In mid-August, the CFP Board issued some proposed changes to the CFP Board work experience requirement, including differentiating the work experience requirement for those personally deliver financial planning, from those who work in a supporting, supervisory, or teaching role. Up until now, all experience has been treated the same; but under the proposed rules, those who support, supervise, or teach will need more experience than those who personally deliver planning. Yet at the same time, the proposed changes make the differentiation by reducing the work experience requirement for those who personally deliver financial planning from three years, down to only two years. Is this strengthening the standard, or weakening it?Read More...
Coming soon to a branch office in your neighborhood: the latest – and greatest – fiduciary standard ever! No scaling. No cutting or gutting! Blended just the way Wall Street likes it.
Forget that the fiduciary duty is an overlay of principles designed to fill in the gaps of law and regulation to assure that the adviser acts in the best interest of the client. A traditional fiduciary duty, relying on legal precedent, would create an overarching, nearly bullet-proof standard unassailable by Wall Street lawyers eager to poke Swiss cheese holes in it.
Should fiduciary wealth management firms have minimum capital requirements, to ensure they can make good to clients if they do fail in their fiduciary duties? One of the professed strengths of the RIA model is the fact that such firms are held to a fiduciary standard, providing a higher level of legal accountability for firms that fail to put their clients' interests ahead of their own. But strictly speaking, that really only holds as a consumer protection if the firm has the financial wherewithal to actually pay damages, should they arise. Read More...
If there's one staple of financial planning wisdom that virtually everyone will agree upon, it's stocks for the long run. Sure, we all acknowledge that markets can be volatile in the short term, but we all seem to still agree that in the long run, stocks are still where it's at. So as long as you have a long enough time horizon - whether you're a young person still accumulating, or a retiree looking at a multi-decade spending phase - stocks are still a material portion of the portfolio. But within the past hundred years alone, there was nearly an entire generation - who grew up during the Great Depression - that gave up on stocks for their entire lives. What if that happened again? Has the financial planning profession hitched itself to the stocks-for-the-long-run wagon so tightly that if stocks fall off a cliff, so too will the profession?Read More...
The explosion of social media as a means of communication has been stunning. And while those in professional services are just trying to keep up with the change, today's younger generation (and frankly, more "older" people that you might suspect) has already fully embraced the change. What this means, though, is that social media is not just about some new way to do marketing and develop new clients. Instead, it means that financial services needs to figure out how to handle social media - and fast - to even remain relevant and appealing to the future generation of financial planners themselves!Read More...
As the fiduciary tide rises, and more and more financial planners choose to be recognized as fiduciaries (either by choice of regulator, or the various fiduciary oaths taken under the CFP certification, NAPFA or FPA membership, etc.), there seems to be an increasing casualness towards what it means to be a fiduciary. The basic refrain seems to be "Sure, I'm a fiduciary, I only do what I think is in my client's best interests."
But the reality is that being a fiduciary is about more than just doing what you THINK is in the client's best interests; it's about having a process to reasonable ensure that what you do actually IS in the client's best interests!Read More...
If you’ve decided that you are willing to accept the burden, the issue becomes how do you prevent something like what happened at Wealth Management LLC happening to you? If upholding a fiduciary duty is not enough, what will it take to properly respect the burden? I don’t think I have the answer, but I will suggest a place to start:
“Primum non nocere - First, Do No Harm”
"It wasn't a Madoff thing, but the effect was just the same."
Words forever etched in my mind and words that haunt me daily.
In what feels like another lifetime, I worked at a well-respected fee-only financial planning practice. This practice gave me the opportunity to find my calling and my passion. I learned what it meant to be deeply committed to working in the interest of others and to taking ownership of my responsibilities to others.
Unfortunately, those things were not enough to protect clients from irreparable and devastating harm. Unfortunately, none of those things taught me the most important lesson. Unfortunately, none of my learning including an understanding of the heavy burden each of us in the financial planning world carries.
Hopefully, this piece can reach a few of you and help you understand the burden well, and help you better serve and protect the clients you work for.
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With an increasing focus on fiduciary from NAPFA, the FPA, and a global trend towards fiduciary advice witnessed as far as reforms in Great Britain and Australia, it would seem that fiduciary is at the forefront of concerns about financial advice. Yet at the same time, we discuss the issues of fiduciary, broker/dealer, registered investment advisor, and the distinctions about advice that they imply, in the industry and technical jargon not really accessible to most clients. In the process, are we making fiduciary issues more relevant to clients, or actually diminishing the importance? In the end, is it really about having a legally-bound fiduciary on your side... or is it just about talking to someone you trust?Read More...
NAPFA has long been at the front vanguard of the profession, carving a path to advance financial planning forward. And for the most part, it has been incredibly successful. It put fiduciary in the center of the debate, and organizations from the CFP Board to the FPA have adopted fiduciary into their own Codes of Ethics and Practice Standards. It put comprehensive in the center of the debate, and now the CFP Board’s public awareness campaign is anchored around the comprehensive nature of financial planning to pull together all of life’s intricacies. It put fee-only at the center of the debate, and now methods of compensation, conflicts of advice, and objectivity of advice are being evaluated by Congress and government agencies to determine future regulation of the profession. It put the importance of competence at the center of the debate, and now the public media openly acknowledges the value of having the CFP certification as a cornerstone of financial planning knowledge. With so many victories in its core missions, NAPFA had to some extent begun to render itself less relevant, as its successes brought all parts of financial planning closer to its own ideals and diminished its own differentiation. And so at NAPFA National 2011, the organization announced a new branding effort and vision for 2020 – once again, throwing down the gauntlet for leadership of the profession.
