Archives Of Weekend Reading For Financial Planners

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the interesting news that a growing number of states are trying to limit the use of the terms “certified” or “registered” to only those who are actually certified or registered by a state agency or certifying body… raising the concern that “Certified” Financial Planning professionals might someday be prevented from using the term, and leading the FPA and CFP Board to join a multi-organization coalition called the “Professional Certification Coalition” fighting to differentiate bona fide certification credentials from the rest of the specious designations (in financial services and other industries) that state legislators are really trying to crack down on.

Also in the news this week is a brief look at the recent “FINRA Industry Snapshot” (a first-ever report from FINRA on the state of the brokerage industry, which finds that the number of broker-dealer firms and registered representatives has been declining steadily for 10 years… but revenue and profits continue to grow and hit record highs!), and a discussion of some of the public comment letters that came out earlier this month against the SEC’s Regulation Best Interest and new Form CRS proposals (including a stringent objection from a group of 17 state attorneys general that could form the basis of a legal challenge against the rule if the SEC decides to move forward).

From there, we have several advisor technology articles this week, from a look at how “robo” tools aren’t replacing advisory firms, but instead are allowing smaller advisory firms to run more efficiently than ever with the use of technology to automate away expensive back-office staff and administrative tasks, to tips on how to conduct third-party vendor due diligence for cybersecurity purposes, and why both advisors and their clients should be talking more about using Password Managers.

We also have a few retirement articles, including: the role that uncertainty (especially sequence of return risk, but also simply the changing nature of our lives over time) has in determining whether portfolios are depleted in retirement or not (which goes far beyond just investing for a sufficient long-term return); perspective on how economists that study lifecycle finance view traditional financial planning topics and strategies differently; and why a goals-based retirement planning approach is very problematic because, in the real world, most people don’t actually know what their goals are, and even if they think they do, the goals often change by the time the client gets closer to achieving it!

We wrap up with three interesting articles, all around the importance of habits (both breaking bad habits and improving good ones): the first looks at a number of recent books that highlight the latest research in how we form habits, change habits, and improve our willpower and self control; the second is a fascinating study at how we can improve our own self-confidence in our ability to control our behavior and break our bad habits (by adopting seemingly mindless rituals); and the last is a fascinating look at how even the most brilliant creatives still struggle, often for years, with a vision of what they want to achieve and knowing that their current work isn’t up to their own tastes, but that the key is maintaining the habit of continuing to do the work anyway with a focus on self-improvement, and it’s the repeated habit of practice combined with the vision of what your work can be that ultimately makes it great and successful!

Enjoy the “light” reading!

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that the IRS has issued new regulations to provide additional guidance on the Section 199A “pass-through business deduction”, with a particular focus on cracking down on professional services firms (which includes financial advisory firms) to prevent them from abusing potential “loopholes”, like cracking up their businesses into pieces that might have been eligible for the deduction.

Also in the news this week is a discussion that RIA custodians are considering whether to adopt a new pricing model of offering custody services for a basis point charge, rather than just trying to make money on the underlying products that clients implement… in what would be a very positive realignment of the costs that advisors and their clients pay with the value that custodians provide, but could be challenging to transition to the currently-less-transparent “free” model of custody for advisors.

From there, we have several retirement-related articles this week, including research on the kinds of words and images that consumers use to describe retirement (which importantly but not surprisingly varies depending on their own demographics and background), tips to prevent loneliness in retirement for new retirees who often unwittingly become very socially isolated, why more and more retirees are looking for “phased retirement” approaches that blend part-time work with retirement, and the real-world difficulties that many older workers are facing in actually finding meaningful part-time work in retirement.

We also have a few practice management articles, from a fascinating study about what next generation advisors really want in a financial planning job (with 78% wanting to do comprehensive financial planning, but only 2% showing interest in sales and marketing!), how to speed up training for next generation advisors by becoming a more effective mentor, and the rising demand of next generation advisors for family leave policies given that more and more are launching their financial planning careers while also starting a family.

We wrap up with three interesting articles, all around the value of reading itself to advance our knowledge and skills: the first explores the physiology of the brain and how reading literally helps the brain form new connections that can improve our fluid intelligence and ability to spot important patterns; the second looks at the important balance between both book knowledge and real-world knowledge (as book knowledge alone misses real-world applications, but real-world knowledge alone misses important patterns and opportunities that aren’t necessarily intuitive); and the last is a series of four “summer reading” book suggestions on the leading industry books that are most relevant to financial advisors today.

Enjoy the “light” reading!

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big news that Fidelity has launched an entirely free index mutual fund, with an outright expense ratio of 0.0%, in what financially is only a modest decrease in cost from the near-zero expense ratios of many index funds already, but represents a major shift in the industry as asset managers officially begin to focus on generating revenue beyond “just” their investment products alone. Also in the news this week was an announcement that the Trump administration is considering a proposal that would index cost basis to inflation over time, effectively applying capital gains on only “real” gains (above inflation), in what would potentially be a game-changer for the relative value of taxable accounts over tax-preferenced retirement accounts (that would have no such basis adjustment).

Also in the news this week were a number of major industry announcements, including that the CFP Board will be launching a series of public forums over the next 18 months to train CFP professionals on the new Standards of Conduct (and gather feedback on where the Standards Resource Commission should issue additional guidance), the Financial Planning Association announces a newly updated “Primary Aim” for the organization with an increased focus on advocacy for the profession, and the latest FA Insight study shows that advisory firms continue to enjoy strong growth in the midst of an ongoing bull market but that profit margins continue to decline (now to an average of just 20%) as pressure rises on firms to reinvest in their value proposition to justify their fees (which are now also beginning to show signs of competition and compression).

From there, we have a number of regulatory articles, including a surprising SEC action against Schwab Advisor Services that may put newfound pressure on RIA custodians to have a more active role policing the RIAs that use their services (particularly with respect to anti-money laundering regulations), some new guidance from the SEC on what constitutes ‘inadvertent’ custody for which the RIA will not be punished for failing to adhere to the Custody Rule, legal risks to consider for advisors who are publishing content (e.g., blogs or newsletters) and don’t want to get in trouble for plagiarism or copyright violations, and a look at just how far the CFP Board’s fiduciary regulations have come in the past 11 years (and where they may go from here).

We wrap up with three interesting articles, all around the role and value of financial advisors in the eyes of consumers: the first is a fascinating look at what leads consumers to switch financial advisors, finding that changes in personal or financial circumstances (from divorce or marriage to significant increases in income or net worth) are most likely to cause a consumer to switch advisors (despite the fact those are often the “money in motion” triggers that cause clients to become more profitable for their existing advisor!); the second looks at how financial planning as a profession has evolved over the past 45 years since the first class of CFP certificants in 1973; and the last looks at new research on the value of financial designations themselves, finding that consumers with higher incomes and investable assets really do tend to pay more to advisors who have such professional designations!

Enjoy the “light” reading!

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that the CFP Board has selected Vanguard veteran Jack Brod, CFP, to serve as President-Elect of its Board of Directors, as Vanguard itself becomes a rising force in hiring CFP certificants for its Vanguard Personal Advisor Services division (which Brod helped to establish), and the CFP Board may face new struggles during Brod’s Chairman year in 2020 when the organization will have to actually begin enforcing its new fiduciary Standards of Conduct for the first time.

There were a number of other big news items this week as well, including a new set of retirement plan proposals rolling through Congress (that appear to have a chance to pass) that would expand multi-employer plan (MEP) options for smaller 401(k) plans and make it easier for 401(k) participants to buy (immediate) annuities at retirement, the revelation that, with its final IPO under two weeks out, Focus Financial’s opening price may come in substantially higher than previously anticipated (suggesting there is still substantial investor demand for RIAs and potentially fueling a fresh new wave of M&A), and the finalization of New York state’s fiduciary rule for annuity and life insurance sales (which could prove to be an industry-wide template if the NAIC does not implement a similar model rule).

From there, we have a number of articles on next generation advisors, succession planning, and continuity planning, including: the generational perspective gaps that are impeding the ability of founders and successors to establish effective succession plans; why next generation advisors want more than a job (and how to inspire them to come into the financial planning profession); issues to consider when implementing a real-world succession plan (from both the founder-owner and successor-owner’s perspectives); the tax-related considerations in how a buy/sell agreement or succession plan is structured; and how to properly structure a continuity plan for those who do not want to retire and transition to a successor but do need a contingency plan for what happens to the business and their clients if something happens to them (e.g., in the event of sudden disability or death).

We wrap up with three interesting articles, all around the theme of how financial advisor and financial advisors are changing in the future: the first explores the rise of financial wellness programs in the workplace, as employee research finds that financially-related issues cause so much disruption in the workplace that employers can get a positive ROI by subsidizing or even fully paying for financial wellness programs for employees, spawning not only a growing volume of financial wellness technology platforms, but even a rise in human financial advisor solutions offered in the workplace channel; the second looks at how nearly 5 years ago Australia set the template for fiduciary reform by being one of the first major countries to ban commissions for financial advisors, but the fact that those advisors remained employed by the companies that manufacture and distribute product has left them so conflicted that a Royal Commission is now investigating and deliberating about whether to split advice and product sales entirely (in a move that again could become a template for reform around the globe); and the last looks at how, despite the industry’s efforts to improve gender, age, and ethnic diversity, the needle has barely moved in years, raising the question of whether the problem is simply a lack of awareness and diversity support programs, or if the industry’s traditional view that “Financial success is derived from having a fixed set of goals funded as a consistent percentage of income into stock-market-based accounts” (based on our investment-centric business models) could unwittingly be less appealing and less aligned to the real-world needs and views of women, Millennials, and people of color, who may approach their own financial goals and saving and investing philosophies differently?

Enjoy the “light” reading!

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that the SEC is getting more aggressive in enforcing against advisors who violate the no-testimonials rule through social media platforms, as while previous SEC guidance has noted that there’s nothing wrong with third-party social media websites that reference an advisor (from tweets about the firm, to having a Yelp page with reviews), the SEC did fine 3 advisors $10,000 each for hiring a third-party firm that solicited their clients to leave (positive) testimonials/reviews on the advisory firm’s Yelp page. And also in the news this week is the decision of the SEC to move forward with a so-called “ETF Rule” proposal that would drastically streamline the time and cost it takes for asset managers to launch new ETFs.

From there, we have a number of insurance-related articles this week, from a look at the looming rise of no-load insurance policies (driven both by regulatory shifts away from commissions and towards fiduciary fees, and also the success of early no-load variable annuity products in the RIA channel), to a discussion of whether consumers (and advisors) are now overweighting the risk of future LTC insurance premium increases, and a discussion about whether advisors should start recommending various types of “concierge medicine” and “direct primary care” (DPC) health care solutions for clients in lieu of (or in addition to) traditional health insurance.

We also have several practice management articles, all focused around building teams and retaining team talent, including: an overview of Angie Herbers’ “Diamond Teams” approach to developing advisor talent; tips to building deeper and stronger teams in your advisory firm; how to apply educational and instructional design principles to train and develop your team members more effectively; and a look at how to better retain female advisors in particular (as the number of female advisors has remained stubbornly ‘stuck’ and not rising for more than a decade, despite a significant rise in efforts to recruit women into the industry).

We wrap up with three interesting articles, all around the theme of entrepreneurship and starting your own advisory firm (or not): the first explores the challenge in larger advisory firms of finding next generation (G2) entrepreneurs to lead the business, which author and practice management consultant Philip Palaveev suggests may be less a lack of entrepreneurial talent and more a tendency of advisory firms to not take the steps and opportunities to develop the entrepreneurial talent they have; the second explores a research study that found, despite the stereotype of the 20-something uber-successful tech entrepreneur (e.g., a young Bill Gates, Steve Jobs, or Mark Zuckerberg), that the average age of an entrepreneur is actually 42, and the most successful entrepreneurs averaged age 45 when they founded their firms; and the last similarly looks at another research study finding that the odds of a startup business still being around in 5 years increases a whopping 500% when the founder is over the age of 35, and increases by 85% if the founder has at least 3 years of experience first… suggesting that in reality, the best path to starting a successful advisory firm with clients might never have been finding the “right” 20-something entrepreneurial advisor, but instead requiring all advisors to first get their 3 years of experience, complete their CFP certification, and consider waiting as long as 10-15 years into their career before actually going out to start their own advisory firm from scratch in order to increase the odds of long-term success.

Enjoy the “light” reading!

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the announcement that the CFP Board is gearing up for a new round of advertising campaigns as part of its ongoing public awareness campaign, this time focusing on the emotional and psychological benefits of working with a financial advisor, including feeling more “confident, optimistic, secure, and at ease” with one’s finances.

Also in the news this week is a controversial court ruling in Georgia that allowed an RIA to enforce an employment agreement that required its departing advisors to give 60-90 days notice in advance of leaving the firm (where the RIA sued after the advisors departed the firm abruptly to join Morgan Stanley under the terms of the Broker Protocol), raising the question of whether broker-dealers in turn might try to add similar “garden leave” requirements to their employment contracts as a way to subvert the Broker Protocol for departing brokers. And there was also a big announcement from Vanguard, just in time for “Independence Day”, that starting in August it will begin to offer nearly 1,800 ETFs on an expanded no-transaction-fee ETF platform… and in the process, declaring war on other custodian’s existing back-end revenue-sharing or shelf-space distribution agreements required to get onto their NTF ETF platforms (from which Vanguard has increasingly been booted in recent years for being unwilling to pay to play).

From there, we have a number of retirement-oriented articles, from a look at the rise of the FIRE (Financial Independence, Retire Early) movement, to a discussion from a longevity researcher about whether it would be more appropriate for people to spend their 20s and 30s “just” being trainees/apprentices and raising families and not starting full-time jobs until their 40s (given our increasing capability to remain productive well into our 70s thanks to medical advances), and an examination of whether advisors may be overestimating health care costs in retirement as recent studies have shown that beyond Medicare premiums themselves the medical expenses of retirees are actually remarkably moderate and stable (especially for those who have at least a “mass affluent” level of wealth).

We also have several practice management articles, including: an analysis of why the greatest challenge for advisory firm business owners to manage is the potential gap between workload obligations to clients and the staff resources necessary to deliver promised services; why especially in the early years of an advisory firm, 5-year (or even 3-year) business plans are largely useless; and how to demonstrate the ongoing value of a financial advisor by creating a “Client Confidence Index” that periodically surveys clients on their feelings of financial confidence, control, and clarity… and then reflecting those results back to them to show progress and the advisor’s value-add over time.

We wrap up with three interesting articles, all around the theme of taking vacations to better maximize health and productivity: the first looks at the growing trend of workers not taking vacations, even when they’re otherwise available, due to both the workaholic culture of many firms, and often simply a lack of systems to make them feel safe and comfortable to take a vacation; the second examines how even amongst the most productive people, there’s often little more than 3-4 hours of “real” work that gets done in a day, suggesting that instead of trying to push employees to work harder throughout an 8-hour workday that it may be better to embrace taking breaks instead; and the last provides a remarkably simple and effective system to handle the pain of “digging out” from the email backlog after a long vacation… by simply creating an autoresponder to tell people to email you again if they feel it’s necessary after you’re back, and then just delete all the email in your Inbox on your first day back at work!?

Enjoy the “light” reading!

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the announcement that the CFP Board is launching a new “Standards Resource Commission”, a 13-person panel that will be tasked with creating guidance on the CFP Board’s new Code of Ethics and Standards of Conduct to help CFP professionals know what they actually need to do to comply with the new rules.

Also in the news this week was a controversial internal memo at Wells Fargo that going forward, clients will be given the option to “opt out” of permitting their broker to take their contact information if the broker leaves, in what critics are calling an effort by Wells Fargo to end-run the Broker Protocol without formally dropping out of it. And the IRS provided a preview of its new Form 1040, which – in light of all the deductions and credits eliminated by the Tax Cuts and Jobs Act of 2017 – is aiming to consolidate the 1040 itself, the short-form 1040A, and the 1040EZ, into a new shortened postcard-sized tax return… albeit with what will still be a lot of new worksheets to calculate the deductions and credits that remain.

From there, we have a number of marketing and business development articles, from a look at how improving at sales and business development first requires a mindset shift that it’s about trying to share services that help (and why would you not be persistent in trying to offer real help to a prospect!), to advice on how to get better at networking, and some insights about what prospective clients actually want to see (and don’t want to see) on an advisor’s website.

We also have several retirement planning articles, including: a way to separate financial independence into multiple tiers depending on the nature of the lifestyle it can afford, and whether or how many trade-offs must still be accepted to make it work; how to think about and talk to clients whose struggle is not failing to save enough for retirement, but having saved “too much” yet being unwilling to spend and enjoy their wealth; and how to plan for and frame the cost of health (Medicare) insurance and medical expenses in retirement.

We wrap up with three interesting articles, all around the theme of the business of advice itself: the first explores how often the best “advice” that we can offer is simply to listen, help clients be heard, and only occasionally, maybe offer some tidbits of guidance if and when they truly ask for it; the second looks at how the shift to more behaviorally-oriented advice (as opposed to traditional investment and financial advice) can fundamentally change the nature of the questions we ask clients; and the last looks at research finding that perhaps there’s such thing as being too empathetic with clients, and that the better way to connect with and help clients while avoiding burnout is not to empathetically feeling with them (and sharing their pain), but simply trying to extend kindness and compassionately feel for them, instead.

Enjoy the “light” reading!

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the official news that the Department of Labor fiduciary rule is really, truly, finally dead, as the 5th Circuit Court of Appeals finally issued its formal court mandate to vacate the rule.

Also in the news this week, following on the heels of the demise of the fiduciary rule, is the announcement that both Merrill Lynch and JP Morgan are considering whether to roll back their commission bans on retirement accounts as the fiduciary rule goes away (albeit to appeal to the subset of investors who actually wanted a commission-based account, because they didn’t trade often anyway, and were unhappy that the firms were using the DoL fiduciary rule as an excuse to force them into higher-cost fee-based accounts). And this week’s news also includes an important Supreme Court ruling in the case of Lucia v SEC, finding that the SEC’s administrative law judges are improperly appointed… although ironically, the Trump administration had already begun the process of shifting away from ALJs and towards appointed judges for government agencies anyway!

From there, we have a number of investment-related articles, including: the ongoing (and perhaps inevitable?) grind of mutual fund fees towards zero, as fund families find other ways to get paid instead; how the pressure on mutual fund fees is starting to push upstream to custody and clearing platforms, that often boost the expense ratio of funds by as much as 40bps to cover platform fees that most investors mistakenly thing are going to the mutual fund company and its managers when they’re not; and the last looking at how the rise of technology to manage large numbers of stocks may soon make it feasible for at least do-it-yourself investors to start creating their own rules-based investment algorithms that basically amount to their own personalized index fund.

We also have several additional articles on tax planning this week as well, from IRA planning strategies in 2018, to tactics to better manage investment advisory fees in a world where miscellaneous itemized deductions (including those for advisory fees) are no longer permitted, and a dive into the increasingly popular strategy for high-net-worth investors to get around the $10,000 deduction cap on property taxes by splitting up their real estate and transferring it in slices into a series of out-of-state non-grantor trusts.

We wrap up with three interesting articles, all around the dynamics of finding more productive uses for your time and energy: the first explores how, if you really want more time to connect with family and friends, the key is not to declutter your schedule with fewer obligations, but to add an obligation to your calendar specifically for family-and-friends time; the second looks at how the concept of “antifragility” can be applied directly in our own lives, especially when it comes to taking an ongoing series of small risks that give ourselves opportunity for a big outcome; and the last looks even further at how we can actually promote more serendipitous events in our lives, as research increasingly shows that “luck” is a material component of big success… but that some people are better at making their own luck with deliberate habits and strategies.

Enjoy the “light” reading!

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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!

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