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 release of the CFP Board’s newly proposed Code of Ethics and Standards of Conduct for CFP professionals, which would further expand their scope of fiduciary duty to virtually all forms of financial advice.

Also in the regulatory news this week was an interesting public comment letter from the CFA Institute about the SEC’s potential consideration of fiduciary rulemaking, suggesting that the starting point would simply be to regain control of advisor titles and labels (and require anyone who even holds out as a financial advisor to be subject to the Investment Advisers Act of 1940). And in the meantime, the state of Nevada just passed a “surprise” piece of legislation that, in just over a week, will suddenly require all financial advisors in Nevada – including those at RIAs and broker-dealers – to be subject to a fiduciary duty when working with clients, regardless of whether it’s a retirement account or not.

From there, we have a few practice management articles this week, including: how developing “Core Values” for your firm can help you figure out how to filter out who are the right clients, the right employees, and the right opportunities for the business to pursue; why it’s so crucial to have a personal support network as a financial advisor that can keep you positive and motivated when the inevitable business challenges come; and why it’s crucial for advisory firm owners and the entire leadership team to establish a clear and consistent vision for where the business is going (and then work to keep aligned on that vision).

We also cover a few articles about the intersection of financial planning and cash flow/spending behavior, from why it’s important to not just analyze a client’s household cash flow but examine the underlying financial habits they represent (e.g., how the client makes decisions about large purchases, and whether they save intermittently or automatically), to the reason why behavioral biases mean in practice consumers tend to fare better contributing to a Roth 401(k) than a traditional 401(k), and how the tendency for one member of a couple to be a “spender” can trigger marital strife (though notably, being married to a “tightwad” does not typically trigger marital conflict!).

We wrap up with three interesting articles, all focused around broader industry trends: the first looks at how the rise of no-load funds and increased transparency were associated with an explosion in the adoption of mutual funds (and ETFs), while the still-commission-based and still-transparent insurance industry has seen its sales drop by almost 50% in the past 30 years, and whether a new company called Assurance (which aims to be the Morningstar of life insurance policies) can help to change the trend; the second examines how, despite an incredible 8-year bull market, most of the financial services industry is not very exuberant, or is outright gloomy, which appears to be a result of the fact that almost all the gains of the bull market have gone to just Vanguard, while the rest of the asset management industry has failed to participate in the rally; and the last is an investigative report from Reuters, which finds that FINRA is struggling to rein in a subset of broker-dealers who continue to actively hire brokers with problematic disciplinary records, raising the question of whether FINRA is even capable of fully executing on its investor-protection mandate, and whether state securities regulators may try to expand their oversight of broker-dealers to fill the void.

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 several stories on the initial aftermath of the DoL fiduciary rule becoming applicable on June 9th, including the growing number of annuity agents who are opting in to using the Best Interests Contract Exemption (instead of PTE 84-24), state insurance regulators considering whether to change the annuity suitability rules to a more fiduciary-like standard, and a look at the latest Schwab Independent Advisor survey that finds as DoL fiduciary shifts more advisors towards the AUM model and increases competition, that more advisors are feeling compelled to offer more  services and spend more time with clients to justify their advisory fees (but without being able to charge more for the extra effort and offerings).

From there, we have a few technical articles this week, from Ed Slott discussing how HSAs can be used not just for ongoing health costs but as a supplemental tax-preferenced savings account for future retiree health care costs, the rise of 81-100 group trusts as a lower cost alternative for small business employer retirement plans (in a world where it’s still difficult to offer a Multiple Employer Plan [MEP]), and a discussion of what Private Placement Life Insurance (PPLI) is and where it fits for certain ultra-high-net-worth clientele.

We also have several practice management articles, focusing on hiring and building our your advisory team, including: a roadmap on how to hire top talent (by first determining core values and core competencies, and using those to screen out candidates first); why it’s better to look for “cultural add” than just “cultural fit” to improve diversity (and how hard that really is, given our tendencies to hire people like ourselves); and guidance from Julie Littlechild on how to establish a mentoring program to aid in the personal development of your team.

We wrap up with three interesting articles, all focused around homeownership, housing policy, and the country’s growing challenges with affordable housing: the first looks at how the trend of Millennials to live in the urban core of cities (instead of the suburbs) is exacerbating the housing crisis, as there simply isn’t as much room to build housing in already-densely-populated urban areas (and the high cost of land in urban centers tends to lead developers to build more expensive housing to generate a return on their own real estate investment, which just makes the problem worse); the second explores how the shift of the economy from manufacturing to knowledge workers is leading to a growing concentration of workers in urban areas (where “smart people” can meet and gather and form businesses together), which suggests the housing challenges created by urban concentration will just get worse (even as it provides an unexpected windfall for existing homeowners in major cities); and the last explores how the emerging affordable housing crisis is bringing newfound scrutiny on the popular mortgage interest deduction, which over the years has shifted to disproportionately become a tax subsidy for upper-income individuals (who can actually afford houses, and have mortgages that charge enough interest to exceed the standard deduction, and benefit the most from the deduction at their higher tax rates), and whether it’s time to reform the program into at least an alternative 15% mortgage interest credit (which would reduce the benefit for upper-income individuals, and make it more accessible for lower-income individuals, even and including those who don’t itemize their deductions at all).

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 implementation of the Department of Labor’s fiduciary rule, with the previously-delayed Impartial Conduct Standards taking effect today, June 9th… even as the DoL begins the public comment process of modifying the rule, and Congress proposes further legislation to potentially kill it, suggesting that the fiduciary battle is far from over, especially given that full enforcement is still not scheduled to take effect until 2018 (allowing room for further debate and at least modifications to the rule and its requirements).

From there, we have several articles around marketing and business development, including some very practical ideas on how to improve your client onboarding process to improve trust (and generate referrals), marketing ideas on how financial advisors can build the business (hint: it’s more about persistency of the marketing strategy than a super-creative idea to do something completely new!), and a look at the latest research on how we determine who to trust in the first place (in the context of both employees trusting company leadership, and prospective clients trusting a new advisor).

We also have a few technology-related articles this week, from suggestions on what financial advisor websites need to do to actually generate real prospects, to the new technology solutions coming forth (from financial planning software enhances to online risk tolerance assessment tools) to help aid in advisor digital marketing, a new kind of risk tolerance solution that uses facial recognition to detect when clients become financially stressed, a new digital 401(k) solution for financial advisors, and a look at the proliferating number of “client portals” that financial advisors can offer (none of which really do everything that a financial advisor actually needs!).

We wrap up with three interesting articles, all focused around crafting and improving the financial advisor value proposition: the first is a fascinating look at “The Elements Of Value” from a recent study published in the Harvard Business Review, finding that the key components of value break down into a series of 30 categories, organized around four categories of Functional, Emotional, Life-Changing, and Social Impact (where businesses don’t need to offer all 30, but can excel but thinking about how to be especially good at 5-10 of them); the second looks at the way one financial advisor describes his value proposition to clients, emphasizing that while most people can do it themselves with available technology tools today, few have the time, knowledge, inclination, and behavioral focus to do it well (whereas the value of the financial advisor is knowing and ensuring that it will be done right!); and the last is a look at how the rise of a fiduciary duty, coupled with the rise of technology, is leading financial advisors around the world to struggle in articulating their value proposition going forward, and suggesting that ultimately the way forward will be a shift from helping clients with the “hows” (which they can just look up online), and instead work with them on their financial “whys” 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 big news that the SEC has issued a new request for public comment on standards of conduct for brokers and investment advisers, raising the question of whether the SEC will finally act on a fiduciary rule, just as the Department of Labor’s version takes effect on June 9th… and whether a new SEC fiduciary standard would help level the playing field for investment advice, or risk just watering down the fiduciary standard instead.

From there, we have a series of articles looking in particular at the broker-dealer industry as the DoL fiduciary rule rollout looms in the coming week, from a discussion of UBS’s new compensation changes for retirement accounts (eliminating commissions and production payments in lieu of a simpler asset-based compensation system), to a look at how Merrill Lynch’s commission ban and step away from wirehouse recruiting makes it look as though the company might be pivoting itself to become a giant national RIA, how Morgan Stanley is developing new technology to make its fiduciary advisors more proactive with clients, an industry survey of broker-dealer presidents finding that concerns about adapting to the DoL fiduciary rule have become all-consuming for most (to the point that they may be neglecting key investments into advisor technology tools), a look at the ongoing plight of the small broker-dealer, and whether the ongoing diminishment of the broker-dealer community may lead to the diminishment of FINRA itself (unless, perhaps, the organization reinvents itself as the new overseer of a uniform fiduciary standard?).

We also have a few more technical articles, including strategies to (legally) delay or minimize the impact of RMDs, the benefits of using a trusteed IRA (as an alternative to the typical custodial IRA arrangement), and how tolerance-band rebalancing strategies can increase returns (by helping to leverage market momentum, though not necessarily as much as just engaging in an actual momentum strategy!).

We wrap up with three interesting articles, all focused around the brain and how we think and learn: the first looks at how our brains actually take in and interpret information, driven primarily by a small section of the brain’s left hemisphere whose job is to interpret what is happening around us (but given its limited information, the interpretation isn’t always accurate or correct in its assessments!); the second explores the difference between “long-term” and “expiring” knowledge, recognizing that most people spend their time consuming the latter (e.g., news headlines and cable TV), and not enough on the former (obtained through reading books, and perhaps the occasional long-form blog post!); and the last looks at how, if you really want to make progress, the key is not just to set goals for yourself, but to establish systems that you can execute to get there… recognizing that if you’re really good at creating effective systems for yourself, you may not even need to set goals in the first place!

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 Labor Secretary Acosta will not be delaying the June 9th applicability date for the Department of Labor’s fiduciary rule, ending the active debate of the rule’s viability that has raged for the past 6 months since President Trump was elected. However, the reality is that even with the rule taking effect on June 9th, most of the key enforcement provisions will not apply until January 1st of 2018, and even as Secretary Acosta notes that there was “no principled legal basis” to change the June 9th date, he also reaffirmed that the DoL is still considering whether the revise the rule, especially after President Trump’s Executive Memorandum in February directing the DoL to further study the rule’s impact. Which means while repeal is no longer on the table, the DoL fiduciary rule will likely remain a highly contentious issue, with more twists and turns, through the end of the year.

From there, we have a number of articles about pricing your advisory firm services, including two articles providing strategies on how to set your pricing “purposefully” and in a manner that you can maintain (and not succumb to giving discounts if/when clients begin to haggling over pricing), and another on pricing models for working with younger clients in particular (based on a recent SEI study finding that Millennials are interested in paying for financial advice, but do not want to pay via commissions!).

We also have several practice management articles about how to train, develop, or become a successful younger advisor, including: the need to craft deeper and more fully-fleshed out career tracks for young advisors; the rise of call-center-based financial planning jobs, as large firms increasingly roll out digital advice platforms that necessitate a base of centralized associate planners; how firm owners should evaluate young talent to identify a good prospective financial planner amongst their job applicants; how to develop more confidence as a financial advisor (a critical key to success); and the kinds of fears that all financial advisors succumb to, and that must be faced (and overcome) to advance your own career.

We wrap up with three interesting articles, all around the issues and concerns of ultra-wealthy clients: the first is a look at the deep concerns and challenges that the ultra-wealthy have in even talking about money and prospective inheritances with their children (despite the fact that it rarely turns out any better to skip the conversation, and have heirs find out about their inherited wealth from a trustee or estate attorney!); the second is a look at the rising popularity of “extreme” emergency preparedness, from glitzy bunkers to high-end evacuation services, that the ultra-wealthy are buying as a form of “insurance” against extreme risks (from terrorism to cyber warfare to natural weather disasters); and the last reviews a recent research study finding that one of the best ways to get the wealthy to give more to charity, given that the wealthy often focus on their individuality as a key to their success, is to emphasize the individuality of their charitable giving and the role that they, personally, can play, rather than simply emphasizing the common good.

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 Focus Financial, the RIA roll-up aggregator that is fresh off having a majority stake acquired for nearly $2B, just acquired a pair of ultra-HNW independent RIAs with a whopping $18.5B of AUM, with rumors that the intention is not merely to keep growing and rolling up advisory firms, but aiming to cross-sell those ultra-HNW clients with estate tax problems potentially lucrative life insurance policies… and raising questions of the product-independent nature of getting advice from an RIA (and whether the existing Focus Financial RIAs will even be willing to support the sale of insurance products).

From there, we have a number of investment-related articles this week, from a look at what it really takes to run an ETF index (it’s harder than it looks!), to a series of studies suggesting that SRI/ESG investing may adversely impact performance (ironically perhaps because eschewing vice and sin stocks appears to give them a relative bonus on performance that SRI/ESG funds then miss out!), a look at how risk tolerance questionnaires for investing might change in the world of big data (where at a click of the button, you might be able to see exactly how clients invested/behaved in prior bear markets), and a discussion of whether it’s time to transition to “behavioral finance 2.0”, which stops just looking at broad-based trends in how consumers behave sometimes irrationally, and instead boil it down to what’s going on at an individual level, and what it actually takes to help them change their behavior for the better.

We also have several practice management articles, including: how to spot warning signs that a client may be thinking about leaving (and what to do about it); how to conduct surveys of your ideal clients to figure out what it really takes to get more of them (and differentiate your services and expertise for them); the problem with the “I Know Better” fallacy of trying to prescribe what your clients want, instead of just asking them (not everyone has the intuitive genius to just “figure it out” the way Henry Ford and Steve Jobs did!); and some great advice on how to reframe and “reset” your relationship with accumulator clients who are now preparing to retire, so they realize you can be just as relevant and valuable for them in the coming years of retirement as you were in the process of helping them to get there.

We wrap up with three interesting articles, all around the theme of behavioral finance and financial psychology: the first examines a new research study on why retirees tend to spend less as they age, suggesting that it may not just be a matter of slowing discretionary expenses, but a rising pessimism that makes us more concerned and less optimistic about the risks and return potential of markets; the second looks at various mental accounting mistakes we make when thinking about retirement spending (including the challenge that those who are frugal in accumulating for retirement often have trouble re-tooling their thinking to be able to enjoy their money in retirement); and the last looks at the way clients answer the question “would you prefer to have $1,000,000 in retirement, or a $5,000/month (guaranteed) income”, and how some retirees appear to suffer from an “illusion of wealth” or an “illusion of poverty” that causes them to believe one is substantially more or less valuable than the other (even though, according to current annuity rates, they’re approximately equal in value).

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 article generating the most “buzz” in the world of financial advisors this week: a takedown of the DALBAR behavior gap study by Morningstar’s David Blanchett, who, similar to Wade Pfau in recent months, and this blog several years ago, finds that the DALBAR methodology does not accurately measure (amnd substantially overstates) the actual size of the investor behavior gap caused by bad-market-timing investment decisions. (Though Blanchett still affirms that the behavior gap exists, albeit at a far small magnitude than the nearly-600-basis-points that DALBAR suggests). Also in the news this week was a recent social media guidance update from FINRA, in Regulatory Notice 17-18, which should dramatically expand the adoption of social media for registered representatives working under broker-dealer firms.

From there, we have a number of articles about industry trends this week, from a major announcement that Merrill Lynch is stepping back from the “recruiting wars” amongst broker-dealers and instead is going to focus on hiring advisors with 3-8 years of experience and their CFP certification and pay them a stable salary for three years, to the latest M&A activity for RIAs (which hit an all-time high in the first quarter of 2017, but appears to be rotating to “smaller” firms with $100M to $1B being sold), a substantial increase from advisors and their clients in socially responsible investing (with a desire for SRI up from barely 20% to over 40% in just one year!), and a look at the accelerating growth of Vanguard and Schwab’s tech-augmented-human advisor services, which at their current pace could siphon off as much as 2% of the aggregate growth of the entire RIA community in 2017.

Other articles on industry trends this week include: an in-depth Barron’s profile on Morningstar, its new CEO Kunal Kapoor, and its controversial decision to begin offering nine mutual funds in its Managed Portfolios solution for advisors, despite its history as an independent rater of mutual funds; Bogle’s “dire” forecast for the mutual fund industry, that funds shouldn’t even bother trying to compete on price (because they won’t win), and that at best they should just focus on their core competencies and try to win where they can, or simply enjoy the profits while they can get them until their funds wind down; the parallels between what Vanguard did to mutual funds, and what robo-advisors might do to human advisors, and where the silver lining may be; and a look at how, as more and more advisors become “fiduciaries”, there will be a growing awareness that not all fiduciaries are the same, and some simply don’t have the competency to execute as fiduciaries… which could even lead to a backlash against the term.

We wrap up with three interesting articles, all around the theme of consumer financial stress and financial advice behaviors: the first looks at how financial literacy programs are not only failing to make a lasting impact when actual outcomes are measured, but could actually cause harm by making people overconfident in their actual financial capabilities, and fail to recognize the impact their circumstances may have on their financial situation; the second looks at the growing base of research on how financial stress of employees impacts the workplace, which appears to be spurring a growing interest in employers to support financial planning and financial wellness programs; and the last is a fascinating look at the latest FINRA financial capability study to try to identify who is more likely to seek out financial advice (or not), and finds that one of the greatest inhibitors to hiring a financial advisor may be the consumer’s fear about whether they’re hiring a good one (or not)!

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 a look from CFP-and-doctor Carolyn McClanahan about what financial advisors need to consider when it comes to the potential future of health insurance for clients under the American Health Care Act (AHCA), which could substantially impact clients with pre-existing health conditions, and “early” retirees trying to bridge the health insurance gap between the end of employment and the beginning of Medicare.

From there, we have several technology-related articles, from early looks at the new Orion Eclipse rebalancing software and the new RobustWealth rebalancing and client onboarding “robo” tools, to some of the recent FinTech startups in the Envestnet | Yodlee incubator platform that are building new solutions for financial advisors (leveraging Yodlee data), and a first glimpse at a new advisor business intelligence (and advisory firm valuation) tool called Truelytics.

We also have a number of practice management articles this week, including: the rising trend of advisory firm mergers (as an alternative to just selling and exiting the firm); the common crossroads that advisory firms hit at they grow (and how to overcome them); what advisors should do to overcome “succession planning paralysis”; and tips on how to find an ideal buyer for your advisory firm if you’re looking to sell (and want to be certain you get the right fit).

We wrap up with three interesting articles, all around the theme of behavior change and improving savings behaviors for clients: the first is a series of recent research studies finding that most consumers actually prefer accounts that impose otherwise “unnecessary” restrictions and penalties on withdrawals (a form of “commitment device” that actually helps us to want to save, knowing the restrictions will help us follow through successfully!); the second is a fascinating look at how to help clients think about and change their spending behaviors by grouping spending into Owe, Grow, Live, and Give categories (where the trade-offs help us weigh decisions between freedom, comfort, purpose, and abundance); and the last is an overview of the research on behavior change that we as advisors can apply in working with our clients, to help them actually follow through on the recommendations that we give them!

And be certain to check out the brief video at the end… a recent new commercial from Schwab Intelligent Advisory, highlighting the financial planning services that Schwab is now offering directly to consumers, as the firm increasingly tries to compete with outside broker-dealers that may be impacted by the DoL fiduciary rule under the tagline “Intelligent Tech, Personal Advice”… but puts itself in a position to compete with the RIAs on its Institutional platform as well!

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 TD Ameritrade has struck a deal with DFA that will cut transaction costs for DFA mutual funds by as much as 67% (down to $9.99/trade), potentially setting off a new pricing war with the other RIA custodians when it comes to asset managers that refuse to pay sub-TA and other revenue-sharing fees back to the platforms.

From there, we have several articles about marketing, including a look at what you should (and shouldn’t) be measuring for success when engaging in social media, how a face-to-face request can be 34 times more effective than just sending an email (though with the ability to send a high volume of emails, the latter can still be more productive in certain situations!), and when it makes sense to try to publish a book as a financial advisor (hint: don’t do it for the book sales, do it for the credibility it gives you to attract more clients, and get a ghost writer to help you put your thoughts down on paper if necessary).

We also have a number of practice management articles this week, focused around the theme of attracting and retaining next generation talent, including: how advisory firms are starting to formalize their career tracks as a way to compete for young talent, why having clearly written job descriptions (including criteria for advancement) are crucial to become an “employer of choice”, why it matters that you formally write down your business’ “core values” (and how to get started), why attracting and retaining next generation talent is essential to build an enduring business that has transferable value, and some tips for next generation advisors looking to buy into an advisory firm (and how to think about the risk of doing so).

We wrap up with three interesting articles, all around the theme of personal and professional change: the first is a look at how a key role of the financial planner is helping clients to change and adapt to an uncertain future, but our own role as financial planners is changing as the nature of money itself continues to change and evolve; the second is a look at a financial advisor who was struggling with a near-failing advisory firm, and ultimately went through a process of deep self-reflection to figure out what it would take to turn it around (including a hard look at whether he really wanted to be a business owner or not, and how much income he really wanted and needed to feel successful); and the last is a fascinating look at how the Great Depression was one of the nation’s darkest and most stressful times, but also a period of tremendous productivity growth and invention, which helps to serve as a reminder that while it’s not always fun to feel stressed, it’s actually the stress that helps to drive us forward to achieve the things that ultimately help to bring financial success… and personal happiness, too. (So if you are wishing your life was less stressful… be careful what you wish for!)

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 a fascinating new report from Morningstar, finding that the industry’s shift to adopt T shares and Clean shares under DoL fiduciary could improve mutual fund returns in the aggregate by as much as 0.50%/year, through a combination of cost savings and the anticipated pressure of advisors to adopt lower-cost fund choices (over comparable higher-cost ones). Also in the news this week was the announcement that front-end advisor software provider Oranj was purchasing portfolio rebalancing software provider TradeWarrior, and the blockbuster deal that private equity firms Stone Point and KKR were buying a 70% stake in Focus Financial valued at $2 billion (and helping to validate that the RIA aggregation/roll-up model is far from dead).

From there, we have a few articles about advisor technology this week, including a Joel Bruckenstein review of the new FinMason risk tolerance assessment tools, a head-to-head comparison of Redtail CRM versus Salesforce Financial Services Cloud, and a brief review of new advisor screensharing software app ScreenMeet.

We also have a number of marketing and sales related articles, including: why meetings with prospects should always include two people from the advisory firm, ideally with different and complementary sales styles (e.g., one “charmer” and one “analytic”); why the presentation of an advisor’s physical office space really matters (and when it makes sense to invest into an interior designer to get help!); and how to handle the looming “marketing wars” that may soon emerge in the increasingly competitive advisory landscape.

We wrap up with three interesting articles, all on the theme of big data: the first is a look at how a number of tax prep services offered free tax preparation this year, from TurboTax to H&R Block and even Credit Karma, as the providers are realizing that not charging for tax preparation, and using tax filers’ big data, has even more income potential, whether to recommend tax strategies, credit cards, or loan refinancing deals; the second looks at the recent launch of USAFacts, a new initiative from former Microsoft executive Steve Ballmer, that brings together Federal, state, and local government data to understand where tax dollars go, and the results they achieve, in a way that no one has been able to produce before; and the last is a discussion of behavioral economics professor Dan Ariely’s new “Common Cents Lab”, that is partnering with FinTech software providers to run behavioral finance “experiments” and harness the value of big data to understand what it takes to actually help consumers change their financial behaviors for the better!

And be certain to check out the video at the end – the start of a new video series being offered from journalist and financial consumer advocate Dan Solin, that provides simple 1-minute video tips for consumers, and can even be embedded by financial advisors directly onto their own websites for free (just be certain to include proper attribution back to Solin!).

Enjoy the “light” reading!

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