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Advisor Business
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The Self-Directed Investor Is Back Off The Sidelines, Cerulli Warns |
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Wednesday, February 22, 2012 14:14
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Tags: client satisfaction | investing As noted by the talented Steve Higgins here, after close to a decade on the defensive, independent investors have returned to the market -- and Cerulli analysts warn that the trend could play against advisors looking to give those investors some help.
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Assets in self-directed brokerage accounts surged 42% in the two years following the 2008 crash and now clock in at $3.7 trillion.
That may not look huge compared to the $12 trillion in advisor-led accounts, but the fast rate of growth here reveals that retail clients are once more feeling confident that they can go it alone.
The "independent investor" effectively stopped being a force in the industry in the aftermath of the 2000-1 bear market, paving the way for various advisor models to renew their dominant position in the marketplace.
The timing is also on the ominous side, Cerulli points out.
Self-directed investors admitted defeat after the turn-of-the-century downturn because they ran out of money and confidence. As they rebuilt their savings, they were less inclined to do it themselves and more eager to seek out professional help.
This time around, the ranks of self-directed investors soared while Wall Street was melting down. Clearly the wirehouses suffered from an overall erosion of confidence, but these disgruntled clients didn't pull out of the market entirely.
They simply decided that they could do it as well as the professionals, at a lower cost.
We now have a full trough-to-trough cycle since the 2000 bear market pushed these people back into the arms of advisors. The experience has taught all advisors a great deal and, presumably generated some impressive history of outperformance.
If the 2008 crash pushed them back out and today's market is skittering along, that long-term track record may be the best marketing advantage that advisors have.
Sometimes the independent investor beats the market and thrives. Sometimes he or she doesn't. But being able to keep sight of long-term goals and plans is where the advisor shines in any market environment.
That's what "staying the course" really means. It's not a commandment to stick with the advisor in a bad market any more than it's an invitation to chase augmented returns when things look good.
Read more...
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UBS Sues Departing Advisor Team For Taking Client Files With Them |
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Tuesday, February 21, 2012 16:15
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Tags: recruiting In an unusual deviation from the recruiting protocol, UBS has sued an advisory team who went to Wells Fargo and apparently took more than their share of the firm's account information with them.
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UBS says David Kinnear, Kathleen Bakas, and staff migrated "confidential trade secret information" when they moved.
Since the Swiss bank was one of the first to sign the recruiting protocol that protects migrating advisors who take their own clients' contact information with them, this seems to be a lot more than just copying the CRM files.
Not many details are available, but UBS wants FINRA to give its claims expedited treatment.
Maybe Kinnear, Bakas, and company took other UBS advisors' accounts or some other form of proprietary documentation -- training files? Procedures?
On their own, they generated about $3.7 million a year, which could translate to around $400 million in AUM.
UBS can definitely survive losing that. They've proved in the past that they're willing to let the assets move with the advisors -- after all, they tend to be on the winning end of the endless game of wirehouse musical chairs.
Let's watch this one. Whatever they took, UBS wants it back. And for the time being, recruiting from UBS may slow down, whether the recruiting firm is an independent RIA or another of the wirehouses.
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Health Savings Accounts Gain Traction |
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Tuesday, February 14, 2012 14:49
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Tags: healthcare After years of obscurity, health savings accounts (HSAs) are now being actively purchased by employers to help them manage benefit costs.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits. Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization. Plus, get other membership benefits, including: - Analysis daily of issues affecting advisors
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Bank of America and JPMorgan together, as two of the major advocates for the vehicles, currently administer around 1.1 million HSAs.
That's about 30% growth over the last 12 months and reflects, among other things, the rising cost of traditional employee health insurance and the looming start of various Obamacare reforms.
Like 401(k)s, HSA assets can theoretically be actively managed, which makes this a potential business opportunity for advisors who think they will be around for the long term.
Currently, banks have stepped up as the primary HSA managers, filling the accounts with in-house investment products.
Since these accounts are designed to be drawn down during an individual's working lifetime, average balances are still low -- on average, each participant has maybe $1,500 in his or her HSA -- so anyone looking to get into this market will need to find ways to achieve scale in order to be profitable.
If nothing else, offering HSA support as an add-on to small business consulting may be a differentiator for advisors who target entrepreneurs.
The assets may be at best an incremental boost to AUM, but they should prove sticky as business owners cope with new mandates to provide some form of health coverage.
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An Advisor Affiliated With Retirement Income Industry Association And Its Retirement Management Analyst Designation Responds To My Post Saying Designation Proliferation Is A Disaster For Consumers |
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Tuesday, February 14, 2012 03:16
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Tags: CFP Board | CPAs | financial planning | investment advisors | NAPFA | profession | RIAs Dana Anspach, a fee-only financial planner and licensed Retirement Management Analyst, has responded graciously to my post yesterday with a personal letter addressed to me on her blog on About.com.
My post yesterday said the proliferation of financial advisor designations is a disaster for consumers, and asked whether the Retirement Income Industry Association, a new accreditation body licensing the Retirement Management Designation, would add to the confusion consumers face in trying to find a financial advisor they can trust. I asked why RIIA, which is backed by a number of large Wall Street product manufacturers, did not partner with CFPS, CFAs, CIMAs, CPAs, and other established professional designations for financial advisors. If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits. Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization. Plus, get other membership benefits, including: - Analysis daily of issues affecting advisors
- Aggregation of news from dozens of sites targeting wealth managers
- Reviews by advisors of practice management applications
- 30 independent experts blogging on advisor business issues
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Rather than paraphrase what Anspach, a fee-only advisor and member of NAPFA said, her response in its entirety is below.
Andrew says that, "RIIA appears to be a good organization. So this story is not meant as a knock against RIIA" and he goes on to say that "...the group is impressive. Its board of directors includes representatives from the largest and smartest companies in the financial advice business, Bank of America's Head of Personal Retirement Solutions, David Tyrie, the former head of the mutual fund industry trade association, Matthew Fink, the top financial whiz from Ibbotson Associates, Peng Chen, and other powerful people."
He then asks, "But why did product companies have to go and create their own designation? Why didn't these powerful companies just go to the existing professional organizations and support their effort to educate their professionals?" and he says, "While RIIA may actually do great work -- it is backed by big bucks to pay for research studies and has attracted numerous academics to its board of "special advisors" -- creating yet another designation for retirement advisors only will confuse consumers."
I felt compelled to comment.
Dear Andrew,
I appreciate your comments on the RMA designation and RIIA organization. I am a fee-only advisor, member of NAPFA and hold my CFP® designation. I am a member of RIIA and serve as Chair of their Practitioner Peer Review committee, and I (obviously) write for a division of the New York Times called About.com as their Guide to MoneyOver55.
As I specialize in working with upcoming retirees, I first attended a RIIA conference in 2009. What impressed me the most was instead of a roomful of marketing and sales professionals, I found myself surrounded by academics; CFAs and MBAs, all tackling the problem of retirement income from a scientific angle. The caliber of people and level of thoughtful discussion far exceeded that of any other conference I had, or have, attended in my 17 years of practice. When they offered the RMA designation in early 2010, I was one of the first to sign up.
As a CFP® I can tell you the profession of planning for retirement income takes a different skill set than that of general financial planning that is focused on the accumulation of assets. There is a desperate need to educate advisors on the process of planning for income, as proper planning can have a significant impact on the financial security of our nation's retirees. General financial planning courses do not provide the level of detail and education needed, just as a general medical degree does not qualify someone to become a surgeon, an endocrinologist or a cardiologist.
Andrew, let me ask you, if you had a heart problem, would you want to see your family practice doctor, or a cardiologist? Consumers seem to be able to wade through the plethora of medical specialties and find what they need. How do we help them apply a similar selection process to the financial community?
It is easy for me to think that as a consumer, if I need to build a stock portfolio, or hire someone to manage a mutual fund, I would seek a CFA. If I am in my 30's and 40's and need a financial plan to get me on the right track, I would seek a CFP®. If I am a business owner designing a buy/sell agreement funded with life insurance, I would seek a CLU. If I have complex tax planning needs in addition to financial planning needs, I would seek a PFS. Of course this is easy for me to distinguish, as I am in the industry. Perhaps what is needed is not less specialization, but more education to help consumers understand the skill set of the professional most suited to provide the services they need.
As a retirement planning specialist, I know in many cases careful planning can add hundreds of thousands to a client's retirement income, or to assets passed to heirs - all without the sale of a single product.
As a fee-only advisor, I encourage consumers to look at where someone's compensation comes from to understand what may be motivating their behavior, and so I understand your desire to look at RIIA's source of funding. I can tell you from the inside, the product companies have not created the RMA designation. It is many people like me, laboring for love (or maybe we're just a little crazy), who have volunteered countless hours of time to contribute to the RMA curriculum and work continuously to improve and expand upon it.
For example, later in 2010, as RIIA began to expand upon their curriculum, I was asked to contribute content to the RMA curriculum, which I did. The content I contributed had nothing to do with investment or insurance products. On the contrary it had to do with tax planning, and the impact proper tax planning can have on a retiree's after-tax income in retirement. This content was not supplied by, funded by or in any way influenced by a product provider.
RIIA's mission is to be a view across the silos, incorporating points of view and research from the insurance, investment, defined contribution, and practitioner perspective to create best practices and a process and curriculum that focuses on process first, with the selection of products to come only after proper planning.
Andrew, your post brings up a valid point about the need to help consumers find a trusted advisor that has a skill set that matches their needs. I invite you to continue your discussion and join us at our upcoming spring 2012 RIIA conference in Chicago in March, and determine first-hand what you think.
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Financial Advisor Designation Proliferation Is A Disaster For Consumers And Retirement Management Analyst Designation, A New Designation Sponsored By Product Manufacturers, Illustrates The Threat To Professionals |
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Monday, February 13, 2012 17:29
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Tags: financial planning | marketing | prospects | retirement income | retirement planning | Wealth Management “Retirement Management Analyst (RMA) Designation Expands Into Level 1 Curriculum and Level 2 Curriculum,” says the headline of a press release issued this morning by the Retirement Income Industry Association (RIIA).
While the news could be good, it is nonetheless yet another example of the proliferation of financial advisor designations bedeviling a consumer’s quest for a trusted financial advice. If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits. Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization. Plus, get other membership benefits, including: - Analysis daily of issues affecting advisors
- Aggregation of news from dozens of sites targeting wealth managers
- Reviews by advisors of practice management applications
- 30 independent experts blogging on advisor business issues
- 24/7 access to webinars with 50 hours of CFP® CE and 100 hours of IMCA CE
Register Now | |
RIIA appears to be a good organization. So this story is not meant as a knock against RIIA.
Trouble is, consumers can’t tell whether the young accreditation body is for real. Nor do consumers know if the RMA designation is worth the paper it’s printed on.
The proliferation of advisor designations poses a major competitive threat to CPAs, CFAs, CFPs, CIMAs, CLUs, ChFCs, and other established professional designations.
Put yourself in a consumer’s shoes. Your financial advisor has a long list of designations after his name. Is an RMA better than a CFA or CFP? The consumer does not know. Even if a consumer checks, the answer is difficult to discern.
“Launched in 2009 through requests from RIIA members and in response to demand from financial advisors and consumers, the RMA designation is the only scientifically-based, rigorous retirement planning education and certification serving the financial services industry including defined contribution and retail distribution organizations, financial advisors, broker dealers, banks and insurance companies,” says the press release issued this morning. “Individuals earning the RMA designation are uniquely prepared to deliver retirement income solutions and services to clients who want a secure income stream and ongoing professional management throughout their retirement years. To help RMA candidates prepare for the exam, RIIA partnered with software providers and leading universities.”
If a consumer goes to the RIIA website to find our about the RMA designation, the group is impressive. Its board of directors includes representatives from the largest and smartest companies in the financial advice business, Bank of America’s Head of Personal Retirement Solutions, David Tyrie, the former head of the mutual fund industry trade association, Matthew Fink, the top financial whiz from Ibbotson Associates, Peng Chen, and other powerful people.
RIIA’s home page features its effort to educate financial advisors so that Americans can find safer retirement solutions.
And it doesn’t hurt that "RIIA" sounds a lot like RIA. Consumers are bound the think RIIA is related to being an RIA. Nonetheless, the group looks like it’s doing good work.
But what’s really happening here?
Truth is, RIIA is a group created by product manufacturers. BlackRock, New York Life, Allianz and other powerful companies have allied themselves to create a designation of their own.
Now there is nothing wrong with that. These companies are a key part of the solutions professionals must provide to consumers.
But why did product companies have to go and create their own designation? Why didn’t these powerful companies just go to the existing professional organizations and support their effort to educate their professionals?
My guess is the CFP Board and even the well-heeled CFA Institute would have welcomed the assistance of the product companies in designing better educational programs for financial professionals. Does adding yet another accreditation help consumers?
While RIIA may actually do great work -- it is backed by big bucks to pay for research studies and has attracted numerous academics to its board of “ special advisors” -- creating yet another designation for retirement advisors only will confuse consumers.
What do you think of the RMA designation? It looks like RIIA can add value because the product companies are where the money is.
Do you have room for one more designation on your business card?
What can established professional licensing bodies do to fight designation proliferation?
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