Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that the window for the Department of Justice to appeal the DoL fiduciary rule to the Supreme Court has passed, in what most believe is the fiduciary rule’s final death knell… even as the 5th Circuit’s clerk office has still not actually issued its formal mandate to actually vacate the rule.
Also in the news this week is an announcement by FINRA that it is beginning the process of overhauling the back-end technology that powers the CRD (Central Registration Depository) system that handles all the registration and disclosure details of FINRA-registered representatives (in what is anticipated to be a 3-year technology project to complete), and a fascinating study from the Boston Consulting Group that finds as many as 1/3rd of advisors are discounting their fees despite the fact that a mere 10% of clients are very fee-sensitive and fully aware of what they’re paying in the first place!
From there, we have a number of behavioral finance articles, including the idea from Shlomo Benartzi that clients should “A/B test” their financial preferences before committing to a major financial decision, that our instincts as social animals to compare to other people is a driving force in our financial unhappiness (but can be ‘managed’ by getting a financially healthy role model instead), and a look at how the ongoing force of technology commoditizing products is leading advisors increasingly the direction of handling the more emotional aspects of clients’ financial decisions.
We also have several additional articles on the evolving role of the financial advisor, including a look at how most younger clients actually need more financial advice and not investment advice anyway (which can be evaluated by looking at their human-capital-to-investment-capital ratio), a discussion from Morningstar’s Don Phillips on the rise of the (non-investment) advisor, and an analysis by Bob Veres of how the evolution of the financial advisor over the past 40 years has arguably already so morphed the role of the advisor (and the role that commissions play in incentivizing advisors) that the SEC may be ill-equipped to handle the advisor of the future.
We wrap up with three interesting articles, all around the theme of the role our industry associations play in the financial planning profession: the first raises the question of whether the FPA will once again take up the fiduciary torch by suing the SEC over its watered-down SEC advice rule that exempts brokers from a fiduciary duty (after suing the SEC on a similar version of the same issue – and winning – nearly a decade ago); the second examines the CFP Board’s new Code of Ethics and Standards of Conduct and how the organization has effectively shifted from a “two-hat” approach (with a fiduciary and non-fiduciary hat) into a “tattoo business” where the fiduciary CFP obligation cannot be removed once tattooed on; and the last explores the sticky question of whether we have too many professional associations and designations that create redundant cost and diluted advocacy, or if the reality is that we need multiple designations and associations to have a healthy level of competition amongst the organizations that serve financial advisors in the first place.
Enjoy the “light” reading!