Financial planning can often involve some pretty long meetings, simply given the complexity of both the lives of our clients, and the solutions from which they must choose. Unfortunately, though, recent research shows that when we have to stay mentally focused for an extended period of time, it can actually lead directly to less effective decision making. Consequently, asking clients to make important decisions at the end of a long financial planning meeting - even one filled with great information and education - may actually be the worst way to lead the client to a well-thought-out decision, due to mental fatigue! Fortunately, though, there are solutions. Some planners may choose to adjust how meetings are structured, making the meetings shorter and/or presenting decision-making opportunities to clients earlier (before they are so mentally fatigued). Alternatively, it turns out that a remarkably effective solution is to actually refuel the brain, with some carbohydrates/sugars that bring the brain the glucose it needs to refresh itself. But in the end - whether it's a shorter meeting, a cookie, or some fruit juice - it's probably time for planners to pay more attention to the client's state of mind before moving to the decision-making phase of a financial planning meeting!
Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights a scary new trend for advisors to be aware of: thieves who impersonate clients and/or hack into their accounts to try to get you to wire money out to the thief's account. From there, we look at a mixture of articles, from a review of the recent upgrades to wealth management software eMoney Advisor, to a call by Bob Veres for new 21st century regulation (and what it might look like), to some good practical tips on how to get more value from networking events with the right questions to ask, and how advisors can start using Pinterest (the latest social media site that is exploding in popularity). We also look at some technical articles on the resurgence of reverse mortgages, and the latest from Wade Pfau in the Journal of Financial Planning on how valuation-based tactical asset allocation can increase safe withdrawal rates and reduce required savings by accumulators. We finish with a review by John Mauldin of the latest jobs report, an interesting blog from the Harvard Business Review about how you should focus on your accomplishments and not your affiliations, and an interview with yours-truly in the Journal of Financial Planning on a wide range of financial planning and professional topics. Enjoy the reading!
As Wall Street firms continue to struggle, beset from all sides by a waning public image, financial uncertainties, numerous regulatory battles that could drastically change their business model, and an ongoing defection of brokers and clients, the independent financial planning community continues to grow. In fact, within a few years, Cerulli predicts that wirehouses will no longer be the largest financial services channel. Yet at the same time, an increasing number of financial planning practices are not only taking business away from traditional wirehouse firms, but proactively focusing client attention on it with every media article that discusses troubles on Wall Street, to emphasize how their firm is different. The challenge, though, is that by trying to differentiate from the Wall Street firms by talking about their problems, we don't actually elevate ourselves - we remind clients of the trust problems in the financial services industry. The end result - celebrating the decline of Wall Street wirehouses may actually help to drag us down with them!Read More...
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!
On January 18, the CFP Board issued proposed changes to its process for addressing bankruptcies of CFP professionals and candidates for certification. Under the current rules, CFP certificants and candidates who experience a single bankruptcy are subject to a hearing by the Disciplinary and Ethics Commission, which may result in disciplinary action including a private letter of censure, suspension, or revocation of the marks. Under the proposed rules, the disciplinary process would be eliminated, and replaced with a disclosure process that would require CFP certificants who experience a single bankruptcy to have such bankruptcy publicly disclosed on the CFP Board's website for a period of 10 years, but no longer otherwise be subject to discipline or restrictions regarding the CFP marks. The comment period for the proposed changes ends on Friday, February 17th, and in today's blog post I share my own comment letter feedback to the rule.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...
For most, the question of "minimums" in financial planning is a practice management issue from the firm's perspective: how much in fees must a client generate to be economically feasible, based on the firm's particular service model?
Yet as financial planning seeks to broaden its scope and serve more people, a question arises from the opposite side of the table: is there a certain amount of income or net worth necessary to even make financial planning advice useful to someone?
Is there such thing as having too little money, income, or wealth, for financial planning to even be a worthwhile thing to pay for in the first place? In other words, is there a minimum for a financial planning relationship, from the client's point of view, below which the prospective client just doesn't have enough income or assets for a financial planner's advice to be relevant?
The membership of the Financial Planning Association has been declining for several years. After a peak of over 28,400 members in late 2002, the organization was largely flat for many years, still hailing at 27,805 members by the end of 2007. But the membership tumbled almost 15% from the end of 2007 through the end of 2009, and it is been largely flat at a base of approximately 23,600 members since then.
The FPA has suggested that its declining membership count is a result of its strong and passionate advocacy positions - in particular, its high Standard of Care and its positions on fiduciary financial planning - which have perhaps alienated some current/former/prospective members, but defends its positions (and their membership-limiting consequences) as being a necessary result of its mission to advance the financial planning profession.
Yet the question arises - if high standards of care and fiduciary financial planning are really at the heart of FPA's membership problem, then why is FPA membership declining even while the number of CFP certificants who are already committed to a comparable standard of care and fiduciary duty continues to rise!?Read More...
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include several recent pieces about behavioral finance (both by, and about, research luminary and Nobel prize winner Daniel Kahneman), some interesting glimpses of how social media and the online world is shifting the process of finding a financial advisor and delivering financial advice, and a few investment pieces about the unraveling European (and now especially, Italian) sovereign debt situation and a growing likelihood the ECB will be compelled to "start the presses" to address it. We also look at two pieces highlighting trends in the industry, especially the RIA space. Enjoy the reading!Read More...
Trust. It lies at the heart of what we do as financial planners. Without a trusting relationship with clients, we cannot work constructively to advise them and help them to achieve their goals. At a broader level, if the public does not trust financial planners, they will be unwilling to work with us in the first place.
Yet at the same time, there is not necessarily a clear agreement amongst financial planners about what exactly it is that best inculcates that trust relationship. It is about establishing the credibility as an expert to become a trusted advisor for the client? Or the intimacy and authenticity necessary to ensure that the client feels safe and comfortable to share with you in the first place, and be willing to act on your recommendations?
If you had to pick one factor as the primary one leading to trustworthiness, which is more important to you: credibility, or authenticity?Read More...
