feed - Part 85

Weekend Reading for Financial Planners (Nov 8-9)

November 7, 2014 03:01 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with an article highlighting the recent dispute between the CFP Board and (former) CFP certificant Nigel Taylor, who surrendered his CFP certification after an allegation that his firm was in violation of the "fee-only" compensation disclosure rules... and has, in the process, highlighted a critical concern regarding whether the CFP Board has the same scope to enforce its compensation disclosure rules against a firm in the way it does against individual CFP certificants.

From there, we have a large number of practice management and career development articles this week, including: how the effort that potential employees put into the process of applying for a job with you may be more important than their resume and background and experience in the hiring decision; a pair of articles that provide suggestions and tips on how to hire (young) advisors, and build a process around doing so; how advisory firms must learn to shift from focusing on rainmakers to grow and instead adopt firm-wide marketing strategies that allow everyone to participate and support the growth process; tips for young advisors who find themselves rising in their firms and becoming a Millennial manager for the first time; a look at how many young advisors are adopting a "career portfolio" by diversifying income streams across multiple business and freelance endeavors; suggestions on how to evaluate whether your client service team is actually doing a good job servicing clients; and a look at how different "mercenary or missionary" cultures in advisory firms can impact their growth and success over time.

We wrap up with three interesting articles: the first looks at how the financial blogger conference FinCon may be a good template for how advisor conferences need to change to gain better engagement and attendance from young planners; the second look at why it is so difficult to get new clients to make a change to a new advisor, and how the biggest key to success may not be about better communicating your value (although that matters too!) but simply showing them how you will make the process of change itself as easy and hassle-free as possible; and the last provides an interesting reminder that while it's important to be conservative in helping clients to their financial goals, planners should be cautious not to superimpose their own risk and concerns as planners onto their clients' lives, or the advisor risks causing the client to leave a large inheritance but fail to enjoy their wealth with the time they had to enjoy it!

And also be certain to check out the videos at the end from Bill Winterberg, highlighting some of the news and buzz from this week's Schwab IMPACT conference! Enjoy the reading!

Weekend Reading for Financial Planners (Nov 1-2)

October 31, 2014 03:01 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the big announcement that Charles Schwab is entering the "robo-advisor" fray, with an offering called "Schwab Intelligent Portfolios" that will be available for consumers (and shortly thereafter as a white-labeled version for RIAs on the Schwab platform), and will be free to use with only a $5,000 minimum (and automated tax-loss harvesting starting at $50,000).

From there, we have a number of practice management and technology articles this week, including a discussion of what to look for when merging smaller advisory practices into your own firm (from the perspective of someone who's done several such deals, both successful and not), tips for advisors who want to get "cyber liability" insurance to protect against the risk of cyber attacks and wire fraud, guidance on how to form a client advisory board, and a look at how an online chat tool on your website can help engage visitors and turn them into genuine client prospects.

We also have a few more technical articles this week, from a Morningstar analysis of the rise of passive investing that finds predictions that consumers are abandoning active management for low-cost indexing may be overstated, to a look at why it's so significant that the Treasury and IRS gave the green light to deferred income annuities inside target-date funds, an analysis of consumer borrowing options that find borrowing from a 401(k) loan may be quite underrated (at least relative to the other borrowing options typically available to consumers), and a good summary of basic strategies and resources to families who haven't saved enough (or anything) for college and are now trying to figure out what to do as the kids prepare to apply.

We wrap up with three interesting articles: the first looks at how not only do many advisors have a problem branding themselves, but that the entire financial planning profession has a "branding problem" due to a lack of clear vision about its fundamental role and purpose in society; the second is a critique by GMO's James Montier of the whole concept of managing companies by trying to "maximize shareholder value" and how the incentives that have been created are actually damaging (long-term) shareholder value; and the last is a fascinating look at how too much positive thinking can actually be damaging to achieving goals, and that balancing optimism with realism is crucial to obtain the motivation necessary to pursue the goal... which has some notable implications for how we as financial planners guide our clients towards retirement! Enjoy the reading!

Real-Time Collaborative Financial Planning And The Evolving Role Of The Financial Advisor

October 29, 2014 07:01 am 21 Comments CATEGORY: General Planning

With the ever-increasing breadth of information available online with each passing year, consumers have more and more information at their fingertips – accessible with a smartphone or tablet! – and problems that once required paid experts for solutions can now be resolved with a quick Google search.

Yet while the power of internet searches can solve more and more complicated problems, when it comes to the real-world challenges of our financial lives, we hit a wall; some problems are just too complex to be solved with information alone, and still require the guidance of an expert to navigate. Of course, real world financial planning problems can be so complex, the financial planner can’t and won’t likely have all the answers, either. There is too much uncertainty for a known outcome, too many what-if scenarios to consider, and ultimately most people face practical constraints on their resources that require them to choose from the available trade-offs; there are no “right” choices, just paths to consider and consequences to weigh.

Which means in the end, the highest and best purpose of financial planners may not simply be to consult with and answer complicated questions, but to actually work collaboratively with clients utilizing technology to help them simulate the possibilities in real time, choose which goals to pursue, and then leverage the planner’s knowledge and experience to craft a plan to get them there.

Weekend Reading for Financial Planners (Oct 18-19)

October 17, 2014 02:01 pm 2 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the big announcement that the "robo-advisor" Betterment has launched an Institutional platform that will partner with Fidelity to offer a "robo" solution for advisors to use with their (smaller) clients.

From there, we have a number of practice management articles this week, including a look at new compensation models being explored by advisors who are looking to get away from the AUM model (or serving clients who simply don't have the assets to work on an AUM basis in the first place), examinations from two recent benchmarking studies about what top performing firms do that are different than the rest of the pack (including differentiating themselves with niches and specialization to support their pricing, and using "non-professional" support staff to enhance the productivity of their lead advisors), and an interesting article by Bob Veres looking at the wide range of changes being recommended to advisors and sharing his own take about what is and is not really important for advisors to focus on right now.

We also have a few more technical articles this week, from a review of target-date funds finding that many are becoming increasingly aggressive and equity-centric in the current low bond yield environment (with one fund as high as 94% in equities for someone in their 40s!), to an interesting profile of economic and retirement policy researcher Jeffrey Brown (who may not be familiar to most advisors but probably should be!), to an interview with Nobel price winner Bill Sharpe who has been increasingly focusing his current research time on the complex challenge of retirement planning. There's also an article looking at how, despite all the ongoing fears, health care inflation for seniors appears to be slowing, as the latest announcement of Medicare Part B premiums will be $104.90/month again for the third year in a row.

We wrap up with three interesting articles: the first is a comparison of popular risk tolerance tools FinaMetrica and Riskalyze, finding that one seems to be far better as a sales and prospecting tool for clients but the other may be more defensible in court; the second provides some tips on efficiency and productivity based on the latest research of behavioral finance expert Dan Ariely; and the last is a profile of venture capitalist and technology innovator Marc Andreesen, who created the first popular web browser and backed Twitter, Facebook, and AirBnB, and now sees opportunities for similar disruption in financial services (especially around how big banks charge for facilitating credit card and banking transactions, as "crypocurrencies" like Bitcoin gain momentum).

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including his take on the recent announcement that Betterment Institutional will partner with Fidelity, and how amidst the SEC's push for better cybersecurity with advisors they lost 200 of their own laptops with potential client data (oops!)! Enjoy the reading!

Weekend Reading for Financial Planners (Oct 11-12)

October 10, 2014 02:01 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the latest in the ongoing saga of the CFP Board's compensation disclosure woes; the latest news is that another CFP certificant was accused of violating the fee-only rules by also owning an insurance company, but has avoided a CFP Board investigation by dropping his CFP marks, "resolving" the issue but raising questions about how this was even possible (as it violates the CFP Board's own Terms of Service to drop the CFP marks with a pending disciplinary issue) and potentially setting a dangerous precedent that encourages other CFP certificants to simply break the rules and then drop their marks if a complaint is ever filed so they can avoid any public discipline.

From there, we have a few practice management articles this week, including one article that looks at tactics firms are taking to attract talent given the shortage of young advisors coming into the business, another that reviews Fidelity's recent "Recruiting Redefined" study that finds the greatest challenge for bringing in talented young advisors may be the product-sales-centric focus of much of the industry and the fact that most college students aren't even aware of a potential career as a comprehensive financial planner, a third article that provides a good reminder of how establishing a succession plan with an existing staff member can avoid communications breakdowns that damage the firm, and a final article that explores how for firms that have focused on holistic advice and not "sales" the challenge now may be on to shift the firm's culture to promote more business development or face declining growth rates as the founders eventually wind down their own efforts.

We also have a few more technical articles this week, including a tale of woe from the tax court about how not do try to invest in real estate using your IRA, an article about the unique situations where it actually does make sense for a married couple to file tax returns separately and not jointly, a discussion of the importance of not just digital asset planning in general but especially for small businesses where digital assets can have significant value, and a nice retrospective look from the Journal of Financial Planning at the so-called "4% rule" as this month is the 20th anniversary of Bengen's seminal research article.

We wrap up with three interesting articles: the first looks at the rise of "prize-linked savings accounts" that pair together small savings accounts or CDs with a "bonus" lottery ticket for a small monthly prize to encourage savings behavior (as even if the person doesn't win, they still saved!); the second looks at the rise of patent trolls in the context of online financial planning and investment advisory tools and whether the "robo-advisors" may face a patent challenge; and the last discusses why a fiduciary standard is crucial to clean up the industry, as when standards are otherwise too low a few "bad actors" can actually drive away the good and legitimate businesses to the long-term detriment of consumers.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including the announcement that Schwab may soon be rolling out a "robo-advisor" solution of its own (that would potentially be available to advisors using their platform!), a new digital estate planning assistance tool, and more. Enjoy the reading!

The 8 Best Conferences For Financial Advisors In 2015

October 6, 2014 07:01 am 18 Comments CATEGORY: Conferences

As someone who will speak at almost 70 conferences this year, I've participated in nearly every major conference available for financial planners. Given that there are so many conferences, though, I know it can be incredibly difficult for most advisors to select the right conference for themselves each year, and I am often asked for recommendations about what I think the "best conferences" are to attend. Of course, what is "best" will vary from one advisor to the next, depending on their own needs and what they're looking for!

Accordingly, in 2012 I started to craft my own annual list of what I consider to be the "best-in-class conferences" for financial planners (in the US, and now with a suggestion for our international readers as well!), separated into categories for advisors to match to their needs. This year's conference categories are: Best Technical Content, Best Estate Planning, Best for Advisor Technology, Best Investment Management, Best for Advanced Practitioners, Best Overall Value, Best International Conference, and Best Practice Management. Excluded from the list in 2015 is "Best Virtual Conference" for the simple reason that increasingly, more and more existing conferences are becoming available for virtual attendees, eliminating the need for standalone virtual events!

Of course, the reality is that the conference season isn't even quite over yet for 2014; nonetheless, as we head further into the fall season, it's time to start planning for next year, especially since some January conference early bird registrations close soon! So I hope you find the details of this list (including some conference discount codes for readers of Nerd's Eye View!) useful for you to use as your own guide in setting your conference budget and selecting events to attend for yourself and/or your team for 2015!

Valuation-Based Tactical Asset Allocation In Retirement And The Impact Of Market Valuation On Declining And Rising Equity Glidepaths

September 17, 2014 07:01 am 11 Comments CATEGORY: Retirement Planning

For retirees who are more concerned about running out of money in retirement than leaving a large inheritance behind, the optimal retirement asset allocation strategies shift from focusing on wealth maximization and owning as much in equities as you can tolerate (to provide the greatest return on average), to approaches that do a better job of preserving wealth in adverse scenarios (even if it costs excess upside when times are good).

This retirement approach of focusing on minimization to spending risks over maximization of wealth accumulation has led to a wide range of retirement asset allocation and product strategies, including the use of annuities with guarantees, bucket strategies with cash reserves, and most recently the “rising equity glidepath” approach where portfolios start out more conservative early in retirement and become progressive more exposed to equities over time as bonds are spent down in the early years.

The caveat of risk minimization strategies, though, remains the simple fact that most of the time, they turn out to be unnecessary, as the risky event never actually manifests. As a result, tools like Shiller CAPE that allow advisors to understand whether clients are more or less exposed to a potential decade of mediocre returns (which brings about the “sequence-of-return risk” in retirement) can be remarkably effective at predicting when it’s necessary to focus on risk minimization in the first place, and when wealth maximization may be the more prudent course.

In fact, as it turns out, market valuation measures like Shiller CAPE can actually be so predictive of the optimal asset allocation glidepath in retirement, that the best approach may not be to implement a rising equity glidepath or a static rebalanced portfolio at all, but instead to adjust equity exposure dynamically based on market valuation from year to year throughout retirement. While this kind of tactical asset allocation approach is not necessarily a very effective short-term market timing indicator, the results suggest nonetheless that it can help to minimize risk when necessary, take advantage of favorable market returns when available, and have some of the best of both worlds – albeit with the caveat that markets can still deviate materially in the short run from what valuation alone may imply regarding long-term returns!

Weekend Reading for Financial Planners (Sep 13-14)

September 12, 2014 02:57 pm 0 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with a call for better regulation of financial planning as a distinct calling unto itself, recognizing that in Massachusetts it's harder to get a license to be a cosmetologist than it is to become a financial planner! There's also an article discussing the recent rumored-to-be-on-a-fast-track NASAA regulatory proposal (now in comment period) that may require state-registered RIAs to adopt more substantive business continuity and succession plans for the protection of their clients.

From there, we have a few interesting new studies and articles on the so-called "robo-advisor" trend, including a Gallup poll that finds investors still prefer dedicated human advisors to financial website solutions by a 2:1 margin (and more affluent individuals favor the human solutions even more), a Spectrem Group study that finds for consumers who do plan to work in an online environment that the robo-advisors may actually be slightly preferable to human advisors engaged virtually (though there may be enough interest for both to succeed), and an interesting discussion from Mark Hurley about how ultimately the technology-will-replace-advisors threat isn't really any more dangerous today than it was in 1999 (when similar comments were made) and that ultimately much of the technology that backs today's robo-advisors will likely end out being used by the rest of the financial services industry (rather than continue to compete with it).

We also have several investment articles this week, including: a look at how some advisors are starting to adopt small allocations of Bitcoin into client portfolios; how Bitcoin does not really function (yet?) as a true currency but as a non-liquid investment asset may still improve risk-adjusted returns for portfolios (at least based on the historical track record for the virtual currency, which may or may not persist in the future); a fascinating look from Howard Marks of Oaktree at how true risk is more about the possibility of permanent loss of capital than about volatility, but that the truer measure of risk is also surprisingly difficult to quantify and apply effectively; and a discussion from Jason Zweig of the Wall Street Journal at the behavioral finance phenomenon of "shared attention" and the fact that who you choose to listen to and follow and get your information from can have a surprisingly powerful effect (good or bad) on your (investment) results.

We wrap up with three interesting articles: the first looks at how the only real way to stay competitive in today's environment is to be a continual learner, or else face stagnation and boredom that can undermine yourself and your company; the second discusses the five essential skills that planners must learn (as distinguished from the technical knowledge we must have to be competent) if we truly want clients to implement our financial advice (hint: it's all about the key skills that create true rapport and trust); and the last is a piece by industry commentator Bob Veres that takes an interesting look at the current regulatory environment and suggests that the real problem is not that we need to apply a new fiduciary standard to brokers but simply that the SEC has allowed the brokerage industry to drift too far from where it once was and should just do a better job enforcing the rules that were originally written which require a clear(er) separation of brokerage firms and investment/financial advice in the first place. Enjoy the reading!

Weekend Reading for Financial Planners (Sep 6-7)

September 5, 2014 12:03 pm 2 Comments CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with the announcement of a series of events by the Institute for the Fiduciary Standard and TD Ameritrade to celebrate (and build awareness for) "Fiduciary September" this month, along with news of the latest in the Camarda vs CFP Board case (including a much-discussed request by the CFP Board for the Camardas' entire client list even though they have not been accused of client mistreatment), and a study from Pershing suggesting that the "fee only" label may not have as much cache as believed and for consumers is analogous to just saying "no commission" instead.

From there, we have a few retirement-related articles this week, including the latest from Wade Pfau and David Blanchett about the use of Monte Carlo analysis and the relevance (or not) of the 4% rule in today's environment, a review of some of the proposals to "fix" Social Security and how it might change in the next 20 years (when the trust fund is scheduled to run out and force at least some change), and a look at how researchers are suggesting that the ideal retirement vehicle of the future really might be a variable annuity (albeit not quite the types available in the marketplace today).

We also have a few practice management and marketing articles, from a look at how the evolution of Google's search algorithms are favoring specialists over generalists in search results, to ways you can actually try to become a "thought leader" (and not just abuse the increasingly overused term) to enhance your firm's appeal to prospective clients and potential referrers, and some marketing tips for those who are specifically trying to reach a younger Gen Y clientele (for whom many "traditional" marketing methods don't necessarily work).

We wrap up with three interesting articles: the first takes a harsh look at what it really means to be client-centric, suggesting that most advisory firms can't possibly be truly client-centric because they're trying too hard to be everything to everyone (which means they can't really center their focus on any particular type of client); the second suggests that financial services firms and software vendors need to stop focusing on individual client products/accounts and come up with a "household" identifier to make it easier to understand and group a client household's entire balance sheet and cash flow activity; and the last is a look from Bob Veres at the ways that advisors are trying to differentiate themselves in an environment where it seems increasingly difficult for many to do so.

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including a look at the changing landscape of technology from the major RIA custodians and tips to stay safe online after this week's "Celebgate" hack of private photos! Enjoy the reading!

Weekend Reading for Financial Planners (August 30-31)

August 29, 2014 02:22 pm 1 Comment CATEGORY: Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with an interesting lawsuit that has been filed by "whistleblower" David Danon against Vanguard, suggesting that it is abusing its unique corporate structure to avoid any Federal and state income taxes that should be paid (to the tune of $1B of foregone Federal taxes in the past decade), in addition to implicitly giving it an unfair competitive advantage as a result.

From there, we have a few investment-related articles this week, including a discussion of whether the era of the stockpicker may be definitively coming to an end as Vanguard approaches $3 trillion of AUM and the expansive march of investment tools and technology makes "everyone" such a capable investor that there's not enough alpha left to go around, the emerging price war between established financial services companies (and financial advisors) and technology companies (e.g., robo-advisors) who are driving down the cost of a pure passive strategic portfolio that is regularly rebalanced, and a fascinating article finding that low-cost active managers really may be providing value (including Vanguard's own active funds) and that the real issue is not about active vs passive but simply high-cost versus low-cost.

We also have several technical financial planning pieces, from a great discussion by David Blanchett and Wade Pfau about how most of the criticisms of Monte Carlo are not actually faults of Monte Carlo but simply flaws in how our typical Monte Carlo tools are designed and used (and could be solved with better software tools and assumptions), to a look at the re-emergence of "jumbo" reverse mortgage loans after "smaller" HECM reverse mortgages have dominated the landscape for 5 years (though the new loans may still be too expensive to be competitive). There's also a good summary of the recent Social Security Trustees' Report, highlighting that Social Security is not as bad off as most suggest!

There are a couple of practice management articles as well, including how advisors can take advantage of the "small data" opportunities in their practices along with the "big data" solutions that are being built for them, some tips about processes/procedures to implement to avoid HR headaches as an advisory firm owner, and a nice guide on how to onboard a new employee in an advisory board.

We wrap up with three interesting articles: the first looks at whether the financial services industry needs to get better about communicating more visually and putting some "glamour" into solutions (without being abusive); the second is written by a so-called "0.01%er" about the problems with income inequality and making an interesting case for why a significant increase in the minimum wage could be good for both the middle class and capitalism; and the last paints a sad but disturbingly accurate picture of just how "strange" the financial services industry really is, in a country where doctors must attend medical school and lawyers must pass the bar - and even becoming a taxi driver in London requires passing a test that can take years of practice - but in financial services, "managing money requires little more than a desire to manage money" (and a very rudimentary licensing test)!

And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including big changes for online data storage for users of Dropbox and a look at whether the latest Google Apps are making Microsoft Office less necessary than ever! Enjoy the reading!