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The 4 Different Types Of Fiduciary Financial Advisors

January 12, 2017 07:44 am 20 Comments CATEGORY: Planning Profession

Periscope Office Hours Cover Image Jan 10 The 4 Different Types Of Financial Advisor Fiduciaries

While the looming DoL fiduciary rule has heightened consumer awareness of the concept of fiduciary duty, the reality is that being a "fiduciary" (or not) isn't actually a singular concept. While conceptually, it's about acting in the interests of the client, and honoring the fiduciary duties of loyalty and care, not all regulators define (nor enforce) those terms consistently.

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, I explore four different types of financial advisor fiduciaries, including RIAs that are SEC fiduciaries, DoL fiduciaries serving retirement investors, CFP fiduciaries providing financial planning, and voluntary fiduciaries who decide to step up to honor private/third-party fiduciary standards.

One reason for varying fiduciary standards is the fact that different industry channels are regulated by different overseers – each of which defines fiduciary obligations in their own way. Registered Investment Advisers (RIAs) are overseen by the SEC and state regulators, which have both adopted a disclosure and transparency oriented approach to fiduciary duty, but only to investment advice and investment management. While the DoL fiduciary rule impacts anyone giving advice on retirement accounts (and not taxable investment accounts), but is more stringent in its limitations on conflict of interest. And the CFP Board requires that certificants often adhere to a fiduciary duty, but the requirement depends on specifically whether the certificant is actually doing "finanical planning" for a client.

And organizations with voluntary fiduciary standard for their advisor members - like NAPFA and the XY Planning Network - have their own definitions of when a fiduciary duty applies, and what conflicts are and aren't permitted. In addition, RIAs who are struggling to differentiate as fiduciaries - now that DoL fiduciary will apply the rule to more advisors in the future - are looking to even more stringent versions of voluntary fiduciary rules, such as the new Fiduciary Registry from the Institute for the Fiduciary Standard, or CEFEX certification.

The bottom line, though, is simply that there are many different definitions of fiduciary duties, and two advisors who are both "fiduciaries" might still have very different fiduciary obligations. And unfortunately, given the research showing that consumers struggle even to understand the difference between fiduciary and suitability standards, it's not likely most will grasp the nuances of the many different types of fiduciary duties anytime soon.

Squaring-The-Survival-Curve And What It Means For Retirement Planning

January 11, 2017 07:01 am 1 Comment CATEGORY: Retirement Planning

It's become a well-recognized phenomenon that life expectancies are on the rise, and have been for more than a century now. For many, this leads to the "inevitable" conclusion that someday we'll all be living to age 150 and beyond, and that we need to plan for drastically longer retirement time horizons - or even that retirement itself will be transformed (or become irrelevant) if medical breakthroughs allow us all to enjoy 100+ years of active lifestyles. However, a fresh look at the data reveals that this may not actually be the likely outcome.

In this guest post, Derek Tharp – our new Research Associate at Kitces.com, and a Ph.D. candidate in the financial planning program at Kansas State University – delves into the nuances behind the changes in mortality rates over the past century and in recent decades, and what they imply about the future.

Because the interesting phenomenon of recent advances in life expectancy in particular is that while overall life expectancies have been rising, most of the gains are attributable to people living closer to the maximum human lifespan (rising up towards about 115 years), and not as much from increases in the maximum age itself. And in the past two decades, the empirical data suggests that the maximum lifespan of human beings has stopped increasing altogether, peaking out around age 115. As a result, future medical advances may simply make us more and more likely to live to that maximum age, but there's little evidence to suggest that anyone is ever going to live to 150 and beyond... a phenomenon known as "squaring the (survival) curve".

The significance of rising life expectancy being due primarily to an increasing likelihood of living to maximum age, but not increasing the maximum age itself, is that retirement planning may need to adjust for a longer active phase of life... or more pessimistically, for prolonged periods of substandard health as what might have killed us in the past now simply slows us down! The potential for continued squaring the curve may also dramatically change the pricing and even the relevance of various types of insurance products, as long term care insurance becomes less necessary (if we're healthy for more of our lifespan), and annuity mortality credits become less available (because people die close together at the end of their maximum lifespan).

But the fundamental point is simply to understand that the ongoing rise in life expectancies doesn't necessarily mean that someday everyone is going to live to age 150 and beyond. It may simply mean that more of us will live to approach what appears to be a "maximum" human lifespan around age 115... and in fact, recent shifts in who is living longer (and who is not) suggests that we may have already hit that longevity wall.

#FASuccess Podcast: How Ron Carson Built Carson Wealth & Carson Institutional

January 10, 2017 07:01 am 6 Comments CATEGORY: Financial Advisor Success Podcast

Welcome to the second episode of the Financial Advisor Success Podcast!

In this episode, I spoke to Ron Carson, a veritable legend in the world of financial planning. Not only has he been the top-ranked advisor at LPL for 25 years running(!), and is regularly recognized at the top of lists like Barron’s for the size of his advisory business Carson Wealth, but Ron is also the founder of the Peak Advisor Alliance, and Carson Institutional… in addition to founding his own charitable endeavor, the Dreamweaver Foundation.

It’s taken Ron considerable energy and determination to get where he is today, and this interview sheds light on all the hard work he’s done to build such an impressive career. While it may seem like successful people simply spring into existence, I hope these interviews show you that all financial advisors, even those who have been incredible successful, still struggle at times.

And Ron Carson is no exception. In this episode, Ron talks candidly about his humble beginnings and the moment of physical, emotional, and professional burnout - when he was about to give up after failing to break $30,000 of GDC after six years - and how the actions he took in his moment of desperation actually turned into his career-making opportunity. He also shares the mistakes he’s made along the way, including his slow adoption of technology, and struggles to delegate and invite other (über-talented) people into his business’s inner circle. We also discuss Ron’s thoughts on making your employees into stakeholders, how he juggles the advising, mentoring, and charitable businesses he’s founded over the years, and more!

I hope you enjoy this second episode of the Financial Advisor Success Podcast! Please share your comments here on the blog of what you think, and I hope you’ll leave us a review on iTunes as well (which is important as iTunes looks to reviews to decide which podcasts to make most visible for other financial advisors who are searching!).

The Latest In Financial Advisor #FinTech (January 2017)

January 9, 2017 07:01 am 0 Comments CATEGORY: Technology & Advisor FinTech

Welcome to the January issue of the latest news in Financial Advisor #FinTech – where we look at the big news, announcements, and underlying trends and developments that are emerging in the world of technology solutions for financial advisors and wealth management!

This month's edition kicks off with the big news of the early 2017 rollout of Schwab Intelligent Advisory, a new service that was initially dubbed another "robo" but in reality is a financial advice solution powered by human CFPs who will simply leverage MoneyGuidePro financial planning software and virtual client meetings using telephone, video chat, and email to service clients... but at a "robo" price of just 28bps with a $25,000 minimum. The new Schwab Intelligent Advisory service is likely intended as a play to capture mass affluent consumers as the DoL fiduciary rule impacts and disrupts at least some broker-dealers... but in the process may also pose a serious competitive threat to the independent RIA community, including a large number of advisory firms that currently custody their assets at Schwab!

From there, the latest highlights also include:

Smarsh acquires MobileGuard to expand their text message compliance archiving services.
eMoney Advisor launches a new data gathering and client onboarding solution, threatening independent players like PreciseFP.
Orion Advisor Services launches a fee benchmarking tool to help advisors substantiate their pricing as "reasonable compensation" under DoL fiduciary.
Finicity raises a $42M Series B to expand their account aggregation capabilities after completing the takeover of the old Intuit Financial Data API.
Blucora's Tax Act partners with Legg Mason's robo-advisor Financial Guard.
Personal Capital blows through its VC growth targets and earns its remaining Series E ahead of schedule.
Will digitization of financial advisor business metrics eventually create fully automated tools to provide advisory firm valuations?

You can view analysis of these announcements, and more trends in advisor technology, in this month's column, including a look at the new national sponsorship arrangement between the FPA and Betterment for Advisors, how XTiva is trying to create a marketplace for enterprise "sales management" solutions for wealth management firms, and the recent rollouts of TD Ameritrade's new VEO One platform and Envestnet's new Yodlee app for Tamarac advisors to turn their portfolio accounting client portal into a fully holistic performance financial management dashboard for clients.

I hope you're continuing to find this new column on financial advisor technology to be helpful! Please share your comments at the end and let me know what you think!

*And for #AdvisorTech companies who want to submit their tech announcements for consideration in future issues, please submit to [email protected]!

Weekend Reading for Financial Planners (Jan 7-8)

January 6, 2017 02:51 pm 3 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the news that President-Elect Trump has selected Wall Street attorney Jay Clayton to take over as Commissioner of the SEC for Mary Jo White... signaling a potential shift of the SEC's focus away from rulemaking and enforcement, and putting into doubt whether the SEC is likely (or not) to move forward on its own fiduciary rule in the coming years.

Also in the news this week is progress from the Department of Labor to carve out a Financial Institution exemption for IMOs to qualify for the Best Interest Contract and oversee independent annuity agents selling indexed annuities, and a new study from Cerulli finding that despite their tech-savvy inclinations, younger consumers are actually the most likely to be willing to pay for financial advice (but still necessitating a different business and service model than the traditional AUM-centric comprehensive-wealth-management approach used for retirees).

From there, we have a number of articles on marketing and business development this week, including: how to make 2017 the year you generate a better "return on effort" by better focusing your marketing activities; the importance of managing your digital first impression to prospects who check you out online; the core information than any/every financial advisor website must convey to prospects (but most don't); how a "Now" page on your website can help humanize you and make a better connection to prospects; a study that found the fastest-growing RIAs really are more likely to effectively check the boxes on digital marketing strategies; and a look at how many advisors may be self-sabotaging by separating "business and friendship" when in reality they should focus on conveying their passion and let friends and colleagues who want help come to them and work together.

We wrap up with three interesting articles: the first is a call from Don Trone of 3Ethos to the CFP Board to stop holding out as a fiduciary champion when the CFP Board's practice standards still allow many CFP certificants to avoid a fiduciary duty, and the organization's opaque governance and limitations on its own accountability make it look hypocritical in calling for higher standards for advisors; the second is a look at how the world of mutual funds also faces an odd double-standard, where 401(k) plan administrators can be sued for using high-cost mutual funds that they don't even profit from, but the mutual fund companies themselves face no accountability for trying to sell those high-cost funds in the first place; and the last is a fascinating look from the Wall Street Journal at the evolution of the 401(k) plan, and how even its original creators are not happy with how the 401(k) plan has largely replaced the defined contribution pension plans it was originally supposed to just supplement.

And for those who may be interested, at the end you can check out what I've done to implement my own New Year's Resolution to get healthier in 2017 – by supplementing my existing standing desk with a new under-desk treadmill. In fact, all the background articles for this week's Weekend Reading were curated for you as I walked (in place) for several miles while reading and typing!

Enjoy the "light" reading, and I hope you had a safe and happy New Year!

Create A Stop Doing List To Start Growing Again In 2017

January 5, 2017 07:16 am 3 Comments CATEGORY: Personal/Career Development

Time management is crucial, as we're all limited by the same 24 hours in a day and 168 hours in a week. The challenge, however, is that even knowing time management is important, sometimes you don't even realize there's a problem until it's too late. Like the analogy of the boiled frog, that will just sit in a pot of cool water that heats gradually until it boils itself to death (never realizing the growing threat), the slow and steady accumulation of clients can mean that we overburden ourselves too slowly to realize we need to something about it, until by the end we're buried and it feels like there isn't even enough time to fix the problem!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, I share my number one tip for getting "unstuck" in the New Year if you've hit the wall: create a "Stop Doing" list!

As contrasted with a "To-Do" list of things that must be done, a "Stop-Doing" list tells us things we should not be getting done. Or at least, not be personally doing anymore. In other words, it's about making a commitment to creating free time by literally not doing as much as you have in the past.

So how do you figure out what goes onto a Stop-Doing list? The easiest way it to simply list out all of the tasks you do routinely and repeatedly... and then figure out how to stop doing them and instead delegate them to someone else.

Unfortunately, delegation itself is hard. But an easy way to delegate repetitive tasks in particular is through the use of screencasting software. You simply need to identify a task you complete repeatedly, record yourself doing it while talking through each of the steps, and then give someone else the video to use as a guide! It's a way to train on how to do a delegated task, in no more time than it takes to just do it anyway (but you'll never have to do it again!).

For the tasks that are less repetitive and require more expertise, you can look to hire outside professionals to free up more of your time. Because the reality is that you can't be the best at everything in a business. Focus on the most important revenue-generating (e.g., client-facing) responsibilities, and let go of the rest. Fortunately for advisors, a whole range of services providers are cropping up that specialize in allowing advisors to outsource certain business activities.

The bottom line, though, is that good time management is about saying "No". Whether that means saying "No" to repetitive tasks you can delegate, or "No" to less value-adding responsibilities you can outsource (or just let go of altogether), creating a "Stop-Doing" list for 2017 may be one of the most effective ways to gain control over your schedule again!