Nerd's Eye View blog

What’s The Best Way To Improve The Quality of CFP CE Instructors?

April 12, 2011 01:34 pm 2 Comments CATEGORY: Planning Profession

Unfortunately, there is no shortage of bad continuing education instructors. Whether it's a boring delivery, explanations that are either too simple or too complex, content that is never made to feel practical and useful, or something else, almost any CFP practitioner has probably gone through the experience recently.

And the challenge is perhaps especially acute in regards to Ethics CE, where many presentations are either dealing with very abstract ethics concepts or very narrow case situations that may not feel relevant, and the number of instructors is already very limited.

In response, the CFP Board has changed the requirements to be an eligible CFP Ethics CE instructor in the future, requiring all such instructors to have held the CFP certification for at least 5 years to be eligible, to ensure that the instructor has the experience to make Ethics CE relevant. The problem? This requirement still does nothing to ensure that the instructor is a good teacher who knows how to make the content relevant for an audience! Read More...

Why Does Everyone Think Safe Withdrawal Rates Are An Autopilot Program… They’re NOT.

April 8, 2011 08:25 pm 5 Comments CATEGORY: Retirement Planning

The concept of safe withdrawal rates has been around for almost 20 years now, since it was first kicked off in the Journal of Financial Planning by Bill Bengen in 1994. Over the years, a number of developments have come along that has further elaborated upon and enhanced the body of research above and beyond its original roots. Nonetheless, despite significant advances in the theory and methodologies used to apply safe withdrawal rates in practice, one significant misconception remains, for some inexplicable reason: the idea that safe withdrawal rates are a pure auto-pilot program forcing clients to spend little from their portfolios, even in bull markets, such that the client is expected in any reasonable market environment to pass away leaving an enormous inheritance after a life of 'excessive' frugality. This misconception needs to end; it's not what the financial planning process is about, it's not what the research says, and it's not what is done in practice anyway!Read More...

The Road To Financial Success Is NOT Paved With Coupons!

April 8, 2011 02:39 pm 6 Comments CATEGORY: General Planning

As prices of almost everything on the grocery store shelves seems to creep higher, we seem to get a bigger buzz than ever by saving money in the checkout line. Coupon use is on the rise, and this week was the series premier of TLC's "Extreme Couponing" television show.

Yet while it's nice to save a little money when you reach the cash register, and every bit of savings helps a little bit in the long run, let's keep it all in perspective: clipping coupons, a little or even a lot, is not the key to a comfortable retirement. When we talk about the importance of saving for long-term wealth accumulation, it's about the savings that you invest, not the discounts at the cash register. The road to long-term financial success is not paved with coupons!Read More...

How Would You Change The Rules To Improve The Quality of Continuing Education Content?

April 7, 2011 01:58 pm 3 Comments CATEGORY: Planning Profession

Every practitioner who has been in business for any period of time has had the experience: the continuing education session being attended is bad. Maybe the content is useless or irrelevant. Maybe it's too simple, or too complex. Perhaps the speaker is just a poor teacher, or an ineffective communicator. In some cases, the instructor doesn't even know the content as well as the people who are supposed to be learning more about it!

And of course, when CFP practitioners - as with many professionals - have continuing education requirements, bad sessions perhaps feel ever worse. Not only might they feel like a waste of time, but they're a required waste of time!?

So the question emerges: what can be done to improve the quality of continuing education content?Read More...

Do Planners Ever Lower Pricing Due To Feelings Of "Guilt" Over Market Losses?

April 4, 2011 02:31 pm 1 Comment CATEGORY: Practice Management

The times when the markets deal losses to clients are always difficult and stressful, but the difficulties are often exacerbated when clients realize that under most pricing structures, the planner will still be paid even when the portfolios are not up. To be fair, this is often quite reasonably justified by a great deal of value that the planner brings to the table above-and-beyond just portfolio management, and in the typical AUM structure market losses do still mean at least a decrease in the amount of fees that the client pays. On the other hand, because planning fees may already be declining in the face of a bear market, the last thing most planning practices can afford is to lose a client completely; reduced fees are still better than no fees at all. As a result, sometimes planning firms may do whatever they think is necessary to retain a client... including changing their pricing structure on the fly, and offering to reduce their clients' fees to help maintain client retention. But in the end, was the pricing change simply a retention strategy... or are planners actually expressing "guilt" about client losses by trying to make them up with lower pricing?

CFP Board Declares Virtually All Ethics Content Not Eligible For Ethics CE… No Joke

April 1, 2011 03:04 pm 6 Comments CATEGORY: Planning Profession

It is a hallmark of an occupation seeking to be recognized as a profession that its services must be rendered ethically. In turn, this means that part of the path to becoming a profession includes developing a Code of Ethics, and defining appropriate rules of conduct that apply the ethics to the particular situations faced by those delivering professional services. And the profession's code of ethics and rules of conduct are ultimately only effective if they are taught to those who deliver professional services - so they can in fact act within the guidance of the prescribed code - and if disciplinary actions are taken to enforce the code against those who violate it.

Notwithstanding the importance of having a Code of Ethics, the rules of conduct that accompany it, and the need to teach professionals delivering services about the code and associated rules so they can act accordingly, the latest rules change from the CFP Board may be going a little too far, though. Because starting in October, the ONLY content that will be eligible for satisfy the Ethics CE requirement for CFP certificants will be teaching the CFP Board's own Rules of Conduct and Practice Standards. The other 99.9% of Ethics knowledge that has been developed over the past two millenia? Don't even bother applying.Read More...

How Do YOU Decide If A Mutual Fund Has Lost Its Mojo?

March 31, 2011 07:47 pm 3 Comments CATEGORY: Investments

Unless you manage to purchase an index fund that produces zero tracking error, at some point the investments you own will deviate from their associated benchmark. Whether it's the tracking error of an index fund, or the relative under- or out-performance of an active fund manager, returns can vary over time. And while most of us don't fret over small deviations from a benchmark - nor do we mind when the deviation is due to outperformance! - but at some point, a fund may underperform its relevant benchmark by enough, and for a long enough period of time, that you have to question whether it's time for a change. But the caveat is... what IS a big enough underperformance deviation, and how long must it persist, before you actually do decide to make a change? What is the best practice for deciding when a fund has lost its Mojo?

Are Advisors Leaving Money On The Table By Undercharging Clients?

March 29, 2011 09:35 pm 5 Comments CATEGORY: Practice Management

It's a general principle of economics that price is related to demand. The more you charge, the fewer will buy (or are interested in, or can afford) your services; the less you charge, the more buyers you can attract. The key, of course, is to price low enough to attract buyers, but high enough that your business is still viable and profitable.

Yet in the case of professional services, comparisons on price alone are often difficult, and other factors weigh into the decision; as a result, it's difficult to easily judge who really has the lowest cost relative to the value they provide. From the business' perspective, it is similarly difficult to judge where you should really set your price in order to keep your business viable and profitable, while not dissuading clients due to cost.

Accordingly, a recent study on fee-based advisors suggests that many may not have the equation quite right, and may in fact be leaving significant money on the table.Read More...

What Is The Essence Of Good Financial Planning?

March 28, 2011 05:25 pm 7 Comments CATEGORY: Planning Profession

As the financial world grows ever more complex - and so too does the financial planning advice delivered to navigate it - it is sometimes difficult to keep a handle on the fundamental guiding principles that are the essence of good financial planning. Yet ultimately, some would make the case that if you can't boil down the value you deliver and the basic tenets of your advice to a very concise statement, you haven't really identified the essence of financial planning. So what would be YOUR basic financial planning advice, if you had to boil it down to only a sentence or two?Read More...

What Can Financial Planners Learn About Habit Formation From Weight Loss Experts?

March 23, 2011 03:25 pm 3 Comments CATEGORY: General Planning

Although we may focus on various steps we can take to get a better return on our investments or a lower cost for our debt, in reality the most foundational base for financial success is having good financial habits.

Yet in practice - as we've all witnessed with clients - not everyone has already learned and embraced good financial habits, and even worse, it can be extremely difficult to change bad financial habits. On the other hand, the weight loss field is in a very similar position; just as the key to financial success is to save more and spend less (than you make), the key to weight loss is to exercise more and eat less.

So if it's once again all about habits, maybe there's something that planners can learn about helping clients with financial habits from weight loss experts who assist with other types of behavior and habit change.