Enjoy the current installment of “Weekend Reading For Financial Planners” - this week’s edition kicks off with the news that according to CFP Board leaders, “everything is on the table” when it comes to the organization’s announced competency standards review. Among others, one notable item that could be reviewed is the current certification requirement that a candidate must have attained at least a bachelor’s degree, which some observers have suggested limits the pool of potential CFP professionals at a time of high demand for advisor talent.
Also in industry news this week:
- The SEC this week released its 2023 examination priorities, which include its new marketing rule, Reg BI, and complicated investments
- The House of Representatives is considering legislation that would broaden the definition of who qualifies as an accredited investor and is potentially eyeing a role for financial advisors to help guide clients interested in private investments
From there, we have several articles on practice management:
- A structured approach firms can use to design a forward-looking org chart
- Why outsourcing certain operational tasks still requires ongoing work from firm employees
- How firms can get employee buy-in when making major business changes
We also have a number of articles on retirement planning:
- A study has found that retirement can lead to cognitive impairment, possibly as the result of reduced social engagement
- Why professionals might consider taking several mini-retirements throughout their careers
- A simple rule that can help individuals choose the best place to live
We wrap up with three final articles, all about meetings:
- Why internal meetings can be bad for both productivity and employee wellbeing, and how firms can make them better
- How one company benefited from canceling all meetings for an entire week
- Tactics firms can use to reduce the burden of meetings, from sending asynchronous videos to implementing ‘No-meeting Wednesdays’
Enjoy the ‘light’ reading!
(John Manganaro | ThinkAdvisor)
From time to time, CFP Board has reviewed its certification and Continuing Education (CE) requirements to ensure they are meeting the needs of the organization, its certificants, and the broader public. The latest round kicked off in December, when CFP Board announced that it will form a Competency Standards Commission in 2023 to review and evaluate its competency requirements for Education, Examination, Experience, and CE to earn and maintain the CFP marks, addressing topics such as the amount of CE credits that CFP professionals should need to earn on an ongoing basis (and what content, from providing pro bono service to taking practice management programs, should qualify), current education requirements to get the CFP marks in the first place, and the efficacy of the Experience requirement.
Amid this backdrop, CFP Board Chair Dan Moisand said this week that “everything is on the table” when it comes to the competency standards review, including whether to continue with the requirement that CFP mark holders must have attained at least a bachelor’s degree. Some observers have suggested that the requirement limits the pool of potential candidates based on their financial resources to attend college rather than their actual knowledge and competency, particularly among groups (e.g., Black and Latino Americans) that are underrepresented within the ranks of CFP professionals compared to the broader population. Moisand and CFP Board CEO Kevin Keller noted the importance of growing the base of trusted and competent advisors at a time when demand for these services is increasing, and when many current advisors are retiring.
Moisand and Keller also highlighted the CFP Board’s recently announced decision to bifurcate into two organizations: CFP Board of Standards (which will be a 501(c)(6) nonprofit) and CFP Board Center for Financial Planning (which will continue to the carry the 501(c)(3) status of the current CFP Board), both of which will have the same board of directors and chief executive. The officials noted the ability of the new 501(c)(6) organization to more directly promote the financial benefits that clients of CFP professionals experience (to boost the number of consumers seeking out a CFP professional), as well as the benefits planners themselves derive from their work (to increase the number of candidates seeking CFP certification). Though indirectly, the shift of the standards from a (c)(3) to a (c)(6) organization would also provide a means for the CFP Board to more readily be able to lower the Education standard as it pertains to the degree requirement (without impairing the ‘for the public’ mission of the (c)(3)), should the Competency Standards Commission decide to pursue that path.
Notably, major changes resulting from the competency standards review are unlikely to happen quickly, Moisand and Keller said, pointing out that the review process is likely to take several years, and will include a proposal and public feedback process. And given that the review is likely to cover a range of key issues for both current CFP professionals (e.g., CE requirements) and for candidates for certification (e.g., education and experience requirements), the review will play an important role in determining the competency standards (e.g., whether an undergraduate degree should be required in addition to prescribed financial planning coursework) not only for those aspiring to become a CFP professional, but also ensuring that current mark holders maintain (and continue to be educated on) the skills necessary to provide competent service to their clients!
(Mark Schoeff | InvestmentNews)
Each year, the SEC publishes a list of examination priorities, detailing the areas in which the agency plans to focus based on where it believes present potential risks exist to investors and the overall market. The regulator’s 2023 list was released this week, and covers several hot-button issues relevant to the advisor community.
For instance, the SEC said that it will do more than evaluate advisors’ written policies and procedures to comply with its new marketing rule (which has presented RIAs with the opportunity to greatly expand their marketing efforts with new options, from client testimonials to promoting the reviews they’ve received on third-party websites), but also evaluate whether RIAs have a reasonable basis for believing they will be able to substantiate material statements of fact and requirements for performance advertising, testimonials, endorsements, and third-party ratings.
The SEC also plans to prioritize enforcement of Reg BI, particularly with regard to individuals who are dually registered as advisors and brokers. The regulator last week issued a Risk Alert outlining deficiencies related to dual-hatted representatives uncovered during recent examinations, including around how firms are disclosing to their clients the capacity in which an adviser is acting, as well as related conflicts. For instance, according to the Risk Alert, SEC staffers have been finding instances where broker-dealer registered representatives making investment recommendations were not disclosing to clients whether they were acting as a commission-based broker or a fee-based investment adviser at the time of the recommendation.
The regulator is also planning to focus on a range of issues concerning recommendations of certain types of investments, including complex products such as derivatives, leveraged Exchange-Traded Funds (ETFs), high cost and illiquid products (e.g., variable annuities and nontraded REITs), and proprietary products, among others. The SEC also wants to assess whether Environmental, Social, and Governance (ESG) investment products are appropriately labeled, and whether and how advisors determine that their recommendations of such funds are in their clients’ best interests (including whether and to what extent advisors themselves are doing due diligence to confirm that ESG products they use really were appropriately labeled). And on the account side, the regulator plans to examine advisor recommendations regarding retirement account rollovers and 529 plans.
Altogether, the SEC’s examination priorities for 2023 reflect a desire to enforce major regulations issued in the past few years (e.g., Reg BI and the marketing rule) and an interest in assessing advisors’ use of increasingly popular (but often complicated) investment products. Which helpfully gives advisors a heads up on areas to focus on for their own internal compliance reviews, before they experience a formal examination in the coming year!
(Mark Schoeff | InvestmentNews)
The market for private investments has gained increased attention in recent years as some companies have achieved substantial valuations while remaining private, often leading to big paydays for early-stage investors. At the same time, these investments can be incredibly risky, and the graveyard of failed companies is rarely mentioned in media reports touting the latest ‘unicorn’.
To help prevent less-sophisticated investors from making risky private investments, the SEC’s Accredited Investor rule limits those who can invest in many early-stage companies to investors with certain income or wealth (currently, those with either $200,000 per year of earned income [or $300,000 with a spouse] for each of the prior two years and the current year, or who have a net worth of over $1 million, excluding the value of their primary residence), as well as investment professionals and certain entities. While some have argued that this rule is too strict (as it prevents many potential investors from accessing private markets and limits the pool of capital for companies), others have suggested that it could be tightened further (as income and wealth are not necessarily proxies for the ability to analyze a private company and the risks involved in such an investment).
This week, a hearing of the House Financial Services Subcommittee on Capital Markets took up this question after Republicans introduced legislation that would expand the accredited investor universe to include, among others, those who invest 10% or less of their net worth or annual income in a private offering, those who self-certify, and those who receive a recommendation about a private offering from a financial advisor who is accredited. During the hearing, the top Democrat on the committee expressed some openness to the idea, suggesting that standards should be based on sophistication, which could be attained vicariously through an advisor, rather than wealth. At the same time, some consumer advocates have warned that expanding the pool of accredited investors could lead to disastrous consequences if less-wealthy investors exposed a substantial portion of their savings to private investments that are less liquid and transparent than are securities traded on public markets (while others.
And so, while it remains to be seen whether legislation to expand the definition of an accredited investor will eventually become law, continued public interest in private investments highlights the important potential role of financial advisors in helping their clients evaluate potential private offerings and, perhaps more importantly, whether these investments fit within their broader asset allocation and financial plan!
(Marc Butler | Advisor Perspectives)
As a financial planning firm grows, its management might realize that while the firm’s organizational structure might have fit its size in previous years, it is not optimized for where the firm wants to go in the future. At the same time, creating a new organizational structure can be challenging, both in considering what management wants it to look like, as well as in the potential human resources challenges involved with creating (and possibly eliminating) certain positions. But Butler suggests that firms can use a step-by-step process that will increase the chances that an organizational redesign will be successful.
The first step for firms is to define its future-ready structure. In this step, best practices include striving for a ‘flat’ organization, minimizing the number of levels from the CEO on down, as well as ensuring that most managers have between 4 and 10 direct reports (a sweet spot to ensure managers have a sufficient number of reports, but are not overwhelmed). In addition, it can be helpful for firms to focus on building structure first (to support the needs of the company the firm aspires to be two years from now) without constructing it around the current staff composition (as some of the people working at the firm today might not be a fit for the team needed to reach the firm’s aspirations).
Next, the firm can define the roles needed to support the company it aspires to be, as well as their associated responsibilities (which might not match the roles that currently exist within the company), again without regard for the current individuals on staff. Firms can then promote transparency by publishing the roles and responsibilities definitions for the entire company to review, and have managers discuss these definitions one-on-one with associates (and adjust annual performance goals accordingly). Relatedly, the firm can develop a transparent career progression framework that clarifies the role hierarchy and the requirements to advance to from one role to the next.
The final step is to actually build the firm’s future-ready org chart, which includes considering where current staff members fit in the new structure, whether certain individuals might be a better fit for a new role, whether certain personnel do not fit in the new structure at all, and what hiring will need to be done to ensure the ideal fit for each position.
Ultimately, the key point is that regular reviews of a firm’s organizational structure are important to ensure that it reflects where the firm wants to be in the future rather than where it was in the past. And by first focusing on where the firm wants to go, rather than how current staff will fit within a new structure, firms can more successfully design an org chart that meets its needs (while being transparent with current staff members and helping them understand where they might fit in the ‘new’ organization, even if it is potentially in a different role!).
(Matt Sonnen | Wealth Management)
As a financial advisory firm grows, owners will often reach certain 'capacity walls’ where additional support is needed to handle the range of tasks needed to serve clients and operate the firm. In addition to making a new hire, another option is to outsource certain tasks, whether to a software solution or to a service provider. But Sonnen argues that completely outsourcing tasks is not possible, and that doing so inevitably requires some work by a firm employee.
For example, a firm might hire a compliance consultant rather than bring on an in-house compliance expert. The problem, though, is that while the consultant might be able to provide expert advice, a calendar of compliance tasks that must be completed each moth, or other related services, someone at the firm will still need to manage the compliance program for the organization (including liaising with the consultant!). Another example is hiring a managed service provider to oversee the firm’s computer network and offer cybersecurity protection for the firm and its data. But while these services can reduce the burden on firm staff, someone internally will still have to serve as a point of contact to the managed service provider and handle tasks that must be completed inside the office (e.g., physically restarting computers and network equipment).
The key, then, is for firms to have an honest conversation with a potential outsourcing provider to better understand the services the provider will perform and those that will still need to be handled by a firm employee (or the firm owner themselves!). So while outsourcing can be a valuable way for firms to free up time for the owner and employees, it is important to first understand exactly how much time will be saved by using an outsourced solution!
(Andrea Belk Olson | Harvard Business Review)
While change is inevitable in life, adjusting to change can be a challenge. This is particularly true in the business world, where change decisions made at the management level can impact the entire organization, sometimes upending the processes and tasks of teams and individuals. Because change can potentially breed resentment among staff, Olson highlights several tactics that can increase the chances of a smooth transition for both the company and its employees.
First, while firm leaders are typically the ones who introduce change, it is important to engage those who might not hold a leadership title but are key influencers of company culture (who could be middle managers, key sales personnel, or others), as they can help establish a foundation for change rooted in reliable voices. Also, giving staff agency when it comes to the change, for example holding small discussions where departments can determine potential roadblocks, can promote a greater sense of being ‘heard’ among staff than a company-wide Q&A session after the decision has been made.
Firms can also find success by focusing on relevant and attainable changes. For instance, if a current change effort can be tied to a known pain point for employees, the change can be reframed from a potential distraction to a wanted deviation from the status quo. Further, breaking a large change into a series of ‘micro-changes’ can make it more digestible, achievable, and manageable for those who will be affected by it.
At the leadership level, it is important to be authentic, embodying behaviors that support the change. For example, if the firm wants to give back more to the community, giving employees paid hours for volunteering is likely to be seen as more effective than an email promoting the initiative. Finally, companies can also bring in outside change facilitators, who can help smooth communication between staff and leadership and potentially neutralize internal office politics by being an impartial third party.
Ultimately, the key point is that while executing changes within a firm is inevitably challenging, leadership can help smooth the process by demonstrating an authentic interest in feedback from the workforce and implementing the change in a way that minimizes disruption!
Retirement is often depicted as a time of leisure and pleasure, free of the constraints of a 9-to-5 workweek. But while many parts of this transition are enjoyable, it can often be a major shock for many individuals, who might not have as many social connections or mental challenges once they are no longer going to work. This raises the possibility of retirement potentially leading to a range of negative effects, from loneliness to a loss of mental acuity.
Researchers from Binghamton University sought to explore the health effects of retirement by analyzing data gained from a natural experiment that occurred in China when the government opened retirement benefits to individuals in certain parts of the country but not others (allowing the group receiving benefits to retire earlier). The researchers found that the availability of the retirement benefits was associated with significant adverse effects on cognitive function among the elderly, with more negative effects on females. Participants in the retirement program reported substantially lower levels of social engagement than those who were not eligible, which the researchers linked to the decline in mental function. And while the ability to retire earlier did lead to some health benefits among participants (e.g., reduced alcohol consumption), in terms of overall health, these were outweighed by the negative impacts on cognition. The results also match previous studies of individuals in the United States and Europe, suggesting this could be a global phenomenon.
Altogether, this research suggests that the changes associated with retirement have the potential to lead to negative health outcomes, particularly if it leads to a reduction in social connectedness. This creates an opportunity for financial advisors to support their clients nearing retirement by helping them understand what it really means to retire, including ways to maintain social connections, whether it be through hobbies, volunteering, or even part-time work!
A ‘traditional’ career might include 40+ years of work followed by an extended retirement into old age. While busy professionals might take vacations along the way (perhaps for a week or [gasp] two weeks), longer breaks are less common. But instead of this traditional approach, Johnsrud suggests that individuals might consider taking several ‘mini-retirements’ (which could last anywhere from one month to one year, or even longer) over the course of their career.
One of the benefits of a ‘mini-retirement’ is the ability to get caught up on important, but not urgent, items that might be on one’s to do list. Whether these are projects (e.g., a major home renovation), or social engagements (e.g., seeing friends and family spread around the country), it can be much easier to get them done when there are full weeks available, rather than just weekends or limited vacation days. A mini-retirement can also provide the time to try something new, whether it is personal (e.g., taking an extended trip) or professional (e.g., take a course to explore a potential new career path). Mini-retirements can also be good opportunities to focus on one’s health as well, as it can be easier to eat better and exercise more when the bulk of the day is not consumed with work.
In the end, while mini-retirements can open up a range of possibilities, they also require planning (not only to decide what to do during the mini-retirement but also for the financial implications of not working for an extended period). And so, financial advisors can add significant value to clients who are considering a mini-retirement, whether it is a one-time sabbatical or several breaks during the course of a career, by helping them create a sustainable plan to support their ‘retirement’ goals, both during their career and once they leave the working world for good!
(Brett and Kate McKay | The Art Of Manliness)
Deciding where to live is a momentous decision, both financially and for personal happiness. Unfortunately, there is no one ‘right’ answer when it comes to finding the best place to call home, as each individual has different preferences and circumstances. The key, then, is to find the location (and housing situation) that will provide the most happiness, most of the time.
This “90/10 Rule” suggests that individuals should focus on the factors that influence 90% of one’s life, rather than the other 10% (or, framed more generally, the majority versus minority of one’s time). For instance, a couple could be deciding whether to buy a house that is close to their respective workplaces or one that is 30 minutes away from work but within walking distance of their favorite restaurant. In this case, they might consider that the house closer to work will save each of them 1 hour of total commuting time each day (potentially adding up to more than 200 hours per year!) whereas being closer to the restaurant will only save them an hour every few weeks. Or perhaps an individual who loves the ocean is considering taking a high-stress job in a city near the ocean or a more meaningful opportunity in a town further inland. In this case, given that the stressful job is likely to wear on them each day and they would only be able to go to the beach a couple times a month, the less-stressful option might be the way to go.
Ultimately, the key point is that the ‘shiny’ features of living in a certain location (e.g., proximity to a hip downtown) could have less impact on one’s overall happiness than the factors that affect day-to-day life (e.g., job quality, commute, cost of living). Of course, these factors could change over time (e.g., a retired individual with no commute might prioritize proximity to amenities or family) and vary by individual (e.g., some people might be willing to live with a long commute if it means better beach access), but the key is to try to understand the factors that will affect the majority of one’s life in order to make a better decision of where to live!
(Arthur Brooks | The Atlantic)
Office meetings are a seemingly inevitable part of work life. According to one study, the average full-time, white-collar professional in the United States spends 21.5 hours a week in meetings. And while meetings can be useful, unnecessary meetings waste $37 billion in salary hours each year, according to one estimate. Further, when meetings are seen by participants as a waste of time, job satisfaction can decline, suggesting that firms can not only improve productivity, but also employee happiness, by being more circumspect about the meetings that are held.
Given the potential downsides to holding too many meetings (that last for too long), firms have a range of options to reduce this burden. One tactic is to create ‘meeting-free days’ where employees have the full day to work without any meeting interruptions. According to one study, productivity and workforce engagement are maximized at four meeting-free days each week, with stress minimized when there are no meetings at all. While this might not be possible for a given firm, starting at one meeting-free day each week can be a good way to gauge the productivity and happiness benefits.
When meetings are necessary, controlling their length can help prevent them from eating into participants’ workdays. While there is no consensus as to the ‘perfect’ meeting length, a half hour or less could be a good place to start. In addition, limiting attendees to only those who are vital to the discussion can not only encourage participation but also help meetings from going beyond the scheduled time.
And so, given that advisors already spend a significant amount of time in client meetings, scheduling internal firm meetings in a thoughtful manner can help promote productivity and prevent burnout. Whether it is by limiting the number of days of the week they are held, the time scheduled for each meeting, or simply reducing the overall number of meetings, firms have many options to reduce the burden of meetings and potentially boost staff productivity and job satisfaction!
(Cal Newport | Study Hacks Blog)
In many workplaces, meetings can easily fill up one’s calendar, leaving little time for actual ‘work’. While offices can consider ways to reduce the number of meetings each week, there is still another option available: what would happen if the company canceled all of its meetings for a given week?
The workflow automation company Zapier experimented with this idea, canceling all of its meetings for one week. This meant canceling everything from team meetings to 1-on-1 meetings between managers and employees to project kickoffs and brainstorming meetings. During this “Getting Stuff Done” week, the company leveraged technology tools to maintain communication between team members and track progress. For example, without a meeting with her manager, one employee instead sent her an instant message with the questions she wanted to raise. In addition, rather than having a project check-in meeting, the team shared their updates in their workflow software program. And instead of holding a strategy call, stakeholders shared their thoughts and comments in a shared document.
In a post-experiment survey, the company found that 80% of respondents would like to have a similar week in the future, 80% achieved their goals for the week, and 89% found communication to be about as effective during the week as during a typical week, all suggesting that while canceling meetings permanently might not be a possibility for many firms, taking an extended break from them might show that many of them are not as necessary as they were previously thought to be!
(Lauren Weber | The Wall Street Journal)
Meetings have been a core part of office work for decades (centuries? millennia?) and many companies have found that time spent in meetings only increased since the onset of the pandemic, leading some workers to work into the evening to make up for time lost in meetings. But given the potential downsides of so many meetings (from lost productivity to employee burnout), many companies are rethinking how they approach meetings.
For instance, e-commerce site Shopify deleted 12,000 events from employees’ calendars, opening up 95,000 hours. This purge included canceling recurring group meetings, banning most Wednesday meetings, and requiring that meetings with 50 or more people be held in a 6-hour window on Thursdays. Separately, when tobacco company Reynolds American wanted to update staff on restructuring plans, it sent a 10-minute video to employees rather than following through on its original plan for a 90-minute town hall meeting. Notably, canceling certain meetings can make the meetings that are held even more productive. For example, given the additional time on their calendars, employees can come to meetings better prepared to contribute than if they had several meetings earlier in the day.
Ultimately, the key point is that by being more thoughtful when scheduling meetings (e.g., asking whether the goal could be accomplished using asynchronous tools instead) and reviewing recurring meetings to determine whether they are still necessary, firms can not only potentially boost productivity, but also help their employees enjoy a better work-life balance by giving them enough time to complete the work on their plate during normal business hours!
We hope you enjoyed the reading! Please leave a comment below to share your thoughts, or make a suggestion of any articles you think we should highlight in a future column!
In the meantime, if you're interested in more news and information regarding advisor technology, we'd highly recommend checking out Craig Iskowitz's "Wealth Management Today" blog.