Media Reviews

This month's issue of the Journal of Financial Planning includes a couple of nice columns, one on the protocol for your relations with people who have recently lost a loved one, another on how to hire younger advisor employees. But the real fireworks this month is a blockbuster expose by Rolling Stone's Matt Taibbi on how Congress chewed up the financial reform bill, and how it's far less protective of the public than it was originally intended to be. Both Republicans and Democrats participated in the watering-down of the measure, and although there is no mention of fiduciary, you get a glimpse of how hard it is to get meaningful consumer protections through Congress in this environment.

It makes for depressing, and very enlightening, reading. [Read more »] 

It IS interesting that LPL chose this rather unfavorable market environment to launch its initial public offering, although the environment IS somewhat better than the past two years. Kudos to Financial Planning magazine for at least asking the question. Joel Bruckenstein's cover article looks at the new technology platform that is under construction at Schwab Advisor Services, and then gently points out that the company executives might be making... misleading claims when they say they're the first out of the gate with an integrated solution. (To be charitable, maybe they're unaware of Fidelity's and Pershing's already-functioning platforms...) But the fact that Schwab has finally taken up the challenge is good news; a technology arms race among institutional custodians will benefit all advisors in the long run...
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This issue of the Journal of Financial Planning features three articles which reinforce, in interesting ways, things you probably already know but may not be giving enough attention: the messiness of financial planning, and how you can turn that to your advantage in client relationships: the messiness of client thinking about investments and how you can protect your client relationship from it; and Vern Hayden talks about the essential core of your business and invites you to put more attention there, rather than on a lot of inessentials which probably take up most of your day.

I thought the article on using options to hedge client portfolios was interesting for two reasons: first, it found that hedging (buying options) all the time is prohibitively expensive; when markets are volatile, the cost exceeds the benefits. And second: it found that if you hedge in a disciplined way, only when the costs are low, you might be able to add risk-adjusted return to client portfolios.

The Economist articles warn us to brace for two major transitions in the Middle East; the leaders of both Egypt and Saudi Arabia are ailing, and there is no clear succession plan. And it tells us that the most recent bond auction selling Greek (and Spanish) debt went off without a visible hitch, which may mean the worst of the crisis in Euroland is over.
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The July issue of Investment Advisor includes a package of feature articles on transition planning, but... There's one excellent article (the first reviewed here), and after that the others look like filler or an afterthought. I included the final article in the package among the "high" rating articles because it offers some (albeit sketchy) actual case studies, which is valuable material that the magazines, for whatever reason, have drifted away from.

As usual, Mark Tibergien, Angie Herbers, Dan Skiles and Tom Giachetti offer real insight and advice; I suspect most readers turn to their columns before they read anything else. [Read more »] 

Mike Martin is a very thoughtful advisor who has been writing some pretty pessimistic assessments of the global economic scene and the investment opportunity set. He's one of those people who foresaw the meltdown in 2008, which may or may not recommend him now, but I think his analyses are always well-intentioned, thoughtful, and a good addition to the Financial Advisor article lineup. I also liked Bernie Clark's writeup of his/Schwab's latest poll of advisors, who (on average) spend 30% of their time on operational issues in the office.

I've also included articles from The Economist on the turmoil in Central Asia (conclusion: it's not going away soon), on the future (or lack thereof) of the European Union, and on the prospects of gold based on a pretty detailed supply and demand analysis. The gold article is something you could share with your most conservative (or frightened) clients.
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Marie Swift's feature article in this month's issue of Financial Planning magazine talks about what we hope will be the final aftershock of the market meltdown: restoring client loyalty or watching clients whose confidence was shaken walk out the door. A number of commentators imply that your relationship standards with clients are at least one notch higher now than they were pre-crash, and that may be a permanent change. Another permanent change: one of the largest investment platforms in the dually-registered world has adopted a number of fiduciary-friendly features, suggesting that regardless of the SEC's actions, the fiduciary future may be upon us already.

Martin Shenkman and Ed Slott do their usual thing: offer advanced planning tips, while Stephanie Bogan identifies the stages that each advisory firm passes through if it is to evolve beyond the lifestyle practice. And Thornburg's George Strickland says that carefully-laddered individual muni investments may provide a better hedge against inflation AND rising interest rates than TIPS. It's an interesting argument. [Read more »] 

I find myself wondering what the staff meeting must have sounded like where it was concluded that the FPA adds value to your life and practice by polling Journal readers and asking questions like: "Are you confident in the investments you are recommending to your clients?" or: "Are you reevaluating your asset allocation mix?" But I may have been a bit cranky when I picked up this issue of the Journal of Financial Planning, because once again the cover art reflects a cartoonish understanding of the financial planning world. FPA members deserve so much better than they're getting from their professional publication...

But the magazine still has its useful moments, thanks to the generosity of a handful of practitioners. In this issue, Jon Guyton has contributed an excellent column proposing a withdrawal policy statement for retiree clients, and there's a pretty good evaluation of a complex little corner of the rules governing Social Security payments.

The Economist, meanwhile, gives us a bit of an insider's look at the resignation of the Japanese prime minister, the new coalition government in Britain, venture capital in Europe, the new labor issues in China, and whether it's a good thing (or not) that unemployment benefits have not been extended here in the U.S.
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Despite Investment Advisor's strong orientation toward promoting the independent broker-dealer community and serving as its mouthpiece, Financial Planning magazine's annual broker-dealer survey is consistently much more comprehensive and interesting. You get the feeling that IA's editors weed out anything in the data that one or another BD executive would rather the field force not hear about, while the FP editors seem to be looking for issues and anomalies.

Case in point? FP notes that only three independent BDs showed revenue growth in 2009, and highlighted some firms which experienced dramatic decreases in revenue. In addition, it highlights how few firms still generate more than half their total revenues via fees; annuity commissions, in most cases, trump "fee-based" revenues, which may explain why the Financial Services Institute seems so alarmed whenever Congress or the SEC talk about a fiduciary standard.

Meanwhile, the most interesting article in this issue is an analysis of two advisors who are buying small independent accounting firms. By far the majority of accounting firms are solo practices, whose owners face the same issues that advisors are facing: where do I find a successor? The firms are small enough to be purchased at reasonable cost and via some kind of earnout arrangement; more importantly, the acquiring advisory firm can begin to introduce a broader range of services to the accounting firm's clients. You buy a profitable business and then expand the revenues--and take care of the founding accountant's clients when he/she retires.

The subject of the day, in practice management, is client segmentation and determining your ideal client. Both John Bowen and Gabriel Garcia (previewing an upcoming Schwab white paper) shed some interesting new light on how, exactly, to accomplish this in your own practice. [Read more »] 

Several of the articles in the June issue of Investment Advisor received "high" relevance ratings, not because you need to go back and read the whole article, but because they include something of interest, which I highlight here. In that category, put the Waddell article on Congressional action--it's helpful to know that SEC chair Mary Schapiro is lobbying for the power to impose a fiduciary standard, and the Financial Services Institute (the independent broker-dealer trade group) is lobbying hard against all things fiduciary. Olivia Mellan's interview with Dr. Robert Butler suggests that the U.S. medical system and the business sector are both ill-prepared for dealing with the aging baby boomer population, the latest installment of Michael Patton's series has some interesting things to say about his brokerage experiences, and Bob Clark's column introduces a platform that makes alternative investments accessible at a retail level. And you should know in passing that Bob Ketchum, CEO of FINRA, just will not stop talking about a fiduciary standard in the BD and brokerage business models, even if he seems a bit naive about what, exactly, the term "fiduciary" actually means.

The articles that you might consider reading in their entirety include the broker-dealer survey rankings, not to learn who is bigger than whom, but to get a picture of which firms are growing and who isn't, who seems to support fee-revenue activities and which firms have astronomically high turnover in their field force. Mark Tibergien, Angie Herbers, Dan Inveen and Eliza DePardo all provide thoughtful practice management advice, and the Dan Skiles article on when and how to upgrade to Windows 7 could have some immediate practical significance. [Read more »] 

If your only mission as an advisor is to collect as many assets under management as you can get your hands on, you might want to skip Roy Diliberto's column in this month's Financial Advisor. He argues, persuasively, that there is a fine balance between saving too much and spending too much, and many clients are kind of extreme in either direction. Advisors who are working hard for their clients have to rein in overspending, and may have to point out the lost opportunities that come with oversaving. Deciding when to tell clients to spend more of their portfolios (when your revenues may be affected) is yet another conflict of interest that advisors have to face.

Elsewhere in this issue, Joni Youngwirth offers some advice on often-overlooked issues that come up when you're transferring your business, Joel Bruckenstein reviews one of the few planning programs that can be used in conjunction with your clients, and Eric Reiner offers some insights into the new taxes connected with the health care reform package. If you're interested, this issue also offers the broker-dealer rankings, one of three magazines now that collects data and offers rankings. [Read more »] 

Harold Evensky is about to turn his quarterly column over to the academics, which might not be a good thing, since he has been such an effective filter of the noise (and there is SO much of it) in the academic journals. In this issue of the Journal, he summarizes articles which say something similar to what Mohamed El-Erian has said: that we are slouching toward a "new normal" economic and investment world. It would be nice if he'd tell us exactly what returns will be in various asset classes.

Meanwhile, tech consultant Bill Winterberg does a nice job of teaching us about the unfamiliar world of social media, and a former director of risk analytics at Merrill Lynch walks us through the unfamiliar universe of puts and calls, options and futures, trying to help us make sense of it all. (Hint: reduced volatility and equally-reduced long-term returns. The options markets seem to be highly-efficient.)

I was disappointed in the focus of the cover article (are ETFs alternative investments?), but in execution, it is far better than what we've grown used to from the Journal's cover articles. Let's celebrate progress where we can... [Read more »] 

I apologize: I didn't do a very good job of winnowing down the number of important articles because there were too darn many good ones in this 40th Anniversary issue of Financial Planning magazine, ranging from Stephanie Bogan offering a 3-factor model for identifying what kind of planning firm you have, to profiles of Bill Bengen and Dave Yeske, to an article on investing in microlending organizations, to Martin Shenkman offering a detailed analysis of how GRATs are about to be radically disempowered and Ed Slott reminding us to have clients take their required minimum distributions this year.

I also wrote the cover story, which I briefly summarize; it basically predicts a fairly dramatic upcoming 10 years, driven by evolutionary change that will make today's planning practice seem awfully quaint to the advisor of 2020.

Let's hope the editors of our trade magazines don't follow this example and create relevancy in nearly every article in the publication; we have too much to read already. [Read more »] 

There's a lot of noise here about regulatory reform--David Tittsworth is a respected member of the community who seems to be clear-eyed about the impact of the various bills on the SEC; Bob Clark is kind of shrill in his (yet again) denunciation of the Financial Planning Coalition; there's a great interview with compliance attorney Tom Giachetti, and then there's Mary Schapiro, in an interview where she says all the right things and seems to keep a straight face, and earlier when she is named one of the most influential people over the past 30 years in the financial planning profession, right up there with Ken Fisher, Franklin Delano Roosevelt, Harry Markopolos, Steve Jobs and Michael Milken. One wonders where today's practitioner would have gotten inspiration and evolutionary guidance these past three decades without those lights to guide us.

In all the hoopla over a bill that is still being negotiated, don't miss the Dan Skiles column (on cloud computing) toward the back of the magazine; Skiles is going to be a wealth of insight for the magazine going forward.

Here's to a better regulatory future... [Read more »]