MEDIA REVIEWS – July 16-31, 2018

This issue of Financial Advisor includes the annual ranking of RIA firms, based on assets under management—and once again you’ll see a lot of firms, especially near the top, which are family offices or some other business model.  If you’re curious about how many dollars under management that big firm down the street has, then this is a good resource, but otherwise it’s kind of a rehash of what you already know about trends in the RIA world.

There’s also a very short article about DPL Financial Partners, which is bringing transparent, no-load insurance to the fiduciary world, but Inside Information readers have already received a much more in-depth review of the current and future offerings there.

Articles that received a “high” relevance rating:

“Standing Still is Not an Option”
by Christopher Robbins
Financial Advisor, July 2018
https://www.fa-mag.com/news/standing-still-is-not-an-option-39464.html?issue=303
Relevance: high

There are now more than 680 RIA firms that have at least $1 billion in client assets, according to a Cerulli Associates report.  Those firms make up less than 4% of all the RIAs, but they control 32% of the total RIA workforce and 60% of the assets.  The article says, without citing any statistics, that brokerage teams are increasingly finding the RIA model attractive, and that high-net-worth clients are increasingly aware that there are fiduciary advice options.  Despite the vacating of the DOL fiduciary rule, many advisors intend to continue acting as fiduciaries.  Advisors say there will be confusion if the new SEC rules are adopted, between a fiduciary standard and a best interest standard. 

The article tells us what you already know: that some larger firms are launching initiatives to serve less-wealthy clients, that firms are implementing succession plans at various stages, and that clients are increasingly interested in impact investing.  Few actual details are given other than quotes.

There are various charts and graphs in this package, including a “ranking” of 707 RIA firms, listing their AUM from Ferrell Wealth Management at $430,000 AUM up to CAPTRUST with $273 billion), growth rate last year, assets per client, and growth in number of clients.  (You can access it here: https://www.fa-mag.com/userfiles/000002018_IMAGES_ALL/FA_ISSUES_2018/07_JULY_2018/RIA_2018_Ranking.pdf)  Another graph says that more than 95% of the surveyed RIA firms provide financial planning and asset allocation, and 82% provide mutual fund selection and oversight.  But the numbers drop when you get to tax planning (68%), charitable counseling (68%), insurance planning (61%), estate planning (62%) and tax preparation (18%).  One other tidbit: 41% of the firms said they have held exploratory merger talks.  (p. 46)

“Here Come New No-Load Insurance Policies”
by Ben Mattlin
Financial Advisor, July 2018
https://www.fa-mag.com/news/here-come-new-no-load-insurance-policies-39476.html?issue=303
Relevance: high

Inside Information readers already know about the DPL Financial Partners platform that is bringing transparent, no-load insurance and annuity products to the fiduciary marketplace.  Founder David Lau notes that insurance is the last bastion of commission-driven distribution in financial services.  Shouldn’t somebody change that?  Without commissions, the no-load variable annuities have 85% fewer costs.  The mission of DPL is to help insurance companies understand the world of no-load advisors, and to help fiduciary advisors become more familiar (and comfortable) with insurance products.

The articles notes that Nationwide Advisory Services, formerly Jefferson National, has been successful attracting interest from financial planners who don’t take commissions.  And it profiles TIAA-CREF Life Insurance Company, which has provided life and annuity products in the fee-only marketplace for some time.    (p. 73)

“How to Achieve Everything You Desire and Aspire To”
by Joe Deitch
Financial Advisor, July 2018
https://www.fa-mag.com/news/how-to-achieve-everything-you–desire-and-aspire-to-39477.html?issue=303
Relevance: high

The author of “Elevate: An Essential Guide to Life” says that an open heart and an open mind is the path to enduring growth.  For change to occur, we have to be open to it—and most people are not.  They tend to be pretty stuck in their ways.  We have to overcome our self-imposed limitations, biases, fears and misconceptions.  We have to question our reality.  We have to pay attention to ourselves, making a conscious act that expands our consciousness.  Otherwise, we’re stuck in our perception of the world, and that limited awareness defines our reality.

The goal is to turn frustration into fascination, and then everything gets better.  (p. 84)

The rest of the articles:

“FAs Using AI”
by Ben Mattlin
Financial Advisor, July 2018
https://www.fa-mag.com/news/fas-using-ai-39478.html?issue=303
Relevance: low

Nationwide Advisory Solutions (formerly Jefferson National) commissioned a study of artificial intelligence in the financial services industry.  In the future, there will be “chatbots” that respond to client questions, and there may be automated asset allocation and portfolio rebalancing.  We are told that automated solutions will drive new efficiencies and help with cybersecurity issues, but there isn’t a lot of detail here.  (p. 13)

“Is the Philanthropic Slowdown the New Normal?”
by Karen DeMasters
Financial Advisor, July 2018
https://www.fa-mag.com/news/is-the-philanthropic-slowdown-the-new-normal-39479.html?issue=303
Relevance: moderate

The Association of Fundraising Professionals reports that giving was slower than usual in this year’s first quarter, declining over a low first quarter last year.  The number of donors is down 6.3% from the first quarter of 2017; total revenue is down 2.4% and the number of new donors fell by 12%.  One possible reason: the new tax law, which raised the standard deduction, meaning fewer people will itemize, and therefore fewer people will get a deduction for their contributions.  (p. 14)

“The Art (and Wine) of Non-Correlated Assets”
by Jeff Schlegel
Financial Advisor, July 2018
https://www.fa-mag.com/news/the-art–and-wine–of-non-correlated-assets-39480.html?issue=303
Relevance: low

Josh Rogers, who has his own broker-dealer in Chicago, created an Art & Wine Advisory program to help clients invest in these high-end collectibles and gain exposure to non-correlated “investments.”  If clients want an art or wine advisor, one of the BD’s reps will make an introduction, and then that art or wine advisor will work directly with the clients.  There will be a commission on all purchases.  (p. 16)

“Medicare is Removing Social Security Numbers from New Cards”
by Juliette Fairley
Financial Advisor, July 2018
https://www.fa-mag.com/news/medicare-is-removing-social-security-numbers–from-new-cards-39481.html?issue=303
Relevance: low

The new cards are being sent out in the mail.   (p. 18)

“AUM and the Valuation Paradox”
by Evan Simonoff
Financial Advisor, July 2018
https://www.fa-mag.com/news/aum-and-the-valuation-paradox-39465.html?issue=303
Relevance: low

The author notes that 97.3% of the RIA firms in the magazine’s annual survey charge AUM fees, but 32.2% are now also charging hourly fees, while 43.4% are charging flat-fee retainers.  Then he pivots to valuations, and the discussion becomes somewhat muddled.  Should an advisory firm be investment-focused or planning focused?  Should a firm take a holistic or narrow approach to financial planning?  There are no answers here, just questions.  (p. 23)

“Financial Engines + Edelman = LOVE”
by Gail Graham
Financial Advisor, July 2018
https://www.fa-mag.com/news/financial-engines—edelman—love-39467.html?issue=303
Relevance: low

Is it fair to call this article’s title “cheesy?” We are told that the two firms are “forging a beloved financial services brand that helps people feel safer, more confident and secure in how they balance life and money.”  She expresses almost gushing respect for Bill Sharpe (founder of Financial Engines) and Ric Edelman (founder of Edelman Financial Services), who, she says, has “concern and respect for the average American investor,” and is “driven by a personal mission to help people live secure financial lives.”  (This is a person whose firm charges 2% AUM.)  Graham likes the fact that a digital solution will help Edelman reach a younger, more digitally-aware cohort.

Graham says that “the new brand will emerge as a lovable one.”  She expects a broader marketing and educational outreach utilizing video and social media.  She says that the combined firm “can really shake things up.”  She wants desperately to be hired as a consultant to this new merged firm.  (p. 27)

“The Perennial Bloom”
by Mitch Anthony
Financial Advisor, July 2018
https://www.fa-mag.com/news/the-perennial-bloom-39468.html?issue=303
Relevance: moderate

I don’t totally get the analogy between annual and perennial plants and financial advisory firms, but Anthony wants us to ditch the money-centered approach and be a life-centered planner.  The latter works with (not for) their clients in making wise financial decisions about a broader range of issues, like debt, spending, risk management, income and charitable activities.  They focus on personal progress and measure success by “return on life.”  The review process puts the client’s narrative ahead of the numbers.  This, we are told, leads to deeper, more satisfying relationships and outcomes.  (p. 30)

“Running Leaner and Meaner with Tech”
by Eric Rasmussen
Financial Advisor, July 2018
https://www.fa-mag.com/news/running-leaner-and-meaner-with-tech-39469.html?issue=303
Relevance: moderate

The article suggests that future advisors (and some today) could ditch the receptionist and meet with clients on video, sign them up with e-signatures and use one of the online investment platforms to manage their assets.  They will offer landing pages and reports in password-protected vaults.  Payroll and books and records can be outsourced.  If you don’t like the robo solutions, you can use Orion or AssetBook.  (p. 32)

“Marrakesh Is Making a Bid as the Art and Golf Capitol”
by Tom Kostigen
Financial Advisor, July 2018
https://www.fa-mag.com/news/marrakesh-is-making-a-bid-as-the-art-and-golf-capital-39470.html?issue=303
Relevance: low

Remind me: how is a breezy profile of the largest city in Morocco relevant to the day-to-day business of financial planning?  (p. 36)

“Cultivating Ultra-Affluent Investors”
by Russ Alan Prince and Richard Flynn
Financial Advisor, July 2018
https://www.fa-mag.com/news/cultivating-ultra-affluent-investors-39471.html?issue=303
Relevance: low

The definition is those with $10 million or more in investable assets.  If you want to serve this cohort, we are told, you “must know the difference between promoting a product and solving a problem.”  Are you up to that?  The additional services you might consider adding to your planning business are income tax planning, estate planning, protecting wealth from gold digging spouses, charitable planning and exit planning from their businesses.  This is terrific advice for that insurance salesperson, who doesn’t do any of these things today.  But real financial planners already handle these chores for their clients.  (p. 39)

“Personal Continuity Planning for Retiring Business Leaders”
by Stephanie Brun De Pontet
Financial Advisor, July 2018
https://www.fa-mag.com/news/personal-continuity-planning-for-retiring-business-leaders-39472.html?issue=303
Relevance: low

The author of “Transitioning From the Top” tells about her interviews with a dozen successful leaders of family enterprises.  But she gets off to a rocky start by starting with Dick DeVos, the founder of Amway.  Post-Amway, we are told, he has been “guided by his interests to identify and work on meaningful projects.”  (No further details are given.)

Frank Schurz, of Schurz Communications, “pursued his passions for fishing and waterfowl hunting.”

The article says that former entrepreneurs keenly miss their office and administrative support (a nice office and staff to do their bidding); decision-making authority; and loss of status.  People should give real time and thought to how they will fill their days when they are no longer leading the business.  (Is this the first time you’ve seen this advice?)   (p. 42)

“Pursuing Dividends in a New Era”
by Jerilyn Klein Bier
Financial Advisor, July 2018
https://www.fa-mag.com/news/pursuing-dividends-in-a-new-era-39473.html?issue=303
Relevance: moderate

Many investors replaced bonds with dividend stocks in their portfolios—and actually increased their yield.  But with risk-free rates rising, the competition for capital will heat up.  REITs and MLPs are getting crushed, and so are bonds on the longer end.  Utility stocks have also seen recent downturns.  Advisors are also preparing their clients to see negative returns on their actively managed bond fund statements.  (p. 66)

“The Art of High Conviction Investing”
by Marla Brill
Financial Advisor, July 2018
https://www.fa-mag.com/news/the-art-of-high-conviction-investing-39475.html?issue=303
Relevance: low

A profile of the Baron Fifth Avenue Growth fund and portfolio manager Alex Umansky.  (p. 70)

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