In our intra-industry debates about compensation models, there is an emerging view that one of the challenges of charging for assets under management (AUM) is that by charging based on investments, your clients will become investment-centric. The prescribed cure to this is to use another compensation model, such as charging a flat retainer fee, or an hourly fee. That way, clients will not always have their attention drawn to the portfolio that derives their fee, and the planner can help to focus them on other aspects of planning. Yet this raises a fundamental question: does charging AUM fees cause clients to be investment-centric, or are clients investment-centric and therefore preferring AUM fees?
Home ownership has long been viewed as a foundation of building wealth. For many Americans, the equity in their home is the single greatest asset on their balance sheet, often dwarfing the amount of investment assets they hold in savings and retirement accounts. But does that really mean that home ownership is the best long-term investment around, and a step that everyone should take if they wish to build financial success in the future? Not necessarily. Because in reality, the real reason home ownership is the average American's greatest asset is not because of appreciation in the value of housing; it's simply because of leverage. Read More...
Unfortunately, there is no shortage of bad continuing education instructors. Whether it's a boring delivery, explanations that are either too simple or too complex, content that is never made to feel practical and useful, or something else, almost any CFP practitioner has probably gone through the experience recently.
And the challenge is perhaps especially acute in regards to Ethics CE, where many presentations are either dealing with very abstract ethics concepts or very narrow case situations that may not feel relevant, and the number of instructors is already very limited.
In response, the CFP Board has changed the requirements to be an eligible CFP Ethics CE instructor in the future, requiring all such instructors to have held the CFP certification for at least 5 years to be eligible, to ensure that the instructor has the experience to make Ethics CE relevant. The problem? This requirement still does nothing to ensure that the instructor is a good teacher who knows how to make the content relevant for an audience! Read More...
The concept of safe withdrawal rates has been around for almost 20 years now, since it was first kicked off in the Journal of Financial Planning by Bill Bengen in 1994. Over the years, a number of developments have come along that has further elaborated upon and enhanced the body of research above and beyond its original roots. Nonetheless, despite significant advances in the theory and methodologies used to apply safe withdrawal rates in practice, one significant misconception remains, for some inexplicable reason: the idea that safe withdrawal rates are a pure auto-pilot program forcing clients to spend little from their portfolios, even in bull markets, such that the client is expected in any reasonable market environment to pass away leaving an enormous inheritance after a life of 'excessive' frugality. This misconception needs to end; it's not what the financial planning process is about, it's not what the research says, and it's not what is done in practice anyway!Read More...
As prices of almost everything on the grocery store shelves seems to creep higher, we seem to get a bigger buzz than ever by saving money in the checkout line. Coupon use is on the rise, and this week was the series premier of TLC's "Extreme Couponing" television show.
Yet while it's nice to save a little money when you reach the cash register, and every bit of savings helps a little bit in the long run, let's keep it all in perspective: clipping coupons, a little or even a lot, is not the key to a comfortable retirement. When we talk about the importance of saving for long-term wealth accumulation, it's about the savings that you invest, not the discounts at the cash register. The road to long-term financial success is not paved with coupons!Read More...
Every practitioner who has been in business for any period of time has had the experience: the continuing education session being attended is bad. Maybe the content is useless or irrelevant. Maybe it's too simple, or too complex. Perhaps the speaker is just a poor teacher, or an ineffective communicator. In some cases, the instructor doesn't even know the content as well as the people who are supposed to be learning more about it!
And of course, when CFP practitioners - as with many professionals - have continuing education requirements, bad sessions perhaps feel ever worse. Not only might they feel like a waste of time, but they're a required waste of time!?
So the question emerges: what can be done to improve the quality of continuing education content?Read More...
