Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights an interesting article about the benefits and risks of exchange-traded notes, and two new articles about retirement spending and how to consider more flexible retirement spending plans. We also look at two striking investment pieces, one from Morningstar Advisor that highlights upcoming research about how the rise of index trading may be increasing the correlation of markets and reducing the benefits of diversification, and Mauldin's weekly update suggesting that Greece's restructuring deal is not the end of the European debt crisis. We wrap up with a nice article from Bob Veres about what it takes to be a successful financial planner, some tips from a recent Harvard Business Review blog about how to make yourself more focused and productive to reduce feelings of burnout, and the big media news of the week - the very public resignation of a Goldman Sachs executive director named Greg Smith, suggesting that the company has lost its moral bearing. Enjoy the reading!
One of the primary business virtues of comprehensive financial planning is the deeper relationship that is formed as a result of going through the financial planning process. The experience helps to engender trust between the advisor and the client, which in turn can aid in client retention, and make the client more comfortable referring the advisor to others. Yet at the same time, one of the primary challenges of being comprehensive and holistic is that when you do so much for the client, it's difficult for the client to explain what it is the advisor really does, in the process of making a referral.
In fact, a recent survey highlights this striking contrast - clients of holistic advisors were almost 20% more likely to provide referrals, and amongst those who didn't refer, clients still generally felt that holistic advisors were more likely to have earned the right to receive referrals. The survey results also paradoxically revealed that clients who didn't refer their holistic advisors were almost 30% more likely to state it was because they didn't know any referrals or were uncomfortable to make referrals!
In other words, holistic advisors were simultaneously more likely to earn the right to receive referrals, yet ended out making a significant portion of their clients less comfortable and less able to think of anyone to refer!Read More...
Prior to the implementation of the so-called "second Bush tax cut" - the Jobs Growth and Tax Relief Reconciliation Act of 2003 - the long-term capital gains tax rate was 20%, which was reduced to 10% for those in the lowest tax bracket. With the 2003 tax legislation, the maximum long-term capital gains rate was reduced to 15%, with a tax rate of 5% for the bottom two tax brackets, and in 2008 the latter rate was reduced to 0%. Those 15% / 0% long-term capital gains rates remain in effect today, and are scheduled under the Tax Relief Act of 2010 to continue until the end of 2012. After that point, the current laws expire, and the long-term capital gains rate reverts to its prior 20% / 10% rates... with the addition of another 3.8% for high income clients under the new Medicare unearned income tax! Not only does the scheduled increase in long-term capital gains rates represent a rising potential tax burden for clients in the future, but it also creates a surprisingly counter-intuitive but beneficial tax planning strategy - instead of the traditional approach of harvesting capital losses, in 2012 it's time to harvest long-term capital gains!Read More...
Every community has its home - that place we all feel compelled to return to from time to time. In the financial planning world, that home is the FPA Experience conference - the annual convention of the Financial Planning Association that has become the biggest event of the year dedicated to the financial planning profession. Thousands of people from across the country - and increasingly, around the world - feel the need to visit the financial planning "homeland" and attend the conference. Some attend for the continuing education credit; others attend to be a part of their financial planning community. Personally, though, I believe the best reason to attend the conference is to see the latest offerings in the exhibit hall for the financial planning world, from products to services to vendors and technology providers. In fact, I would even say we have a professional ethical obligation to see the "big show" in financial planning at least once every couple of years.
As financial planning continues to grow, it becomes more and more competitive, and increasingly difficult for firms to differentiate themselves. As a result, firms slow their growth rates, and some struggle to survive or grow at all. While most firms work harder and harder to make marginal improvements in their process, service, and value, to differentiate themselves from their competition, there is an alternative available: to seek to completely redefine the financial planning value proposition, letting go of things that are no longer truly important, and instead focusing on creating value that will make financial planning relevant to new audiences. And as financial planning enters the digital age, there is perhaps more opportunity than ever to begin doing things in a completely different - and better - way. So if you could rewrite the financial planning value proposition from scratch, would you still be doing it exactly the way that you do? Or is the reality that by letting go of "the way things have always been done" we could recreate a financial planning offering that would reach more people than ever? Read More...
Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights an array of industry practice management articles, leading off with a new discussion of "super ensemble" firms - the emerging regionally dominant wealth management firms with $5 billion or more of AUM that are challenging both small local firms and big institutional competitors. We also look at articles about the quickening pace of consolidation, the rising trend of large firms hiring career changers to replace retiring advisors as there aren't enough young people entering the industry, a prediction that flat fees will soon replace AUM as the primary method of advisor compensation, and a look at a new advisor firm offering from a Wharton professor seeking to provide a client-centric platform for new advisors to build their businesses. We finish with a good article from economist Gregory Mankiw in the New York Times about what carried interest really is and why it's so hard to figure out how to tax it, an intriguing look at the risks that western civilization faces from which it must emerge or face a risk of collapse, and a fascinating look at how the popular 60/40 portfolio may actually be far more risky than we commonly believe. Enjoy the reading!Read More...
