Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the article generating the most “buzz” in the world of financial advisors this week: a takedown of the DALBAR behavior gap study by Morningstar’s David Blanchett, who, similar to Wade Pfau in recent months, and this blog several years ago, finds that the DALBAR methodology does not accurately measure (amnd substantially overstates) the actual size of the investor behavior gap caused by bad-market-timing investment decisions. (Though Blanchett still affirms that the behavior gap exists, albeit at a far small magnitude than the nearly-600-basis-points that DALBAR suggests). Also in the news this week was a recent social media guidance update from FINRA, in Regulatory Notice 17-18, which should dramatically expand the adoption of social media for registered representatives working under broker-dealer firms.
From there, we have a number of articles about industry trends this week, from a major announcement that Merrill Lynch is stepping back from the “recruiting wars” amongst broker-dealers and instead is going to focus on hiring advisors with 3-8 years of experience and their CFP certification and pay them a stable salary for three years, to the latest M&A activity for RIAs (which hit an all-time high in the first quarter of 2017, but appears to be rotating to “smaller” firms with $100M to $1B being sold), a substantial increase from advisors and their clients in socially responsible investing (with a desire for SRI up from barely 20% to over 40% in just one year!), and a look at the accelerating growth of Vanguard and Schwab’s tech-augmented-human advisor services, which at their current pace could siphon off as much as 2% of the aggregate growth of the entire RIA community in 2017.
Other articles on industry trends this week include: an in-depth Barron’s profile on Morningstar, its new CEO Kunal Kapoor, and its controversial decision to begin offering nine mutual funds in its Managed Portfolios solution for advisors, despite its history as an independent rater of mutual funds; Bogle’s “dire” forecast for the mutual fund industry, that funds shouldn’t even bother trying to compete on price (because they won’t win), and that at best they should just focus on their core competencies and try to win where they can, or simply enjoy the profits while they can get them until their funds wind down; the parallels between what Vanguard did to mutual funds, and what robo-advisors might do to human advisors, and where the silver lining may be; and a look at how, as more and more advisors become “fiduciaries”, there will be a growing awareness that not all fiduciaries are the same, and some simply don’t have the competency to execute as fiduciaries… which could even lead to a backlash against the term.
We wrap up with three interesting articles, all around the theme of consumer financial stress and financial advice behaviors: the first looks at how financial literacy programs are not only failing to make a lasting impact when actual outcomes are measured, but could actually cause harm by making people overconfident in their actual financial capabilities, and fail to recognize the impact their circumstances may have on their financial situation; the second looks at the growing base of research on how financial stress of employees impacts the workplace, which appears to be spurring a growing interest in employers to support financial planning and financial wellness programs; and the last is a fascinating look at the latest FINRA financial capability study to try to identify who is more likely to seek out financial advice (or not), and finds that one of the greatest inhibitors to hiring a financial advisor may be the consumer’s fear about whether they’re hiring a good one (or not)!
Enjoy the “light” reading!
source https://www.kitces.com/blog/weekend-reading-for-financial-planners-may-13-14/?utm_source=rss&utm_medium=rss&utm_campaign=weekend-reading-for-financial-planners-may-13-14
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