Investment Advisor

The cover article of this month's Investment Advisor, as you'll see below, interviewed an interestingly eclectic group of observers and members of the financial planning community. You will stop short when you read that Dan Ariely, the behavioral economist and keynote speaker du jour this past year, believes that advisors should recognize that"the benefit they are providing their clients, in terms of balancing their portfolio, cannot justify the amount they are charging for the service." Wow! Later, Shlomo Bernartzi, an economist with Allianz Global Investors, says that advisors are too heavily focused on selling past performance and picking mutual funds. Dick Wagner believes that financial planning is still too linked to selling product. Look at yourself in this mirror and you can almost see your knuckles dragging on the ground.

In his column, Mark Tibergien talks about merger negotiations and the sticking point of equity; Bob Clark says that advisors are not yet sophisticated enough to recruit wirehouse brokers, and Angie Herbers offers a fascinating poll of her current and former clients, which conclusively proves, to her, that revenue-based bonuses are the most motivating type of compensation you can offer your key staff members. Dan Skiles and Tom Giachetti offer good information as usual.

I wanted to let everybody know that I just sent out some Client Articles, one on the outlines of the new tax compromise (including details on the estate tax "fix" that you probably haven't read anywhere); another offering a tour of a presentation by a Fed economist on the visible economic recovery in the U.S. I also sent out a review of the proposals for debt reform recently released by the National Commission on Fiscal Responsibility and Reform, and a more prosaic article in identity theft.

If you have subscribed to Client Articles and didn't find them in your e-mailbox, go to my web site and pull them down. If you haven't subscribed to Client Articles, well, the cost is $298 a year to supplement your current client communications, and one advisor recently worried that, with the articles she has been sending out lately, her clients might be getting spoiled. [Read more »] 

Investment Advisor does a great job of assembling practice management insights, demonstrated here by FA Insight principals Dan Inveen and Eliza De Pardo's analysis of the most effective advisory firms, Mark Tibergien's discussion of using outside financing to grow your business, Angie Herbers nailing a lot of advisors as overspenders on their practices, Tom Giachetti showing how some advisors might inadvertently have custody of client assets (and what to do about it), and Dan Skiles helping advisors spot holes in their office security. Meanwhile, Bob Clark has found a lot to like in the Financial Planning Coalition's position paper on the fiduciary standard, but is anybody at the SEC listening?
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Alas, the September 24 "fiduciary standard forum" in Washington, D.C., created to raise awareness among lawmakers and regulators, is scheduled in conflict with NAPFA's Practice Management & Technology Conference, which means I'll be introducing speakers and serving on panels while Tamar Frankel and Arthur Laby are delivering academic white paper reports on the superiority of the fiduciary standard.

Meanwhile, this is Investment Advisor's broker-dealer of the year issue, with the annual interview of the CEOs of the winning companies. One takeaway: you might be a little surprised at how naive they seem to be about the fiduciary concept and how it works in the real world. Mark Tibergien is hardly naive when he talks about the most important issues to address if you're thinking of merging with another advisor, and Angie Herbers talks about how to address the six most common problems that advisors run into with employees. Further down, you'll find the most relevant articles from the Economist; the future of the Internet, the philanthropic differences between the wealthy and unwealthy, and surprisingly good news from U.S. auto makers. [Read more »] 

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 »] 

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 »] 

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 »] 

Yes, this is a Media Reviews message, but before you get to that, I want to pass on two things: an offer, and a terrific analysis of a situation that we're all talking about.

The offer is from Pershing; the company has agreed to invite readers of Inside Information--a rich trove of thought leaders in the profession--to attend the INSITE 2010 Conference at no cost. (The current registration fee is $195.) The conference takes place Wednesday, June 9 to noon on Friday, June 11 in Hollywood, FL; the speakers include political consultant David Gergen, Hank Paulson, Mark Tibergien, Moshe Milevsky, Daniel Pink and Jeremy Siegel.

If you're interested, register at www.INSITE2010.com, register as an attendee, and when prompted, enter the coupon code INSITEVeres. (When you enter the code, you'll bypass the payment fields. If there's a problem, you can contact Pershing at INSITE@Pershing.com.)

The analysis comes from Ron Rogé, who has been a pioneer in the advisory profession and one of the very first people I have ever heard talking about the fiduciary standard. When the Goldman Sachs indictment was announced, Ron was dismayed at the way the situation was covered by the media and discussed by the regulators--who, as he says here, seem not to realize that the fact pattern raises the most basic possible issue of consumer protection.

I encourage you to read it and, if you want, pass it on--it's the best, clearest evaluation of the essential point that I've yet seen. (Media Reviews follows.) [Read more »] 

Some of the articles that were given high relevance ratings got there because of an important tidbit of information, like the purchase of the FNIC/Multi-Financial and PrimeVest by people with extensive brokerage experience, or the fact that ETFs are having trouble gaining traction in the 401(k) world because they're hamstrung by not having 12(b)-1 fees to pay out to the sponsors and sales agents.

Others, however, have real substance. The strength of Investment Advisor magazine is its practice management content; in this issue, Dan Inveen and Eliza DePardo say, politely, that the average advisory firm hires before it thinks, and the result can be an organizational mess. Mark Tibergien talks through some of the problems with transition planning from the founder to younger staff advisors; what makes his column unusual is that, in addition to all the normal dysfunctions we hear about the founders, he places some of the onus on the younger advisors and identifies a few of THEIR dysfunctions. Angie Herbers, meanwhile, says that some advisory firms have become so bureaucratized that it's easy for a smaller, more entrepreneurial firm to hire some of their young talent away--but take Inveen and DePardo's advice and think through what you're looking for before you seize this opportunity.

Finally, for all card-carrying members of the Tea Party, John Guy, one of the more outspoken advisors in the business, says that it's time for the protesters to come up with concrete solutions to the very complex problems surrounding our national debt. What should we cut, how much and who is going to get less than they anticipated or expect? The party that comes up with those answers, and makes them sound reasonable, and shares the pain fairly, is the organization that I want to join.
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