Inside Information

I'll say it out loud: the cover article for this issue of the Journal of Financial Planning is genuinely embarrassing, and the "research" package is only a little bit less so. We've talked about this before, and other advisors have pointed it out as well, but there's no sign the FPA has any changes in mind.

And maybe it's all for the better; you can skip over those articles, save yourself some time, and turn to Jude Boudreaux's evaluation of the psychological hurdles in succession planning, or the article on comparing dollar-cost averaging with lump sum investing, or the contribution that talks about the fact that as clients get older, they become more dependent on their advisor--yet another argument for the fiduciary standard. [Read more »] 

I really enjoyed Evan Simonoff's article on how the rollups have fallen on hard times, perhaps because they were fundamentally flawed to begin with. The idea that you can buy up a bunch of independent advisory firms and take them public at a much higher multiple than you would be able to sell them for individually has always seemed kind of scammish, and when you look at the preferred deal terms--the rollup company gets first dibs on your revenues, which means that the remaining amount of your firm that you own is worth substantially less--you realize that there is a predatory element in this market. It makes far more sense for advisory firms to consolidate with each other if they're seeking scale and synergy.

Meanwhile, this issue of Financial Advisor has a transcript of a conversation among some industry leaders, talking about how the profession can regain the trust of the general public. It is still hard to imagine that consumers believe that the Madoff scandal is somehow representative of the RIA profession, or that they might confuse RIAs with Wall Street, but, well, those distinctions are going t [Read more »] 

How do today's tax rates compare with what Americans have paid in the past? [Read more »] 

Financial Planning magazine does the best job of all the magazines of collecting charts and data in the annual "broker-dealer survey" start-of-Summer ritual, and we see that this is a recovery year for the industry after two negative years in a row. True, the number of reps are down overall, but revenues are up a median 13.2%. These statistics also tell us, every year, that all the talk about "fee-based" services is mostly talk; the majority of revenues at all but a very few BDs are earned through commission sales, and the average assets under management in most systems is extremely low compared with the average fee-compensated advisor. The coverage is not perfect; why are insurance and brokerage BDs mixed in with independents, rather than given their own category rankings? This one change alone would have given us a much clearer look at the state of the industry.

You can see major trends in the profession being shaped through the profile of Richie Lee in Dallas and the Blue Ocean Marketing article, and Pamela Christensen's article on preplanning services (chiefly budget and debt planning) will be interesting to any advisor interested in taking on clients who have high cash flow but little in the way of investable assets. Finally, I thought this was the best article by Craig Israelsen in years--about how to select funds based on their value-added in the rebalancing process. [Read more »] 

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