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Advisor Business
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CFP Board Announces Chair Appointments To Disciplinary And Ethics Commission, Advisory Councils |
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Tuesday, January 29, 2013 15:18
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Tags: CFP Board
Certified Financial Planner Board of Standards, Inc. (CFP Board) yesterday announced the appointments of 2013 Chairs to the Disciplinary and Ethics Commission, Public Policy Council, Council on Education and Council on Examinations.This Website Is For Financial Professionals Only
In early November, three members of the Disciplinary and Ethics Commissions resigned after an independent investigation into marketing disclosures led to the resignation of the chairman of CFP Board, Alan Goldfarb.
CFP Board is struggling to come to grips with the fact that many CFPs are affiliated with broker/dealers and, thus, run into complicated consumer discolusre rules imposed by CFP Board on registered reps acting as fiduciaries. So these appointments could be important as regulatory rules governing RIAs are being expected to be considered this year by Congress and the Obama Administration.
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Advisor One Offers Preview Into February Issue Of Research Magazine On Topics Including The Value Advisors Bring To Clients; A4A Will Review Them Over The Course Of The Week |
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Monday, January 28, 2013 13:11
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Tags: Advisor businesses | client education | feedback | financial planning
Advisor One recently offered an interesting glimpse into Research Magazine’s upcoming February issue.
This week, we’ll take a look at some of the topics covered and offer a few additional thoughts on the focus of the issue as well as tips for assimilating the unformation into your own practice.
Today, we'll look at the value advisors bring to their clients.
This Website Is For Financial Professionals Only
Not surprisingly, contributing editor and Texas Tech University professor Michael Finke finds that the bulk of advisor value has to do with planning and relationships rather than investment performance.
Yet, as the IPI study showed us, investment returns are certainly a component of the criteria investors use for choosing advisors.
A recent Fidelity study showed that only 57% of clients felt their advisors provided value during the 2008 crisis. The ones who did provide value focused on helping clients achieve long-term goals and also offer more robust investment advice.
Money is a highly emotional and stressful topic and clients look to advisors to reduce the stress it places on their lives. Families of wealth often have complex situations that they look to advisors to simplify for them.
The value advisors offer from a performance perspective can vary widely from study to study.
One of the tasks of an advisor is to know an investor’s particular investment experiences and biases and to help educate against those. This enables investors to keep focused on the investment strategy and long-term goals set in early meetings together.
Another study showed that advisors who subscribe to a particular investment philosophy may lose clients when that philosophy is not in favor in the marketplace. For example, advisors focusing on value investing in the tech boom of the late 90s saw significant client attrition.
Another task of financial advisors is to help clients objectively quantify risks and relate those risks to the client’s particular tolerance for volatility.
Ultimately, however, estate planning, retirement planning, taxes, and insurance were the highest ranked forms of advice clients valued most.
Studies can offer good insight to overall client trends. After looking at various studies and the different aspects of value cited, it might be a good exercise to survey your own clients to see how they value the services you provide them.
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Underscoring Why The Financial Planning Coalition Is Headed In the Wrong Direction, 1,100 Advisors Attended AICPA’s Financial Planning Conference |
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Friday, January 25, 2013 02:47
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Tags: CFA | CFP Board | Dodd-Frank | fiduciaries | financial planning | FPA | IMCA | NAPFA | profession | regulation | RIAs | SRO
With AICPA saying 1,100 advisors attended its financial planning conference this past week, the importance of CPA financial planners to the financial planning profession is self-evident, as is the unrealistic and ill-advised position of the Financial Planning Coalition on how best to protect consumers and regulate the financial advice business.
This Website Is For Financial Professionals Only
The 30% growth in attendees at the AICPA conference, which stands in stark contrast to the falling attendance in recent years at FPA’s annual meetings, highlights the need for a broader vision of the profession from the Financial Planning Coalition (FPC).
With a new Congress now in session and the Consumer Financial Protection Bureau preparing to consider ways to implement the 2010 Dodd-Frank legislation regulating the financial advice business, CFPs are being represented by the FPC—a coalition of CFP Board, Financial Planning Association (FPA), and the National Association of Personal Financial Advisors (NAPFA). But is the FPC serving CFPs and consumers well by pursuing a separate bid with CFPB for regulation the advice profession instead of creating a broader coalition with other professional designations?
The CFPB is a federal super-agency created by 2010's Dodd Frank legislation to oversee regulation of the U.S. financial services industry. President Obama today re-nominated former Ohio Attorney General Richard to lead the CFPB. With President Obama elected three months ago to a second term, CFPB and the administration is gearing up to make crucial decisions about how RIAs and registered reps will be regulated. Postponed for the last two years, the long-awaited decision on the regulation of RIAs and registered reps is likely to be decied in 2013 or 2014.
Financial Planning Coalition is unilaterally pursuing its own path with CFPB to create a regulatory framework for financial planners. CFP Board recently made several recommendations to the CFPB, including the establishment of a ratings system for senior-oriented financial services designations. The Coalition would like to make CFP Board the self-regulatory body of financial planners.
However, CFPs must ask themselves: Would any regulatory bid that does not include a broader coalition of professional designations—Chartered Financial Analysts (CFAs), CPA Personal Financial Specialists (CPA/PFSs), Certified Life Underwriters (CLUs), Chartered Financial Consultants (ChFCs), Certified Private Wealth Advisors (CPWAs), and Certified Investment Management Analysts (CIMAs)—serve consumers’ best interests?
Does it serve the profession well?
Wouldn’t a broader coalition of professional bodies carry more weight with regulators and provide a better regulatory solution to consumers?
At 1,100 attendees, the AICPA conference this past week attracted half the 2,000 advisors who reportedly attended the FPA annual meeting in September 2012, and attendance is likely to grow again next year as more of the nation’s 380,000 CPAs specialize in advising clients on personal finance as fiduciaries. The influence CPAs have on financial planning professionals and the nation’s 67,000 CFPs is thus likely to grow in the years ahead.
Meanwhile, CFA Institute, which has 50,000 U.S. Charterholders and is widely accepted as the global standard-setting body for investment advisers to high-net-worth individuals, is experiencing an explosion in the growth of its private wealth advice division. Since the Global Settlement of 2003, Wall Street analysts have been driven toward advising individuals. A third of all CFAs advise individuals now and that number is growing by about 2,500 a year. In addition, Investment Management Consultants Association (IMCA), another accreditation body for financial professionals with about 8,800 designees, is experiencing about 5% annual growth in its CIMA and CPWA designations.
The Financial Planning Coalition—to truly represent financial planners—must broaden its perspective and work with other professional designations. To pursue its own path is unrealistic and self-serving.
While the CFP Board and the Financial Planning Coalition rightly say the CFP sets the standard of excellence in providing comprehensive financial planning advice, CFPs don’t make their money on financial planning. They make their money on investment advice. So saying the CFPs are better advisors to individuals on personal finance matters is disingenuous and does not befit a group that claims it wants to do what is the best interest of consumers.
To promote competition and advance turn the financial advice business into a profession, the Financial Planning Coalition must be a real coalition and represent a broader swath of financial advice designations than just CFPs.
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Digging Deeper Into The Recent IPI Report Reveals Hidden Industry Issues Affecting Clients Of All Asset Levels |
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Thursday, January 24, 2013 13:23
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Tags: Advisor businesses | client loyalty | client satisfaction The recent study from the Institute of Private Investors (IPI) was quite revealing of the investment trends and attitudes toward advisor relationships by the ultra-wealthy.
The main takeaway from a media perspective is that, to attract these clients, advisors need to make them partners in the asset management process. This is something many advisors are reticent to do with clients at any asset level. This Website Is For Financial Professionals Only
Of course, the real key to developing relationships with families of wealth lies much deeper. It involves identifying the real issues families of wealth face. And those issues are not so very different than those faced by those with lower net worths.
The study primarily reflected the views of investors with at least $30 million in assets; 40% of respondents have assets of $200 million or greater. But these numbers don't matter nearly as much as those following.
Fully 32% of respondents with up to $50 million in assets say they are comfortable handing over the entire management piece to their advisors. That means the other 68% are not.
Ever since the double whammy of the Madoff scandal and 2008 financial crisis, those with serious investment dollars have begun to think twice about offering complete trust to their advisors.
Only 28% of families now say that they are confident their current investment strategies could effectively manage future geopolitical crises or domestic policy shifts.
Only 38% of advisors surveyed felt confident saying their firms had less conflict of interest, more reasonable fees, and greater transparency than they did five years ago.
These statistics are only further testimony that our industry as a whole continues to have the wrong focus, regardless of what marketing materials may say.
Contrast these figures with the 36% of families who turn over the management reins entirely to someone they have in-house, usually a family member or someone well-known to the family.
Also contrast them with the mere 10% of families outsourcing their CIO function as a result of the Dodd-Frank redefinition of a family office who give that person full discretion.
Truth is, even trusting someone in-house has its risks, risks that are much less easy to identify. If that in-house person is a family member, it can easily breed distrust among family members who had no say in that person’s appointment.
It’s not unusual for family leadership to blindly trust family members or advisors close enough to be considered part of the family—something the IPI report says they are very reluctant to do with external advisors.
This poses an even greater threat to the family wealth than a Madoff, a Stanford, or a domestic policy shift.
Family dynamics can make it difficult for other family members to challenge such an appointment even when there is evidence of subpar management ability and those family members have the right to do so.
The real message from the report is that families of wealth—even those with fewer assets than represented in the IPI study—desperately need a different type of relationship with their advisors, whether those advisors are in-house or external.
Keeping a closer eye on investment strategies and their implementation as well as dealing with advisors they know more closely is a good first step on the part of families. Partnering with clients in devising and implementing an investment strategy is indeed a step in the right direction for advisors.
But the advisor-family client relationship that most benefits families of wealth is one that offers not only the objectivity of someone who is technically external to the family but also someone who has taken the time to know the entire family—not just leadership—intimately and fully.
Such an advisor can help the family identify goals that are authentic to them, then jointly design an investment strategy to help them achieve those goals.
Even more importantly, this person can give the family—especially leadership—the courage to make difficult decisions at critical points that they might otherwise not address, either because the dynamics in the family inhibit them or because they are fearful of what's happening in the markets.
This is the time when they need an advisor whose philosophy of wealth management begins with the entire family's view of success. Why shouldn’t that advisor be you?
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Series Of Four Reports Ques Advisors On How To Adapt Businesses And Interact With The Futurewealthy; Second In Series Reveals Communication Age |
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Wednesday, January 23, 2013 13:23
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Tags: Advisor businesses | client communications | investor behavior
Along with the new generation is coming a new wave of wealth and their main form of communication is digital.
This is the conclusion of the second in a series of four reports on the so-called Futurewealthy. This Website Is For Financial Professionals Only
The name of the report is The Futurewealth Report: Stepping into the Communication Age.
The first in the series dubbed the new generation of wealth owners Futurewealthy and noted how they have woven digital technologies into every aspect of their lives.
This report shows that not only have the Futurewealthy mastered all digital forms of communication, they have put in the time and mastered the skills necessary to make their voices heard and to have impact.
They collectively spend over 30.5 hours a week in some form of communication or dialogue. For those whose wealth is above $4 million, that number climbs to 43 hours.
Those whose net worths are below $500,000 spend only about 25 hours per week. It’s not that traditional forms of communication are disappearing; it’s that the Futurewealthy are adopting new approaches to them.
Overall, the Futurewealthy spend 19 hours of their total communication time on email, web portals, social networking, instant messaging, and VOIP calls.
The wealthiest segment spends 28 hours of their total communication time over those media.
The report indicates how wealth managers and advisors should adapt their communication styles to match the next wave of wealthy clients.
The next report in the series will be on technologies the Futurewealthy expect their advisors to offer and be able to use as well as the types of financial relationships they will desire. |
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