Weekend Reading for Financial Planners (Feb 9-10)

Posted by Michael Kitces on Friday, February 8th, 6:01 pm, 2013 in Weekend Reading

Enjoy the current installment of "weekend reading for financial planners" - this week's issues starts off with the big regulatory news of the week - that FINRA may be backing away from its efforts to regulate investment advisers - along with two articles about being a good financial planning professional: the first indirectly suggests that perhaps life insurance needs to be recognized as its own profession (with its own professional designation, the CLU); and the other notes that fiduciaries might be trying to hard to get clients by using fiduciary as a tool for instilling fear, uncertainty, and doubt, instead of trying to get clients by acting like a fiduciary in a way that demonstrates leadership and helps clients with their decision-making process.

From there, we look at a series of articles this week about blogging and more generally about using content to attract prospective clients and grow your business as a financial advisor. The first article highlights an advisor interviewed at the recent TD Ameritrade conference who's bringing in $2M per month of AUM purely from blogging in targeted niches; the second looks at how blogging is evolving, noting that while short blog posts are often popular it may be the longer blog posts that really demonstrate your expertise to clients; the third providing a fantastic list of topic ideas for advisors (you'll never have writer's/blogger's block again!), and the last providing some useful tips about how to distribute your blog content so it's read more widely and grows an audience.

Beyond the blogging articles, there's a great piece about how to set good investment defaults with clients so that they will more often make good decisions (or at least need to go further out of their way to make bad ones), an interesting look at how Gen Y advisors may be leaning increasingly towards wirehouses out of a desire for a more structured career environment, a strange-but-true article highlighting research that finds clients may be more inclined to engage in risky financial decisions if they are touched on the shoulder by a woman, and a NY Times discussion of how economics research is beginning to focus on not just the objective economic data but also the subjective data on happiness, raising the question of whether in the future we'll look at Gross Domestic Happiness alongside the country's Gross Domestic Product?

We wrap up with a lighter article from the Harvard Business Review, which serves as a reminder that one of the greatest technology tools to enhance business efficiency and productivity, not to mention client service, was actually invented almost 140 years ago: it's called a telephone, and it's time we picked it up a little more often to just talk to clients (or staff), and perhaps rely a little less on all the email back-and-forth Enjoy the reading!



(Editor's Note: Want to see what I'm reading through the week that didn't make the cut? Due to popular request, I've started a Tumblr page to highlight a longer list of articles that I scan each week that might be of interest. You can follow the Tumblr page here.)

Weekend reading for February 9th/10th:

Exclusive: Watchdog Backs Off Over Financial Adviser Regulation - In the big regulatory news of this week, FINRA CEO and chairman Rick Ketchum went on record Wednesday stating that FINRA was going to back away from its push with the House Financial Services Committee in its efforts to become the regulator for investment advisers; given leadership changes in the House after the 2012 elections, FINRA simply doesn't think it can convince lawmakers to support a change anytime soon, despite an eye-popping $4.9 million it has apparently spent on lobbying since 2008. A follow-up story by Advisor One suggests that this may simply be a short term tactic by FINRA, and that the organization may simply be planning to shift its focus to try to drive legislation through the Senate instead. So stay tuned to see what unfolds for the rest of the year on investment adviser regulation; will FINRA be back soon, or is this an opportunity to take a pause and consider what good oversight of investment advisers should really look like?

2 Designations, 2 Professions - This article by financial planning veteran Vern Hayden in the Journal of Financial Planning provides an interesting look at how the financial planning profession has been evolving, as Hayden notes his own 42-year journey from being a financial planning life insurance salesman to a financial planning tax shelter salesman to a financial planning financial plan salesman to a financial planning get-assets-under-management salesman, to finally becoming a financial planning professional. Hayden notes that as a profession, financial planning has come a long way; although Hayden was around when the CFP certification started, he waited until 1978 before he was convinced that it was a stepping step to becoming a real financial planner. Yet Hayden notes that even as financial planning has grown and evolved, it has had a tenuous-at-best relationship with the life insurance industry, even though so much of what financial planners do still ties to the prudent use of insurance, and that the insurance industry had its own true-professional designation, the CLU. In fact, even Hayden notes that despite his roots and background, he outsources his own client insurance work to a specialist. The ultimate point - perhaps life insurance and financial planning should be recognized as two professions, each with their own key designations, rather than having generalist financial planners do specialist life insurance work, or having specialist life insurance underwriters do broader financial planning work?

The Wages Of Fear - This article by Don Trone in Financial Advisor magazine suggests that advisors may still be relying too much on the use of Fear, Uncertainty, and Doubt (together labeled as "FUD") to motivate prospects to action; it may not be about fear-based selling of products, but Trone points out that a lot of statements advisors make about fiduciary duty to prospective clients still amounts to an effort to create FUD. Trone suggests instead that the real way to persuade and succeed is not to focus on fiduciary FUD, but instead to take on the mantle of client-centric leadership that really helps them to make decisions - in a similar vein to what I've written in the past as well, it's better to inspire clients by being a fiduciary than by talking about it. For instance, talking about your industry knowledge, your track record, your credentials and experience, are all about you - they don't demonstrate leadership or help clients to make decisions. By contrast, understanding the client, the client's business, being responsive to client requests and being accountable to the client, solving problems and marshalling resources, focuses on what you do for the client, and don't rely on FUD at all. In fact, knowing how to execute can be the greatest value of all to the client.

Building A Business On Blogging - This article from Financial Planning magazine provides a brief look at an advisor who's bringing in a solid $2M per month of AUM, just by blogging. There's no social media involved; it appears to be just about creating targeted content, and letting Search Engine Optimization and Google Search do the rest of the work. Of course, "create targeted content that brings in millions every month" is still hard work, and the advisor apparently maintains several dozen niche websites to hit his numbers. Nonetheless, this is a pretty impressive success story, and was highlighted at the TD Ameritrade conference last week. The article is sadly too brief for the kind of information depth that curious readers might have, but does share some good tips from the advisor that really focus on the theme of creating targeted content for a specific niche of clients that deals with what keeps them up at night.

Is Blogging Evolving? - This article from Stephanie Sammons of Wired Advisor raises an interesting question about blogging - is it better to publish short posts that express a quick idea or insight, or longer articles that are more in-depth and detailed, especially when the pressure is always on to keep producing content all the time? Certainly, there's a lot of evidence to support the value of short posts that people can quickly read and consider, but there are benefits of longer articles as well in demonstrating your expertise (in fact, Sammons cites this blog as an example). Ultimately, Sammons suggests that you need to recognize what your audience wants and adapt accordingly, but it's worth noting that if your goal is to demonstrate that you're an expert for your clients (or potential clients), you need to actually create enough content to demonstrate you really are an expert! However, choose whatever medium is preferable for you; if you like to write, you can blog, but if you prefer to talk conversationally you can podcast and if you like to present you can try video. To succeed, though, the real key is to keep going back to what your prospective and current clients are talking about, what's concerning them, and really listen to them; don't get stuck writing in a bubble about things that matter a lot to you, but might not matter as much to the people you want to reach.

Blog Topics Financial Advisors Can Write About - Continuing the blogging theme, this article by Suzanne Muusers of Prosperity Coaching provides a nice guide for how advisors can get inspiration on what to write and blog about - a great resource for those struggling with writer's (blogger's?) block. Muusers breaks the content ideas into several useful categories; for instance, you can write about how to do something (e.g., create a budget, start a part-time business, hire a financial planner, etc.), or answer typical client questions (can I roll over my 401(k), what's the difference between fiduciary and suitability, what should I do with an inheritance, etc.), or share your opinion on a current event/topic in the news (e.g., the economy, inflation, the Fed, etc., but be sure to be specific!). You can also try telling a story (share what keeps you awake at night, or how/why you became a financial planner), discuss issues you're current helping clients with (tips to work through a sticky divorce or how to handle the death of a spouse), or create useful lists (5 things to do when you retire, 6 popular finance websites, etc.) or relevant products reviews (e.g., on finance books, credit cards, etc.). Also, don't forget to share big news and events for you and the firm, any awards and accomplishments, and be sure to share interviews and other things you do with the media. If you're still stumped about what to put on your blog after reading this list... read it again!?

17 Reasons Your Financial Blog Isn't Getting The Traffic It Deserves - This article from Financial Social Media provides some great tips about how to build more traffic to your blog - after all, it doesn't really help to just write the content regularly (the ideal recommendation is twice per week!) if you don't get anyone to visit the site and read it! So how do you drive more traffic? First of all, share it on your social media channels, which means not only scheduling it to post on Twitter (ideally several times as people miss tweets if they're not only at the time!), but also to Facebook, and on LinkedIn (where you can post it to your own timeline, to a group you participate in, or send out an announcement to the whole group). Also, make sure you have tools on your blog that allow social sharing, so it's as easy as possible for your readers to share your content for you, and make sure the site is friendly to mobile devices as well as desktop computers. Schedule your posts to go up in the morning (between 6AM and 10AM) to maximize traffic the day it goes out, make sure you spend time thinking about a title that will really attract some interest, and consider further promoting what you write to forums, through email newsletters, or content sharing partnerships.

Establishing Your Top 10 Investment Default Settings - The behavioral finance research is very clear in showing that defaults matter - we have a strong tendency to do whatever the default happens to be, even if we don't realize it. Accordingly, this article by Bob Seawright on his Above The Market blog provides some great ideas about how to set proper defaults for clients on investment-related decisions, which helps to ensure that at least if you're going to vary from the default you'll have to come up with a good reason to do so! Recommendations include setting a default saving strategy, having an investment plan that by default gives you some exposure to equities for long-term growth (60/40 is a decent start), start passive (if active has a place, it should only be as a deliberate decision to vary from a low-cost passive default), be a cheapskate (fees matter, so the lower cost should always be the default unless there's a specific reason to go another direction), tax efficient is better (especially in today's more progressive tax rate environment!), don't forget to rebalance (and ideally, automate it!), keep it simple, have a good reason to change course (a Mad Money mention of a stock is not a good reason!), and don't be in too much of a hurry to make investment decisions and implement an investment plan. While there may not be many great revelations here, don't underestimate the value of having a clearly defined and articulated set of defaults (for yourself and your clients); it can go a long way to maintaining good and healthy investment behavior!

Gen Y Advisors Unhappy with Independence - A recent Pershing study shows that Generation Y may be less inclined towards the independent track than older generations, which leads to several striking implications for the industry, including a lack of young people to buy out the firms of existing independent advisors who may soon retire, and the fact that a desire for a more structured environment with better technology platforms and more career support is actually leading Gen Y advisors increasingly towards wirehouses over independent firms. The statistics are quite striking, as only 31% of advisors aged 25-39 are satisfied with having gone independent, compared to a whopping 90% of advisors over age 50. However, it's notable that because of the tarnishing of many large firms' brands, younger advisors feel attracted to the structure, but may not be loyal. Perhaps the most salient point of the article comes towards the end, where Generational Insights founder Cam Marston points out that most firm owners talk too much about the struggles and challenges they faced in building their business, and not enough time focusing the conversations on the career possibilities for the new advisor. In other words, if you want to attract younger advisors into the firm, talk less about what the firm accomplished in the past, and more about the potential for the future!

A Woman's Touch Increases Risk-Taking - In this article, financial planner Nathan Gehring highlights some bizarre-but-apparently-true recent research that found physical contact from a female leads people - both men and women - to be more willing to accept financial risk. The hypothesized reason is that even just a female touch on the shoulder invokes a sense of security reminiscent of a mother's touch. While the research is just one study on a small scale in a controlled environment, it nonetheless raises an interesting question about what kinds of factors - including just the way we (briefly) physically interact with clients - may be confounding their decision-making process. As Gehring also notes, the study also has some pretty dangerous implications; on the one hand, relying on a female touch or handshake could actually "help" advisors drive clients towards specific strategies, and on the other the technique could also be used by unscrupulous salespeople to steer prospects toward a specific (risky) product.

Money Changes Everything - This NY Times article provides a nice overview of some of the recent research on money and happiness, which is finding the old adage "money can't buy happiness" is far more nuanced in the real world as economists begin to connect subjective data on emotions in with objective economic data. The earliest research in the space started from Richard Easterlin in 1974, who did find that people do not appear to become happier as they become richer, and in fact there's some data to suggest that the happiness levels in relatively poor countries is not all that different from more affluent countries around the globe. However, more recent data suggests this isn't entirely true; poor people in poor countries do appear to be somewhat less happy, although it's not just because they're poor, per se, but because their lack of resources leads to hardships like less flexibility for making major life choices, worse health care and higher child mortality rates, and other "grave" problems. But the potential of measuring happiness on an ongoing basis, on both a local and national level, may well be an emerging horizon for economic research, and could become a factor in making policy decisions. At a high level, it raises a rather fundamental question: should the role of government in economic policy be to maximize Gross Domestic Product, or Gross Domestic Happiness?

Just Call Someone Already - This article from the Harvard Business Review blog provides a simple reminder of a powerful piece of technology that can help facilitate effective communication: the telephone. In a world that is dominated by email and calendars and scheduling calls and meetings, somehow picking up the phone to call has become too friendly, or too intrusive, or outright inconsiderate and disrespectful of the other person's time. Even though the reality is that you may end out spending more time and effort (and words of communication!) trying to schedule the call than it would take to just make the call, especially if scheduling assistants are involved! And it's not just about the waste of time, but the lost communication opportunities, as telephone calls allow for more spontaneous conversation and reduce the misunderstandings that sometimes emerge when the written email fails to convey the proper emotion or context. So if you want to try something that truly improves your efficiency, productivity, and relationships with clients... try being innovative and just picking up the phone to call them. Without an appointment.

I hope you enjoy the reading! Let me know what you think, and if there are any articles you think I should highlight in a future column! And click here to sign up for a delivery of all blog posts from Nerd's Eye View - including Weekend Reading - directly to your email

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  • Allison

    Thank you for these great resources! I wanted to share another awesome resource for financial planners. It's a goal-setting and achievement platform where you set goals, including industry-specific strategic-planning goals, and then receive text and email messages that put your personal and career goals in front of you as often as you'd like. Please check out financialservicesgoals.com.

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