORY: General Planning

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...

How Might Big Brokerage Firms Transition In A Fiduciary Financial Planning Future?

June 13, 2011 03:22 pm 4 Comments CATEGORY: Practice Management

There is a prevailing view in the independent financial planning community that when financial planning is ultimately recognized as a profession, and is regulated on the basis that advice must be delivered in a fiduciary context, that the independent planning community will take the center stage, as big brokerage firms will be afraid of the fiduciary liability.

But what happens if the opposite occurs - if a major firm steps forward to embrace fiduciary financial planning and seeks to pose a credible challenge to the independents? How might big brokerage firms transition in a fiduciary financial planning world, and can them stem - or reverse - the current rising tide of defections out of the brokerage world?Read More...

How Do You Systematize Financial Planning When Every Client Is A Unique Snowflake?

June 10, 2011 03:51 pm 4 Comments CATEGORY: General Planning

If you've been to any session delivered by a practice management consultant in the past several years, you've probably need that to grow your business further, you need to standardize and systematize. In other words, you can't do everything differently for every single client and expect to keep growing much, because at some point your practice is so complex delivering 100 different services to 100 different clients that you just can't absorb the 101st without having your head explode (or alternatively, you couldn't possibly find the time to meet with the 101st prospect to try to get him/her as a client anyway).

In response, planners tend to complain: "But financial planning must be tailored to each individual's situation; and since every client is a unique snowflake unlike any other, so too must their financial planning experience/products/deliverables each be individualized, unique, and customized one client at a time."

Are there still ways to run an efficient practice in a world like this?

I Hate Capital Gains Taxes – Except When I Don’t

June 9, 2011 11:54 am 0 Comments CATEGORY: Taxes

When it comes to my personal taxes, I am a chronic late filer. In my own defense, it is usually because some partnership or another could not get me my K-1’s by the deadline, so I go ahead and file the extension. Or maybe it’s because the pain of actually seeing my tax bill is too great and I find a way to defer that decidedly unpleasurable experience to a later date. This year I had a large tax liability associated with capital gains in my managed accounts, and since 100% of my money is invested in the Pinnacle DMG portfolio, I couldn’t help but think of other Pinnacle clients in the same boat. Since cutting a check to the IRS has the remarkable ability to focus my thinking about tax planning, I thought I would share a few of the thoughts that crossed my mind at the time.Read More...