“The Need for Financial Planning” covers financial planning topics and ties in data suggesting the opportunity for new and prospective advisors to improve America’s financial health. *** As we recently covered, the new tax law titled the Tax Cut Jobs Act brought in the most significant changes to tax planning in several decades. These big changes bring the need for advisor guidance in helping clients navigate the new rules. One of the more significant parts of the new law is a new deduction for business owners. Dubbed the Section 199A deduction, or QBI (Qualified Business Income) deduction, its purpose is to maintain the tax benefit (no double taxation) that certain…
-
-
Industry Insights: Industry Players by Advisor Headcount
“Industry Insights” covers trends and topics within the financial planning industry. *** When first starting out in the industry, you may be curious about which firms are the dominant players. Sure, you are probably familiar with the big names like Merrill Lynch and Wells Fargo, but quantifying their role – and impact – in the market is a bit different. There are a variety of ways to measure market position, of course. Today we look at how firms stack up by advisor headcount. Total advisor estimates vary rather widely. Cerulli Associates estimates there are around 300,000 financial advisors in the United States. Michael Kitces recently explained why this figure is…
-
Financial Planning Articles (March 30, 2019)
“Financial Planning Articles” is a collection of articles and research that I’ve been reading regarding financial planning, industry trends, career development, and more. *** This edition begins with two articles covering today’s client preferences and industry trends. The first provides more data points showing clients prefer technology to complement, rather than replace, human financial advice. The second suggests Schwab is positioning itself well for this dynamic, announcing this week a new version of its robo-advisor platform on a monthly, subscription-fee basis. The next two articles center around advisor marketing and public relations with the first highlighting all of the benefits of creating a client persona and how to develop one.…
-
The Need for Financial Planning: Tax Cut Jobs Act Guidance
“The Need for Financial Planning” covers financial planning topics and ties in data suggesting the opportunity for new and prospective advisors to improve America’s financial health. *** Since its passing in late 2017, you have probably heard of the Tax Cut Jobs Act (or TCJA). With tax season in full swing, you have probably seen it being mentioned even more frequently. But perhaps you’ve always had your tax professional handle all of your matters and aren’t really sure of the new law’s significance. As prospective financial planners, the passage of TCJA cannot be understated. Major changes to the tax law do not come around very frequently. The last? 1986 (!).…
-
Industry Insights: Licenses Needed for Each Type of Business Model
“Industry Insights” covers trends and topics within the financial planning industry. *** We continue our look at some of the fundamental aspects of the financial services industry. Last week, New Planner Recruiting hosted an informational webinar covering tips for getting hired as a new planner. One of the slides did a good job summarizing the industry’s business models while including some of the big-name firms within some of the models. In addition, the slide addresses a frequent source of confusion for many new to the industry – which licenses are needed for each model: While certain licenses may be better-known to industry newcomers, they may simply not be needed depending…
-
Financial Planning Articles (February 2, 2019)
“Financial Planning Articles” is a collection of articles and research that I’ve been reading regarding financial planning, industry trends, career development, and more. *** This edition begins with two articles on the topic of advisor value. The first, from Sarah Max with Barron’s, provides a recap of industry studies showing the significantly positive impact advisors continue to have on client finances. Michael Kitces and behavioral finance specialist Carl Richards continue the topic in their inaugural collaboration (of what may turn into a series) discussing the multiple sources of advisor value (while teasing how to frame value with clients). We then turn to a financial planning practice article on the growing…
-
The Need for Financial Planning: Two Types of Portfolio Risk (Part 2)
“The Need for Financial Planning” covers financial planning topics and ties in data suggesting the opportunity for new and prospective advisors to improve America’s financial health. *** Continuing our look at systematic risk, unsystematic risk, and diversification, today we dive in a bit deeper to consider foreign equity markets and historical returns. As we mentioned in Part 1, investors tend to overallocate their equity positions to their home country (a tendency referred to as home-country bias). For example, we noted that U.S. investors allocate over 70% of their stock portfolio to U.S. stocks even though they only represent approximately 50% of the global stock market. When considering foreign equities, which are the…
-
Industry Insights: Differences Between Broker-Dealers and RIA Firms
“Industry Insights” covers trends and topics within the financial planning industry. *** It can be a challenge to understand the basic models of financial planning firms. Terms and acronyms like broker-dealers, IBDs, wirehouses, and RIAs can quickly become confusing. To add some clarity, let’s take a closer look at some key differences when considering the two primary models: broker-dealers and RIAs (Registered Investment Advisors). Broker-dealer is the term for entities that trade securities for their customers (brokering) or for their own account (dealing). Those who get their start with broker-dealers have to become registered representatives (through industry licensing). Registered representatives are paid on the basis of product commissions and must recommend…
-
Financial Planning Articles (January 11, 2019)
“Financial Planning Articles” is a collection of articles and research that I’ve been reading regarding financial planning, industry trends, career development, and more. *** This installment features a heavy dose of personal and career development articles from both Michael Kitces at Kitces.com and Shane Parrish at Farnam Street. Kitces explains why what may feel like “paying your dues” as a new advisor is really just a necessary aspect of learning the skills of the profession. His second article reviews strategies for satisfying the CFP Board experience requirements as a career changer. Parrish’s articles cover productivity (and doing less in order to do more) and learning how to learn and better…
-
The Need for Financial Planning: Two Types of Portfolio Risk (Part 1)
“The Need for Financial Planning” covers financial planning topics and ties in data suggesting the opportunity for new and prospective advisors to improve America’s financial health. *** When designing portfolios, one of the primary issues is defining, measuring, and allocating risk. The traditional approach to risk management separates risks into two worlds: systematic and unsystematic risk. What exactly do these risks entail? Systematic risks are risks that investors accept by simply investing in the system. In other words, these are market risks that cannot be diversified away. Systematic risks include such negative events as wars, natural disasters, and other similar unexpected events. If you’ve ever heard of the term Beta,…
