Earlier this month the Financial Planning Association hosted FPA Retreat, one of the leading cutting edge conferences on the art and science of financial planning. Drawing hundreds of attendees from across the country (and around the world, with participants coming from as far away as Australia!), the conference never lacks for interesting ideas and conversations, both within the sessions and out in the hallways. This year, though, those who didn't attend still had the opportunity to enjoy some of the content virtually, thanks to an active group of participants who "live Tweeted" highlights throughout the conference on the #FPARetreat11 hashtag. For those of you who missed it, here are some of the highlights...Read More...
Is Social Media A Tool For Deepening Client Relationships?
As the popularity of social media rises - from Facebook to LinkedIn to Twitter - advisors are increasingly asking "what's all the buzz about" and "why should I care?" As many point out, planners develop new clients primarily by getting referrals from existing clients, and having face-to-face meetings to get to know them better. No one makes a decision about who to give their life savings to based on a Facebook page, right!? Perhaps, but a focus on the new business development opportunities from social media misses an important but crucial point - there's already plenty of value to be derived from social media, just by connecting to your EXISTING clients, to deepen the personal relationship you already have with them!Read More...
It’s Not Just About Telling Clients What To Do, It’s About Motivating Them To Do It!
Being a good financial planner is not just about having the knowledge and information to direct clients on how to best achieve their goals and financial success.
Ultimately, most would agree that the true measure of success is to look at how effective the planner is in actually helping clients achieve those goals; in other words, does the client actually have an improved path to success because of the planner's involvement. In turn, this means that the planner's true success hinges not only upon having the right advice, but also depends upon the client actually implementing that advice, and the planner's ability help those clients make the required changes!
There's just one problem: it turns out that telling people what to do is actually a terrible way to get them to do it!Read More...
Are Some Financial Planners Unwilling To Take Their Own Investment Advice?
If there's one piece of investment advice that's almost universally agreed upon by financial planners, it's this one: don't bail out of stocks after a bear market. In fact, the entire foundation of wealth accumulation in the financial planning world is predicated on a healthy exposure to stocks for the long run, especially during the accumulation phase.
The planning world has attached itself to this stocks-for-the-long-run focus over the past two decades with its shift to an assets-under-management (AUM) business model, where revenues and value for the firm are tied to the markets in a similar manner to the client's wealth and (future) income.
Yet in recent years - and especially since the 2008-2009 bear market - some planning firms have been starting to shift away from the AUM model, opting instead for more stable income business models like retainers. Yet this raises the question: if clients are supposed to stick with stocks for the long run and stay the course through temporary market downturns, are planners being hypocritical by not doing the same thing with their AUM business model?Read More...
Should Planners Have A Responsibility To Report The Wrong-Doing Of Other "Bad" Planners?
One of the most common complaints within the industry about the state of financial planning is that it is marred by so many practitioners who say they are financial advisors, but do not really do financial planning... or worse, do it badly, wrong, or outright deceitfully. Yet although so many planners state that they have come across such "bad" practitioners, virtually none state that they have ever reported a bad practitioner, either to regulatory authorities, or to the CFP Board if the individual holds the CFP marks but doesn't do financial planning "right." Yet how will the financial planning industry be cleaned up of its inappropriate practitioners if we do not take a part in it? So there's the question: what is - or should be - the responsibility of financial planners to report the wrong-doing of other people who hold themselves out to be financial planners?Read More...
Just How Much Do You Assume Mass Affluent Clients Will Pay For Retirement Medical Expenses?
With the cost of health care just continuing to spiral higher and higher as the years go by, it becomes increasingly difficult to advise clients about how much to save to handle those future costs in retirement.
On the one hand, it's crucial not to undersave, such that ongoing health care costs devastate and deplete the retirement portfolio; on the other hand, excess conservatism can be bad too, forcing clients to unnecessarily constrain their lifestyle with more saving than is necessary, or working longer and retiring later than was actually needed.
So just how much do you assume your mass affluent clients will pay in projected future health care costs during retirement?Read More...
If The Fiduciary Fight Wins, Does Your Marketing Plan Lose?
The Financial Planning Coalition is fighting the advocacy fight for a fiduciary standard for financial planning. While this certainly is a consumer-centric direction for financial planning, the firms today that practice financial planning may need to be careful about what they wish for. After all, for many firms, the fact that they operate as fiduciaries has become a central message of their marketing to prospective clients.
So what happens if the Coalition wins the fiduciary fight? If everyone who practices financial planning must operate as a fiduciary, do a number of currently successful firms lose their key marketing differentiator and have to rewrite a new marketing plan?
Why Winning Fiduciary Fight Would Increase – Not Decrease – Financial Planning Competition
As financial planning continues its path towards profession, the next major hurdle appears to be the application of the fiduciary standard to the delivery of financial planning advice. For many planners, though, the push for fiduciary is not just about advancing the profession; it's also about cleaning it up, and getting rid of all those people who say they do financial planning when they do not.
In other words, it's about carving out a protected space - as is done with most other professions - where only those who really do it can call themselves professionals, just as only licensed medical professionals can practice medicine, and it's illegal to conduct an unauthorized practice of law. And although establishing such barriers around a profession can also make it more financially rewarding in the long run for those who practice - part of the reason that doctors and lawyers are compensated well is that not just anyone can be one - it may actually have the opposite effect in the nearer term.
The bottom line: it's possible that putting a firm fiduciary legal standard into place could actually cause a dramatic increase in financial planning competition!Read More...
The Employer Counter-Offer – Flattering Or Insulting?
It's a familiar scenario for some: you've worked for the company for years, and feel your contributions are under-appreciated, and that it's time to look for new opportunities. You begin the job search process, and find a new employer who is excited to have you come on board, providing a nice increase in your compensation as a part of the package. Deciding to take the new offer, you go back to your original employer to break the news... only to discover that, when faced with your anticipated departure, the attitude has changed. Suddenly, your existing employer offers you higher compensation; perhaps a promotion and new title; maybe even some equity in the company. So what do you do? Are you appreciative your employer finally recognizes your value? Or insulted that it took your imminent departure to raise the issue? If you're the employer, did you just come up with a way to retain your employee, or hasten his/her departure?Read More...
The Real Reason That Financial Planners Fail To Serve The Majority Of Americans
It has long been a criticism of financial planning that it is focused to far up the wealth scale. Financial planning firms at best only start serving the "mass affluent" (typically defined as $100,000 to $1 million in investment assets), and the elite independent firms often have minimums of one or several million dollars. The only exception is typically the younger high income earner, who may not have sufficient assets yet, but earns a few hundred thousand dollars a year, is accumulating assets quickly, and may need significant income tax planning support in the meantime. Yet the statistics show that the average American doesn't even have $100,000 in investment assets, and nearly half of Americans don't pay income taxes at all.
The response from planners is that it's just too difficult to serve clients at those lower wealth and income levels; the business model "doesn't work" and isn't viable/profitable. Yet perhaps the real reason is not that the business model is impossible to design, but simply because it's so hard to get a sufficient volume of clients, due to the sad reality that the value of financial planning hasn't been clearly defined to the public at large, and as a result it's very expensive to "sell" clients on financial planning when there's no real demand from them to "buy" it in the first place.Read More...
