This first Financial Planning issue of the new year includes the annual ranking of independent advisory firms, ranked, of course, by size—measured as assets under management. You’ll enjoy looking over the asset size of different firms, and see their growth rates, but you’ll also wonder whether the profession is well-served by calling these the “top” advisory firms by any criteria other than quality of advice.
I liked the forecasts offered by Christine Gaze, who is a new practice management consultant for larger advisory firms, and I think Joel Bruckenstein’s review of eMoney provides a window into one of the more interesting planning software programs out there, now upgraded. And take a look at the Michael Kitces column, which compares the outcome of two versions of the same retirement portfolio, one using decision rules as to when to liquidate stocks (in up years), the other simply rebalancing each year with no fancy rules. The rebalanced portfolio is very nearly equivalent to the portfolio that follows decision rules, and is arguably superior in its outcomes. Interesting…
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I have to admit, when the Investment Advisor cover story proclaimed that the SEC was broken, I expected the discussion to go beyond the pernicious influence of government sunshine laws and Dodd-Frank. If you’re interested, I created an incomplete list of the things that I think are broken at the SEC, none of which were discussed or, perhaps, even recognized by the author. Very disappointing, but maybe Investment Advisor will take another crack at it someday.
Better to turn to Mark Tibergien’s advice on what to do (and what not to do) when creating a compensation plan at your firm. The recommendations include not overpaying for bringing in new business because it can make it hard to maintain profitability in good times, and because more new business comes from serving existing clients well and the rise in markets than from new clients coming in the door. Also remember that compensation is not, in itself, a motivator; it should be used as a reward to the motivated members of our staff.
Angie Herbers, meanwhile, recommends that you start preparing now for the next downturn, especially in the marketing area. She says that the best time to bring in new clients is when the public is spooked by a bear market. Build your cash reserves and add capacity, and most importantly, create a marketing plan that you can roll out when the inevitable happens.
Meanwhile, Dan Skiles offers some great procedural advice for handling the cost basis reporting by the custodians, harmonizing their data with your system’s, choosing your reporting method individually for each client and each client’s different asset classes, and recognize that this can add to the potential for errors. If you manage retirement plan assets, Tom Giachetti offers some guidance on Department of Labor rules, specifically around model portfolios that are, or are not, made up of the underlying investments offered to plan participants.
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David Tittsworth’s voice will be missed by all who believe in the fiduciary standard in the financial services world, and there may be celebrations going on at brokerage firm headquarters to mark his retirement. Meanwhile, in this issue of Financial Advisor, we get a peek at new tech initiatives at the larger custodial firms, and two columns that relate to selling your practice: an interview with David Grau, who says that most advisors should look at internal succession rather than an outright sale to an unrelated party, and Mark Hurley, who says beware of anyone offering stock in exchange for all or part of your firm.
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Nobody remembers that I (Bob Veres) created the very first advisor software survey, because I kept a spreadsheet of all the software options that I would send to advisors when they would ask me a software-related question. Today, the Financial Planning software survey, created by Joel Bruckenstein, is a huge resource for the profession, a barometer of where we are and where we’re going. That said, I miss the comprehensive listing of all the programs out there, price, contact information and feature set.
Beyond that, I’m pretty sure I have never given out this many “high” relevance ratings in a single issue of any magazine before. Kelli Cruz offers great advice on how to make performance reviews productive and less painful. Kimberly Foss helps advisors recognize and manage their own stress levels during a market downturn (how soon will we need this advice?) and Ann Marsh has managed to compile 17 different tips on planned giving for clients. The profile of Mike Walther, who has been profiled in Inside Information, identifies a potentially huge resource for advisory firms, Ed Slott gives guidance on how to roll corporate plan assets into traditional and Roth IRAs based on a new revenue ruling, Don Korn offers a pretty good summary of ways that you can lower taxes by spreading out your tax base among family members, and I really liked Alan Roth’s advice about listening to soothsayers who masquerade as economists. The parting thoughts offered good advice on a thorny topic (dementia) and even the Veres column made peculiar sense this month.
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