In December, Congress passed the Temporary Payroll Tax Cut Continuation Act of 2011, which extended the 2 percentage point payroll tax "holiday" of 2011 into the first two months of 2012. However, to offset the nearly $20 billion cost of the payroll tax cut extension (along with a few other provisions), Congress adjusted the so-called guarantee fee charged by Fannie Mae, Freddie Mac, and the FHA, mandating that the fee must rise by at least 10 basis points. The new g-fee increase is set to apply beginning on April 1, 2012 (no fooling!), and its effects are already being felt as borrowers look to set 45- and 60-day rate lock guarantees on current purchases and refinances. The net impact to clients: if there's a purchase or refinance being considered, it could be worth many thousands of dollars to get the loan done as soon as possible.Read More...
Since the turmoil of the financial crisis in 2008, financial planners have become increasingly obsessed about so-called "black swan" and "fat tail" events. As we witnessed one "impossibly rare" volatile day after another that fall, the fact that financial planning models its uncertainty using Monte Carlo analysis with normal distributions suddenly became not a virtue, but a liability. Yet for most clients, who don't invest with leverage, even a black swan event does not result in immediate destitution, but merely sets them on an unsustainable path that must be adjusted in the years that follow to prevent a subsequent depletion of assets. Which means in reality, it's not about more accurately modeling the probability of a black swan... it's about having a plan for dealing with it when the time comes.Read More...
Enjoy the current installment of "weekend reading for financial planners" - this week's edition highlights a new research piece in the Journal of Financial Planning on dynamic asset allocation and itwo innovative new financial planning software offerings. There's also a good practice management piece by Angie Herbers, and two strong (but not particularly bullish) investment pieces by Mauldin and Hussman. We wrap up with a light piece about how quickly the world is changing, and that the key to success in business in the future is about "learning as fast as the world is changing." Enjoy the reading!Read More...
Financial planning has long struggled with the criticism that it serves only a limited subset of the relatively affluent, and has failed to develop business models that deliver financial planning to the wide swath of "average" Americans with more limited income and resources. Yet at the same time, the reality is that our education as financial planners does not really effectively prepare us for the kinds of "financial counseling" knowledge and skills required to serve those with less income and fewer assets. Which raises the question: is that simply because financial planning hasn't grown far enough, or is the reality that the financial planning body of knowledge is separate and distinct from the kind of "counseling" knowledge needed to help people through the basics of navigating our financial system, from credit cards to credit reports to checking accounts to the use of public agencies? Or perhaps stated more broadly, is financial planning for the mass affluent and wealthy a different discipline than financial counseling for those of more limited means?Read More...
In recent years, the financial planning profession has been focused on the development of a fiduciary standard for financial advice, to protect the public from the harm done by those who claim to act in their clients’ best interests but actually make recommendations to benefit themselves. However, the reality is that the recent challenges of fiduciary have extended beyond just the delivery of financial advice; since the financial crisis of 2008, the issue has also extended to the duty that Wall Street investment banks owed to those they sold securities to (even when the company “knew” the investments were dogs at best, or at worst actually bet again their customers for profit). Other fiduciary concerns that preceded the financial crisis have also been highlighted in recent years, such as the obligation of investment managers to vote the proxies for stocks they hold in the interests of shareholders. The good news in all of this is that the public backlash against a wide range of damages the financial system and corporations have inflicted upon the public is raising the focus on fiduciary simultaneously across multiple channels. The bad news is that the fact the fiduciary is so wide in scope appears to be making it extremely difficult to implement with practical regulation.Read More...
Continuing education is a fundamental principle of being a professional. In fact, Competence is one of the 7 core principles in the CFP Code of Ethics and Professional responsibility, which includes both attaining and maintaining an adequate level of knowledge to serve clients. Unfortunately, though, it’s often the case that continuing education is not much more than checking off the box to receive credit for sitting through a session, regardless of whether the professional really learned anything. Well, in the spirit seeking out continuing education that actually teaches you something, here are my recommendations for the top 3 financial planning conferences in 2012 that are worth the investment and might actually teach you something new.Read More...