Is it really possible that 100 different independent RIA firms have more than $1.7 billion of AUM? The other thing that's interesting to note is how many of them list themselves as "self-custodian." This term is not explained, but it would be interesting to know exactly what it means.
I think the highlight of this issue is the Allan Roth article, which looks at "deep risk"--the chance of an inflation-adjusted negative return over a 30-year period. This includes inflation, deflation, confiscation (or confiscatory taxes) and devastation from natural catastrophes or military conquests. A chart shows the assets which will insulate you from these risks, and you end up with a portfolio that is geographically-diversified, and overweights precious metals and high-quality bonds. It creates an interesting discussion about the best way to determine your clients' asset allocation.
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In this month's issue of the Journal of Financial Planning, Michael Kitces article makes some good points about the retirement accumulation assumptions you may have been making for your clients--that there is some sequence risk similar to the sequence-of-returns that retirees face in their early years at the beach, except that for pre-retirees the sequence risk comes at the end of the accumulation stage. There's a caveat to the analysis, though: many pre-retirees can afford to put aside more later in life than earlier, and the analyses that Kitces offers assume that contributions are static for a full preretirement period. You may think that is unrealistic.
The other highlight is an article on reverse mortgages which looks at the impact of tapping into home equity equal to half of a retiree's retirement portfolio, or 100%, supplementing the income (in other words, taking money out of the home equity rather than the portfolio) during bear markets. It also looks at the impact of interest rates while the strategy is implemented, but does not look at the impact of interest rates rising or falling (or, most likely, both) throughout the retirement period.
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This month's Financial Advisor issue includes a cover story on the current CFP Board controversy--or, as the magazine prefers to call it, "fiasco"--and gives a pretty good overview for anyone who hasn't been following Ann Marsh's coverage in Financial Planning magazine these last six months. The gist of it is that the Board's staff--many of them imported from FINRA--seem to have decided to enforce the way advisors describe their compensation method differently from the way they have in the past, introduced a somewhat arcane standard of enforcement that apparently took by surprise the Board's board of directors, evidenced by the fact that one of the first enforcement actions took place against the sitting board chair.
Subsequently, the Board was made aware of the fact that many wirehouse brokers had been describing themselves as fee-only on the Board's own website, which misled financial consumers for years--and instead of taking enforcement action when this was pointed out, the Board allowed those advisors to "reconsider" their postings. It seems like every time the Board decides to unilaterally take radical action in secret, without involving its stakeholders, its reputation ultimately takes a hit, harming the CFP mark. Will this lesson ever be learned?
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If you're interested in succession planning issues, be sure to read Angie Herbers' column in the December issue of Investment Advisor, which takes up the subject of "Founder's Syndrome" and the psychological issues related to transferring ownership and control. And if you think that's irrelevant information, consider Mark Tibergien's column about "super-ensembles," which represent the most profitable and efficient advisory business in the profession. They are created by a diverse group of owners, each with their own skillset, and happened only because a founder was willing to cede control in the best interests of the firm.
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