As the baby boomers move inexorably closer to the point where they begin to retire en masse out of the workforce, so too does financial planning move closer to the point where the majority of experienced practitioners and firm owners will begin to exit the business. Industry guru Mark Tibergien estimates that as many as 2/3rds of all financial advisors may look to exit in the next 10 years, requiring more than 200,000 new planners to enter the industry just to keep the total number of practitioners even. Yet the reality is that so far, the industry appears to be woefully behind. As a result of this prospective workforce distortion, financial planning will potentially undergo significant changes in the coming years, and not necessarily for the good. In a "seller's market" for talent, large firms that can compete with both training and resources, and that have the profit margins to absorb higher compensation costs, will survive and grow; on the other hand, smaller firms may find themselves in a plight of being "stuck" small, unable to attract or even afford the young talent necessary to grow. And in the process, the greatest loser may be the majority of the American public, who simply will not be served when a dearth of planners inevitably causes the few practitioners that remain to be attracted to the most lucrative high net worth clients.Read More...
Enjoy the current installment of "weekend reading for financial planners" - this week's edition starts off with a rather scathing article by NAPFA Chairman Ron Rhoades on why FINRA not only shouldn't be the SRO for investment advisors, but is failing its original charter and should be disbanded altogether. From there, we look at two technical estate planning articles - one on the different ways that incapacity is defined for trigger powers of attorney or even the competence to sign a Will or trust in the first place, and the other on how beneficiaries can potentially try to "bust" trusts that are no longer working as desired. We look at three practice management articles this week, including Mark Tibergien's latest offering on the importance of managing expenses as well as revenue growth, reporting on the recent FA Insight study showing firms with more widely distributed ownership are consistently better performers, and results from an Investment Advisor / ActiFi study at what practice management issues are most important to advisors and where they're currently getting help (surprising result - broker/dealers may be stepping up far more than custodians). We also look at an interesting retirement income analysis from Joe Tomlinson suggesting that SPIAs might be particularly effective for retirement portfolios despite - and in fact, because - of low current rates, and an analysis by Geoff Considine about why advisors may be giving short shrift to Master Limited Partnerships in their portfolios. We finish with a sharp analysis by John Hussman about what's really at the heart of the ongoing global economic malaise, an interesting write-up by Bob Veres about several presentations about trust at the recent FPA Retreat conference, and a lighter article by Abby Salameh on RIABiz abuot how to take a breath and relax to avoid being overwhelmed as a busy advisor. Enjoy the reading!
As the financial planning profession continues its inexorable march towards a fiduciary client-centric standard of care that minimizes or outright avoids conflicts of interest, those most passionate about carrying the torch have often been the most vocal in promoting those standards within their own businesses. Yet recent research shows that from the consumer's perspective, "fiduciary" is confusing and the word "fees" evokes an outright negative response; the special meanings we attach to those words inside our industry have translated poorly to the general public. The key, then, is to figure out how to operate in the interests of clients, while communicating a message that is less about the battles being fought inside the industry and more about how the client benefits. Otherwise, while it's true that those firms doing the best job of truly serving clients may be rewarded with the most referrals, they may not be able to convert those referrals to clients and grow their businesses if they have dug themselves a hole they can't climb out of by using consumer-unfriendly terminology in the first place!Read More...
Between FINRA, the SEC, 50 state investment advisor regulators, and 50 state insurance departments, the world of financial advising is highly regulated, albeit in a very piecemeal manner. As a result of this fractured regulatory dynamic, the reality is that it can often be remarkably difficult for a prospective client to really check out information about an advisor, potentially requiring contact to as many as 102 different regulatory agencies just to determine if the advisor has a clean conduct record.
A new company called BrightScope is seeking to change that dynamic. By collecting publicly available data on advisors from the various regulatory agencies and aggregating it together on a single site that is easily accessible by consumers, BrightScope is helping consumers understand the conduct history of their advisors, in a manner better than the problematic FINRA BrokerCheck system.
And in the long run, BrightScope hopes to expand this even further beyond conduct alone by establishing standards and metrics for everything from advisor experience to education and credentials to investment recommendation performance results. But in the end, will BrightScope really be able to clean up the financial services industry - reaching enough consumers to make itself relevant and turn its service into a viable business model - or is this just another short-term fad that will fizzle away?Read More...
While most aspects of the financial planning update are getting easier, especially as account aggregation software becomes more prevalent - allowing the planner to automatically get regular updates from all client financial accounts, including those not under the planner's direct investment purview - the value of real estate continues to be a sticking point for many planning firms. How do you update the client's net worth statement without slowing the process down by waiting for the client to provide an estimate? Will the client's estimate really even be accurate, anyway? And the process can be even more problematic for firms that set fees based not on assets under management but net worth. How do you get a fair estimate of the value of property that relies on the client when the client's fee is impacted by that estimate? In an increasingly technology-driven world, there's now an answer: with real estate valuation services on the web, like Zillow.
As social media continues to rise in the digital age, financial planners are increasingly getting involved on platforms like Facebook and Twitter. However, fears and misconceptions about social media - along with a general uncertainty about exactly what the point is and why planners should get involved - have dramatically slowed advisor adoption. Yet the reality is that there are several simple and clear ways that platforms like Twitter can be used to create value for financial planners - including some easy ways, like helping the news find you and social listening, that pose no compliance hassles or risks, either! Keep reading for some tips about how to get started, what programs to use, and how to get start getting value from Twitter!
