Enjoy the current installment of "weekend reading for financial planners" - highlights this week including news on the regulatory front, a number of practice management articles, a few articles about the current difficult investment environment (and whether we may be tipping, or have already tipped, into a recession) and an interesting piece about how the mere gender of the advisor can impact client responses about risk tolerance. Happy reading!Read More...
Borrowing money to invest is a risky thing for individuals to do. While it's a common path for businesses - borrowing money to plow into investments, infrastructure, staff, expansion, etc. - it is done in part because business structures allow for limited liability; in other words, we often borrow in business specifically because the debts cannot track back to business owners the way individual borrowing can. Accordingly, for most individuals, the only major debt that is taken at all is a mortgage to purchase a house, and only because that's a "long term" investment (and because we couldn't afford a house any other way); most other forms of individual debt are considered "bad" debt and only used as a necessity to be paid off quickly (e.g., credit cards or auto loans). As a result of these attitudes about debt, I'm not certain I have ever seen a financial planner tell a client "since you're low on cash flow right now, you should take out a loan so you can have money to buy stocks in your 401(k) this year." Tax deferral on retirement contributions aside, it's just viewed as too risky by most to borrow money just to invest in equities in a typical investment account. There's just one problem... by telling clients to keep their mortgages as long as possible while building their retirement accounts, we're doing the exact the same thing: telling clients to invest in the stock market by borrowing. Read More...
With the never-ending onslaught of information in today's world, I am often asked what I am reading, as someone who consumes perhaps an abnormally large amount of financial planning content. Accordingly, I've decided to start a new column for this blog, called "Weekend Reading" - where I'll share a few of the more interesting articles I've read in the current week. The goal is to keep it to no more than an hour's worth of reading; something you can do in a single sitting when you're taking a rest over the weekend and trying to keep up with the financial planning world. Here I offer up the first week's articles. I hope you find it helpful! Read More...
Market volatility is a stressful time, not only for clients, but often for planners as well. Not only does client activity rise, with more phone calls, meetings, and some hand holding, but at the same time revenues come under pressure, as new (and sometimes existing) clients often become less willing to implement, and firms with revenue is tied to the markets can actually see an outright decline in income. But the latter part, at least, is not something you have to just accept; there are ways to hedge the revenue and profit risk in your practice, and so far, those strategies are doing exactly what they're supposed to!Read More...
Last month, the CFP Board released proposed changes to the CFP certification experience requirement in order to earn the CFP marks. This weekend the comment period closed; in this blog post, I share the feedback that I submitted. What do you think about the proposed changes?
Hanging prominently on the rear wall of the chambers of the Financial Services committee hearing room in the Rayburn House office building is a full-length, tastefully executed portrait of FINRA’s chief lobbyist. That would be Mike Oxley, the former chairman of that committee and a namesake of Sarbanes-Oxley fame during the congressional crackdown on the Enron accounting scandals. Oxley’s job: get his client some sweet new regulatory turf composed of 11,000 of the biggest investment adviser firms in the country before brokerage advice dries up in the marketplace. So far the pay is good -- $125,000 reported in the first half of 2011 -- and more where that came from.
