Mike Piershale, ChFC, president of Piershale Financial Group in Crystal Lake, Ill., has a rule: he never meets with a new client without asking to see their tax return. Over the last 25 years in business, he’s found that tax planning is one of the most beneficial services he offers. Too many times, he says, investors are getting hit with higher tax bills than they should, which should be taken as a cautionary tale by financial advisors and accounting professionals.
The SEC is developing a rule that would require investment advisors to create a transition plan to deal with a major business disruption, according to SEC Chairman Mary Jo White, quoted in an article at InvestmentNews. This could include a succession plan in the event that they die or become incapacitated. State regulators, meanwhile, are working to draft a similar rule for advisors they oversee. A link to the article follows. Also, former SEC chair Harvey Pitt and TD Ameritrade executive Skip Schweiss found some common ground during a discussion on advisor regulation at the MarketCounsel conference last week. Both said the status quo for advisor exams isn’t working and backed a third-party auditing system, and the two also agreed on the need for a common fiduciary standard, according to a story at ThinkAdvisor, below.
Kudos to those advisors who have a succession plan. Now it’s time to create a Plan B. In a blog post at InvestmentNews, JC Abusaid explains how succession plans can fail (e.g., lack of financing, health changes) and how to put together a backup plan — finding a contingency partner. A link to the story follows. Also, results of a new study show that advisors are able to generate greater returns for clients, but that gain is basically erased by fees and expenses. The study was based on Canadian data. In addition, the study found that advisors appeared to “project their own preferences and beliefs onto their clients” and used a generic model portfolio that they might vary, depending on the client. A story at Reuters provides the details.
Sales & Marketing
Seventy-five percent of advisors are using social media for business purposes, withwirehouse advisors taking the lead over their independent and RIA peers, according to the Putnam Investments 2014 Social Advisor Study. In addition, wirehouse advisors appear to be gaining more clients and assets through their participation in social media. More details are in a story at ThinkAdvisor. Also, advisors may need to take the lead when working with centers of influence, hosting review meetings with them to build rapport and go over business essentials. A story at WealthManagement.com offers suggestions on what to discuss: industry trends, client updates, and “lead signals.” A link to the article follows.
Finra is responding to the “pain points” identified by client members in a survey and has stated that it will modify rules surrounding communications and gifts to clients, according to a story at InvestmentNews. A link to the story follows. Also, a former Morgan Stanley advisor scored what legal experts say is a rare victory in an arbitration case with his former firm. The advisor received $150,000 for “emotional distress.” The details are in a story is at Financial Planning.
Tax-loss harvesting is no longer simply an end-of-year consideration for advisors. It’s become a year-round practice, particularly as specialty shops and automated software systems have come into the picture. Still, there are many who urge caution. Read the pros and cons in an article at Financial Planning. Also, Joe Duran of United Capital downplays the threat of robo-advisors, noting that clients want human help when situations get complex or markets get scary. The big winner, he writes, will be the “bionic advisor” who balances the use of people and technology. His blog post is at InvestmentNews.
Sales & Marketing
Some themes are particularly relevant this time of year: Gratitude, philanthropy, year-end planning tips. Incorporate some of these topics into your social media posts over the next month, Amy Sitnick of SEI Advisor Network suggests in a blog post. She provides some “don’ts” as well. “Don’t drink and post,” she cautions. A link to the post follows. Also, if you are simply accepting a client’s definition of their “problem” to find solutions, you could be making a big mistake. Charles H. Green, in a post at Trust Matters blog, writes that a joint discovery of the problem definition is a good way to get to the heart of the matter. “The client doesn’t buy the best solution: instead, they reward the firm that did the best job of helping them define the problem,” he writes. See his post below.
If you’re a good teacher, you might just have what it takes to succeed in the retirement plan arena.
Jacob Gold, president and CEO of Jacob Gold and Associatesin Scottsdale, Ariz., chanced upon his burgeoning 401(k) niche while teaching a non-credit community college course ten years ago.
“I taught the basics of stocks, bonds, and asset allocation over nine weeks,” Gold recalls. “The head of human resources at PF Chang’s China Bistro was one of my students and liked my approach. She asked if I would be open to designing a similar course for her employees.”
The comment period for FINRA’s proposed data-sharing system closed earlier this week, and strong opposition was voiced by industry trade groups SIFMA and FSI. SIMFA states that the Comprehensive Automated Risk Data System, or CARDS, “would deliver a dramatic intrusion into one’s personal privacy and compromise one’s civil liberties.” Read more in a story at Financial Planning, below. Also, NASAA is warning investors about the potential for fraud with self-directed IRAs and advises them to be aware of the “limited duties” of a third-party custodian. A story at ThinkAdvisor offers more details on the scope of those duties, as described by NASAA.
Financial Planning’s annual technology survey is out, providing the latest trends in financial planning software, risk assessment tools, robo advisor tech, use of tablets, and more. One big finding: Readers said financial planning software was the technology that had the biggest impact on their business in the past year. Also, client segmentation can help firms work more efficiently and profitably, but the difficulty lies in coming up with clearly defined and workable tier levels of service. Michael Kitces provides a hypothetical schedule of segmented service levels that advisors can adapt for their own use. His blog post is at Nerd’s Eye View.