Enjoy the current installment of "weekend reading for financial planners" - highlights this week include several recent pieces about behavioral finance (both by, and about, research luminary and Nobel prize winner Daniel Kahneman), some interesting glimpses of how social media and the online world is shifting the process of finding a financial advisor and delivering financial advice, and a few investment pieces about the unraveling European (and now especially, Italian) sovereign debt situation and a growing likelihood the ECB will be compelled to "start the presses" to address it. We also look at two pieces highlighting trends in the industry, especially the RIA space. Enjoy the reading!Read More...
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include a striking and somewhat controversial article about a financial planner who lost his house via a short sale in the Las Vegas housing bubble, a number of articles about recent initiatives from the FPA and NAPFA, and two investment articles, including a piece by Rob Arnott about starting to buy long-term inflation protection at today's "cheap" prices, and an article by Hussman suggesting a near-100% probability of an imminent recession with a recommendation to reduce risk exposure. Enjoy the reading!Read More...
A common complaint about the use of tactical asset allocation strategies - which vary exposure to bonds, equities, and other asset classes over time - is that they are "risky" to the client's long-term success. What happens if you reduce exposure to equities and you are wrong, and the market goes up further? Are you gambling your client's long-term success?
Yet at the same time, the principles of market valuation are clear: an overvalued market eventually falls in line, and like a rubber band, the worse it's stretched, the more volatile the snapback tends to be. Which means an overvalued market that goes up just generates an even more inferior return thereafter. However, greedy clients may not always be so patient; there's a risk that the planner may get fired before valuation proves the results right.
Which raises the question: is NOT reducing equity exposure in overvalued markets about managing the CLIENT'S risk, or the PLANNER'S?Read More...
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include a few blockbuster articles, from a new call to the profession to adopt a more scientific and evidence-based approach to advancing financial planning, to an incredible new research report on how to develop staff and grow a firm, to a scary warning about the current regulatory winds buffeting financial advisors. We wrap up with three striking-but-bearish articles on the mortgage markets, the stock markets, and the economic situation in Europe and here in the US. Enjoy the reading!Read More...
Enjoy the current installment of "weekend reading for financial planners" - highlights this week include two new articles on safe withdrawal rate research, an investment discussion about Europe from John Hussman, a few practice management articles about business development and cultivating relationships (or not!), a controversial piece that 401(k) plans should have no more than 10(!) investment offers, and more. Happy reading!
As planners continue to seek ways to make their businesses more stable, successful, and profitable, it has become increasingly popular lately to talk about including separate fees for financial planning services, often in the form of a retainer. As the general view goes, doing so allows you to stabilize your income with a steady retainer base, and simultaneously helps you to better reinforce the value of your financial planning by setting a clear price tag on it.
There's just one problem: When you look at business models outside of our industry, we see the reality is that setting a separate price tag on standalone services does NOT help consumers value and appreciate the service more. In fact, it helps them to minimize use of the service, and absorb the cost only reluctantly (and sometimes even resentfully) when absolutely necessary.
So does that mean by charging separately for financial planning, we're proactively DISCOURAGING clients from utilizing our financial planning services and encouraging them to think more investment-only!?Read More...
In the ongoing search for more diversification - and especially, low correlations as a potential for stabilizing returns in a difficult stock environment - advisors have increasingly shifted in recent years towards "alternative" investments. From real estate and REITs to gold and other commodities to more, a recent FPA survey on Alternative Investments found that 91% of advisors are using some form of alternative investments. Sadly, though, the focus on finding investments that have a low correlation - according to FPA's survey, the number one criteria for choosing an alternative investment - has grown to such an obsession, that we're willing to name anything that has a low correlation as "a new asset class." But the reality is that while some alternatives really are investments that truly have their own investment characteristics unique from stocks and bonds as asset classes, others alternatives - like managed futures - simply represent an active manager buying and selling existing asset classes. Which means it's about time for us to start distinguishing between a real alternative asset classes (e.g., commodities or real estate), and the real value of managed futures.
Enjoy the current installment of "weekend reading for financial planners" - highlights this week including news on the regulatory front, a number of practice management articles, a few articles about the current difficult investment environment (and whether we may be tipping, or have already tipped, into a recession) and an interesting piece about how the mere gender of the advisor can impact client responses about risk tolerance. Happy reading!Read More...
With the never-ending onslaught of information in today's world, I am often asked what I am reading, as someone who consumes perhaps an abnormally large amount of financial planning content. Accordingly, I've decided to start a new column for this blog, called "Weekend Reading" - where I'll share a few of the more interesting articles I've read in the current week. The goal is to keep it to no more than an hour's worth of reading; something you can do in a single sitting when you're taking a rest over the weekend and trying to keep up with the financial planning world. Here I offer up the first week's articles. I hope you find it helpful! Read More...
As safe withdrawal rate research gains in popularity, it is both increasing used - and misused - by financial planners and the press. Although the research does have its limitations - which I discuss frequently in my presentations at various financial planning conferences throughout the year - and is built on many assumptions that deserve to be challenged, a rising number of safe withdrawal rate critics appear to criticize the approach based on inaccurate statements. So let's clear up a few points of confusion about safe withdrawal rate assumptions. Read More...