Enjoy the current installment of "weekend reading for financial planners" - this week's edition kicks off with a summary of this week's Department of Labor hearings on the fiduciary proposal. While arguments were heated on both sides (which variously argued that fiduciary duty will either drive costs down for investors by eliminating conflicted advice, or drive them up by raising compliance costs!), the rule still appears to be on track for implementation in 2016, with perhaps just some adjustments to make it more "workable" in practice.
From there, we have several practice management articles this week, including: a look at how despite the rise of technology solutions Cerulli finds that the number of self-directed investors has significantly decreased in the past 5 years and the number of "advisor-reliant" consumers is on the rise; a summary of the latest FA Insight benchmarking study on People and Pay in advisory firms, which finds that RIAs are enjoying record profit margins and productivity, but that the lack of young talent may soon begin to take a toll; a discussion from industry practice management guru Philip Palaveev about how "flat" organizations with little hierarchy sounds good in concept but fails in practice, especially in advisory firms; tips from Mark Tibergien on a different approach to strategic planning; and a look at how the aging advisor population is leading to an increased number of practices that have to fold due to the sudden death of the owner, and how custodians are often compelled to act quickly, especially when the firm lacks a continuity plan, which may include cutting off the advisory firm's staff access to clients, and even shifting clients over to the custodian's self-directed platform, retail branch advisors, or even other firms.
We also have a few technical planning articles, from a look at the rise of "private exchanges" for health insurance in mid- and large-sized firms, the latest research from S&P that finds actively managed funds are so struggling to generate outperformance that they're not just underperforming net of fees but the majority in most categories (especially equities) are even underperforming before fees, and a discussion of the current research on how much retirees really need for retirement income and how the common 70%-80% replacement rate may actually be significantly overstating what most retirees really need (especially those with above-average household income).
We wrap up with three interesting articles: the first covers some of the latest polling research from Gallup, which finds that adoption of financial planning is on the rise across the country, especially amongst those who are still saving and aren't yet retired (perhaps a result of the pressure of technology on commoditizing the value of investment-only solutions for accumulators?); the second is a discussion of the new Schwab Executive Leadership Program, which is taking cohorts of 30-35 future leaders from advisory firms and putting them through a year-long MBA-style program in management (and getting rave reviews for the quality and beneficial impact of the program from its participants); and the last is a discussion of how the market's sustained inability to make materially new highs since last Thanksgiving could be a troubling sign that the positive feedback loop for investors is breaking down, which risks culminating in a fear-driven bear market if the bull market cycle doesn't underway again soon.
And be certain to check out Bill Winterberg's "Bits & Bytes" video on the latest in advisor tech news at the end, including a discussion of Envestnet's acquisition of Yodlee, a new integration of up-and-coming financial planning software Advizr with Orion Advisor Services, and a look at whether automated investment services (i.e., direct-to-consumer robo-advisors) are losing their exclusivity as established financial services firms increasingly launch their own.
Enjoy the reading!