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Who Speaks For The Planner?
By Bob Veres
September 1, 2011
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I think we all know that the financial planning profession is drowning in paperwork and the problem is only going to get worse.
If you want to communicate with clients using any form of social media, you either have to have "Daddy" (I mean, the compliance department) tell you it's okay after reading your message, or you have to track every single thing you say and prepare to defend it before an SEC auditor, who will probably write up a deficiency no matter what you say or do.
If you want to put an advertisement in the local paper, be ready for half the advertisement to be given over to disclaimers.
And if you're currently SEC-registered, you're probably already resigned to the idea that FINRA is going to be promulgating a new rules-based system for determining if you acted like a fiduciary each and every day for the rest of your business life.
Do doctors, lawyers or accountants face this kind of day-to-day regulatory hassle? Does anybody? I can tell you from personal experience that we journalists don't. If anybody came into my office and asked for books and records, I would have no idea where to start.
This vexing -- and increasing -- compliance hassle is generating a certain amount of frustration in the profession, and most of the people I talk with don't know where to turn.
Consider the membership organizations that are charged with watching out for your interests:
FSI lobbies Congress and FINRA on compliance issues, and then BD members use the compliance rules to control what their advisor representatives can do and say.
As one advisor put it to me recently: "Even the large firms are shrewdly utilizing compliance to make captive representatives out of personally-owned firms. They change the rules to benefit themselves, reduce payouts on products, all in the name of compliance."
I've talked with some advisors who discovered, to their surprise, that they are members of FSI without even realizing it; their membership dues are deducted from their payout and sent over to FSI along with their names.
The FPA and NAPFA (through the Financial Planning Coalition) lobby Congress and the SEC primarily on behalf of consumers.
The uniform fiduciary standard really would not benefit advisors. It would once again blur the line between those who sit on the same side of the table as consumers, and those who don't. Yes, there might be more safeguards in what brokers could do with consumers, but this would come at the cost of a clear marketing distinction that fiduciary advisors enjoy today.
So who speaks for the planner? Who is watching out for the business interests of the advisor and advisory firm in these lobbying activities? Are your membership dues being spent in ways that aren't helping you or your business?
Is this something that needs to be fixed?
Please tell me what you think.
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For more on planning, client service, practice management and marketing, or to join the Inside Information community, contact Bob Veres at Bob@BobVeres.com or go to http://www.bobveres.com/. For more information about the Business & Wealth Management Conference (October 13-15), go to http://www.signupforconference.com/.
While the recent FPA Convention provided some new and very interesting presentations and introduced some pretty high-brow concepts, Financial Planning columnist Bob Veres felt far too many of the presentations were bogged down by speakers who decided -- or were compelled -- to “dumb down” the material to appeal to the lowest common denominator. What did you think?
Ahead of next month’s Business & Wealth Management Forum in Chicago, it’s time to start asking some big-picture questions. For example, how could our profession have a bigger political impact than we do today and if there are better ways to add value than simply tending client portfolios?
Make no mistake. We are going to sail through a lot of these volatile periods over the next five to 10 years and the profession needs to brainstorm better ways to deal with them that won't harm clients and their investment goals. We need to better understand what's going on. And consumers deserve to be told more than just which way the wind is blowing today.
How do you talk to your clients about the debt ceiling and budget battles when so many people are strongly -- perhaps not always rationally -- on one side or the other of the political divide? Suddenly, loss of confidence in our country's legislative and executive leadership is driving loss of confidence in the markets and it seems the two are now linked in ways that we may never have seen before.
I think we as advisors are going about our lobbying effort all wrong. More to the point: does it make sense for us to keep lobbying on behalf of the consumer or should we act like everybody else in the universe and lobby for things that would better serve our own interests?
Lately, I've seen more and better thinking about asset management than you could find in the previous 20 years in the profession and I think it may be time to give modern portfolio theory a makeover. In fact, I think this fits a long-standing historical pattern.
I may be opening up an old wound here, and if I am, I hope you'll forgive me. But I find myself wondering about all the ways that the interests of a broker-dealer differ from the interests of its affiliated advisors. I've never seen this explored anywhere.
I have a lot of pet peeves but one of my biggest is how we, as a profession, tend to define other professionals by one number: their assets under management.
To me, the most interesting event of the year, so far in the financial planning space, is the Schwab organization's new Independent Branch Services initiative. The gist of it is that Schwab's retail division is looking for experienced advisors to come in and transform their practices into Schwab branch offices on a franchise basis.
I've put on my annual to-do list that sometime this year I'll create a Facebook page, and Lord help me, I may even start twittering before long. This means I'm about to stick my toe into the dreaded Social Media world.
The time and energy that the advisor focuses on the client produces far more terminal wealth for that client than anything you can get from the traditional investment management services.
The royal wedding, eliminating the notorious mastermind of the Sept. 11 attacks--this is going to be a week to remember forever. But I also wonder whether it might represent another milestone.
I have a very simple question to ask all of you. Suppose, by some miracle, that you were given an extra two hours a week to spend in your office. How would you spend that time?
Some advisors are averse to even DISCUSSING the value of portfolio management, possibly believing that we all spend too much time talking as if financial planning and portfolio management are the same service--which they clearly are not.
What portfolio management activities provide the MOST value for your time/money/energy/attention, and which activities provide the LEAST value for your time etc.?
One of the most interesting things to come out of this conversational thread about the regulators is the amount of fear advisors are expressing about speaking openly.
The current SEC inspection and audit process is kind of silly, at best, and a waste of resources, at worst. FINRA's process, from what I've been told, makes even less sense. But what can we do to improve things?
I see a lot of advisors who get very little interaction with the sponsors, and there is little in the design of today's exhibit halls that encourages that interaction--and THAT was my point.
One of the biggest wastes of time and talent that I see in the financial services industry is something you probably take for granted: the conference exhibit hall.
The more you hear about the SEC examination process, the more you realize that the examiners can't quickly recognize the honest advisors from the crooks, and are generally more interested in finding fault with the honest advisors than identifying the crooks.
It seems we have reached the absolute bottom of the barrel in terms of regulatory efficiency. If the SEC is spending weeks on trivial issues and completely missing Bernie Madoff then it is clear that something is seriously broken.
Having attended hundreds of practice management and motivational sessions at various conferences over the years, it has become clear to me that most of our roadblocks to business and personal success are (get ready to wince) self-created.
There seems to be a lot of "energy" (and sometimes anger) around the idea that some people provide full-service financial planning and some people call themselves planners while actually selling products or managing assets for a living.
We call this the "financial planning profession," right? So here's a topic for discussion: how is it that many people calling themselves a financial planner don't actually do financial planning work for their clients?
The community really needs to know if you are (or are not) satisfied with the service you're receiving, and how it has (or has not) helped you focus on your direct client services.
One of the postings after a recent chat has started us all on a discussion of another possible way to handle this macroeconomic chore: Actually do your own evaluation of the markets and decide whether to be in or out.
Ever since September 2008, clients are asking for more than you can possibly deliver: to keep track of the macro-economic big picture and help them get out of the market as soon as we start moving into another meltdown period. So the question is: How can we possibly respond to these lofty expectations?
The financial planning community has a lot of knowledge and wisdom – way more than any individual writer or commentator. But how do we tap the deep wisdom of the crowd to help us resolve important, complicated issues? Bob Veres, a columnist for Financial Planning magazine, is here to trigger conversations on important topics for advisors on issues and subjects facing the industry. First up: The regualtory standard.
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