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 big news that two lawsuits have been filed against the SEC regarding its new Regulation Best Interest, one by a coalition of 8 state attorney generals that claim the SEC failed to follow the requirements of Dodd-Frank that any new standard of conduct for brokers be at least as stringent as the fiduciary duty that applies to RIAs, and a second by XY Planning Network that claim the SEC has exceeded its authority by trying to re-draw the dividing line between brokers and investment advisers and that all financial planning advice is required under the Investment Advisers Act of 1940 to occur under the RIA aegis anyway (making the standard of conduct for broker advice under Reg BI a moot point anyway).

Also in the news this week is an announcement that the various annuity carriers that declared they were pulling their fee-based annuity contracts out of New York due to the new disclosure requirements under Regulation 187’s new fiduciary rule for annuity and insurance sales may now return, thanks to further guidance from the New York Department of Financial Services that commission-based annuity agents won’t be required to disclose to clients that there may be less expensive fee-based versions of the same annuity contract if they’re not dual-registered to sell both in the first place… and raising concerns that New York is already undermining the relevance of its own new Best Interests standard by simply encouraging annuity agents to maintain commission-only agent licenses to avoid the disclosure requirements.

From there, we have several AdvisorTech articles this week, from the announcement that the CFP Board will now begin to grant CFP CE credit for at least some technology-related content, to the highlights of the new FinTech solutions that debuted at the recent In|Vest technology conference, the launch of a new digital-only commission-free RIA custodian called Altruist, and a discussion of the recent NASAA study finding that cybersecurity deficiencies are on the rise in state RIA examinations.

We also have a few investment-related articles, including the milestone that the total amount of U.S. equity assets held in passive mutual funds and ETFs have finally surpassed actively managed U.S. equity funds (though the total amount of global assets held in passive vehicles is still relatively low), and two different articles critiquing and debunking the recent Michael Burry statement that passive index funds may represent a “bubble” at risk of popping.

We wrap up with three interesting articles, all around the theme of where people choose to live: the first looks at how the looming deadline for tax extensions from 2018 means a slew of high-income taxpayers will see for the first time how much their tax liabilities were impacted by the new $10,000 cap on deducting state and local income and property taxes, which may potentially lead to an uptick of high-income individuals relocating to states with lower tax burdens; the second explores how the trend of intra-US migration from dense metropolitan areas to other parts of the country appears to be accelerating due not to the impact of taxes but to the cost of housing and the pursuit of more affordable housing options; and the last examines how the feasibility of working remotely in the modern digital age may be further accelerating the trend of relocation away from big cities as knowledge workers can increasingly be paid for what they do regardless of where they live (making it feasible to choose where to live based on housing affordability, taxes, weather, and any other preferences they may have… but without any need to consider the availability of local jobs in the new location!).

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with a fascinating new consumer study finding that the titles that financial advisors use really do matter, particularly when it comes to the perceived loyalty that the individual will give to their clients, with “financial planners” and “financial advisors” gauged as significantly more trustworthy than stockbrokers and insurance agents… and raising questions of whether the SEC should have gone further in its title reform efforts under Regulation Best Interest.

Also in the news this week was an announcement by the CFP Board, in response to the recent Wall Street Journal article about its lax enforcement of standards, of the members of its new Enforcement Task Force, and that the task force will be comprised mostly of former securities regulators (suggesting that the CFP Board may indeed be preparing for a substantial step up in its enforcement efforts). In addition, the buzz is growing that the SECURE Act may finally be passed in the coming month (as an add-on to the budget legislation that Congress must pass by the end of September, and Jackson National paradoxically announced, that due to New York state’s new Regulation 187 fiduciary rule for annuities, the company will bizarrely be suspending its fee-based annuities but keeping its commission-based annuities in what appears to be an attempt to not have to disclose how significant the differences in costs and benefits may be between commission- and fee-based annuity contracts.

From there, we have several practice management articles this week, including a look at the new add-on services advisory firms are beginning to offer to help justify their advisory fees (and avoid needing to cut fees), the latest advisor benchmarking study that finds advisor compensation in various key roles may be starting to flatline (but only because firms are developing more traditional career tracks with formal promotions instead), issues to consider when instituting a new advisor bonus plan for bringing in new clients, what to consider to properly define who an “A” client really is (beyond just their assets under management or revenue to the firm), and what to consider when considering whether to make a counter-offer to an employee who says they’re leaving (and why it’s best to try to avoid ever being in such a position in the first place).

We wrap up with three interesting articles, all around the theme of entrepreneurship: the first looks at a recent study finding that despite the popular view that more heads are better than one, startups founded by solo entrepreneurs are more likely to survive and thrive than team-based start-ups (that in practice just end out being more likely to have critical disagreements about the vision or direction of the business and break up later); the second explores another new study, finding that the vision of young-genius entrepreneurs (e.g., Bill Gates, Steve Jobs, or Mark Zuckerberg) is really the exception to the rule, and the average age of entrepreneurs is actually 42, with the fastest-growing startups have an average founder age of 45; and the last explores the journey of entrepreneurship for advisory firm founders in particular, and the ways the role of the founder and the demands of the business on that founder change and evolve as the business itself grows and develops over the years.

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with a look at the various Democrat plans beginning to emerge that may shift the US tax system from being heavily income-based to a blend of income- and wealth-based instead… as regardless of an advisor’s political affiliation and belief in Democrats’ policy goals, a major shift in tax policy in the U.S. will have substantial impact for many advisors’ clients, and is already an increasingly common topic of conversation with clients, which means it’s crucial to be aware of the leading proposals and what they entail. Though given the increasingly political environment, it’s notable that also in the news this week is a new effort from the Investment Advisers Association (IAA) to make it easier for at least smaller RIAs to be more politically active with campaign contributions (if they wish to) without becoming buried in the burdensome “pay-to-play” compliance rules that RIAs must follow to ensure their political contributions don’t result in working with “prohibited” clients in government.

From there, we have articles around spending behaviors, including one study finding that a whopping 30% of clients still hide at least some spending decisions from their financial advisors (ostensibly out of a fear of being judged for their decisions), the ways that affluent clients sometimes “buy” privacy not for luxury but simply to protect themselves from the public eye, the emergence of the “subscription monthly-pay model” in the world of luxury travel for affluent clients, and the ongoing rise of “medical tourism” where some companies are even paying their employees to have surgical procedures done in foreign countries (even if it’s necessary to fly a U.S. surgeon there to do the procedure) as a way to lower health care costs for the business.

We also have a few marketing articles this week, from a look at how to use and leverage Google Reviews (without running afoul of anti-testimonial compliance rules), how to set up Goal Tracking in Google Analytics to actually figure out where new prospects are coming from (and what actually connects with them on your website), and some tips for experienced advisors whose growth has stalled to re-ignite their prospecting efforts.

We wrap up with three interesting articles, all around the theme of the ever-evolving profession of financial planning itself: the first is an “Open Letter” on diversity from a financial planner who is a woman of color about the real-world challenges that emerge in being a “pioneer” in what is still a predominantly white industry; the second looks at what the CFP Board must do from here to shore up its credibility after the recent Wall Street Journal article suggesting the organization wasn’t effectively enforcing its own standards; and the last takes an interesting retrospective look at the financial planning profession itself as it approaches its 50th anniversary this December, whether the profession is really living up to its promise as a profession, and concerns of whether financial planners really have the advocacy organizations in place that are necessary to carry the torch of higher standards into the future.

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with new guidance from the SEC that is taking an increasingly tough look at proxy voting and how RIAs (and the proxy advisers who give them guidance) are voting their proxies in an age of rising shareholder activism (suggesting that there may be another shoe to drop with additional proxy voting guidance in the coming year as well).

From there, we have several marketing-related articles this week, including a look at how the best approach to prospective clients is better understanding what their biggest worries are (recognizing that when clients feel truly understood after having been asked good questions, they often just presume the advisor will have the skills to solve their problems anyway), a good “probing” question to ask to better understand prospective clients’ real needs, a look at the wide range of reasons that clients actually hire an advisor (hint: it’s not just about solving complex problems or helping them with financial ignorance, sometimes it’s just for the convenience of delegating what they could but don’t want to do themselves!), and ways to field the always-challenging question of “how much do you charge?”

We also have a few investment articles this week, from a discussion of what the inverted yield curve signals (or not), to why there’s actually such a thing as being too diversified in stocks (at least for active managers who are actually trying to outperform), how liquid alternatives may not actually be much of a diversifier to equities (at least compared to just buying old-fashioned intermediate-term Treasuries), and how hedge fund alpha has continued to shrink over the past decade from what appears to be “too much” interest from institutional investors that caused hedge funds themselves to shift their focus and business practice (in not-entirely-positive ways).

We wrap up with three interesting articles, all around the theme of working long hours and the importance of finding balance: the first is an interesting research study that finds it’s not actually working long hours that can cause adverse health effects, but specifically having a workaholic mentality that isn’t able to disconnect from work (even after the long work hours are over); the second provides a powerful reminder on the importance of delegating in order to grow; and the last points out that while being “busy” is almost worn as a badge of honor in modern culture, in practice it’s often just a signal that someone is doing a poor job prioritizing their work and their focus… which means instead of just trying to be Busy, it’s better to try and find Balance by truly prioritizing what really matters most, and learning to let go of the rest that doesn’t really matter in the end (because, by definition, it wasn’t the greatest priority!).

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the release of the latest edition of Morningstar’s “Mind The Gap” study, which analyzes investor returns based on asset-weighted flows in/out of mutual funds and ETFs, and finds that while the behavior gap does persist, it is “just” about 0.45%/year over the past decade, and is actually positive (i.e., investors on average outperformed) when it comes to asset allocation funds (as the low volatility of such diversified funds appears to drastically reduce the tendency to try to market-time them in the first place).

From there, we have a number of insurance-related articles this week, including a discussion in The Wall Street Journal of Madoff-whistleblower Harry Markopolos who claims that GE and its long-term care insurance unit in particular may be “the next Enron” and that the LTC insurer has understated its future liabilities to the tune of $10s of billions, how the pricing of insurance products (or the participation rates of fixed indexed annuities) is deteriorating in the face of now-falling interest rates, and a new Private Letter Ruling from the IRS that will allow RIAs to receive their advisory fees directly from a fee-based annuity without triggering a taxable event (and in fact, will effectively be paid by the client on a pre-tax basis for any annuity with embedded gains!).

We also have several practice management articles, from the ongoing rise of non-compete agreements at RIAs to prevent employee advisors from taking clients when changing firms (notwithstanding the fact that RIAs historically have been the bastion of no-hands-tied independence), to the business management hazards of valuing an advisory firm based on a multiple of revenue alone, the “exploding” number of options for advisory firms to borrow in order to acquire other firms, the practical challenges of trying to grow by acquisition and actually close on and integrate a newly acquired advisory firm, and the practical value of benchmarking studies as a means to not just evaluate the firm’s AUM and growth relative to peers but also its productivity and efficiency in allocating its resources across the firm.

We wrap up with three interesting articles, all around the theme of how to actually make a good decision: the first looks at the “anatomy” of a Great Decision, which ultimately comes down to making a principles-based decision, and using a broad multidisciplinary lens to consider the issue from all angles before making the decision; the second looks at how thinking about decisions more probabilistically as “bets” is a better approach that naturally considers the role of luck and hidden information (and recognizes that the key to a good decision is not to guarantee a good outcome, but simply to minimize the odds of a bad one); and the last discusses the so-called “37% rule”, that the best amount of time to allocate to a decision is 37% of the total time designated to the project (but after 37% of the time has passed, it’s time to execute the decision and do the best you can with whatever you’ve got at that point!).

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with an edgy new academic study finding that dual-registered advisors on average charge fees that are significantly higher than standalone RIAs, face more conflicts of interest, and end out with a higher rate of regulatory complaints, raising serious concerns about whether the shift towards, and growing popularity of, dual-registered investment advisors may ultimately face a regulatory backlash.

Also in the news this week is a decision by the New York State Supreme Court to uphold its new Regulation 187 that would require all insurance agents and brokers to meet a fiduciary duty when providing insurance and annuity recommendations to clients, and a blockbuster investigative report from Financial Planning magazine finding that JPMorgan not only inappropriately fired a whistleblower for raising a red flag about its practice of selling proprietary products to fiduciary clients, but appears to have falsified client complaints against the advisor as well… and FINRA still disciplined the advisor and refuses to retract it, while FINRA itself faces the conflict of having JPMorgan’s former top lawyer as a member of its own Board.

From there, we have several technology-related articles, including a look at the growing number of tools for advisors that help to estimate healthcare costs in retirement and plan for senior medical expenses, a look at the slow-but-steady rise of artificial intelligence in wealth management (which thus far, is actually being driven in large part by CRM provider Salesforce), and how “digital marketing” technology is becoming the hot area for advisory firms to spend more on (given the potentially immediate positive ROI for investments into marketing technology versus other areas like compliance tech).

We also have a few articles on investing, including a guide on how to select the right outsourced investment management provider (i.e., TAMP), a prediction that only two types of asset managers (high-performance boutiques and mega-scale behemoths) will survive in the coming decade, and a Morningstar analysis of what exact drives the tax-efficiency of ETFs.

We wrap up with three interesting articles, all around the theme of the ways our future is changing through the power of technology: the first looks at the rise of technology-driven homebuyer services like OpenDoor and OfferPad, that are applying algorithms to turn residential real estate into an “e-commerce” environment with faster buying and selling; the second explores how, despite the eye-popping rise of platforms like Uber, such mega-platforms can still be highly prone to disruption themselves depending on the nature of their networks; and the last looks at how the near-ubiquity of smartphones is leading them to be increasingly used as our identification device, with initiatives underway to digitize into our phones everything from MetroCards to even our Driver’s Licenses.

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big investigative journalism report from the Wall Street Journal this week that the CFP Board’s “Let’s Make A Plan” website was including thousands of CFP brokers who had a history of disciplinary misconduct and/or other material disclosures on the FINRA website that were not communicated on the CFP Board’s website… leading the CFP Board to immediately make changes to its site to link to BrokerCheck and IAPD, to increase its reviews of CFP professionals’ disciplinary records during the renewal process, and to appoint a new Task Force chaired by former Texas Securities Commissioner Denise Voigt Crawford to “strengthen and modernize” CFP Board’s enforcement.

Also in the news this week are several articles about the increasingly controversial 12b-1 fee, from a lawsuit from the SEC against Commonwealth Financial alleging that the firm received more than $100M in not-properly-disclosed 12b-1 fees as part of a revenue-sharing agreement with NFS (that may have directed investors towards higher-cost share classes that paid such 12b-1 fees to NFS and Commonwealth), and a look at how Vanguard itself competes by not paying 12b-1 fees to other platforms even as Vanguard’s own brokerage and Personal Advisor Services solution may be collecting 12b-1 fees from other mutual funds in order to fund their own platform costs.

From there, we have a few articles on cash flow and budgeting issues, from a look at the recent Equifax settlement for $125 cash or up to 10 years of credit monitoring (and how to claim them, and why the credit monitoring may be a far better deal than the cash), to a takedown of why consumers should ignore Suze Orman’s recent admonition that “wast[ing] money on coffee is like peeing $1M down the drain”, and an interesting framework to help figure out when it is a good idea to “go cheap” and when it’s better to still spend up for quality.

We also have a few articles on mergers and acquisitions in the advisor space, including the latest “Deal Book” report from M&A consultant David DeVoe that finds record highs in both the volume of RIAs selling and the valuations that advisory firm sellers are commanding in the marketplace, a breakdown of the common components of an advisory firm deal (from Deal Structure to Financing to Tax Treatment), and some “must-know” items to be mindful of when you receive an unsolicited inquiry to sell your advisory firm and now must suddenly decide whether to consider the buyer’s offer.

We wrap up with three interesting articles, all around the theme of maintaining a productive office workspace: the first looks at the increasingly popular rise of “phone booths” (but without the phones) as a form of ‘privacy pod’ in open floor office plans; the second explores the research on how having multiple monitors really does make us more productive at work; and the last looks at how the physical layout of an office space matters not only for its visual and aesthetic appeal, but because it can impact the sound of the space, which in turn can impact everything from our productivity to even our mood in the office.

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 number of big industry shake-ups, including the sudden news that TD Ameritrade CEO Tim Hockey is out (for what may have been a failure to pay enough attention to the company’s RIA channel), and a management restructuring at Schwab that elevates its Schwab Advisor Services RIA division to report directly to CEO Walt Bettinger at the top of the organization, as the RIA channel continues its rise (and even the attention and resources it commands at historically-retail-oriented brokerage firms).

From there, we have several practice management articles this week, from the latest Schwab RIA Benchmarking Study that shows RIA growth remains solid (but not huge), averaging a 5.4%/year growth rate in clients over the past 5 years, the dynamics of what happens when an advisory firm decides to close its doors to new clients after growing to be “big enough” to satisfy the owner’s needs, how equity-sharing is becoming increasingly common at large advisory firms as a way to attract, but especially retain talent, and a new Risk Alert from OCIE that advisory firms are not doing enough to run their own independent background and disciplinary checks on new hires (and thus failing to properly report disclosable events to prospects and clients).

We also have a few marketing articles, from why it may be better to help prospective clients conduct a “fee audit” of their current advisor (before trying to convince them of your own value for the fees you charge), how trademark law works when it comes to advisory firms and the names of their businesses, and how the targeted advertising capabilities of search engines and social media is making outbound paid advertising an increasingly lucrative channel for advisory firms to pursue for getting new clients.

We wrap up with three interesting articles, all around the theme of trying to make good decisions on the path to self-improvement: the first looks at the fascinating phenomenon that successful systems are often “complex to make [but] simple to break,” which means at some point in the process of success (from business to investing), the focus shifts from building the complex system to work, to simply trying to make sure it doesn’t die a simple death; the second looks at how to think about potentially complex decisions not as an all-or-none “it’s right” or “it’s not,” but on a “confidence meter” scale from 0% to 100%, with a threshold for when a bet is at least “sure enough” to be worth making (while also recognizing that the threshold cannot be 100% because virtually no decision is entirely assured); and the explores how we often try to improve by making something bigger or better, but in practice some of the best improvements can come simply by reducing the leaks and fixing the tiny errors and mistakes that take away from compounding growth along the way.

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 industry news that the CFP Board has decided to delay enforcement (but not the rollout itself) of its new fiduciary standard, allowing brokerage firms another 9 months (from October of 2019 until June of 2020) to adjust their policies and procedures… while reinforcing that the CFP Board’s new fiduciary standard will be enforced once Regulation Best Interest is also effective after June 30th of 2020.

Also in the news this week is the announcement that Salesforce is rolling out a new low(er)-cost version of its Financial Services Cloud, in an effort to reach the small-to-mid-sized independent advisor marketplace that is currently dominated by industry-specific competitors like Redtail and Wealthbox.

From there, we have several articles on regulatory topics, from a look at what’s coming for advisors with the new 2-page Form CRS that must be provided to prospects and clients starting next year (and how hard it may be to fit all the required information onto “just” 2 pages), to a discussion of why it’s so important to read the Privacy Policies of the FinTech vendors that advisors use (some of which actually do share portions of client and/or advisor data with third parties!), some tips on text message compliance, and technology strategies on how best to facilitate file-sharing with clients.

We also have a few behavioral finance articles this week, including: recent research suggesting that the bulk of investors (at least who go direct to Vanguard) actually are relatively patient, prudent, and calm (and that the “dumb money” retail investor may actually be less common than previously believed); research on whether “smart” people with a high IQ are really better investors (or perhaps just better at not making behavioral mistakes); and why it’s important to evaluate your decision-making process properly and not engage in “resulting” that can lead to repeating bad decisions and underappreciating good ones (that happened to not work out as well as anticipated).

We wrap up with three interesting articles, all around the theme of the opportunities of compounding returns (in sometimes unanticipated ways): the first is a fun look at the town of Quincy, Florida, which has the highest rate of millionaires per capita due to the advice of a local banker during the Great Depression that the local community invest in the consumer durable stock of Coca-Cola… which over its lifetime has compounded its original $40 shares into $10M/share (split-adjusted and dividend reinvested back to its original IPO in 1919!); the second looks at the emergence of “non-linearity” in earnings, especially in professional services jobs, such that couples can often earn more by choosing to have one spouse work significantly more hours and the other work part-time or less, instead of a “traditional” dual-income (two-full-time earning) household; and the last explores how the rise of the internet has facilitated the rise of “microbrands,” ultra-targeted niche solutions that leverage social media and digital advertising to not only reach a unique segment of consumers, but to pre-test their business offering to affirm a niche clientele will purchase before the product is ever made (which is increasingly relevant for the rise of niche financial advisors, too!).

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big Advisor #FinTech news that Orion is acquiring financial planning software Advizr for a whopping $50M in an effort to expand its platform towards more holistic wealth management and provide advisory firms a more planning-centric portal for clients to engage with.

Also in the news this week is the announcement that just 3 months after its launch, Schwab’s monthly subscription service has raked in a whopping $1B of AUM, and AdvicePay crossed 20,000 advisors under enterprise contract facilitating financial planning fee payments, as consumer interest in the monthly subscription model of financial planning continues to heat up.

From there, we have several industry-related articles, including a surprising call from the FPA that the CFP Board should delay enforcement of its new fiduciary Standard of Conduct (but just until next June, to take effect alongside the new Regulation Best Interest), the announcement from the FPA that its OneFPA Network Plan has been finalized by the Board and will be proceeding forward with a 10-chapter beta test (despite generating positive Public Comment letters from less than 0.02% of its membership), an Op-Ed from former CFP Board chair Ray Ferrara disputing at least some of fiduciary advocate Don Trone’s allegations that the CFP Board needs to improve its own fiduciary governance processes, and the news that Fi360 has become (only) the 10th financial advisor designation to earn (ANSI) accreditation for its AIF (Accredited Investment Fiduciary) designation.

We also have a few marketing-related articles this week, from tips on how advisory firms can differentiate themselves on their websites once Reg BI eliminates “fiduciary” as a differentiator, how to improve your Advisor Bio page so it doesn’t “suck,” and basic tips on how to improve the SEO (Search Engine Optimization) of the articles you do publish to your website.

We wrap up with three interesting articles, all around the theme of figuring out what is really fulfilling and “enough” to make us happy: the first looks at how more and more research shows what really makes us happy in our jobs, yet in practice people are less and less happy at work; the second explores the ways that we tend to pursue money, but when faced with difficult time-vs-money trade-offs (e.g., would you take all of Warren Buffet’s money if you also had to take on his current age of 87?) we virtually always choose the time over the money; and the last examines how often the biggest returns we can get on the path to financial success aren’t actually about earning money at all, but about getting comfortable that what we have is “enough” (and then saving all the rest).

Enjoy the “light” reading!

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