Exciting news! This week we've introduced JobsFP, a dedicated jobs site specifically for financial planning firms and those looking to find a job at one! You can check it out here!

As the buzz around the "robo-advisors" continues, this week marks another two big announcements: Betterment has raised another $32M in a fresh round of venture funding, with another $28M for Learnvest, following on the heels of $35M from Wealthfront just two weeks ago. Collectively, the three platforms have raised a whopping $95M in just the past two weeks, with the total collective funding for the robo-advisor space approaching a quarter of a billion dollars.

Yet despite all this focus, the actual business and revenue growth results for robo-advisors has been fairly meager, at least so far. The latest fundraising for these three platforms brings their total venture capital funding up to more than $150M, despite the fact that after 3-5 years the companies have been around with "exponential" growth, they cumulatively have less than $5M of revenue. Collective across all the robo-advisor-labeled platforms, actual assets under management (not just fuzzy "advisements") is no more than a few billion dollars, which at the fee schedule for these platforms likely amounts to little more than $10M of revenue for platforms that have cumulative venture capital funding in excess of a quarter of a billion dollars. Which implies, to say the least, that at least a few of these VC investments probably won't work out so well.

Nonetheless, this doesn't mean the robo-advisor trend should be ignored, despite the fact that they have little more than roughly a 1/1000th market share of household investable assets. While there's still little evidence to suggest that robo-advisors are drawing any volume of clients from human advisors, they are demonstrating how the core of constructing and implementing a passive, strategic portfolio can be commoditized for an extremely low cost. In the end, we may look back on this 2009-2014 era as one that transformed technology-driven portfolio construction the way the introduction of the index fund transformed the world of stockpickers 40 years ago. Notably, the introduction of the index fund did not eliminate the need for or value of human advisors, but it did force advisors to continue to evolve their value proposition to keep up, as today's evolving robo-advisors will likely do as well. In fact, in the end, the primary players that get "disrupted" by robo-advisors may not actually be human advisors at all, but the custodians, broker-dealers, asset management, and technology firms that support them!

Wednesday, April 16th, 2014 Posted by Michael Kitces in News Highlights | 12 Comments

As social media platforms continue to grow - and as is common, technological change outpaces regulators - the SEC has struggled (many suggest "lagged" might be more appropriate!) in its guidance regarding the advisor use of social media. While the core of the SEC's rules still ultimately boil down to: "Don't say anything on social media that would get you in trouble if you said it in any other public forum as well" the ambiguity regarding how these rules intersect with certain social media platforms has left many advisors (and their chief compliance officers!) confused and worried.

In a just-released update to its social media guidance, the SEC has provided some new rules and clarifications, especially regarding the potential use of third party "advisor review" sites, and also whether it's a testimonial violation to have (or participate in) a "community" or "fan" page, to have a public display of people you're connected to on social media channels (and whether it's an implied endorsement that you may be friends/followed by some of your clients), and whether it's permissible to direct clients to the advisor's social media pages to receive updates in the first place.

In general, the "new" rules are not surprising, follow a logical path to determining whether certain social media actions could constitute testimonials (e.g., the mere fact that clients happen to be connected/following/friending you is not deemed a testimonial), and unfortunately still do not address certain vagaries (e.g., are LinkedIn "endorsements" a violation of the testimonial rule or not?). Notably, though, the SEC's guidance was especially thorough regarding third-party "advisor review" sites and how such platforms can be administered safely without running afoul of the testimonial rules... in the process, potentially giving a green light to platforms ranging from Yelp to more advisor-specific review sites in the future! 

Tuesday, April 1st, 2014 Posted by Michael Kitces in News Highlights | 1 Comment

On Sunday, January 26th, a decision was issued in the latest round of legal motions between the CFP Board and the plaintiffs Jeffrey and Kimberly Camarda regarding their looming public disciplinary action from the CFP Board for what it claims were violations of the compensation disclosure rules.

In a blow to the CFP Board, the judge fully accepted an amended complaint from the Camardas, which is now seeking monetary damages in addition to "just" blocking the CFP Board's public disciplining of the Camardas. In addition, the judge denied all of the CFP Board's various motions to limit the scope of the case, including requests to quash subpoenas of various individuals for deposition. As a result, the breadth of discovery for the Camardas will be fairly wide, as they attempt to substantiate their claims that the CFP Board is in breach of contract, engaging in unfair competition, has violated due process, and may even be responsible for antitrust violations and having engaged in "false advertising" by misleading the public about its standards.

Of course, the fact that the judge has ruled that the full scope of the Camarda complaint will be considered and that the full breadth of their discovery requests will be honored does not actually mean that the CFP Board has been found guilty of anything at this point. Nonetheless, given the coming depositions that must now move forward, and the information requested by the Camardas on various other CFP Board disciplinary cases, a whole lot of additional detail about the inner workings of the CFP Board is about to come to light. To say the least, this case is no longer "just" about the definition of fee-only; it's now about the legitimacy of the organization's enforcement process and the standards for all CFP certificants, and raises the question of whether the CFP Board may have made a serious strategic mistake by trying to make Camarda vs CFP Board of Standards its defining case.

Tuesday, January 28th, 2014 Posted by Michael Kitces in News Highlights | 1 Comment

As the debate around the fiduciary standard continues, lawmakers have once again expressed concern about whether the application of a fiduciary standard may raise the cost of advice for consumers, cutting off access to investment advice for the middle class.

Yet even as this anti-fiduciary argument persists, a closer look reveals just how ridiculous it is. The RIA marketplace is not less profitable than the brokerage world due to its fiduciary compliance costs; in fact, brokers are finding the fiduciary RIA world so much more appealing that the breakaway broker trend has persisted for years.

Instead, the real challenge is that the market for advice is so complex, consumers have trouble choosing at all, and as research has shown, such environments of "information asymmetry" can lead to a "market for lemons" where the quality declines as dishonest businesses drive the honest ones away. In turn, this suggests that in the end, applying a consistent fiduciary standard for those who offer advice may actually be the single best way to drive down the cost of advice for consumers!

Tuesday, January 21st, 2014 Posted by Michael Kitces in News Highlights | 1 Comment

Last week, the SEC announced a change to its rules for social media, permitting companies to use social media channels like Facebook and Twitter to announce important and timely news, rather than "just" the company's website or via a news release. The companies just have to tell investors which social media outlets will be used in the future, so that investors have fair notice of where to tune in to get the latest information.

What's notable about the change is not just that social media will become a permitted channel, but that given the speed of social media, it may have just become the necessary go-to channel. In fact, last week may mark the turning point for when Twitter went from being "just" a social media platform, to being an essential primary source of key news and information!

Tuesday, April 9th, 2013 Posted by Michael Kitces in News Highlights | 0 Comments

Late last week, the SEC announced its Examination Priorities for 2013, which provides some guidance on what the SEC views as the greatest issues for concern and focus, especially amongst its Investment Adviser-Investment Company (IA-IC) program that is responsible for examining nearly 11,000 Registered Investment Advisers (RIAs) along with 800 Registered Investment Companies (RICs, e.g., mutual funds). In addition to a usual array of focus areas, from monitoring the safety of assets, conflicts of interest, and marketing (especially regarding performance marketing), this year's announcement was notable in one other regard: the SEC specifically cited dually registered IA/BD advisors (i.e., "hybrid" advisors) as a new and emerging risk area, especially regarding how advisors make a determination of whether to direct a particular client to the brokerage account versus an investment advisory account.

Tuesday, February 26th, 2013 Posted by Michael Kitces in News Highlights | 5 Comments

In a surprising interview article just released today by Reuters reporter Suzanne Barlyn, FINRA Chairman and CEO Rick Ketchum goes on record stating that he sees "no sign [FINRA] can convince lawmakers in Washington to support a change in the way [investment] advisers are regulated anytime soon." Ketchum attributes this primarily to the leadership changes in the House Financial Services Committee after the 2012 election, as Representative Jeb Hensarling has taken over for Representative Spencer Bachus (it was Bachus who had put forth the 2012 legislation that was widely viewed as paving the way for FINRA to regulate investment advisers). The matter was further complicated by the lack of clear support from the SEC. The bottom line - Ketchum believes that continuing to push FINRA as overseer of investment advisers will make no progress in the foreseeable future, so it's backing off.

Thursday, February 7th, 2013 Posted by Michael Kitces in News Highlights | 4 Comments

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Monday, October 27th, 2014

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Cutting Edge Tax Planning Developments & Opportunities Future of Financial Planning in the Digital Age @ ACP 2014 Conference

Friday, November 7th, 2014

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