Kitces.com - Advancing Knowledge in Financial Planning

The New Ronco Fiduciary Standard – And More!

July 18, 2011 06:39 pm 0 Comments CATEGORY: Planning Profession

Coming soon to a branch office in your neighborhood: the latest – and greatest – fiduciary standard ever! No scaling. No cutting or gutting! Blended just the way Wall Street likes it.

Forget that the fiduciary duty is an overlay of principles designed to fill in the gaps of law and regulation to assure that the adviser acts in the best interest of the client. A traditional fiduciary duty, relying on legal precedent, would create an overarching, nearly bullet-proof standard unassailable by Wall Street lawyers eager to poke Swiss cheese holes in it.

Why "Fiduciary" Might Actually Be A Terrible Marketing Strategy!

July 15, 2011 03:16 pm 11 Comments CATEGORY: Marketing

One of the strategies that many financial planners use to differentiate themselves is to communicate that they are fiduciaries: legally bound to put their clients' interests before their own. In fact, as the debate about the fiduciary vs suitability standards has increased in recent years, more and more advisors who are subject to fiduciary regulation are promoting it as a differentiator in the marketplace. Yet in reality, most people generally assume that anyone they're doing business with will treat them fairly - at least until proven otherwise. Which means that claiming you're a fiduciary isn't necessarily a differentiator - unless you actually go so far as to bash your competition and accuse them, implicitly or explicitly, of being liars and cheaters. Could this be part of why the fiduciary message doesn't really connect in the marketplace? Because it's turning into a giant negative advertising campaign where you bash the competition instead focusing on the value you actually deliver?

Could Stock Options Be A Practice Management Tool?

July 11, 2011 02:42 pm 5 Comments CATEGORY: Practice Management

Learning about stock options is a staple of investment education; whether it's the investment section of the CFP certification curriculum or the Series 7, virtually all planners learn about the basics of stock options. However, in practice, options are very rarely used for hedging the typical client portfolio, due to a number of reasons. Nonetheless, there is perhaps an even better use of options for hedging - not to protect a client portfolio from the next bear market, but to protect the profit margins of the financial planning practice!Read More...

Common – And Wrong – Assumptions about the Safe Withdrawal Rate Research

July 8, 2011 06:37 pm 6 Comments CATEGORY: Retirement Planning

As safe withdrawal rate research gains in popularity, it is both increasing used - and misused - by financial planners and the press. Although the research does have its limitations - which I discuss frequently in my presentations at various financial planning conferences throughout the year - and is built on many assumptions that deserve to be challenged, a rising number of safe withdrawal rate critics appear to criticize the approach based on inaccurate statements. So let's clear up a few points of confusion about safe withdrawal rate assumptions. Read More...

6 Ways A Planner Loses New Clients Before Ever Meeting Them!

July 7, 2011 04:48 pm 3 Comments CATEGORY: Marketing

There is a perception in the financial planning world that the process of acquiring a new client begins at the first meeting - the so-called "approach talk" - and therefore any firm that does a good job at converting prospects into new clients in those early meetings must have an effective business development process. Firms that want to grow more/better/faster are encouraged to refine their process, materials, and techniques used in the approach talk to improve the rate at which prospects convert into clients.

Yet the reality is that from the client's perspective, the process actually starts much earlier; and because the "pre-meeting" parts of the process are so ignored by most planners, the reality is that many (or even most!?) potential clients may be lost before you ever have a chance to meet them!Read More...

Should Fiduciary Planning Firms Have Minimum Capital Requirements To Protect Consumers?

July 6, 2011 03:40 pm 2 Comments CATEGORY: Planning Profession

Should fiduciary wealth management firms have minimum capital requirements, to ensure they can make good to clients if they do fail in their fiduciary duties? One of the professed strengths of the RIA model is the fact that such firms are held to a fiduciary standard, providing a higher level of legal accountability for firms that fail to put their clients' interests ahead of their own. But strictly speaking, that really only holds as a consumer protection if the firm has the financial wherewithal to actually pay damages, should they arise. Read More...