This is a year of exciting changes. There's a national election coming up at a time when the financial markets are under stress. The nation's 78 million baby boomers are starting to collect Social Security. (Some of them may even be financial advisors.) As we assembled, edited and refined our list of Movers and Shakers, we sought out people who, we thought, could have a role in the transitions to come in our industry.

One of them, Robert Arnott, devised a new methodology for indexing investments that is becoming a competitive alternative to the Standard & Poor's 500. Others—Deena Katz, Cheryl Holland and Tim Kochis—are training and developing young talent and figuring out new ways for them to participate in ownership of independent practices. Greg Friedman is creating the technological tools and partnerships the industry desperately needs to become more efficient in an era of compressed margins. Mark Tibergien is taking the management ideas he helped develop at Moss Adams and putting them into practice as the new head of Pershing Advisor Solutions. And Duane Thompson, fresh from shepherding the FPA's victory over the Merrill Lynch rule through the courts, is focused on new regulations to be considered by the Securities and Exchange Commission.

All in all, these Movers and Shakers are an illustrious group. Read on, and get to know whom you'll be watching closely this year.

Duane Thompson
Managing Director, Financial Planning Association
Washington, D.C.

It was pitted as a David versus Goliath struggle, and when the Financial Planning Association (FPA) won its lawsuit against the Securities and Exchange Commission (SEC) last March, words like "surprise" and "stunning" peppered the media coverage of the victory. But there was at least one person who was not shocked: Duane Thompson, managing diretor of the FPA's Washington office and the one who worked most closely with its lawyers.

Thompson's involvement with the issue began in 1999, when the SEC gave him notice that it was preparing a ruling on certain provisions outlined in the Investment Advisers Act of 1940. The SEC's interpretation of the ensuing rule effectively made an exception for brokerage firms that allowed them to provide financial planning services to the public without being subject to the 1940 Act's fiduciary and disclosure protections. The FPA filed a lawsuit against the SEC in 2004.

Thompson never doubted the FPA's challenge. Even so, last spring he prepared two press releases ahead of the verdict of the U.S. Court of Appeals for the District of Columbia Circuit: one for a victory, the other, defeat. The court ruled in the FPA's favor; then, the SEC decided against an appeal.

As gratifying as the victories were, Thompson says, "This is just one stage of a drawn-out battle in defining financial planning to the public." People will increasingly demand advisor relationships built on trust, he predicts, and the marketplace will respond. Fiduciary responsibility is an issue FPA members hold dear. As a lobbyist, Thompson is used to championing causes, but in this case, his heart is in the same place as his employers'.

When Financial Planning spoke to Thompson, he was awaiting the results of the Rand Corporation study, commissioned by the SEC, on the marketing, sale and delivery of financial products and services to investors. The SEC has said the study will help it consider improvements in regulatory and legislative rules dating to the 1930s.

Thompson intends to keep busy. Reflecting on the court victory, he says, "When you have a clear milestone on an issue like this, it feels great, but it also spurs you to think about what's next."

Robert Arnott
Founder & Chairman, Research Affiliates
Pasadena, Calif.

Robert Arnott has always had a passion for out-of-the-box research. After starting his career at the Boston Company, where he was allowed to spend one day a week researching anything he wanted, he quickly learned everything he could about quantitative asset management, a discipline that didn't even have a name at the time. Three decades later, his research has changed the way the industry looks at equity indexes. Capitalization-weighted indexes, such as the Dow Jones Industrial Average and the Standard & Poor's 500, are no longer the only game in town.

"I've always had a concern that cap weighting links the weight of the portfolio to the error in the price," he says. Measuring companies by market weight, he believed, created a tendency to overweight overvalued companies and underweight undervalued companies, leading, eventually, to a drag in performance.

After a dinner meeting with Vanguard founder John Bogle, who started his own business at age 47—the same age Arnott was at the time—Arnott launched Research Affiliates in 2002, a research-based investment firm based in Pasadena, Calif.

He immediately began studying alternative metrics of company size such as sales, profits, net assets and dividends—an approach he called fundamental indexing. Tests in small companies, global markets, speculative markets and even international markets all found significant value added by the new approach. Arnott used his research to develop and market his new, fundamentals-based index, called the RAFI Index, which debuted in 2005.

Not everyone was ready to adopt Arnott's methodology, however. Critics said his RAFI Index was just a value-oriented, small-cap-heavy index that was riding the wave of value's outperformance. "Those who say it is value, just value and nothing but value have it partly right," Arnott responds. "It does have a value tilt; it always will. But those who say it has a small-cap tilt: they're wrong. It has a tilt against whichever end of the size spectrum carries the premium multiples."

Today, the RAFI Index has outperformed the S&P 500 by 170 basis points per year since inception. Arnott remains the public face of Research Affiliates, whose investment strategies are used to manage more than $27 billion worldwide. His writings have been published in the Financial Analysts Journal (which he edited), Journal of Portfolio Management, Harvard Business Review and other respected publications.

And while it's no secret that fundamental indexing still has its critics, that's just fine with Arnott. "It's actually a good thing to have critics," he says. Why? [It's] "partly because it sharpens your thinking," he adds, "and partly because you have to have somebody willing to take the other side of your trades."

Greg Friedman
Founder, President, Friedman & Associates
Novato, Calif.

Greg Friedman describes himself as a member of the new breed of financial planners, but Mr. Fix-it may be just as appropriate. In 1991, two years after landing his first job in the industry, he launched Friedman and Associates, then a solo wealth management firm—and a goal he'd had since his early twenties. Sixteen years later, Friedman has taken his dream business from a sole proprietorship to a trend-setting firm with more than $230 million under management.

But for Friedman, it was the problems he saw in the industry—and not its successes—that shaped his career. "It was about 1995, and essentially the challenge I was faced with was trying to grow really rapidly. I was looking into all different kinds of contact management systems, but none of them fit the bill. So I was faced with a choice: either stop growing or become ruthlessly efficient—and do it through technology." Friedman hired current partner Ken Golding and together they created Junxure, a CRM program customized for advisors. Junxure quickly caught the eye of advisors across the country who convinced Friedman to sell his product to the public, a decision that has raised the bar for technology in the financial services industry.

This year, Friedman created Junxure ClientView, a program that allowed him to replace paper quarterly reports with weekly web reports. Between 1998 and 2004, with the help of his software, Friedman and Associates doubled its client list and tripled its assets under management without adding administrative staff—a feat that earned Friedman the Schwab IMPACT Best-in-Tech award in October.

But despite a popular family of software and a successful business, Friedman continued to focus on holes he saw in the industry. While at a conference last year, he and Golding realized that advisors didn't like the one-size-fits-all format of most software on the market. "I heard people saying, 'I love my CRM, but I don't like my financial planning module.' So our vision was, boy, wouldn't it be great if an independent advisor could say, 'I like this for financial planning and this for portfolio management,' and the programs could actually talk to one another." So the pair formed Your Silver Bullet, an organization dedicated to integrating software in the financial services industry. In its first year, the program has signed up 22 companies and created five new interfaces for the field.

An obvious believer in the power of technology, Friedman and his staff attend training courses every quarter. He says his firm has become much more efficient by applying what they learn and, of course, fixing the problems they find.

Cheryl Holland
President, Abacus Planning Group
Columbia, S.C.

Cheryl Holland has turned her firm into a bastion of best practices. Indeed, Abacus Planning Group in Columbia, S.C., just won the Charles Schwab 2007 Pacesetter Award for its client-centered, team-based approach to practice management. A partner, a planner and an investment manager cater to the needs of each client. But Holland's "high touches" are equally elaborate with her colleagues. She has built up an 18-person office with $570 million in assets under management in less than 10 years by emphasizing the firm's culture and technology.

The culture is based on her values, which include the sanctity of client confidentiality, embracing change and eliciting input from a growing staff. It includes "knowing that you're okay," she says. "Here, an error isn't something to hide. If you make a mistake, own it, we'll fix it." She asks her staff to strive to be the "best in the world at listening."

Mentoring, training, detailed employee goals and performance reviews help guide each employee along his or her career path. "People need to know where the yellow brick road is going," Holland says. Her growth model is based less on a quantitative competition for assets and clients than on helping employees find the role they love.

The office is divided into different functional teams, such as marketing, compliance and technology. "Everyone wants to be on the CFO team to learn about the drivers of the business and how the money is spent," Holland says. Employee bonuses are based in part on their contributions to different teams.

Holland has a highly developed set of systems and procedures that organize the firm's activities. "We really take it far," Holland says. "We have 130 checklists. They are all part of an elegant CRM system we developed three years ago," she continues, when the firm made a significant investment in technology. Now the team is refining the system. "They know the system is their friend, they learned it the hard way," Holland says. "We wanted to develop it so a monkey could do it. Anything we can get the computer to do, we get it to do."

Holland is also a member of Group 2020, a study group that meets twice per year on a topic of interest such as public relations, hiring, firing and retaining employees. "We are an intense, focused, high-energy group," she says. "We began as a group studying alternative investments 11 years ago and have evolved to other topics."

Deena Katz
Assoc. Professor, Texas Tech University
Lubbock Texas

By one reckoning, the financial planning profession will face a shortfall of 50,000 planners by the end of the decade. Deena Katz is doing her part to fill the gap. The chairman of Evensky & Katz, of Coral Gables, Fla., now spends most of her time teaching the next generation of planners at Texas Tech University in Lubbock. "I have the farm team and we're building good financial planners," Katz says. Her efforts have helped meet the industry's current talent squeeze, a problem that will only deepen as the nation's 78 million baby boomers continue to retire along with the first generation of financial planners. She says proudly of her students: "My kids graduate with a degree under one arm and three job offers under the other."

Katz began shifting away from client work in 2004. She recalls meeting with one client that year, a woman who wanted to discuss ways to withhold money from a daughter whose beau she disliked. Katz had recently battled breast cancer, and her experience made her lose patience with this type of inquiry. "The new me said, 'I don't have time for this stuff,'" Katz recalls. She told the woman to stop dangling her money in front of her daughter and get a life. Then, she walked down the hall to her work-and- life partner, Harold Evensky, and told him that she needed to do something altogether different, and that she might have just lost the firm a client. (Katz was wrong: The woman remained with the firm.)

These days, Katz's many projects at Texas Tech include finding ways to entice more women into the profession. This year, there are five times more men than women in both her graduate- and undergraduate-level courses. "I don't really know why," Katz says, especially since the numbers balanced out more evenly last year. Katz herself first entered the planning profession with the desire to help women take charge of their finances. Her inspiration was her mother, a social worker and a bright woman who nonetheless had difficulty managing the family finances when her husband, Katz's father, died in 1955. "When I went into planning I realized I needed to help women, to empower them," Katz says.

In the coming year, Katz plans to balance her teaching responsibilities with professional commitments, including a seat on the Financial Planning Association Board and a column in Financial Planning (watch out for her inaugural column in next month's issue). "I'm going to be here for a while," Katz says of the Lone Star State. "We bought a house."

Tim Kochis
CEO, Kochis Fitz
San Francisco

By his own account, Tim Kochis is one of the "old dogs" of the financial planning profession. But the 35-year industry veteran and CEO of Kochis Fitz in San Francisco isn't content simply to step back and savor his many accomplishments from the golf course. Instead, Kochis continues to forge new paths. Last November, Kochis Fitz announced that it would merge with Quntile Wealth Management, a multifamily office firm in Los Angeles, to create the largest independent wealth management and family office business in California, with more than $5 billion in client assets.

Effective January 1, the merger offers a way for the combined entity to retain its independence, Kochis says. In recent years, both firms rebuffed offers from entities seeking to buy them. Their leadership formed an ownership structure that gives roughly half of their combined 68 employees an equity stake in the business. The employees range in age from their late twenties to early sixties, ensuring there are enough younger employees to buy the shares of older employees seeking to leave the business. This bucks the trend of retiring independent planners' selling their firms to third parties because they've built up so much value that their junior employees can't afford to buy a stake in their businesses. "One of the things we want to do with this merger is demonstrate that there's another path," Kochis says.

That path may one day include other firms as well. "This sounds very ambitious, but we would consider expanding into other markets," Kochis says. He might be willing to join with firms around the country. The firm hasn't yet developed a formal expansion strategy yet, but Kochis is confident that it will happen.

For now, though, Kochis is focused on integrating Kochis Fitz and Quntile. Another challenge for 2008 is preparing clients for a year of not-so-stellar equity returns. "The industry is probably going to have to come to grips with the recalibration of client expectations about returns," he says, after the strong stock performance of the past several years.

Kochis is prepared to meet these challenges and many more. He plans to serve as CEO of the merged firm until mid-to-late 2009 and to shift to client work and ongoing industry leadership after that. He currently serves as chair of the International Advisory Panel for the Financial Planning Standards Council of China, among many other industry responsibilities.

"This is definitely not about Tim retiring at all," Kochis says.

Mark Tibergien
CEO, Pershing Advisor Solutions
Jersey City, NJ

As Mark Tibergien packed up his home in Seattle to move East last fall, he found a relic of his past career as a journalist: The copy of Investment Dealers' Digest magazine from 1972 that announced his hire as a new reporter. He glanced at the ads and noted that many of the financial firms in the magazine had either merged or gone out of business in the intervening 35 years. The new CEO of Pershing Advisors Solutions (PAS) didn't imagine then that he would one day head his own financial firm in a rapidly consolidating industry.

"There was nothing about my career that was natural or expected or planned," Tibergien says. That's a rather startling statement coming from someone who has achieved Tibergien's level of success. He joined PAS, the RIA unit of Pershing, in New Jersey, on October 1—leaving his prestigious perch at Moss Adams, the Seattle-based consulting firm where he became well known and respected as a consultant to independent advisors.

Tibergien grew up in a blue-collar community on the sparsely populated Upper Peninsula of Michigan, where his first job involved reading obituaries on the radio. "I don't think I knew a stock from a bond," he says of those early days. "I was more concerned with the color of the casket." Recruited to open the Seattle office of a valuation firm, he jumped at the opportunity to learn about financial services.

Needless to say, Tibergien knows his way around a lot of complicated investment vehicles these days. The industry expects big things from him in his new position, and Tibergien hints that he won't disappoint. He says he spent his first few months orienting himself, and over the coming months PAS will repackage and revise its business model. But the industry will just have to wait for the particulars: "I'm not willing to show all my cards yet," he says.

Tibergien's challenge will be to differentiate PAS from its competitor custodians. PAS lags Schwab Institutional, Fidelity Institutional Wealth Services and, to a lesser extent, TD Ameritrade Institutional in the market for holding independent investment advisor assets. He wants to rethink the custodian's role and build a leading market position by helping RIAs with the many challenges they face, including consolidation in the industry, compressed margins, talent shortages and competitive marketing.

"This is a kind of precarious time for independent firms," Tibergien says. Many in the industry think it's a little less so with Tibergien around.