Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with a “surprising” Field Assistance Bulletin issued last week by the Department of Labor on its looming fiduciary rule, noting that there’s a real possibility that the rule will not be delayed by the April 10th applicability date, but then stating that if the delay (or even a non-delay outcome) comes shortly thereafter, the DoL won’t enforce the fiduciary rule during the gap period (though notably, any damaged clients in the gap period could conceivably just sue directly).
Also in the news this week was the announcement that Schwab has officially pivoted away from its robo-advisor to a new hybrid offering dubbed Schwab Intelligent Advisory, which will provide advice directly from CFP professionals (in addition to automated portfolios); at the same time, T. Rowe Price announced the launch of its own pure robo solution, ActivePlus Portfolios, though the offering will be limited to providing an asset allocation of T. Rowe Price’s own mutual funds (at no additional cost, beyond the mutual fund expense ratios themselves). Also in the news this week was the revelation that Morningstar is actually preparing to launch its own mutual funds for its Morningstar Managed Portfolios advisor platform, which is suggests will reduce costs on the platform by as much as 20%, but in the process puts the firm in the conflicted position of being both a rater of mutual funds and a manager of some.
From there, we have a number of technical articles, including: the news that the Tax Data Retrieval Tool from the IRS that is used to facilitate income verification for the FAFSA (and income-based repayment plans for student loans) has been taken offline for several weeks due to potential criminal activity (identity thieves trying to steal taxpayer information); an analysis from Ed Slott of the prohibited transaction rules for IRAs that can potentially disqualify the entire account if non-traditional assets are not handled properly; and new research that suggests a slightly different approach to retirement income planning, where consumers don’t simply diversify their portfolio assets, but instead try to diversify amongst the available “Retirement Income Generators” (RIGs) – which might include systematic portfolio withdrawals as one component – to effectively “pensionize” retirement.
We also have several practice management articles this week, from the challenge of figuring out the “right” valuation of your advisory firm (recognizing that outsider buyers often offer higher valuations than internal succession plans, but if key employees leave the outside deal could end out paying less in the long run after all), to the question of whether advisory firms should offer more flextime to employees (and how to structure it), and a look at the rise of Interactive Brokers as a new low-cost niche custodian for independent RIAs (especially those who trade actively and globally).
We wrap up with three interesting articles on the dynamics of managing advisory firms: the first reviews a major new research study of the industry, finding that there appears to be a substantial gender bias in advisory firms when it comes disciplining misconduct, with male advisors being 3x more likely to commit serious misconduct, with a 20% larger average damages settlement for consumers, yet it’s female advisors with misconduct who end out being 20% more likely to get fired and 30% less likely to find another advisory job (though notably, the difference largely vanishes once there are females amongst the ownership or executive suite!); the second is a look at an advisor who decided to establish her RIA as a B Corporation, a new voluntary certification that businesses can obtain to affirm that they will operate not just to maximize profits, but the interests of all stakeholders (which aligns especially well to independent RIAs that serve as fiduciaries to clients in the first place!); and the last is a look at how businesses need to be cautious not just to espouse certain “noble values” that all employees aspire to, but actually include those values in their interview/hiring process, firing employees who fail to live up to them, and promoting those who espouse them best in practice – because otherwise, it doesn’t matter what the firm says, if what it rewards is different, eventually all employees will migrate their behaviors to fit the values that are being rewarded, not the ones written in a corporate Core Values statement.
Enjoy the “light” reading!
source https://www.kitces.com/blog/weekend-reading-for-financial-planners-mar-18-19/?utm_source=rss&utm_medium=rss&utm_campaign=weekend-reading-for-financial-planners-mar-18-19
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