Enjoy the current installment of "weekend reading for financial planners" – this week's edition kicks off with the news that, with the explosive popularity of the $350B Paycheck Protection Program (PPP) for small businesses over the past week, Treasury Secretary Mnuchin is already seeking a $250B expansion to ensure that the dollars don't run out. In the meantime, the White House is beginning to craft a plan about how to re-open the economy if/when/as the growth rate of the virus slows, while economic experts worry about what it will take for Americans to actually trust that it's safe to go out again (especially if there's a second resurgence of the virus later this year).
Also in the news this week are efforts by the CFP Board leading a coalition of advisor membership associations asking Congress to reinstate the tax deduction for advisory fees that was eliminated in the Tax Cuts and Jobs Act of 2017 (as more and more Americans are seeking out financial advice regarding their current situation), S&P deciding to delay rebalancing of the S&P 500 index amidst the recent extreme market volatility (and raising questions about what it really means to be a "passive index"), and the IRS officially expanding the delayed July 15th tax filing date to include more related deadlines from estimated taxes to estate tax returns.
From there, we have several articles on how to leverage video chat tools as we're increasingly relegated to using them to stay connected to clients, prospects, and potential referrers, including how to improve video engagement with clients and prospects, how to conduct 'virtual networking' meetings, and how to leverage your smartphone to record and share high-quality video.
We wrap up with three interesting articles, all around the theme of how the internet has become our lifeline (and how remarkably well it is holding up as we depend on it); the first looks at how the very structure of the internet itself was actually built to be stable (a relic of its Cold-War-era respite that was trying to preemptively protect against global disasters); a deep dive into the data of what Americans are actually doing and using online and how our internet habits are shifting; and an exploration of how the coronavirus pandemic may actually end out stimulating a fresh wave of further investments into internet infrastructure that will just further build our internet capabilities for the decade to come!
Enjoy the 'light' reading!
Treasury's Mnuchin Seeks Additional $250B To Replenish Small-Business Paycheck Protection Program (Erica Werner & Jeff Stein & Renae Merle, The Washington Post) - This week, as the new Paycheck Protection Program was fully rolled out and applications began to roll in, the Treasury is already processing applications for a whopping $70B of the $350B program (though it's not clear how many of those applications have been approved or how much of the funds themselves have been distributed, with many raising concerns about the problematic fast-rollout of the program itself). Still, though, given that the $70B of loan applications represents 'only' about 250,000 small businesses - out of an estimated 30 million small businesses in the US - concerns are mounting that the available dollars of the PPP will soon be depleted, leading Treasury Secretary Mnuchin to ask Congressional leaders to commit another $250B to replenish the funds for the program. However, the proposal is now generating fresh debate in Congress, with Republicans supporting a fast approval of the expanded program, and consideration of whether the program should be expanded to more 'mid-sized' businesses by increasing the maximum-employee limit for PPP loans from 500 to 1,000 employees as well, but Democrats insisting that any expansion of the program for businesses should be coupled with other needed emergency aid (e.g., hazard pay for essential workers that have been forced to remain on the job during the pandemic) and extensions of other key relief programs (e.g., unemployment insurance benefits for those who have been laid off). On the other hand, with unemployment claims rising by millions every week, there is significant collective pressure on Congress to come to a bipartisan resolution and pass some additional relief soon.
Trump Health Team Crafts Plan To Open Economy If Virus Peaks (Jennifer Jacobs & Justin Sink, Bloomberg) - This week, the medical experts of the White House coronavirus task force met to begin discussing what the criteria may be to re-open the U.S. economy in the coming weeks, if the pace of spread of the coronavirus does crest and begin to slow. Notably, though, political and economic advisors were excluded from the meeting, which is being interpreted as a signal that the White House is now prioritizing health considerations over economic concerns. Still, though, the core focus of the task force gathering was to lay out a plan to re-open the economy itself, with potential approaches including the creation of "red zones" and "green zones" where the Federal government believes it's more or less safe to re-open (or whether shutdown and social distancing must remain), to an even-more-drastic expansion of testing with the hopes that testing firms may be able to develop a high volume of 'rapid-test' solutions that would allow large swaths of the population to get regularly tested (given concerns that coronavirus may have a high rate of asymptomatic carriers who spread the virus without showing symptoms themselves, such that self-testing would help identify who should self-isolate in the event they test positive).
Experts Say U.S. Is Nowhere Close To Reopening The Economy (Jim Tankersley, The New York Times) - While social distancing appears to be slowing the spread of the coronavirus, making it more feasible for hospitals to sustainably treat a more moderate number of ongoing new cases, and leading to calls that the government may be able to re-open the economy by the end of April as the infection curve flattens, experts note that the U.S. economy itself cannot fully open and return to normal until individual citizens are confident that they can go about their daily business without a high risk of catching the virus. Which is challenging, both because the models themselves being used to model the spread of the virus - and when it may peak and go into decline - are highly uncertain, leading some states like Florida pledging to stay closed until "only" late April and other governors already declaring their states will remain closed until well into June (e.g., Virginia), and also because "normalcy" isn't just about the epidemiological mathematics of the virus spread but the fundamental perception of safety from and for the average American worker. Accordingly, economics experts emphasize that the first key step remains a rapid ramp-up in testing, in part to better understand how many people really have (or have already had) the virus, and how it is really being spread (given growing reports of asymptomatic carriers), to ultimately determine who is contagious and must be isolated, while also identifying areas or jobs where the chance of infection is very low and could more safely be re-opened sooner rather than later. In the meantime, additional discussions are exploring whether additional economic support may be needed for businesses and workers, alternative options in how to distribute those dollars more rapidly (e.g., via mobile payments apps like Zelle, which both makes it easier for individuals to move the dollars to those in need, and helps the stimulus reach those who don't already have traditional bank accounts), and how to better support and protect the medical workers necessary to support the infected. Ultimately, though, the biggest concern about re-opening the economy is the risk that if it re-opens too quickly, it could cause a second spike of infections, and if that occurs it can undermine trust in the government's safety recommendations and cause people to even further self-isolate and sequester themselves... and make them unwilling to come back out and engage in the economy again even when it is safe to do so.
CFP Board Leads Coalition Asking Congress To Restore Tax Deductions For Financial Advice (Ann Marsh, Financial Planning) - As a part of the Tax Cuts and Jobs Act of 2017, Congress repealed the broad category of "miscellaneous itemized deductions subject to the 2%-of-AGI floor", which included the deduction for unreimbursed employee business expenses, tax preparer expenses... and the deduction for investment advisory fees. But now, with the coronavirus pandemic triggering a recession and a spike in unemployment, Americans are arguably more in need of financial advice than ever... leading the CFP Board and a coalition of membership associations including the Investment Adviser Association, NAPFA, the FPA, and even the Financial Services Institute, to come together and lobby Congress to reinstate the deduction. Ideally, the organizations are hoping that the deduction can be returned without its 2%-of-AGI floor that previously existed, and/or without being an itemized deduction at all (and simply a separate above- or below-the-line deduction) effectively allowing any/all clients to claim the deduction regardless of their income and how much they pay (and to avoid the reinstated deduction from 'only' being available to more affluent households). Notably, the five organizations state that they tried to persuade Congress to include the change as part of the $2.2 trillion CARES Act relief package, but are hoping that as Congress now considers "phase 4" relief, that there may be another opportunity for Congress to take up reinstatement of the advisor deduction again.
Quarterly Rebalancing For World's Biggest ETF Delayed Until June (Katherine Greifeld, Bloomberg) - The biggest ETF in the world is State Street's $256B S&P 500 ETF (SPY), and is ultimately one of almost 60 different ETF products tracking S&P's Dow Jones indexes... all of which received a letter from the index provider on April 8th stipulating that it would be postponing the index's quarterly rebalancing process in light of "extreme global market volatility". Consequently, while some index ETFs will still engage in their normal quarterly rebalancing process in April, most others will wait to rebalance until after the market closes on June 19th, or possibly as late as June 30th. The announced change has spurred concerns from many advisors, raising the question of whether State Street or others may become liable if their index products fail to properly track the overall market due to the decision to delay rebalancing, State Street and others noting that because it was S&P itself that first decided to delay its own rebalancing process that their decision to match the delay simply ensures that they do continue to track the index as constituted by S&P, and some raising concerns about whether this challenges the very principle of having a truly "passive" index fund when the index provider themselves can still make decisions to change the policies of the index in times of market distress?
IRS Extends More Deadlines To July 15 Under Coronavirus Relief (Richard Rubin, The Wall Street Journal) - After previously granting relief to individuals that their tax filing deadlines would be delayed until July 15th, the IRS this week officially expanded the delayed filing deadline, also making the official July 15th date apply for nonprofit tax returns and also estate tax returns. In addition, the deadline for payment of 2019 income taxes was also officially delayed until July 15th, along with the requirement for first and second quarter estimated tax payments for 2020 (which otherwise would have been due on April 15th and June 15th, respectively). Notably, taxpayers won't need to do anything to receive the extensions, which are automatic, and will apply for a wide range of nearly 300 other related deadlines as well, from the time to file petitions with the U.S. Tax Court, to the time IRS employees have to take time-sensitive enforcement actions. Though ultimately, with ambiguity about when the coronavirus spread will actually end, the U.S. Chamber of Commerce is already raising the question of whether the 2019 tax filing deadline may need to be delayed even further - potentially through October 15th, or even as late as next April of 2021?
7 Ways For Financial Advisors To Boost Video Engagement (Megan Carpenter, Financial Planning) - Wealth management is a very relationship-focused business... one that has historically been powered by handshakes and face-to-face meetings, and is struggling mightily to maintain similar levels of engagement in our newfound era of social distancing and videoconferencing. For which firms are finding that the key, in particular, is video conferencing, and the power of video to put the "face to face" back into an otherwise-virtual meeting. Except, unfortunately, many advisory firms still aren't accustomed to conducting video meetings and trying to engage clients virtually through video. Accordingly, Carpenter offers a number of tips for financial advisors to improve their video communications and better engage clients, including: when transitioning to video, try to meet with clients more regularly (e.g., quarterly instead of annually, or monthly instead of quarterly), as it's easier to have 'shorter' video meetings and helps to improve the relationship with enhanced frequency; try conducting virtual social/happy hours with clients and prospects (or even employees), which you can amp up by setting a cheese sampler, craft beer, bottle of wine, or meal from a trusted local restaurant for them to enjoy at the same time; host daily 15-minute mental breaks for employees (not mandatory, just available for those who need it); take common questions that are being asked of you and record it as a video on your phone that you can post to social media accounts; try buying a digital writing tablet so you can 'yellow pad' out concepts on the spot in a meeting and screenshare it to clients; and if you're uncertain, at least just try it by announcing you're doing a 'test' in switching your phone calls and text messages to video for a few days (with family, employees, or clients) and see how the engagement changes.
Knockout Approaches To Virtual Networking (Michael Goldberg, Advisor Perspectives) - While the coronavirus pandemic has disrupted the traditional face-to-face client meeting and forced advisors to begin servicing clients virtually, the 'good' news is that given the already-established relationship with the client, it's still relatively easy to retain their trust; the greater challenge is establishing new relationships when traditional approaches like networking meetings have been up-ended by stay-at-home and shelter-in-place orders across most states. To fill the void, though, Goldberg suggests that it's possible to engage in - or even host - a 'virtual networking' meeting instead (particularly as a substitute/alternative for a networking meeting/group that was already coming together but can no longer do so in person). So how might an advisor engage in or amplify a virtual networking opportunity? Options include: create an open networking meeting virtually via available platforms like Zoom, which can be as simple as just setting a time to host the meeting, and sending out calendar invitations to those you want to connect with (and as with any networking meeting, it will simply be open to whoever was invited and decides to drop in); create structure for a virtual networking meeting by either developing an agenda or, again, similar to an in-person meeting, create a presentation (or find a guest expert who can do so) as a webinar for the first part of the meeting, and then facilitate open networking discussion for the rest of the time together; take the lost in-person networking time to become more active on social media as a way to further create and foster connections with key influencers; start broadcasting your expertise via a blog or podcast as a means to generate awareness of and interest in your virtual networking events; and don't forget the value of making a good 'old-fashioned' phone call to connect with and invite key prospects that you want to engage with.
How To Make Professional Videos With A Smartphone (Samantha Russell, Advisor Perspectives) - For many advisors that are now rapidly shifting to video-conferencing and video meetings, one of the biggest challenges is simply that they didn't already own any video conferencing tools and technology, and are now suddenly being forced to make do with whatever they have. But Russell notes that in the end, the average smartphone is actually an incredibly powerful camera and video recording/broadcasting device... at least when used and set up properly. Some key tips to get the most value out of your smartphone videos include: if you plan to upload the video to share via YouTube, then record with the phone horizontally, while if you plan to share out on social media platforms (e.g., Facebook), it's better to record vertically; set the camera on the phone to be facing you, so you can see yourself on the screen while you're shooting to know that everything is lined up properly; to ensure that your phone is stable when recording (and that you are reasonably well lit), get a basic tripod with an LED ringlight; edit out the first few seconds at the beginning and end (where people can see you turning on the video to get started, or reaching over to stop it at the end), which you can actually do on your phone with its native video editing tools (no need for other editing software); add captions (i.e., video subtitles) to your recording (it helps increase engagement rates and can even provide an SEO boost if you post it on YouTube), which can be done quickly and easily with online tools like Headliner (but you should plan to review it for light editing to make sure the transcription is accurate); and when you're ready to post and share, put the file on YouTube, but also host it on your blog, ideally with a copy of the transcript with the video as well (which again helps for SEO purposes), and leverage further by sharing out via social media channels, and in your email marketing and newsletters.
Your Internet Is Working... Thanks To These Cold-War-Era Pioneers Who Designed It To Handle Almost Anything (Craig Timberg, The Washington Post) - While there have been a few hiccups, by and large the internet has handled the unprecedented surge in demand due to the coronavirus (with Comcast peak traffic up 1/3rd in March and some areas spiking as high as 60%) with remarkable success and stability... despite the fact that the basic architecture of the internet is actually nearly 50 years old, born originally from a Pentagon project during the Cold War. Yet as it turns out, the fact that the original infrastructure of the internet was designed during the Cold War era is actually the point... when the threat of a nuclear attack and global war was still at the forefront, the early pioneers of the internet deliberately designed the system with extensive resiliency and redundancy. As the early internet infrastructure was predicated on building an open network with a high degree of interoperability, moving traffic one 'packet' at a time, making it easy to plug in new nodes and shift traffic loads to replace those that go offline... a key design aspect to avoid the risk of disruption from a feared Soviet nuclear attack (as if there's no concrete path for data from A to B, it's easy to redirect the traffic in the event of disruption), and a significant split from the otherwise-dominant telecommunications approach of the era, embodied by Bell Telephone that ran on a series of fixed networks run by central entities (that allowed for more business command and control, but also increased the risk of outages in the event that a central system went down). The key distinction of the "Netheads" of the 1980s, unlike the approach of the "Bellheads", was the creation of standardized technical protocols that everyone was required to adhere to in order to participate in the network and to move data around... without actually controlling the network itself, forming the framework of what we know as the internet today (which explains why the internet can so efficiently run, pass traffic, and connect people across borders and around the world, and ultimately resulted in even phone companies themselves shifting voice calls from traditional telecommunication circuit networks to the internet's "Voice over IP" (VoIP) approach instead)!
The Virus Is Changing The Way We Internet (Ella Koeze & Nathaniel Popper, The New York Times) - With the coronavirus forcing tens of millions of people to stay home and stop going out, we're spending more and more of our time online, which is shifting - sometimes drastically - our online habits and behaviors as we both seek information about the pandemic itself, and for ways to fill our homebound time. Some key findings and observations include: we are unquestionably spending more time online, but are shifting away from our phone and more onto websites directly (with Netflix phone traffic up only 0.3% but desktop traffic up 16%, and YouTube website traffic up 15% but YouTube smartphone traffic down 4.5%); video chat tools and websites are booming, both using social apps (Google Duo up 12% and Houseparty up 79%), and what historically were "remote-work" apps as businesses move more virtual work-from-home and students become classroom-at-home (leading to spikes in tools like Zoom, Microsoft Teams, and Google Hangouts, along with Google Classroom); Americans are searching out information online, but partisan sites providing opinionated takes are seeing only limited growth in traffic as compared to more local news sites (as we seek the exposure and impact of the virus in our local area), and established large media organizations that can provide the needed facts (along with growth of specialized sites like the Centers for Disease Control); and as live in-person sports decline and e-sports rise, the pandemic appears to be accelerating the trend, with ESPN traffic down 40%, but Twitch.tv gaming video traffic up nearly 20%.
Why The Coronavirus Lockdown Is Making The Internet Stronger Than Ever (Will Douglas Heaven, MIT Technology Review) - As everyone stays home to avoid spreading the coronavirus pandemic, the internet has become our 'umbilical cord' to the outside world, not only for our access to information about the virus, but also our friends and family, our schools, and our jobs... not to mention much of our personal entertainment. As a result, internet traffic has collectively spiked as much as 25% in just a few months, and even more for certain (internet-data-intensive) services like video chat tools, streaming video games, and streaming video services. Yet despite the occasional hiccup, the infrastructure of the internet itself is holding up remarkably well, in part because providers are making adjustments to avoid adding to the strain (e.g., video streaming companies slightly cutting picture quality to reduce the collective data burden), streaming and gaming services have increasingly been building their own purpose-built delivery networks that bypass large sections of the internet (further reducing the collective strain), and the coronavirus pandemic may actually help fuel one of the biggest expansions of internet infrastructure in years. Already, the distributed nature of the internet has made it feasible for more cloud service providers and data centers to pop up across the country and around the world - which has helped to keep the internet stable and reduce outages - and existing internet giants are rushing out upgrades as quickly as they can, particularly by building more local data centers and networks that both reduce the distance that data must travel (by literally having data centers closer to areas of heavy usage) and further decentralizes the internet and improves its stability. At the same time, data caps are being waived (likely to become permanent?), and countries are relaxing regulations to further ease the ability to roll out more data infrastructure and access. In fact, the biggest concern at this point is simply that crucial parts of the internet still require a human touch - e.g., when human engineers must replace servers or fix cables - and that there are still risks if the supply chain breaks down (and internet providers can't order/get new equipment in the first place). Still, though, thus far, not only is the infrastructure of the internet not suffering or degrading (aside from perhaps just the small local hiccup), but the ongoing expansion of the internet in response is already making the system even more redundant and stable against these risks in the future!
I hope you enjoyed the reading! Please leave a comment below to share your thoughts, or make a suggestion of any articles you think I should highlight in a future column!
In the meantime, if you're interested in more news and information regarding advisor technology, I'd highly recommend checking out Bill Winterberg's "FPPad" blog on technology for advisors as well.