Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights a recent development on the regulatory front regarding the SEC's implementation of a fiduciary standard for brokers, and some sharp criticism of FINRA and whether it should even exist from the Journal of Financial Planning. We also look at a few technology pieces, on the rise of Salesforce for CRM, and the emerging use of online scheduling programs to set up client meetings. There's also a great piece from the Journal of Financial Planning on the next generation of Modern Portfolio Theory and portfolio design, and two good investment pieces by John and John (Hussman and Mauldin). We wrap up with an interesting article from Advisor Perspectives on how much of the financial press is misinterpreting and misapplying the Reinhart and Rogoff research about the implications of high debt-to-GDP levels. Enjoy the reading!
As the popularity of tactical asset allocation and using market valuation to inform investment decisions rises, so too do the criticisms to such methodologies. In the long run, this is part of a healthy dialogue that shapes the ongoing evolution of how we invest. But much of the recent criticism to being tactical in particular seems to suggest that if we can't get the timing exactly right, or calculate a valuation that works precisely to predict returns in all environments, that it should be rejected. In reality, though, even just participating in a few booms, or avoiding a handle of extreme busts, can still create significant long-term benefits for achieving client goals. Which raises the question - if we're really focused on the long term for clients, are we expecting too much from market valuation in the short term?Read More...
What one skill (above all others), if you developed and did it in an excellent fashion, would have the biggest impact on you as a financial planner?
This is the question that was posed to the leaders in the financial planning profession. Initially, the plan was to elicit feedback as to where to focus energy in the new year to become a better advisor, but after receiving so many excellent responses I wanted to share the common themes. What is the most important skill? There is always a big focus on the technical side of planning (which is obviously very important), but is it that the most important? Or is it empathy, communication, or relationship building?
The answers varied by the leaders that responded, but the common theme was clearly that in the end, the interpersonal trumps the technical.Read More...
While financial planning has been increasingly engaged in public policy discussions through the Financial Planning Coalition, those interactions have still been largely "selfish" - i.e., pertaining to the regulation of financial planning and financial planners - and have not been regarding broader public policy issues, such as the general fiscal health of the country. On the one hand, it can be difficult for membership associations to take part in difficult public policy conversations when the common bond of membership is professional, and not political; in other words, there are both Republicans and Democrats amongst financial planners, and even if we all agree on the nature of the problem, we may strongly disagree about the appropriate solution, and advocating one path over another can alienate members. Nonetheless, it still seems to me that we could play a more active role, especially in today's environment, by utilizing the unique perspective of financial planning to help make major issues relevant at the personal level. Read More...
Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights a nice technology article for the new year, a great summary of recent retirement research, two notable regulatory actions this week, and some interesting investment and economic discussions for the coming year. We finish with a striking blog post that puts a good perspective on what the Occupy Wall Street movement is about - not resenting the wealthy and successful, but "just" those who profit at the expense of others. Enjoy the reading!Read More...
While the tax code offers a deduction for investment management fees paid by an investor, it is a less than ideal tax deduction. Characterized as a miscellaneous itemized deduction subject to the 2%-of-AGI floor, in practice it is not deductible unless the taxpayer both itemizes deductions in the first place, and has enough miscellaneous itemized deductions in total to exceed the required threshold. In addition, all such miscellaneous itemized deductions are disallowed for AMT purposes - especially problematic since the AMT is somewhat more likely to affect those with sufficient income and assets to be paying such fees in the first place.
To avoid this tax result, some clients and their accountants have been going an alternate route: capitalizing the investment management fee into the cost basis of the assets being managed, which at least provides some tax benefit, by increasing the cost basis and reducing future capital gains (or increasing the losses). Unfortunately, though, the IRS has already responded to the strategy: Just Don't Do It.Read More...
