Financial Planning

I've tried to summarize the cover story of this month's issue of Financial Planning magazine, which is the largest software survey in the history of the advisory profession. But with all the charts and graphs and tables and comments, it would be a lot better to read the original than to go with my cliff notes.

This is also a good time to figure out how you're going to handle the cost basis reporting process with your back office. And my own column looks not only at the brokerage industry's efforts to use FINRA regulation to kill the RIA competition, but how Mary Schapiro has consistently been at the center of its initiatives. Maybe it's just a coincidence... [Read more »] 

Take a good look at the article on bringing interns into your practice--or better yet, look for the more comprehensive white paper on the same subject, at the authors' web site: www.fjyfinancial.com. It's something you rarely see these days: a comprehensive explanation of how to do something complicated in your office.

Meanwhile, Financial Planning has selected a group of "influencers," and instead of picking the same old names, it dared go outside the box and identify some people you may not have heard of. You probably already know the IRA distribution rules when clients reach age 70 1/2, but Don Korn does a nice job of making those rules accessible and easy to follow. And I liked the article on how to deal with clients from hell, even though for many of you it might hit too close to home. [Read more »] 

There were an unusually high number of high-relevancy articles in this issue of Financial Planning magazine, which will be distributed on the floor of the FPA Convention in San Diego. I liked Eleanor Blayney's suggestion at the end of the publication, that we assign a financial planner to take the Congressional leaders on the deficit reduction debate through the six-step planning process and talk about the long-term perspective. There are profiles of Roger Gibson and Julie Littlechild, and a good article from Brad Klontz on why clients sometimes fail to act on your best advice.

And the article on LTC insurance, including some planning tips on how to evaluate whether the investment is worth the cost, is excellent, particularly for advisors who are uncertain how to plan for long-term care issues. [Read more »] 

There is some irony in the Deena Katz column, which I think offers some great advice: take advantage of the slower periods of the year to take stock of your practice and make positive changes. (Imagine the impact of constant, consistent positive changes over time...) Little did she know that you would be working harder this summer to keep your clients from panicking than at any time since the 4th quarter of 2008.

The Quantuvis research is interesting, not so much that the top advisory firms have complicated compensation structures, but that in the end, they pay more per employee than the average firm--which strongly suggests that these firms are generating (and paying out) more profits. And I especially enjoyed the article by John Wasik that investigated the costs and features of different structured investment products and hedges, telling you what I think you probably suspected: that most of them are more expensive and complicated than they're worth. In terms of full disclosure, they seem to rival equity-indexed annuities. [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 »] 

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 »] 

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 »] 

Once again, this month's issue of Financial Planning never managed to make it to my mailbox, and I asked some other advisors who had the same problem. So... I am not including the page numbers with my reviews.

But there is some good information here, including an article by psychologist Brad Klontz that gets beyond what you often hear from money psychologists, where you are urged to act "thoughtfully" and "respectfully," and other advice you knew already. Klontz gets directly into the reason why people sometimes get in their own way. I also especially liked Allan Roth's recommendation that you create your own equity-indexed annuities for your clients. And Craig Israelsen's article tells us what you might have already known: more diversification tends to be better over the long-term. But the differences he comes up with are pretty dramatic.
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This looks like a pretty good issue of Financial Planning, but... You'll notice question marks where page numbers are normally inserted. I didn't receive my issue in the mail, and asked others for page numbers, and the handful of people I called hadn't yet received theirs either. Some of them DID receive the April issue, however. I have no good explanation.

But you have links to all the articles here, including some common sense advice from Martin Shenkman on clients' insurance policies, a tech overview by Joel Bruckenstein, some good practice management advice from Stephanie Bogan and a very interesting article on advisory firms that seem to have migrated toward offering concierge services for their clients. [Read more »] 

Financial Planning magazine is still without a full-time editor, but this is a pretty good issue regardless. You hear about Fidelity's Center for Applied Technology, and both Stephanie Bogan and Deena Katz offer advice on how to narrow your focus and leverage yourself more efficiently. Don Trone offers a checklist for becoming fiduciary compliant, and Dan Moisand brings up a topic that nobody is talking about and everybody is facing: talk radio and certain TV channels are doing everything they can to paint a gloomy picture of America's future and scare older clients out of their wits. Of course, the older clients want to get out of the markets immediately--and how do you, the advisor, handle these requests. It's an interesting question. [Read more »] 

This issue of Financial Planning, sans new editor as yet, includes a really helpful article by Ed Slott about tricky issues involving Roth IRAs, an article about assimilating breakaway brokers by Schwab Advisor Services executive Jonathan Beatty, and a nicely-researched article about advisors dealing with clients with dementia. None of this is earth-shaking, but hey, the year is young... [Read more »] 

The article by Julie Littlechild, which begins on page 78 of the November issue of Financial Planning, may be the most important trade article you will read all year. It talks about what we know about getting referrals, how to cultivate more of them, and clears up a lot of misconceptions--all in about four pages of text. This is abstracted from a longer report, which I have asked Ms. Littlechild to send to me, and I think you should request it too.

Meanwhile, the magazine has named its first annual list of "influencers," advisors who have done important or impressive things in the industry. Rick Kahler, Joni Youngwirth and James Grubman offer very different kinds of practice management/client service insight. And... longtime editor Marion Asnes says farewell; she has left the magazine, and I haven't heard any word about who is going to replace her. [Read more »] 

My goodness, this was a big, thick issue of Financial Planning magazine, with a generally good multi-article discussion of the future of the profession--although a "conflict-of-interest" warning should be issued: I wrote one of them, which you can find below in the "unrated" category.

Other than the cover package, one of the most intriguing articles is Susan Bradley's discussion of how to work with widows--and most importantly, how NOT to work with them. It sounds like common sense, but if you treat each client as a portfolio instead of as a person, you aren't going to connect the way a lot of people in difficult transitions will need you to. I also thought the "Yield vs. Risk" article was interesting, mostly for a graph which shows a very inefficient frontier of possible yield-oriented investments when they're put in a graph with yield on one axis and volatility on another. It shows us, once again, that these are not rational times in the investment marketplace. And Craig Israelsen offers another perspective on the lost decade, showing that it was only "lost" for those who held undiversified portfolios of large cap stocks. [Read more »] 

I think the most interesting article in this issue of Financial Planning magazine is the detailed writeup of FinaMetrica's ongoing study of investor risk tolerance. What is interesting is that the same basic information was made available to all the trade publications, and there were very brief and not very perceptive mentions made of it, but Financial Planning recognized that there might be something important in data which shows that investors' tolerance for investment risk was largely unchanged through the Great Recession and market downturn. What DID change is the perception of risk--people think the markets are riskier when prices fall, which, of course, is the opposite of the truth.

An interesting feature by Dick Vodra, who is one of the original thinkers in the planning world, raises the possibility that our global and/or U.S. economy may not be able to grow in the future--the question is, is there unlimited growth capacity in our economic system, or is there a point when we stop creating, raising and selling more stuff per capita? I don't know the answer, but when you plug very different assumptions into your portfolio design, you get answers that could have implications for your clients.

I've already told you about Margie Carpenter's analysis of the best way to invest in emerging Asian markets; it's available on my web site. In this issue of Financial Planning, Carpenter simply makes the case that investing there is important--and it may offer, by orders of magnitude, the highest potential return in the global opportunity set. HOW to invest is only available in the downloadable report.

As always, thanks for your attention. I just finished writing a column which says that your time and attention are by far the most valuable asset at your advisory firm, and the only meaningful constraint on your own growth. That's another way of saying that I'm grateful that some of it is focused here. [Read more »]