Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the big news that Focus Financial, the RIA roll-up aggregator that is fresh off having a majority stake acquired for nearly $2B, just acquired a pair of ultra-HNW independent RIAs with a whopping $18.5B of AUM, with rumors that the intention is not merely to keep growing and rolling up advisory firms, but aiming to cross-sell those ultra-HNW clients with estate tax problems potentially lucrative life insurance policies… and raising questions of the product-independent nature of getting advice from an RIA (and whether the existing Focus Financial RIAs will even be willing to support the sale of insurance products).
From there, we have a number of investment-related articles this week, from a look at what it really takes to run an ETF index (it’s harder than it looks!), to a series of studies suggesting that SRI/ESG investing may adversely impact performance (ironically perhaps because eschewing vice and sin stocks appears to give them a relative bonus on performance that SRI/ESG funds then miss out!), a look at how risk tolerance questionnaires for investing might change in the world of big data (where at a click of the button, you might be able to see exactly how clients invested/behaved in prior bear markets), and a discussion of whether it’s time to transition to “behavioral finance 2.0”, which stops just looking at broad-based trends in how consumers behave sometimes irrationally, and instead boil it down to what’s going on at an individual level, and what it actually takes to help them change their behavior for the better.
We also have several practice management articles, including: how to spot warning signs that a client may be thinking about leaving (and what to do about it); how to conduct surveys of your ideal clients to figure out what it really takes to get more of them (and differentiate your services and expertise for them); the problem with the “I Know Better” fallacy of trying to prescribe what your clients want, instead of just asking them (not everyone has the intuitive genius to just “figure it out” the way Henry Ford and Steve Jobs did!); and some great advice on how to reframe and “reset” your relationship with accumulator clients who are now preparing to retire, so they realize you can be just as relevant and valuable for them in the coming years of retirement as you were in the process of helping them to get there.
We wrap up with three interesting articles, all around the theme of behavioral finance and financial psychology: the first examines a new research study on why retirees tend to spend less as they age, suggesting that it may not just be a matter of slowing discretionary expenses, but a rising pessimism that makes us more concerned and less optimistic about the risks and return potential of markets; the second looks at various mental accounting mistakes we make when thinking about retirement spending (including the challenge that those who are frugal in accumulating for retirement often have trouble re-tooling their thinking to be able to enjoy their money in retirement); and the last looks at the way clients answer the question “would you prefer to have $1,000,000 in retirement, or a $5,000/month (guaranteed) income”, and how some retirees appear to suffer from an “illusion of wealth” or an “illusion of poverty” that causes them to believe one is substantially more or less valuable than the other (even though, according to current annuity rates, they’re approximately equal in value).
Enjoy the “light” reading!
source https://www.kitces.com/blog/weekend-reading-for-financial-planners-may-20-21/?utm_source=rss&utm_medium=rss&utm_campaign=weekend-reading-for-financial-planners-may-20-21
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