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 the official release of the SEC’s new Advice Rule, which aims to lift the standards for brokers giving advice recommendations with a new “Regulation Best Interest” but stops short of imposing a full (and uniform) fiduciary rule, while also raising the possibility that brokers would at least be restricted from using the “advisor” or “adviser” labels (but not for hybrid B/D-RIA firms that actually comprise the overwhelming majority of all brokers in the first place).

Yet also in the news this week is the acknowledgement that advice itself continues to be increasingly central to both the investment adviser and broker-dealer model, with a research study from Cerulli Edge showing that the majority of clients are now receiving some kind of financial planning services from their investment adviser or broker (up from 1/3rd just 5 years ago), and a consumer study from J.D. Power which found that even as Millennials demand higher quality technology from their financial institutions, it’s still the financial advisor relationship that actually drives Millennial loyalty to a firm!

From there, we have several articles about the insurance industry, including a recap of the highlights from the recent Intercompany Long-Term Care Insurance (ILTCI) conference about the latest trends in the LTC insurance industry (including that traditional LTC insurance is stabilizing but carriers are still rolling out more flexible hybrid life/LTC policies as well), a discussion of the rules regarding the important but often overlooked 2-year Incontestability Period for life insurance policies, and a look at how the fact that most people have declining needs for life insurance over time means that layering multiple life insurance policies with separate time horizons may be more cost efficient than just buying one large 30-year term policy.

We also have several advisor-technology articles, including a look at how some firms are starting to try to proactively leverage artificial intelligence to support the productivity of financial advisors, a second that looks at the growth of the new United Capital “FinLife CX” platform (which can be bundled to an advisor’s existing CRM instead of requiring the advisor to use theirs), and the (re-)emergence of FinFolio 2.0 as a competitor in the space of portfolio accounting and reporting solutions for advisors.

We wrap up with three interesting articles, all around the theme of financial independence and retiring early: the first explores the growth of bloggers that show consumers (especially Millennials) how to live frugally in order to retire early, with the caveat that the most successful bloggers in the space may be achieving early retirement primarily because they earned a well-above-average income, not because of their frugal spending habits; the second goes deeper in exploring the “FIRE” (Financial Independence, Retire Early) movement that is attracting more and more interest from Millennials in particular; and the last is a fascinating discussion about whether and at what age someone should try to retire early to balance out their earnings and life potential with their desired standard of living and freedom… at least, for those who have the incomes that make it possible to save enough to do so in the first place!

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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 will be conducting an Open Meeting of all 5 commissioners next Wednesday, April 18th, specifically to discuss its widely anticipated proposals regarding new fiduciary requirements for brokers and investment advisers. Also in the news this week is a series of proposed “principles” that SIFMA is advocating the industry should adopt for best practices around account aggregation.

From there, we have several articles about how advisors charge for their services, including a new study from Cerulli Associates finding that the use of fixed financial planning fees is on the rise, the announcement that Fidelity is converting its entire financial advisory services to retail clients into a single unified (AUM) fee schedule, a survey from Pershing finding that leading advisory firms that focus on holistic planning are not feeling pressure to cut their fees (but are feeling pressure to offer new services to justify the fees they do charge), and a new Risk Alert from the SEC on RIAs that are failing to engage in proper billing practices with clients (usually not out of intended malfeasance, but simply lax processes and procedures for executing their billing in the first place).

We also have several tax-related articles, including suggestions on the key points to review on clients’ 2017 tax returns as tax filing season comes to a close, the rise of the DAPT (Domestic Asset Protection Trust) for both estate planning and asset protection benefits, and the challenges of tax reporting on Bitcoin and other cryptocurrency transactions (for which active cryptocurrency traders may have a very large volume of individual lot transactions, and the IRS is increasingly scrutinizing whether such investors are actually properly reporting their transactions and gains).

We wrap up with three interesting articles, all looking at the changing landscape of both industry standards and the organizations that serve advisors, including: a challenging article raising the question of whether the FPA is really fulfilling its vision to be a professional organization with local chapters, or is operating more like a trade organization that consolidates power to its national headquarters; a look at whether the CFP Board is doing enough to provide guidance to CFP certificants about how, exactly, they should be complying with the CFP Board’s new fiduciary standards to manage and mitigate conflicts of interest; and a look from Bob Veres at how it seems increasingly inevitable that the entire future of financial advice will be fiduciary… the only question is whether regulators will require the financial services industry to clarify who’s actually serving as an advisor versus a salesperson in the first place.

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big announcement that FPA National has dissolved its affiliation agreement with its New York chapter and spun up a new alternative FPA chapter entity in its stead, in what started out as a dispute about whether certain local chapter board members were inappropriately using lists of consumer contacts from the chapter’s public awareness events to prospect for clients, but has now turned into concerns about whether FPA National is taking too much control of its independent chapter entities.

Also in the news this week is a look at how state efforts on fiduciary standards appear to be slowing (now that the Department of Labor’s fiduciary rule is in limbo, and the SEC is expected to propose their own in the coming months), the announcement of a class action lawsuit against Edward Jones alleging that the firm was too aggressive in shifting clients out of commission-based accounts and into fee-based advisory accounts (compounded by the fact that those advisory accounts may have been investing into Edward Jones’ own proprietary products), and a discussion of some of the talking points that other advisors are using when talking clients through the recent market volatility.

From there, we have several practice management articles this week, including: a review of advisor compensation (and the rising impact of the young-advisor talent shortage) from the latest Schwab and Fidelity benchmarking surveys; tips on how to properly structure partner compensation (broken into base compensation, incentives, and profit distributions) for firms that must transition into more formal partner roles given their growth; how employee turnover can cause poor performance (and how to get control of a turnover problem with clearer definitions of the work, the worker, and the workplace); why advisory firms should be more specific about their vision, mission, and strategy, to avoid what sound like “phony” slogans; and a hard look at the consequences of taking “too much” cash out of your advisory firm instead of reinvesting for growth.

We wrap up with three interesting articles, all looking at the changing landscape of broker-dealers in an increasingly fiduciary future: the first is a review of the latest 2018 Financial Advisor magazine broker-dealer survey, with interviews from most of the leading B/D executives who themselves note that the entire broker-dealer model is going through a big “rethink” for the future; the second looks at how broker-dealers need to re-engineer their technology for managing broker commissions into a more holistic “advisor compensation management” platform that provides business intelligence and workflow support as well; and the last explores how, ironically, it was the independent broker-dealer movement that really helped financial planning to first gain traction 20-30 years ago, even as it’s now the fiduciary financial planning movement that is forcing broker-dealers to reinvent entirely in order to survive (or, alternatively, to simply become giant national RIAs instead!?)!

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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 CFP Board has officially approved its new CFP Code of Ethics and Standards of Conduct, which for the first time will require CFP professionals to be a “fiduciary at all times”… albeit while leaving most CFP Professionals on their own in determining what conflicts of interest are, or are not, permissible to engage in without breaching that fiduciary obligation.

From there, we have several more articles related to advisor regulation, from the news that the National Association of Fixed Annuities (NAFA) has decided to withdraw its Appeal fighting the DoL fiduciary rule now that the 5th Circuit has already ruled against the DoL (to avoid creating a further split amongst the Appeals Courts), to a look at how fiduciary rulemaking is likely to play out in the coming year under the SEC if the DoL fiduciary rule really is vacated, the rise of a “point-in-time” fiduciary as the scope of fiduciary advice is applied to one-time advice interactions (rather than what was historically just ongoing regular interactions between the advisor and client), and a look at why just charging AUM fees alone doesn’t necessarily ensure the advisor is properly managing their conflicts of interest (especially if the firm charges different AUM fees for equities versus fixed-income allocations).

We also have a few advisor technology articles, including: the launch of the Orion “Compass” solution that provides additional compliance reports for RIAs using its performance reporting software (which may be especially helpful the next time the SEC shows up for an exam); the rise of estate planning “FinTech” solutions like EverPlans and Yourefolio as estate planning increasingly shifts from estate tax planning to actual planning around the distribution of the estate itself; and the new “Quick Start” offering from Tamarac that aims to make it easier for breakaway brokers to get up-and-running quickly on their trading and performance reporting software tools.

We wrap up with three interesting articles, all by industry commentator Bob Veres, about various trends in the advisory industry: the first explores how even as the CFP Board lifted up its Standards for the first time in 11 years to expand its fiduciary duty, it is still accommodating a wide range of sometimes-questionable commission compensation models under the auspices that certain products and solutions simply aren’t available or feasible for non-commission advisors… which may become a moot point in the coming decade as more and more firms finally launch “advisory” product solutions and technology makes it easier and easier to serve an ever-widening range of clients; the second details a painful list of the true costs of the low bar of suitability for brokers, which isn’t about the majority of brokers that still do the right thing for clients anyway (simply because it’s good business), but the extent to which bad behavior by a small subset of especially bad actors can and is condoned under the low suitability bar; and the last raises the interesting question of whether in the long run it’s a problem for us to have so many “overlapping” membership associations all serving financial planning and wealth management, whether it would be a better use of resources for them to merge and consolidate together, or if instead it’s actually better to have so many different organizations because the nature of competition helps to ensure that they collectively keep pushing to advance the financial planning profession forward (if only to out-compete the others trying to do the same thing).

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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 Investment Adviser Association, in collaboration with Charles Schwab, has begun an effort with lawmakers to both reverse the recent changes that eliminated the tax deductibility of investment advisory fees and expand the scope of the new “pass-through” business deduction (intended to support businesses that grow jobs and and hire people) to allow at least larger advisory firms that really do hire people and create jobs to be eligible for the deduction as well.

From there, we have several marketing-related articles this week, including: how most financial advisor websites are like a “bad date” that mostly talks about themselves instead of trying to connect with the other person; how Googling around to check out other advisory firms in your area can help to show you how you can better differentiate (or how undifferentiated you may actually be); the steps to follow to create a successful lead-nurturing campaign with prospective clients; key tips for starting your own Public Relations (PR) initiative in your advisory firm with (local) media; and a discussion of a unique COI referral opportunity that most advisors miss out on (working with investment bankers that facilitate the sale of small-to-mid-sized businesses).

We also have a few articles on advisor technology trends, from a look at how performance reporting software may eventually be replaced by “PFM” tools that advisors can give to their clients (which both better engage them, and are less expensive), the rise of the next wave of “robo” firms now targeting disruption in the small-to-mid-sized 401(k) plan marketplace, and a glimpse of the new “Advisor Innovation (AI) Labs” effort from Lori Hardwick and Mike Zebrowski that is aiming to create a new form of advisor desktop that would sit on top of existing broker-dealer or custodial platforms to let independent advisors be more independent (at least, if those firms will cooperate and “let” AI Labs do so with “their” data!).

We wrap up with three interesting articles, all around the theme of raising financially successful children: the first examines the results of a recently published study that took a 40 year(!) view of children in 1968 and again in 2008 to see which children traits were most predictive of the greatest financial success (and found that the “rule-breakers” were often the most financially successful in the end, despite their challenges as children); the second reviews another recent research survey, which found that while those with above-average talent often do at least make above-average income, the greatest levels of success are more commonly driven by luck than talent (or at least talent alone); and the last explores how to raise children to be more grateful, in recognition of both the long-term emotional and other benefits of having an “attitude of gratitude”, and the challenges of doing so in a world where parenting styles that aimed to bolster the self-esteem of children may have unwittingly made them more entitled (and less inclined towards gratitude) in the process.

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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 5th Circuit Court of Appeals has ruled against the Department of Labor and its fiduciary rule, and moved to vacate the DoL fiduciary rule entirely… with the caveat that a separate decision from the 10th Circuit Court of Appeals this week upheld the fiduciary rule, setting the table for a potential final showdown in the Supreme Court, and creating even greater uncertainty about the fiduciary rule in the meantime. Also in the news this week was the revelation that the SEC’s own fiduciary rule proposal may be coming soon – sometime in the second quarter – and its likely to focus more not just on fiduciary disclosures, but also whether advisors and brokers need to be clearer with their titles.

From there, we have several practice articles this week, including: how to conduct effective staff/team meetings (which are especially important as your team grows!); why “compensation” problems with employees are rarely about compensation alone, and effective employee retention is about the more holistic job opportunity and offering; why rearranging your office space (and who sits where) can spur creativity and innovation in the business (albeit at the risk of impairing productivity); and a look at what it will take in the future to be a true “destination” advisory firm (for both future clients, and future employees).

We also have a few articles on retirement planning, from a look at planning strategies to discuss with clients in their 50s when they’re still 5-10 years away from the retirement transition (or in the home stretch to saving enough to achieve it), to recent research that finds a disturbing spike in the mortality rate (especially for men) upon reaching age 62 and becoming eligible for Social Security, and a look at the pros and cons of so-called “bucketing” (or time-segmentation) strategies for retirement portfolios.

We wrap up with three interesting articles, all around the theme of household spending and cash flow: the first looks at the phenomenon of “lifestyle creep”, and why it’s so important to establish systems that aim to save your future raises going forward (so they don’t automatically creep into your lifestyle spending); a fascinating study that finds, due in large part to how judgmental society is of the rich, that most affluent people actually try to hide their wealth and are hypersensitive to being judged about it); and the last looks at how, because money is often a major point of contention between couples in a marriage, that one of the best ways to reduce marital conflict over spending is to give each spouse a guilt-free “allowance” that they can spend on any discretionary expense they want (without fear of being judged!).

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Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that after several years of scrutiny, the SEC’s examination rate for RIAs has risen significantly, up from an average of once every 9-10 years as recently as 2016 to an average of “just” once every 5 years this year (thanks in large part to a reallocation of examiners from the broker-dealer unit into the SEC’s RIA unit instead). Also in the news this week is an investigation from the Massachusetts securities regulators into Wells Fargo Advisors, raising the question of whether the firm may be violating the DoL fiduciary rule by switching clients from commission-based accounts into fee-based accounts when it would have been better for them to just continue to pay occasional commissions in the original account. And new legislation has been (re-)introduced in Congress that aims to increase both the number of small businesses that offer an employer retirement plan (with a proposed up-to-$5,000 tax credit to roll out a plan), along with additional tax incentives for employers that create the plan with automatic enrollment provisions.

From there, we have several articles around the theme of marketing and engagement with clients, including a look at how systematically asking existing clients for their input on the agenda for each client review meeting can potentially increase referrals, how to more deeply engage clients by conducting a simple “Hidden Gems” poll with them, and how to reframe the traditional financial planning discovery questions around identifying client goals to more deeply understand what really motivates them and what they really want to work towards in their financial plan (that they may not have even realized about themselves yet).

We also have a few articles on practice management, including the importance of formally articulating the culture of your advisory firm, the issues to consider when it’s time to increase the equity stake of next generation advisors who thus far only have a small slice of the business, and the rise of “co-planning” as a means to more deeply connect with clients and provide greater value in a more advice-centric future for financial planners.

We wrap up with three interesting articles, all around the theme of trends in the world of financial planners themselves: the first is a good dive by industry commentator Bob Veres into the world of CPA financial planners, who under the AICPA have their own membership group (now 11,500 strong and up 12% in just the past 2 years alone), their own designation (the PFS), and their own views about the professional status of financial planners; the second is a challenge by CFP Board CEO Kevin Keller on whether CPAs, who admittedly have very in-depth knowledge and training on tax and accounting issues, really have the competency to deliver personal financial planning services without going through training like CFP certification; and the last explores whether the best path forward for the profession is to get away from the rising volume of “disclosures” to address various fiduciary conflicts of interest, and instead establish a simpler system that “grades” conflicts of interest, both to help consumers evaluate which conflict of interest disclosures really “matter” or not, and also to provide a means for advisory firms to want to eschew their conflicts of interest rather than just disclose them (in order to increase their advisor rating!).

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 FINRA is considering a proposal that would reduce the obligation of broker-dealers to oversee outside RIAs of hybrid advisors… though it remains unclear if that means broker-dealers will finally be more hands-off from outside RIAs (and the revenue they charge for supervising outside RIAs), or simply require their hybrid advisors to either use the corporate RIA or the broker-dealer’s custody and clearing services for the outside RIA instead.

Also in the news this week is a new letter from the Consumer Federation of America urging the Department of Labor to step up its enforcement of the now-in-effect Impartial Conduct Standards under its fiduciary rule (given the recent enforcement action by Massachusetts securities regulators against Scottrade), and the announcement that David Lau (formerly of Jefferson National, which launched one of the first RIA-friendly variable annuities) is launching a new company called DPL Financial aiming to bring an even wider range of no-commission insurance products to the RIA community.

From there, we have several articles around the theme of practice management, including a look at the new HIFON study-group-cum-membership-organization for operations staff members in advisory firms, a discussion of how the Super OSJ model in broker-dealers is evolving away from “just” providing compliance oversight to a wider range of back-office support and training and technology for their advisors, and a review of the current wirehouse landscape given the ongoing unraveling of the Broker Protocol.

We also have a few articles on financial advisor pricing and compensation, from suggestions on how to handle the infamous question “How do you justify the value of your advisory firm fees?”, to a discussion about how advisory firm business and pricing models tend to change over time for an advisor, and why it’s important for larger advisory firms to have a compensation model for advisors that covers all of their needs (following Maslow’s hierarchy from covering ‘basic’ needs, to those for esteem and belonging to a community, and finally achieving greater levels of self actualization).

We wrap up with three interesting articles, all around the theme of getting your financial house in order: the first examines the rising trend of financial advice and financial wellness programs in the workplace, as employers are discovering that financial stress is so damaging to employee productivity that it actually “pays” to help employees get more financially literate and shore up their debt and emergency savings shortfalls; the second looks at new research finding that community involvement shows a strong relationship to one’s self-assessed financial well-being (providing yet another example of how giving to others helps fulfill our own happiness); and the last is a great walk-through of all the various financial documents that we should keep, don’t need to keep, or can at least scan electronically to help declutter the paper in our lives!

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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 yet another state, Maryland, has now jumped into the fiduciary fray, with its own version of a rule that would require brokers operating in the state to meet a fiduciary standard of care, given ongoing concerns from state legislators about the potential consumer consequences of President Trump’s order to review (and potentially further delay or kill) the Department of Labor’s fiduciary rule. Also in the news this week was a discussion from SEC regulators suggesting that they may be focusing less now on creating new rules for robo-advisors, and instead simply looking to apply the existing principles-based fiduciary regulation under the Investment Advisers Act of 1940 to the robo-advisor business model (with a particular focus on whether robo-advisors, or human advisors using “robo” tools, are probably explaining how broad, or narrow, the scope of their financial advice really is).

From there, we have several articles on the new tax law, including how many small businesses are taking a fresh look at the ideal business entity structure (with some pass-through businesses considering whether to become C corporations for the new 21% corporate rate, and some C corporations considering whether to switch to pass-through status to take advantage of the new 20% Qualified Business Income deduction), a discussion of whether some employee advisors at broker-dealers may want to switch to become independent contractors to take advantage of the new pass-through deduction, how some couples may want to use the “Married Filing Separately” filing status to preserve the pass-through deduction where one spouse is a business owner and the other has (even higher) non-business income, and a look at how the change in tax rates from 2017 to 2018 creates interesting opportunities over the next two months for people to engage in “tax rate arbitrage” by contributing to IRAs for the 2017 tax year and then converting them in the current 2018 year at lower rates.

We also have a few marketing-related articles this week, from tips to squeeze more value out of your client communication and events (by focusing on how to expand or better leverage or re-purpose the content), to how having a narrower niche or target market allows you to build rapport faster with clients by getting to know their common needs and issues (which makes you look like a mind-reader when you can tell them what’s on their minds before they even say it!), and how clients begin to develop a deeper relationship with a professional in as little as 3 extra minutes of the professional listening and making clients feel like they’re heard and cared for.

We wrap up with three interesting articles, all around the theme of selling and business incentives: the first explores a recent research study that finds it’s not the lower fees of robo-advisors that are attracting clients, but the transparency of those fees (and their subsequent performance reporting systems), which has important lessons and implications for all advisors; the second looks at how business model incentives may help to contribute to the unique (and not necessarily pro-long-term-investor) way that brokerage firms typically develop their client statements and websites; and the last provides a good reminder that even if we’re in the business of advice and not product sales that we’re all still selling something to clients, which means perhaps we should focus less on trying to avoid discussions about sales altogether and instead focus more on the most productive ways to ethically “sell” and help clients to reach better financial outcomes!

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 Massachusetts state securities regulator has accused retail brokerage firm Scottrade of violating the Department of Labor’s fiduciary rule by holding a series of “sales contests” in the second half of 2017, as even though the full Best Interests Contract Exemption is delayed until the middle of 2019, the requirement to satisfy the Impartial Conduct Standards of the DoL fiduciary rule did take effect last June 9th of 2017… and raising the question of whether Massachusetts will soon be scrutinizing other major firms for similar fiduciary compliance violations. And in a similar vein, the SEC also announced this week  new “Share Class Selection Disclosure” Initiative that will grant amnesty to RIAs (especially hybrid RIAs) that may have failed to disclose that they were using higher-cost share classes that included 12b-1 fees (paid to a related broker-dealer) without disclosing that there were lower cost alternatives available (but only if the firm self-discloses its error, and refunds all excess profits earned from clients).

From there, we have several advisor technology articles, including a brief recap of the latest 2018 Advisor Software Survey from Joel Bruckenstein and Bob Veres, two reviews of the big news and announcements at the recent T3 advisor technology conference, and a fascinating profile of some of the major private equity and venture capital investors that have been putting money into the burgeoning number of new advisor tech startups that are well-funded with outside capital and not merely “homegrown” solutions built by advisors themselves and re-sold to their peers.

We also have a few articles on the ongoing trends of advisors retiring, merging, and being acquired, including tips for RIAs that are looking to sell about what they should do to find the right buyer, a look at the landscape for broker-dealer recruiting (which is especially hot amongst the largest independent broker-dealers, who are attracting reps from both wirehouses and smaller IBDs), and some advice from Bob Veres on how advisors should think through their own potential retirement (which isn’t just about the financial matters of selling your practice, but is primarily about finding your own new purpose in a world where your primary focus may no longer be your advisory firm!).

We wrap up with three interesting articles, all around the theme of telecommuting and whether working remotely may not be all it’s cracked up to be: the first looks at how working from home is associated with a dangerous rise in loneliness and isolation, which is both leading employees to want to go back and work from an office again, and can even have deleterious health effects; the second examines how working from home also appears to be impairing everything from the innovation to customer service of a number of large firms, which are shifting from telecommuting and remote work policies to more of a “flexible work” policy that allows some work from home but still requires employees to come into the office on most days; and the last explores the rise of co-working spaces, which provide helpful office space and business infrastructure for those who don’t have a good setup at home, but are proving to be popular primarily because of the social and community aspects of co-working (as contrasted, once again, with the potential isolation and loneliness of working from home). Which means at a minimum, those who are interested in working from home – including solo advisors who don’t have an office – need to be mindful of the need to maintain a social network of friends and colleagues, at least in the form of a co-working space.

Enjoy the “light” reading!

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