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Financial Roundup: Social Security, Breaking Away, and Cleaning Up Client Interaction

Here is this week’s roundup of must-read news for financial advisors:

Practice Management

Advisors need to avoid technical terms, confusing acronyms and scary-sounding concepts with clients if they want to get their message across. An article at Financial Advisor provides a rundown of some of the “worst-offending” words and terms used by advisors, such as equities, stocks, basis points and asset allocation. Read the full story below. Also, Allan S. Roth offers a list of investing lessons for clients that will likely hold true through the end of the century. For example: “Stocks are really risky” and “Break the addiction to prediction.” The complete list is in a slideshow at Financial Planning, below.

Don’t Say That! Clean Up Your Jargon to Better Serve Clients

By Christopher Robbins
Source: Financial Advisor

Financial advisors have a lot to say to their clients — but does any of it really get through? As a discipline, financial advice by its nature involves technical language that is difficult for the layperson to understand — but adding to the challenge, advisors and analysts have constructed a confusing lattice of acronyms, shorthand and slang that can obfuscate what they’re trying to say.


10 investing lessons of the century (so far)
By Allan S. Roth
Source: Financial Planning

So far this century, it’s been a wild ride for investing. It hasn’t been easy to guide clients (and ourselves) through the turmoil. The graph (follow the link below) conveys that wild ride. Looking at it may remind you of the fear and greed cycles we all went through. Or maybe it will bring to mind the bubble paradigms that came and went, such as “cash flow no longer matters” (dot com), and “real estate can never decline” (subprime/financial). And how many times in the past 17 years have you heard, “this has never happened before?”


Breakaways/Aspiring Advisors

The breakaway advisor movement is going through a new iteration. The phase is one in which a subset of junior advisors and staff plan to leave their current RIA and take their clients with them, writes Matt Sonnen of PFI Advisors in an article at Financial Advisor. He calls this “Breakaway Advisor Movement, Version 3.0.” See the link that follows. Also, the rise in the number of independent advisory firms has led to more competition and the need for differentiation. That was one of the RIA challenges discussed during a recent roundtable event hosted by Schwab Advisor Services. Read further details in an article at WealthManagment.com, below.

Big RIAs Now Face Their Own Breakaway Movement
By Matt Sonnen
Source: Financial Advisor

There is some debate as to the official launch of the breakaway advisor movement, when advisors began leaving the shackles of the captive wirehouse environment for the freedom and independence of the RIA community. In order to pinpoint an exact date, we not only need to consider the exodus of advisors, but we also need to consider at what point was there a true RIA industry that advisors could break away to.

The Biggest Challenge for RIAs? They All Look Alike
By Diana Britton
Source: WealthManagement.com

The registered investment advisory market channel has grown 12 percent per year since 2005, four times faster than the wirehouses, according to Schwab Advisor Services, citing a Cerulli Associates report. That market share is expected to grow another five percentage points to 28 percent by 2020. “It’s a perfect storm,” said Shirl Penney, president and CEO of Dynasty Financial Partners, a firm that helps employed advisors break away from their firms, set up their own shop and serve their clients as an independent.

Retirement Planning

Does your client have an “illusion of poverty” or an “illusion of wealth”? The answer to this question may give you a better understanding of how clients view their retirement savings. An article in the Wall Street Journal notes that most online retirement calculators give investors a lump sum versus a monthly breakdown, and that can be problematic. See the full story below. Also, it bears repeating that Social Security Administration representatives don’t always give out the correct information on benefits. Mary Beth Franklin, in a column at InvestmentNews, clears up some confusing cases and tells readers where to find resources and answers on the web. See the link to her blog post below.

Would You Rather Have $1 Million or $5,000 Monthly in Retirement?
By Shlomo Benartzi and Hal E. Hershfield
Source: Wall Street Journal

These days, investors can track at any moment how the market’s daily ups and downs are affecting their wealth. Even investors with multiple investment accounts spread across different firms can calculate changes in their net worth in real time, thanks to websites and apps that do all of the work for them. One might think that having all of this information would make people more financially savvy, especially when it comes to saving for retirement. New research, however, suggests that for many people, it may be the opposite.


How to spot fake answers from Social Security reps

By Mary Beth Franklin
Source: InvestmentNews

We’ve all grown a bit weary over politically charged arguments about what constitutes real versus fake news. Based on my overflowing email box, I sense a similar frustration from financial advisers and their clients about how to interpret answers from Social Security Administration representatives that seem to contradict current law.

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