Media Reviews

Something nobody ever seems to notice about the Journal is that it is clearly not advertiser-supported; it relies almost completely on subscription fees to turn a profit. This month is an interesting case-in-point: eight sold advertising pages (the rest are in-house ads inserted by the FPA, which generate no revenue), and one of those pages, from IMCA, is probably a trade-off for an FPA ad in IMCA's publication.

There are two highlights in this issue. The first is Baylor profession Bill Reichenstein's rebuttal of an article that never should have gotten past the Journal's screening process in the first place, and ought now to be retracted. Reichenstein totally debunks the article, but of course that doesn't matter because in sales situations, aggressive insurance agents will direct the prospect's attention to the original article and not bother with the debunking part.

The other highlight is Wade Pfau's introduction of a sustainable savings rate during the accumulation phase of a client's financial life--rather than the usual focus on the sustainable withdrawal rate after the fact. It makes for very interesting reading.
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I wish Bob Clark's column on the new Equity Management System by FP Transitions had contained more details on how it works, and less airy discussion of what advisors in the marketplace, generally, are or are not doing, but it gives us a heads-up, and maybe I'll get into more detail in a future newsletter. Meanwhile, a lot of advisors will recognize their firm as a "tweener" in Mark Tibergien's prescriptive column on how to move beyond this awkward stage, and the article by the FA Insight folks might spur you to create a formal marketing plan... whenever you can get around to it.

Have a great week; I just sent out two client articles on the debt ceiling debate and the ratings downgrade on U.S. Treasuries, giving a plain english description and some reasons not to panic. This will be an interesting week in the markets, and I suspect there will be others who DO panic. [Read more »] 

Angie Herbers is about to come out with a remarkable white paper on how to create a happy and productive staff in a planning practice, and we're seeing bits and pieces of it in her Investment Advisor column--including this one, where we should not be surprised to find that employees want to control their jobs and feel like what they do is significant and important.

Bob Clark takes on FINRA, exposing a naked effort to cripple the independent (and especially fee-compensated) advisory profession in favor of the brokerage firms. And Mark Tibergien suggests that leaders of advisory firms should set the tone by cultivating an environment of happiness. [Read more »] 

Hmmm. Andy Gluck seems to think that it's a foregone conclusion that FINRA will become the regulator for RIAs, and that the FPA is systematically alienating its members. Wall Street wins, the FPA loses--and so does the profession.

For happier news, turn to the latest RIA survey, which ranks advisory firms according to the number of assets they have under management, and provides a few other details (growth, assets per client) that makes you wonder: does anybody rank dentists by the number of clients they serve or how much money they take in during the year? But the good news is that the RIA world appears to be growing again; AUM is up 19.8% year over year, which is certainly faster than the brokerage world is growing.

I also thought the Jim Picerno article on active vs. passive represented a fresh look at the subject, though there seem to be a few holes in the active argument that might not have been considered fully. And Joel Bruckenstein's profile of MacroRisk Analytics identifies a type of software program that many financial planners will be using in the fairly near future. [Read more »] 

I guess I'm not a technical expert, but until I read the Martin Shenkman column on post-death planning issues, I didn't realize how much planning could take place after a client passes on. Alan Roth's article on proper benchmarking is quite interesting, especially when he debunks the track record of an advisor who might be boasting about adding alpha to client portfolios. And the final column in the magazine, by Shlomo Benartzi, represents another effort in our profession's endless struggle to take some of the cruder emotions out of the investment process for clients. [Read more »] 

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 »] 

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 »] 

If you want, you can read down past the 'high relevancy' articles to see what I thought about the cover article in this month's issue of Investment Advisor ('Agents of Change' is the title of the article), but your time is much better spent looking at the annual broker-dealer statistics. The 'President's Poll' gives us information that is kind of obvious, and one might yearn for the days when the magazine was courageous enough to publish the average payout rates for all the BDs, or calculate the profit margins, or give us the percentage of total revenues coming from variable annuities vs. 'fee-based' assets under management, so we could determine for ourselves whether the reps of this or that BD were indeed 'fee-based' or leaning hard toward the sales/commission side of the fence. All we get here are various measures of size, though the average 'production' figures are interesting because they give us a hint about which BDs are doing the most to benefit their reps.

Beyond that, Philip Palaveev, Mark Tibergien, Angie Herbers, Tom Giachetti and Dan Skiles are reliably good at giving excellent practice management insights, and we learn that the independent BDs are about to allow their reps to engage in social media activities, although they will still be carefully supervised by their responsible adults in the compliance department. [Read more »] 

The highlight of this issue of the Journal, and maybe the highlight for the past several years, is an interesting variation of the Bengen research. The "Save Savings Rates" article by Wade Pfau looks, not at the safety of various distribution rates, but the safety of various savings rates under different economic conditions. Looking at the historical record of returns, and taking into account the benefits of hindsight, it looks at what percent of income you would have had to save each year in whatever return environment you accumulated in, taking into account the return environment you are distributing in. As it turns out, those who save in a difficult return environment tend to get a break in the distribution period--and vice versa.

As I say in the review, this is an article you will probably end up reading at some point in your career; you might as well do it now. It's worth your expenditure of time.

Meanwhile, Dan Moisand has put on the record another great argument for not allowing FINRA to take over as the SRO for RIAs, and he brings up the fact that FINRA sold out of more than half a billion dollars worth of auction-rate securities in its own portfolio before concluding that they were not well-structured and poorly-disclosed. You read this and immediately wonder whether the SEC should launch an insider-trading investigation. If this were any private sector entity, the case would be a no-brainer.

In The Economist, notice the article that wonders whether we have entered another Tech Bubble (with Internet-related companies this time) that was published BEFORE the LinkedIn IPO went into a feeding frenzy. And the demographic analysis is very interesting, including the chart that tells you the ten most populous countries in the world in 2100 (Nigeria and the Congo are high on the list)--plus an article that wonders if China has enough people. [Read more »] 

This is the first issue of Financial Planning under the guidance of its new editor, Scott Wenger, a former employee of the Wall Street Journal and managing editor/money and business at the NY Daily News. And I hope this is not a coincidence: when have I ever given so many "high" relevance ratings?

The highest of the "high" are an article by Sonya Britt and John Grable on client risk tolerance assessment, and Joe Tomlinson's deep evaluation of your clients' options when they start converting their portfolios to income generators. The latter article offers a pretty good illustration of the tradeoffs between future value of the portfolio at death and reduction of uncertainty during the retirement years leading up to it.

Meanwhile, Ed Slott does his usual great job of keeping us informed about traditional and Roth IRAs, this time giving you advice on how to handle clients who experience sticker shock on the tax bill associated with their already-completed Roth conversions. You might also look at the Kevin Bishopp article entitled "Mapping It Out;" you can pretty much skip the article itself and look at the Client Engagement Road Map graphic, which lets you map out two years worth of client meetings. [Read more »] 

Andy Gluck is trying to chronicle the ups and downs of the various professional associations, and what that means in terms of power and influence in the current debates over fiduciary, FINRA etc., but having just returned from the NAPFA National Conference, I find myself wondering why he doesn't put NAPFA anywhere in the equation--or the AICPA either.

Elsewhere in this issue, we learn about a new Financial Therapy Association, a new planning tool for calculating sustainable withdrawals from a retirement portfolio, and if you are still rebalancing client portfolios using Excel spreadsheets, then David Lawrence's column was written for you. [Read more »] 

I didn't give the Investment Advisor 25 Most Influential People in the investment advisory world a "high" relevance rating because, well, it is astonishing how little information the magazine was able to capture from this group of individuals who exert so much influence over our world. The real sport is deciding whether you believe these ARE the 25 most influential people, and then being surprised that the magazine didn't (as it has in the past) include three or four of its own columnists.

For a more productive use of your time, look at the combination of Kate McBride's article and Bob Clark's column, which outline some of the contradictions in the current debate over a fiduciary standard, and together offer an interesting breath of sanity.

Or you could look at the combination of Mark Tibergien's and Angie Herbers' columns; Tibergien talks about how to address the succession planning issue, while Herbers shows you the very simple ways that you can instill passion in your employees--which leads to great performance. Add the Joni Youngwirth column on marketing, and the Dan Skiles column on how to evaluate a rebalancing system, and you have a lot of good solid practice management advice.
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