As the public becomes more savvy about protecting themselves from fraud – in part due to the assistance of increasingly sophisticated anti-virus and anti-phishing software – thieves are becoming more and more creative about new ways to steal. A disturbing new trend is that some thieves are beginning to directly target financial advisors and their clients – as famous bank robber Willie Sutton noted, if you want to get rich by stealing, go to where the money is! Accordingly, financial advisors and investment custodians have seen a noticeable increase in attempts at fraudulent wire transfers by “spoofing” – where a request sent “from the client” is actually a spoof from a fake-but-similar email account (or sometimes is even the client’s actual account!), and asks the advisor to process a wire transfer to a third party bank account. By the time anyone realizes the request was fake, the money is already gone, the transfer cannot be unwound, and the wire fraud theft is complete. In response, it’s crucial for advisors to review – and potentially change and improve – their processes and procedures to ensure a wire transfer request is legitimate before acting upon it, especially in scenarios where the transfer is going to a third party. Fortunately, some best practices are emerging about how to avoid these kinds of client disasters!
Enjoy the current installment of "weekend reading for financial planners" – this week’s edition starts off with an interesting analysis of fiduciary history and the CFP Board’s current fiduciary rules for CFP certificants, suggesting that the CFP Board still has a little ways left to go to reach a truly all-encompassing fiduciary standard. From there, we look at an interview in the Journal of Financial Planning with Nobel Prize winner Daniel Kahneman, an exploration by financial planner and researcher Jon Guyton about how the safe withdrawal rate research is holding up for a year 2000 retiree, a study by David Blanchett on the use of variable annuity GMWB riders to support retirement income, a recent study by Harold Evensky (and co-author Shaun Pfeiffer) indicating that active managers may do better in bear markets than bull markets but not by enough to generate consistent alpha over a full market cycle, and a discussion by professor Michael Finke of Texas Tech that the recent Bill Gross article about the "dying cult of equities" may have some validity. There are also a few consumer investment pieces that may be of interest to planners, including a discussion of what "tactical" really means, and some things to watch out for with the recent trend towards managed ETF strategies, along with two strong technical articles, one about new tax planning issues and opportunities tied to the Patient Protection and Affordable Care Act, and the other about how to counsel clients through a short sale or other underwater-mortgage alternatives. We wrap up with an interesting research article suggesting that it’s almost impossible for us to convey that we’re "warm" and "competent" at the same time – instead, the constraints of our language force us to lean in one direction in how we’re perceived, at the direct cost of the other. Enjoy the reading!
As the end of 2012 approaches, so too does the end of our current gift and estate tax exemptions and rates – with the so-called "fiscal cliff" the estate tax exemption is scheduled to fall precipitously in 2013, while the maximum estate tax rate rises. As a result, many high net worth clients have been encouraged to consider gifting away significant sums of money this year – to take advantage of the current exemption – before it lapses. And as with most gifting strategies, often the least effective means is to simply gift cash; instead, popular strategies include using a Family Limited Partnership (FLP) to obtain a valuation discount for the assets being gifted, or alternatively to gift the money to an Intentionally Defective Grantor Trust (IDGT) and use it as seed money to buy even more assets out of the estate. Unfortunately, though, there are many important caveats, including the risk of an estate tax clawback, the affordability of the gift itself, and coordination with state estate tax laws. Nonetheless, with the estate tax exemption amount scheduled to drop more than 80% in just a few months, the pressure is on for many clients to make a decision about whether they will engage in an end-of-year gifting strategy or not – or at least, prepare so that they can complete such a gift once the outcome of the election is known!Read More…
As someone who speaks at upwards of 50 conferences every year, I see a wide range of events created for financial planners. Yet unfortunately, the reality is that because there are so many conferences, it can be incredibly difficult to select the right conference, and I am often asked for recommendations about what I think the best conferences are to attend.
Accordingly, I’ve put together my own list of what I would view as the best-in-class conferences for financial planners (in the US, at least!) in seven categories coming up for 2013: Best Technical Content, Best Technology Content, Best Practice Management, Best for Advanced Practitioners, Best Overall Value, Best Virtual Conference, and Best Overall Financial Planning Conference.
I hope this is useful for you to use as your own guide in selecting events to attend for yourself and/or your staff for 2013!
Enjoy the current installment of "weekend reading for financial planners" – this week’s edition starts off with a fantastic advice article for young advisors about how to build an optimal path for themselves by being authentic (advice that’s probably relevant for advisors of all ages!), along with an interesting discussion of a "new model" to bring financial planning to the masses, and a discussion of the ongoing "Great Divide" between the veterans of financial planning and the younger people entering the business. From there, we look at a good discussion of compensation trends in the industry, a discussion of the conflict of interest disclosure rules for CFP certificants, and two interesting "lists" from RIABiz – one is a list of the top 10 words that should be expunged from the RIA business, and the other is the top 10 steps that wirehouses could take to reinvent themselves and stem the RIA tide (in the interest of consumers). There’s also a good article with starter tips to improve the SEO of your website (i.e., how easy it is for people to find you using the search engines), and a dissection of last week’s "surprise" unemployment report. We wrap up with two interesting articles; one looks at recent research into investment risk-taking behavior, finding that excessively risky investing may not just be a behavioral bias problem but actually a physiological one; and the other providing an intriguing forecast of how the student debt problem could be resolved in the next decade as online education with a near-zero dollar cost could drastically undercut the pricing of traditional colleges and universities and shift how most people get their higher education. Enjoy the reading!
As financial planning firms grow more efficient, especially with the use of technology, it becomes possible for planners to manage an increasingly large number of clients. The only limitation, it would seem, is the time it takes to service them. However, research in psychology and anthropology suggests that there may be another limit to the maximum number of clients – the physiological limit of our brain’s neocortex that constrains the number of social relationships that can be actively maintained. This threshold – called “Dunbar’s number” – is estimated to be about 150 people on average, and corresponds not just to the average size of many ancient tribes and villages, but also the military unit size of the Roman army, and even the average number of Facebook friends or engaged Twitter followers! The implication of the research is that even as firms continue to become more efficient, there’s still a physiological brain-based limit to how many clients we’ll ever be able to manage, which allowing for some personal relationships as well may never be much higher than 75-125 for any planner regardless of the new tools and technologies we create in the future!Read More…