Investment Advisor

I think the most interesting and relevant item in this issue of Investment Advisor is the revelation that Richard Ketchum, CEO of FINRA, announced that the organization would abandon its efforts to become the SRO for financial advisors in the House, but neglected to mention that he's searching hard for a sponsor of similar legislation in the Senate.

Meanwhile, Jamie Green's profile of TD Ameritrade's new leadership will help you navigate through its organizational changes, and the Angie Herbers article is very interesting in its description of a very different career path for younger advisors--starting from day one. I also think pretty much anything Mark Tibergien, Tom Giachetti and Dan Skiles write is relevant; they have been consistently thoughtful about helping you improve your practice and procedures, and this issue is no exception. [Read more »] 

Take a look at Mark Tibergien's and Angie Herbers' columns in this month's issue of Investment Advisor, and see if they aren't basically saying the same thing--and pointing out a huge blind spot in the planning profession's practice management practices. Advisors apparently haven't learned a basic skill that other professions have mastered: teaching not only the skills of the profession--planning--but also teaching how to manage a professional firm. There is an assumption that these skills should be acquired through some other means.

I also liked the point made by Dan Skiles, that you are probably doing a better job managing your clients' plans than your own business plan; that you should measure and monitor progress toward your practice management goals. This, too, is a skill that advisors tend to neglect, even though you probably do it extremely well for clients. [Read more »] 

Bob Clark nails it when he says that incoming (possibly temporary) SEC Commissioner Elisse Walter is "the most pro-Wall Street commissioner ever," narrowly winning that honor away from her predecessor--and making it clear that, against all logic, brokerage house insiders are running the regulatory arm of the wirehouses' main competitors in the marketplace. Does that make sense to ANYBODY?

Meanwhile, this issue of Investment Advisor is heavy on practice management: a summary of the most most recent "Growth by Design" survey, Mark Tibergien talking about how so many advisors look alike to the consuming public, Angie Herbers breaking down the consequences of a profession with too few younger advisors, and Tom Giachetti listing ways that you can pass SEC inspection on the issue of protecting client data. [Read more »] 

The heart and soul of Investment Advisor magazine is the consistently excellent practice management columns by Mark Tibergien and Angie Herbers, plus Tom Giachetti on compliance and Dan Skiles on technology--which, of course, are also practice management issues. This month, Tibergien talks about how to create a successful partnership (hint: ask the tough questions early), and Herbers talks about a superior way to have great employees.

For their sakes, I hope the magazine survives; it's awfully thin this month, and many of the articles were written by the editor. [Read more »] 

Angie Herbers has written a really interesting review of what appears to be a very interesting white paper about... reducing client stress in your office. There are a variety of reasons for this, chief among them that communication works better in a relaxed atmosphere, and clients are more likely to follow your recommendations. The way you ask questions and the environment you ask them in seem to be important.

I also thought the article on broker-dealer due diligence was very revealing, but perhaps not in the way the author intended. I mean no disrespect; it's good information, but it also suggests that the business environment for broker-dealers is awfully difficult these days. Mark Tibergien always offers great advice and information, as does the Angie Herbers column, and Dan Skiles and Tom Giachetti. And you might find it interesting to know some of the biggest compliance violations in the broker-dealer world. [Read more »] 

There's a good core of practice management articles at the core of this issue of Investment Advisor--a magazine which is apparently only available online these days. (Who knew?) Julie Littlechild of Advisor Impact offers the results of many many client surveys and an advisor survey, and finds that there is a roadmap to cultivating the kind of clients who will reliably give referrals. We also get the first of a four-part series that summarizes the best information from the latest FA Insight study, basically telling us that there is a formula for sustainable business growth in the planning profession. Mark Tibergien draws on some of the same data to recommend more business and process structure in advisory firms, Angie Herbers presents an alternative to micro-managing employees and Dan Skiles calls you on your procrastination when you could be upgrading the technology in your office.
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I'm probably being overly critical, but when I sit down with professional or industry leaders, they inevitably provide a lot more insight and information than you ever get out of these Investment Advisor roundtables. I suspect that the CEOs of the "broker-dealers of the year" award winners have a lot of insight, but this seems like just a kind of surface-level skim over a lot of subjects, what you might hear when these gentlemen (they are all men) are making polite conversation. I gave the summary a "high" relevance rating in case you, the reader, disagrees.

I think Mark Tibergien offers great advice to ambitious advisors: focus your attention on one or two things you want to improve in your practice. Angie Herbers, meanwhile, continues her stress-related series of columns, noting that overstressed employees are far less effective and offering some ways to identify the problem in your office. Meanwhile, John Ryan, one of the leading insurance consultants in the planning space, offers a look at the recent turmoil in the LTC marketplace.
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Mark Tibergien is surely right when he says that the time to start focusing on younger clients, and refocusing from exclusively serving baby boomers, is yesterday or maybe last week--and Pershing has a report that offers some additional insights. Bob Clark is surely right that many advisors are not communicating as authentically as clients would like them to, and Angie Herbers feels your stress level. I also liked Steve Weydert's guest column, which suggests that there might actually be a real difference between the services offered by fiduciary RIAs and brokers employed by the wirehouses.

These are really good practice management pieces, and Dan Skiles and Tom Giachetti add weight to the mix. So why is the magazine's own coverage of practice management--evidenced in the cover story in this issue--so... less good? They assembled a terrific group of panelists, but the result is disappointing, especially in light of the impossible-to-live-up-to buildup. Ah well.... [Read more »] 

What does "best execution" mean, and how do you determine whether you're getting it? Tom Giachetti provides a plausible answer. Angie Herbers tells us that the number one challenge is not creating a successful practice; it is dealing with success once it is achieved--which is apparently a rare skill. Melanie Waddell reports that the Government Accounting Office apparently believes that the SEC has not been exactly diligent in its oversight of FINRA--and a cynic might not expect that to change much under the SEC leadership of Mary Schapiro, who was previously the CEO of FINRA. Mark Tibergien makes a case that should be obvious but is not: that women do not represent a client niche, and are, in fact, a member of the same species as men.

The article by Spenser Segal and Jamie Green looks meatier than it actually is, but it makes some interesting points. Custodians, platforms and back offices are increasingly going to be offering practice management services to their advisor clients as the differentiator of the future, as their clearing and back office activities become commoditized. But those firms currently have no clear way to measure the effectiveness of their value-added services.
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Years ago, as editor of Financial Planning magazine, I and my staff created the first, and the second, and the third, and the fourth broker-dealer survey. We spent a lot of time identifying trends, comparing one year's numbers to the next, ranking the survey participants on things like increase in revenues, increase in average payout per rep, total payout per rep, and shifts in the sources of revenue.

I bring that up because there are no trends visible in the 2012 Investment Advisor BD survey; no comparisons with last year, much less rankings based on them. As you'll see from my comments below, there are still some interesting insights, but I think any magazine that collects this data year over year ought to be telling us how the BD industry is trending. Why not?

There are four real gems here. The survey of advisors, by Spenser Segal with help from Jamie Green, shows that many advisors are open to getting help from outside sources, despite the obvious conflicts of interest. Joni Youngwirth's description of the Commonwealth coaching program for affiliated reps offers a lot of good insight into what most advisors are missing in their practices. Mark Tibergien continues the Segal/Green article by noting that there are much better ways to measure costs and track them than the profession normally uses.

And the "Six Week Solution to Succession Planning" somehow manages to live up to its title. It has the clear ring of truth to it. [Read more »] 

Every year, Investment Advisor magazine names its most influential members of our community, and every year there are some head-scratchers. I get that the magazine sees broker-dealer executives as the largest category of influencers, but it seems like they either select them with some degree of randomness or rotate the nominations. I get that the regulators should be chosen, but really, how influenced are you by Mary Schapiro on a day-to-day basis?

You start scratching your head when you read that the magazine believes your practice life is rocked by the decisions made by the heir apparent as leader of the Communist party in China, or the leader of the European Central Bank. And when they include John Corzine and Allen Stanford, well, you have to hope that the editors don't believe these are your role models. I would feel a lot better about the list if the magazine would harvest all of these people for their insights, but what you get is mainly a breezy profile and a few quotes--which, to be fair, is pretty much what everybody else does too.

I liked the article by Joni Youngwirth, who is one BD executive who was NOT named to the list, but who has created a very interesting template for any firm that wants to offer its advisors user-friendly practice management training. Mark Tibergien's column will force you to look up from the work on your desk and pay a little bit of attention to your future, and Angie Herbers may be right when she says that many advisors are the biggest obstacle to progress and staff retention in their offices. After reading Tom Giachetti's column on using outside marketing solicitors, you wonder why anybody would want to take on the regulatory hassle, and Bruce Weininger's column at the end of the magazine should be read by any advisor who fears the power of the large wirehouses and banks.
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I think it's appalling that one government agency (the SEC) is suing another one (SIPC) to force them to compensate investors who put money in Bahamian CDs with Allen Stanford. Or that Congress is considering expanding SIPC to compensate consumers for falling prey to fraud.

But I'll take a deep breath and refer you to the article on how to build an environment that attracts the best young employees, and Mark Tibergien's extremely straight talk with your employees about the fairness of their compensation, or Angie Herbers' discussion of the pros and cons of hiring friends or having employees make friends in your work environment. Olivia Mellan's interview with Julie Littlechild is quite good, and Tom Giachetti offers a helpful peek into the SEC's new limited scope examinations. Fail them at your peril. [Read more »] 

The alert reader will notice that we've reviewed an article from the Advisor Perspectives service which I happen to think is extraordinary and helpful. Overall, I think Advisor Perspectives has become a great resource for investment-related columns, but because it is distributed online rather than printed, it isn't getting sufficient attention. I'm going to look for articles there in the future to review and present as part of this service, because (as you'll see below) some of them are greatly superior to what you've been seeing in some of the other publications.

This one offers a side-by-side comparison of three retirement distribution options--a withdrawal strategy from the portfolio, a deferred income annuity and a VA with guaranteed withdrawal benefits. The comparison is presented fairly: Joe Tomlinson notes that the degree of certainty diminishes as you move from the latter to the former, and looks at how much you pay for that certainty, on a present value basis, using two different return assumptions.

Meanwhile, Financial Advisor offers an advance look at the broker-dealer surveys that will soon come out in Financial Planning and Investment Advisor magazine, so you can look at the rankings, see who has the most reps and generates the most revenue and (my favorite statistic) which firms generate the most revenue per rep, meaning which firms have the advisors whose practices are the healthiest.

Beyond that, I found myself cheering the article by Brian Hamburger, which really lays out the truth about brokerage firm lobbying efforts. I find myself wondering, every time I see how transparent their strategy is, why the smaller independent BD trade organization has chosen to join them, rather than support the efforts by RIA advisors to create a workable fiduciary standard for everybody who provides financial advice.

There are a few really good nuggets in Roy Diliberto's column, and the parting column by Scott MacKillop is a primer for why advisors are rethinking how they implement modern portfolio theory in client portfolios. [Read more »] 

In this issue of investment Advisor, Mark Tibergien points out to outsource-phobes that they are probably outsourcing a lot of activities in their business already. Then he suggests that they take a rational approach to deciding whether to buy or rent office capabilities. Angie Herbers offers her recommendations for how to handle verbal abuse in the marketplace, Dan Skiles offers some best practices for compliant and secure client data, and Tom Giachetti recommends a training process for your staff in compliance issues, even though the SEC doesn't strictly require such a thing.
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