MEDIA REVIEWS – April 17-30, 2008

This is the Broker-Dealer Survey issue of Financial Advisor, but I’m not sure the simple ranking of most revenues, most affiliated registered reps and payout percentages are that helpful to understanding anything more than you know now.  The “gross revenues per rep” number is mildly interesting, although some firms are counting their associate staff people who have a license, while some firms only count “producing” reps, which complicates the value of this number.  It might have been nice to see whether revenues were up or down, and a breakout of sales in different categories, but for those things we have to wait for the Financial Planning magazine version of the survey.

Meanwhile, I really liked Philip Palaveev’s article, which boldly states that most of the mission and positioning statements that financial planning firms create for themselves are essentially meaningless—and not easily distinguished from the firm down the street.  What to do?  Read on.

Articles that received a “high” relevance rating:

“Stop With the Phony Slogans”
by Philip Palaveev
Financial Advisor, April 2018
https://www.fa-mag.com/news/stop-with-the-phony-slogans-37832.html?issue=299
Relevance: high

The author says that too many vision or mission statements produce nothing but bland sentences full of words like commitment, upmost care, passion for what we do, excellence in how we deliver service.  The words offer no idea about the actual direction of the firm, the behavior of the people or the quality of the decisions they make.  They were, in fact, the words Enron had on its website before the demise.

The alternative?  Answer in an honest and transparent manner the most pressing questions.  What will happen to the firm when the founders retire?  What are the firm’s biggest weaknesses, and how will they be addressed?  What are the toughest competitive challenges the firm faces, and how will they be tackled?  What gives you confidence that you will continue to grow and be successful?  What are the best opportunities you face, and how can you capture them?

Make sure your vision statement doesn’t say “collaborative” when the founder makes decisions on his own, or “respect” when employees are berated.  Leading means making difficult decisions, answering difficult questions and being an example the vision you articulate. 

When you think about your strategy, ask yourself another round of basic questions.  Why did we grow last year?  What are we not doing for clients that we should?  Why did we suffer turnover, and why are the skills of the team not growing?

To be effective, the mission and vision statements have to be grounded in the practical reality of the firm.  (p. 25)

“Helping Clients Face Alzheimer’s Disease and Dementia, Part 1”
by Michael Nathanson, Andrew Hudson and Shellie Peters
Financial Advisor, April 2018
https://www.fa-mag.com/news/helping-clients-face-alzheimer-s-disease-and-dementia–part-1-37896.html?issue=299
Relevance: high

Trusted advisors might be the first to recognize signs of dementia in their clients, and in general evaluate the ongoing quality of their decision-making.  But they may be reluctant to have a difficult conversation until some irreparable harm, financial or otherwise.  The article notes that normal aging can require you to repeat things several times for the client to remember them, but the capacity to make financial decisions remains normal.  Mild cognitive development, on the other hand, can cause clients to rapidly forget the information you provide, and they may have difficulty remembering appointments.  Each decision must be broken down into easily-remembered components.  People suffering from mild cognitive development don’t have the capacity to make complex financial decisions, but they can express their preferences if they are given questions that are simple and straightforward.  The article mentions giving clients the Montreal Cognitive assessment (www.mocatest.org) or the AD8 Dementia Screening Interview (www.alz.org/documents_custom/ad8.pdf).

The article turns to Alzheimer’s, talking about new treatments that slow the destruction of brain cells that are still years away, and then stops.  Wait for Part 2.   (p. 31)

“The Big Rethink”
by Dan Janieson
Financial Advisor, April 2018
https://www.fa-mag.com/news/the-big-rethink-37828.html?issue=299
Relevance: high

The author says that in light of the DOL rule and the fiduciary movement, broker-dealers are reinventing themselves as full-bodied wealth management servicing firms.  If they fail, their choices are bleak: sell out or transform into a branch office of a larger firm.

The article includes quotes from Amy Webber, CEO of Cambridge Investment Research, Jamie Price, CEO of the Advisor Group, and Bob Oros, CEO of HD Vest Financial Services, who say that they are embracing fiduciary, leveling their product pricing and reviewing the appropriateness of what they sell.  The shift to “fee-based” platforms will continue.  Wayne Bloom, CEO of Commonwealth Financial Network, says that insurers and alternatives sponsors are all working to build improved products on the fee side.  Insurance BDs, purchased for distribution, will probably be sold in light of the fiduciary movement.

We are given some recruiting statistics, and the general observation that independent advisors are anxious about the future today, according to Jim Nagengast, CEO of Securities America.  Scott Curtis, president of Raymond James Financial services, says that wirehouse reps are its most fertile source of new advisors.

We are told that BDs are embracing digital offerings and focusing on enhanced client experiences, but of course that’s more up to the reps than the home office.    (p. 44)

The rest of the articles:

“Winning At Retirement Is About More Than Money”
by Karen DeMasters
Financial Advisor, April 2018
https://www.fa-mag.com/news/winning-at-retirement-is-about-more-than-money-37908.html?issue=299
Relevance: moderate

Beau Henderson, of RichLife Advisors in Atlanta, says that advisors should talk about life satisfaction issues as well as financial ones.  He’s a radio host.  He says that advisors should be starting conversations with clients about what they want to do in retirement.  How closely is their identity tied to their work?  Have they invested in relationships outside of work?  Does a part-time job or business make sense?  (Don’t most of you ask your clients these kinds of questions?)  (p. 15)

“HNW Clients Warming Up To Digital Advice”
by Jeff Schlegel
Financial Advisor, April 2018
https://www.fa-mag.com/news/hnw-clients-warming-up-to-digital-advice-37909.html?issue=299
Relevance: low

Cerulli says that more than a quarter of investors over age 70 who have $2 million to $5 million in investable assets said they would consider an online-only engagement.  Overall, 46% said they were willing to engage with digital advisors.  (p. 16)

“Male or Female Money Managers?  It Doesn’t Really Matter”
by Christopher Robbins
Financial Advisor, April 2018
https://www.fa-mag.com/news/male-or-female-money-managers—it-doesn-t-really-matter-37910.html?issue=299
Relevance: moderate

Morningstar’s latest report: Fund Managers by Gender, Through the Performance Lens, says that male-managed active equity funds outperformed their category, while all-female bond funds tended to offer better performance Thant he category average.  The study looked at 3,230 funds managed by men only, 104 funds managed by women only, and 1,012 managed by both men and women.  (p. 18)

“Donor-Advised Funds: Where the Money Goes”
by (staff)
Financial Advisor, April 2018
https://www.fa-mag.com/news/donor-advised-funds–where–the-money-goes-37911.html?issue=299
Relevance: moderate

A study partly funded by the Fidelity Charitable Trustees’ Initiative found that DAFs in aggregate gave 28% of their donations to education-related causes, followed by religion at 14% and public-society benefit, also 14%.  Outside of DAFs, 32% of the money goes to religion, 15% to education, 12% to “human services” and 12% to private foundations.   (p. 20)

“Robot Wars and Labor Market Alarm”
by Evan Simonoff
Financial Planning, March 2018
https://www.fa-mag.com/news/robot-wars-and-labor-market-alarm-37836.html?issue=299
Relevance: moderate

Fully 20% to 25% of American workers could find themselves displaced by automation between now and 2030—30 million workers in all—during a time of already-historically high levels of income inequality.  Of course, new professions might emerge in this future world; today, there are more than 1 million software programmers developing applications for iPhones; that job didn’t exist a decade ago.  On the other end of the scale, a study by the Commerce Department last year estimated that autonomous vehicles could displace 4 million workers who drive for a living.  In Japan, there are robotic nurses taking care of senior citizens.

The Great Displacement will coincide with the wave of baby boomer retirees, drastically expanding the number of Americans who aren’t participating in the labor market.   By the 2020 election, politicians could be talking about a universal income for Americans who choose not to work.  Already, 48% of Americans support the concept.  (p. 27)

“The Next Generation Won’t Wait”
by Gail Graham
Financial Advisor, April 2018
https://www.fa-mag.com/news/the-next-generation-won-t-wait-37895.html?issue=299
Relevance: moderate

Why aren’t wealth management firms serving younger, less-wealthy clients? Advisors who DO serve that market say that younger, upwardly mobile investors need help with shorter-term issues that traditional wealth managers don’t typically counsel on.  Included are getting married, buying a house, budgeting, debt management and maximizing company benefits.   Advisors who serve younger clients don’t need expensive offices; they tap into cost-effective technology to scale their work.  The article concludes that established firms ignore the middle market and younger clients at the period of their futures.  (p. 29)

“A Tangled Legacy”
by Tom Kostigen
Financial Advisor, April 2018
https://www.fa-mag.com/news/a-tangled-legacy-37897.html?issue=299
Relevance: moderate

A new book called Grappling With Legacy, written by Sylvia Brown of the family for which Brown University is named, explains the American philanthropic impulse.  Is charitable giving driven by self-interest, guilt or altruism?  (Answer: all three.)  Brown’s family apparently benefited from the slave trade in Colonial America and so guilt is clearly a motivator to give back.  Altruism and self-interest are mixed together when you try to benefit the community that is your own environment.  There’s also a peculiar moral fabric of benevolence in American society, a feeling of obligation to do what’s right and help others.  Brown is building new charitable programs using her research and understanding of wealth, emphasizing smart giving that has a high impact for donors at the bottom of the philanthropy pyramid, the people who give under $100,000 a year who may not be able to navigate the confusing options and opportunities.  (p. 34)

“Giving Among the New Wealthy”
by Betsy Brill
Financial Advisor, April 2018
https://www.fa-mag.com/news/giving-among-the-new-wealthy-37898.html?issue=299
Relevance: low

We are told that younger generations have grown up in the digital age and are heavily influenced by social media.  Women, meanwhile, are controlling a greater share of wealth.  Both are interested in charitable activities and want to effect change.   So a conversation about philanthropy should be included in your initial conversations.  Discuss charitable vehicle options, what they want to do with their wealth when they pass away, and consider doing seminars on philanthropy as a way to attract clients.  And educate yourself about planned giving strategies and impact giving.  (p. 39)

“Too Much of a Good Thing”
by Russ Alan Prince, Frank Seneco and Pat Rufolo
Financial Advisor, April 2018
https://www.fa-mag.com/news/is-too-much-of-a-good-thing-a-good-thing-37900.html?issue=299
Relevance: low

A client has been sold too much life insurance.  What to do?  Conduct an analysis, to understand how the policies are performing and the cost of the present structure.   If the premiums are financed, what are the underlying financial assumptions.  Is the need still there in light of the expanded estate tax exemption?  At the end we learn that this is a marketing opportunity; you restructure the policy and then get additional assets to manage as money is taken out.  (p. 41)

“The View from the Top”
by Karen DeMasters
Financial Advisor, April 2018
https://www.fa-mag.com/news/the-view-from-the-top-37901.html?issue=299
Relevance: low

This is a profile of Sallie Krawcheck, former equity analyst at Sanford Bernstein & Co., then chairperson and CEO of the firm, and later to Citigroup and Bank of America, where she was chief of Merrill Lynch Wealth Management.  Today, she’s  the founder and CEO of Ellevest, a New York-based digital investment platform for women, and chairwoman of Ellevate Network (formerly 85 Broads Unlimited), an organization of female professionals that supports other businesswomen. 

Her message today is that the financial world is run by men for men, keeping women from reaching their financial goals.  She makes a lot of generalizations, like men like outperforming the market while women are not engaged in that.  Women keep too much money in cash.  Etc.  (p. 61)

“Bernstein’s Passive-Active Strategy”
by Gregory Bresiger
Financial Advisor, April 2018
https://www.fa-mag.com/news/bernstein-s-passive-active-strategy-37903.html?issue=299
Relevance: low

Richard Bernstein, of Richard Bernstein Advisors, is a top-down macro investment manager with $6.5 billion in assets.   He claims to follow a “pactive” strategy, some passive, some active, which is apparently really factor investing, and then finding the best ETF or fund to capture the factors.    (p. 76)

“Environmental Disruption”
by Paul Ellis
Financial Advisor, April 2018
https://www.fa-mag.com/news/environmental-disruption-37904.html?issue=299
Relevance: moderate

The United Nations Sustainable Development goals, ratified by 193 governments at the U.N. General assembly, includes initiatives to eradicate poverty, address climate change and create sustainable development across the world—all by 2030.  Basically, this embeds the idea of ESG and impact investing within a global context.  The article mentions the “blended value” financial opportunities, where there is value creation defined as a function of economic returns plus positive social and environmental impact.

Meanwhile, a growing number of companies are assessing their ESG factors over their entire supply chain.  An estimated 380 million new jobs will be created by achieving the development goals in food and agriculture, sustainable cities, energy and materials and health and well-being.  Among the initiatives are low-carbon energy like solar power and distributed electric grids; using blockchain to secure land rights in developing countries; verifying the delivery of government-financed elementary education in remote communities, and recycling waste to produce an alternative to cement to feed the global building boom.  (p. 78)

“Taming the Bond Bear”
by Marla Brill
Financial Advisor, April 2018
https://www.fa-mag.com/news/taming-the-bond-bear-37905.html?issue=299
Relevance: low

A profile of Bob Miller, manager of the BlackRock Total Return Fund.  (p. 80)

“DNA and Long-Term Care Insurance”
by Ben Mattlin
Financial Advisor, April 2018
https://www.fa-mag.com/news/dna-and-long-term-care-insurance-37906.html?issue=299
Relevance: low

In the future, genetic screening could be used to assign risks (and rates) to buyers of long-term care insurance coverage.  But will healthy people, who pass the DNA tests with flying colors, want to buy LTC insurance in the first place?  The article also notes that genetic testing is not a perfect predictor of future health.  Some insurance providers are data mining whether potential policyholders maintain a gym membership and shop at health food stores, which suggests they might be in better shape than those who frequent fast-food establishments.  (p. 83)

“Changing Lanes”
by Catherine Seeber
Financial Advisor, April 2018
https://www.fa-mag.com/news/changing-lanes-is-emotional-37907.html?issue=299
Relevance: low

A planner starts a career, builds a client base, and then decides he/she doesn’t fit at the original firm.  What to do?  One advisor left after signing a one-year non-compete and non-solicitation agreement.  She spent a year doing a lot of research, talking with broker-dealers and RIAs with sound reputations.  She finally aligned himself with a company that believed in his capabilities—and that’s all we’re told.  At the end, we are given this advice: advisors should do right by their clients.  (p. 96)