Financial Advisor Marketing & Technology

Marketing & Technology For Independent Financial Advisors


Archive for May, 2009

Password Management And Form Filling

At a recent webinar I conducted, I briefly showed attendess a program I use for password management. An advisor today emailed me a question asking me about that program.

Incidentally, if you have questions for me, please post them as comments on my blog. Don't email them to me. A lot of other advisors who read the blog regularly can probably benefit by seeing your question or may be able to answer it. I'm trying to create a community here and would genuinely appreciate your help by posting your comments and questions. About 1,000 unique visitors come to my blog every day and it would be great if you were all more visible and kept me in line.I've seen a nice increase in the last week or two in comments and appreciate that.

But back to the password management issue: The program I showed at the webinar recently is RoboForm. It's an inexpensive application that runs on your desktop. It's integrated into Internet Explorer. I've used it to store passwords for my bank account, Amazon, and dozens of other websites for about 10 years.

With RoboForm, you create one "master password" that gives you automatic access to all of your other passwords. You'd better never forget that password!

RoboForm automatically stores the URL of each log-in page—for Google, brokerage and credit card accounts, a back-up service you use, etc.

When you want to log in to a password-protected website, you can pull down a list of passwords in RoboForm. RoboForm will navigate you to the website, automatically fill in your user ID and password on the site, and log you in.

The image on the right shows you the way RoboForm is embedded in my browser. The upper left corner of the image shows you the RoboForm toolbar in my browser. When I click on the "Logins" buttons, I see a list of all password-protected websites for which I have stored log-ins in RoboForm. When I choose any of the sites on that list, RoboForm automatically navigates to the log-in page, fills in my credentials, and logs me in.

RoboForm has a number of other useful features, including:

  • Password Generator to automatically generate "strong" passwords that would be impossible for you to remember
  • Auto-fills forms for you. Insert your credit card numbers, Social Security number, phones, and other identification information one time in RoboForm and it stores it and fill it in when you come to sites requiring that information.
  • Secure note storage.

Any password or other information you store in RoboForm can be encrypted. I’ve never had a security issue.

RoboForm requires a few weeks of active use to master but you can get started using it immediately. The company also makes version that runs on a USB thumb drive, RoboForm2Go, allowing you to carry around stored passwords that are encrypted. Just plug in the USB drive and you can use your passwords on any PC and leave no trace of them behind.

I don't use this RoboForm2Go, but I trust RoboForm and can see why some advisors might find this useful. I would probably "wear a belt and suspenders" if using RoboForm2Go by running it on a USB drive that can be "killed" if lost, something like the Kanguru Defender.

Schwab Tech Honcho Skiles Resigns

Dan Skiles, the face of advisor technology to 5,500 RIAs clearing through Schwab Institutional, resigned his post several weeks ago and started a new job today at Shareholders Service Group (SSG).

Why did the affable 38-year-old executive leave Schwab, by far the largest custodian serving independent advisors, for SSG, one of the smallest custodians? Partly, Skiles says, because SSG offered him a partnership stake and partly because SSG reunites him with former colleagues from his pre-Schwab days, but mostly because he wanted to see his two children more.

In March, when Skiles’ seven-year-old son, Luke, set the table for dinner for his wife and six-year-old daughter but set no place at the table for his father, who he assumed was travelling on business, Skiles says he decided his life was out of order.

“SSG is an opportunity to feel challenged and passionate about my work, which I was at Schwab, but also to still make it home for dinner every night,” says Skiles. “My dad went to Vietnam and was away from my brother for an extended period. He didn’t have a choice, but I do.”

Skiles is an expert on practice management and his role at Schwab landed him at the center of crucial advisor technology issues.

As vice president of Schwab Institutional advisor technology solutions, Skiles was responsible for running a department with 10 technology consultants who are stationed all over the country and charged with giving advisors free advice about implementing portfolio management software and other key systems. In addition, Skiles also oversaw Schwab Performance Technologies, a Schwab subsidiary that owns and distributes PortfolioCenter, a leading portfolio reporting software used by 3,400 RIAs.

A San Diego native, Skiles graduated from San Diego State University in 1993 with a bachelor's degree in recreation management and opened a rock climbing gym with several roommates. He worked in that business for only a few months before being introduced to Robert Reed, a senior executive at discount brokerage Jack White & Co., in 1994. At their first meeting, Reed, who was the No. 2 executive at White, asked Skiles to come back later that same day to meet Peter Mangan, who ran White’s mutual fund supermarket and fledgling RIA business. Mangan hired Skiles on the spot. (The rock clmbing business was sold within a couple of years sold but remains a successful company.)

Internet discount brokers like White grew wildly in the mid-1990s and Skiles handled everything from working on the phones with retail clients to manning the trading desk and helping define technology for advisors. In 1998, when TD Waterhouse purchased White, Skiles was tapped to explain the merged firm’s technology solutions to advisors, and he was instrumental in the design and implementation of VEO, a web-based interface for advisors to Waterhouse’s brokerage platform.

In September 2001, I invited Skiles to participate in a panel I was moderating at the FPA Retreat featuring technology chiefs from all three major custodians—Fidelity, Schwab, and Waterhouse. I invited all three executive to lunch, where Skiles met Rich Freyberg, who then headed advisor technology at Schwab. Freyberg told me after that meeting that Skiles was a “Boy Scout” (referring, presumably, to Skiles’ integrity and not his boyish, clean-cut looks). Several months later, Skiles went to work at Schwab Institutional.

Skiles had a tough job at Schwab because the giant brokerage competes with advisors for retail business and makes portfolio accounting software, a critical system in advisor businesses. Many RIAs for years were uneasy about allowing Schwab to provide their core technology system and custody services, a tension that came to a head in 2001 after Schwab announced it would stop selling its CenterPiece PMS system to advisors that did not use Schwab as a custodian. As Skiles rose in Schwab’s ranks and gained influence over decisions about the company's advisor technology, he was able to avoid hitting such hot-button issues, and relations between Schwab and its RIAs have in recent years been less controversial.

Working at SSG reunites Skiles with Reed, an executive VP and chief compliance officer at SSG as well as with Mangan, SSG’s CEO and majority owner. As I wrote in a recent post, SSG is now a custodian to about 500 RIA firms and it is experiencing a boom amid the economic bust. While the $2 billion amount of assets SSG custodies for RIAs is dwarfed by the big-name custodians—Fidelity, Pershing, Schwab, and TD Ameritrade—SSG has built a profitable business around smaller RIAs that the larger custodians don’t value as much.

According to Mangan, SSG is making inroads with established RIAs with an average of about $30 million of assets under management and who run portfolios of funds, ETFs, and stocks. It’s also gaining traction, he says, with advisors leaving regional and wirehouse brokerages who typically bring no assets initially but garner an average of $15 million in assets from clients within a year of transitioning to SSG. While SSG uses Pershing to clear, and Pershing has its own RIA custody business, Mangan says SSG has differentiated itself by providing diligent service to its advisors and putting together a unique technology platform.

Skiles, who is the 13th employee on the SSG staff, will work on improving internal technology systems used by SSG to service advisors and to help build a technology platform used by its RIA clients. With the broad but undefined title of executive vice president, Skiles' likable personality and natural skills in marketing, communication, and sales as well as his knowledge of advisor technology is likely to help SSG gain a higher profile with advisors even as it is dwarfed by Fidelity, Pershing, Schwab, TD Ameritrade.

What Would FINRA Do?

Investment advisors who have reflexively blasted SEC Chairman Mary Schapiro for saying the government should further regulate RIAs ought to look upon the civil fraud complaint filed against former NAPFA President James Putman as a cautionary tale.

I’m no big fan of FINRA. The Self-Regulatory Organization’s rules often get in the way of communicating with clients and running an honest advisory business. But the SEC’s allegations against Putman are so terribly damning.

Inarguably, additional rules are needed to better protect investors from unscrupulous RIAs. Far less clear, however, is whether being regulated by FINRA would have prevented the fraud Putman is accused of carrying out.

While the case against Putman is but one of a string of SEC enforcement actions targeting RIAs in recent weeks, it’s notable because Putman was a prominent member of the fee-only advisor community and at the moment this once-priestly segment of the advisor world benefits by confronting some ugly realities about the erosion of fidelity within its ranks. With RIAs vociferously protesting SEC Commissioner Schapiro’s stated intention to “harmonize” rules faced by RIAs with those faced by securities salespeople, reps of RIA may be more mindful that something must be done to protect the public’s trust in investment professionals if they understand the facts of the case against Putman.

In reading my summary of the facts stated in the 30-page, nine count SEC civil complaint filed against Putman, his RIA, and his former president and chief investment officer, please think about whether FINRA regulation would have better protected his clients. Leave a comment with your thoughts.

Putman, 57, started Wealth Management LLC, an Appleton, Wis. RIA, in 1985. He served as president of NAPFA in 1996 and 1997. Putman reportedly has not been active in NAPFA in recent years. However, as recently as September 2006, he participated as a panelist at a “NAPFA Cutting Edge Conference,” speaking at a session entitled, “The Search for the (NEW) Investment Paradigm.”

Putman is charged by the SEC with a litany of securities law violations, along with Simone Fevola, 49, who was president and CIO of Wealth Management (WM) from September 2002 to October 2008. The wrongdoing allegedly surrounds six unregistered private limited partnerships created in 2003 by Putman, which significantly changed his firm’s business model. In one of several similarities withthe Madoff fraud, WM took custody of client assets in the pools.

The pooled investments were structured like hedge funds and, as private vehicles, were unburdened by the need to register publicly. Each of the six funds had a specific objective, according to Part II of Wealth Management’s (WM’s) Form ADV ranging on the risk spectrum from capital appreciation to income producing. None was described as speculative. They were to invest in other private funds, funds of funds, debt, real estate partnerships and trusts, and asset-based loans.

As is often the case, the funds wese given an assortment of cryptic names, such as Gryphon, Quetzal, Pantera, and Watch Stone. Putman, who had discretion to invest on behalf of his clients, invested about 47% of his firm’s clients in Watch Stone and 40% of them in Gryphon.

According to the SEC complaint, offering documents for Watch Stone and Gryphon, the two largest of Putman’s pools, say their investment objective would be “to achieve a high level of income consistent with the preservation of capital” and the pools would primarily invest in “investment grade debt securities.” However, Putman and Fevola invested in “risky illiquid alternative investments,” the SEC says. It gets much worse.

An April 14, 2009 Form ADV filing by the federally regulated RIA claimed investments in the six pools were worth $102 million and that WM had another $29 million in separately managed accounts. The SEC says nearly 90% of the $102 million in client funds was invested in two of the partnerships, Watch Stone and Gryphon, which respectively had $50 million and $38 million. The SEC says now that the six WM funds “appear to have limited remaining assets.”

The SEC says Putman loaded up Watch Stone and Gryphons with investments in a life-insurance premium financing partnership that was managed by Joseph Aaron. Aaron in 1996 had been the subject of an SEC enforcement action alleging that Aron had committed fraud in selling promissory notes to investors. Moreover, the SEC says, Putman and Fevola knew about Aaron’s disciplinary history by 2004 but they still failed to verify that valuations Aaron placed on his funds were accurate.

Not only did Putman and Fevola fail to disclose Aaron’s shady past to WM’s clients, but the SEC says they also each accepted “undisclosed kickbacks” from him of $1.24 million in 2006.

Thus, even if you believe that Putman and Fevola were victims duped by Aaron, the SEC allegations paint a picture of Putman and Fevola falling in deeper with Aaron instead of blowing the whistle on him and admitting their mistakes to WM’s clients.

Meanwhile, in addition to the disastrous investments in Aaron’s life insurance investment scheme, other investments made by Stone Watch and Gryphon also went bad. Three of Stone Watch and Gryphon’s largest investments beyond Aaron’s partnerships are now in bankruptcy. Two are real estate funds, managed by California-based MKA Advisors, that went bankrupt in April 2009 and another investment is in fund called Sagecrest, a Connecticut partnership investing in asset backed loans that went bankrupt in the summer of 2008. While Putman in December 2008 wrote off 50% of the value of Sagecrest, the SEC says Putman has continued to value MKA’s investments at pre-bankruptcy levels in reports to clients.

The SEC alleges Putman had never fully disclosed the risks of the underlying funds invested in by Stone Watch and Gryphon, saying the funds were investing in investment grade securities when the offering documents for the underlying funds said investments were be risky and speculative, such as oil drilling deals. The SEC complaint cites a 70-year-old retiree with Alzheimer’s disease who had signed an investment policy statement targeting a fund with a 95% allocation to fixed income securities.

The Case Now
In the last 10 months, a majority of WM’s staff resigned or was terminated, the SEC says. To a reporter who has read many such SEC complaints over the last 25 years, it seems likely that WM staff, possibly Fevola, is actively cooperating with the SEC investigation and that the SEC is now targeting Putman.

As of December 30, 2008, the SEC says Putman valued Watch Stone at $47 million and Gryphon at $22 million. But according to notes taken by a staffer of the RIA during a recent client meeting, the SEC says, Putman admitted to the client that its investment in one of Aaron’s deals could be worthless.

One investor, whose statement cites an investment worth $1 million, was recently told by Putman that his investment could be worthless. Another investor, with a reported value of $670,000 on his 2008 year-end statement, told SEC investigators that he was recently informed by Putman that his investment could also be worth nothing. The SEC says Putman has continued to collect his 1.25% management fee on the funds based on the allegedly overstated valuations of the assets.

The government says that in February 2008 Putman wrote to clients saying that he was was limiting redemptions to 2% per quarter of the value of each client’s holdings for liquidity reasons. However, the SEC says he has arbitrarily honored full redemption of some investors.

“Absent immediate relief, it is likely WM and Putman will distribute the remaining assets of the WM Funds to a few investors who submitted redemption requests prior to September 3, 2008 and leave remaining investors with little or no recovery.”

What's It Mean?
The SEC complaint against Putman should serve as a cautionary tale to advisors. Those who knew Jim Putman say he was a straight shooter and cannot imagine what could have led him down such a tragic path. It's unlikely that Putman intended to defraud his clients when he started the partnerships in 2003.

Anyone who understands human nature should know that we are all tempted by greed, hubris, and corruption. Years of good bullish stock and bond markets and over-the-top returns on alternative investments could easily have caused some advisors to believe they could do no harm and to underestimate risks posed by some deals. From there, it’s a slippery slope and easier to fall in with scoundrels and become corrupt in desperation.

That's why I think advisors should start talking about the shape of coming regulation. Instead of knee-jerk reactions that dismiss calls for new regulation, groups respresenting advisors should be constructively helping to propose solutions.

For example, officals from the Financial Planning Asssociation, Investment Advisers Association, and NAPFA are quoted in an Investment News story pusblshed this afteroon saying that they strongly oppose an SEC proposal to conduct surprise audits by outside firms and have the cost of the exams come out of advisory fees.

How can FPA say that such a program would not affect investor protection? Why is NAPFA saying it's "overkill?" What are these people thinking?

I cannot remember a time when NAPFA and the Consumer Federation of America have been at odds. What's happened with NAPFA's penchant for being on the right side of consumer issues?

The Putman case shows that advisors need to be better policed, and the industry's leadership should embrace that idea by coming up with realistic good-faith proposals–not rhetoric aimed at protecting the interests of advisors but solutions that protect both investors and advisors and, thus, in the long run make for a better business environment for advisory firms.

My question is:
What regulatory framework is best able to restore investor trust when it has been so badly abused under the current compliance regime? Would FINRA oversight of Putman have made a difference? What do you think?

Former NAPFA President Faces SEC Fraud Charges

A former president of the National Association of Personal Financial Advisors (NAPFA) was charged by the U.S. Securities And Exchange Commission yesterday with accepting $1.24 million in kickbacks, dealing a highly embarrassing public relations blow to NAPFA, a champion of consumer rights, advisor integrity, and applying the fiduciary standard to advisors.

The SEC complaint alleges that James Putman, founder, majority owner, and CEO of
Wealth Management LLC of Appleton, Wisconsin, accepted $1.24 million in undisclosed payments derived from investments made by the unregistered investment pools. Simone Fevola, the firm's former President and Chief Investment Officer, was charged along with Putman for taking undisclosed payments from the unregistered investment pools.

The SEC also alleges that Wealth Management, Putman and Fevola misrepresented the safety and stability of the two largest investment pools and placed clients into these investments even though they were inconsistent with some clients' objectives.

According the SEC litigation release, the agency filed an emergency civil action in U.S. District Court of the Eastern District of Wisconsin to obtain an order to freeze the RIA’s assets.

The SEC alleged Putman and Fevola sold clients the private deals from May 2003 through August 2008. In 2006 and 2007, the SEC says, Putman and Fevola each accepted at least $1.24 million in undisclosed payments derived from certain investments made by the pools.

According to the SEC, Wealth Management claims currently to have approximately $102 million of its clients’ assets invested in the pools. However, the SEC says that the pools have “limited remaining assets and that it appears likely that the reported values of the pools are substantially overstated.” The SEC's complaint alleges that the pools' assets are largely illiquid, and Putman has provided redemptions to investors based on what the agency believes to be overstated valuations.

"As we allege in our complaint, Putman and Fevola put their own financial greed ahead of the safety and stability of their clients' investments," said Merri Jo Gillette, Director of the SEC's Chicago Regional Office. "They abused the trust that their clients placed in them, and emergency enforcement action was necessary to prevent further harm to those clients."

The SEC's complaint charges Putman, Fevola and the RIA with fraud. In addition to seeking emergency relief, the SEC's complaint seeks permanent injunctions barring future violations of the charged provisions of the federal securities laws, disgorgement of the defendants' ill-gotten gains plus pre-judgment interest, and financial penalties.

According to Putman’s biography on his firm’s website, Putman was co-founder and the first President of the Northeast Wisconsin Chapter of the International Association for Financial Planning (IAFP), now the Financial Planning Association. He served on NAPFA’s Board of Directors in 1995 and 1996 before being elected as President of NAPFA and serving his term in 1996 and 1997.

Wealth Management’s website features the cover of Financial Advisor, the trade magazine for which I write, which wrote a story quiting him a year ago. (A previous version of this post incorreclty characterized the FA story as "flattering.") It also features a cover story from Bloomberg Wealth Manager Magazine, entitled “Pooled Assets: Why Some RIAs Are Creating Customized Investment Vehicles,” in which Putman is quoted extensively. The site also features a Worth Magazine (my former employer) cover story from July 2002 in which Putman was selected as one of the “Top 250 Financial Advisors In America,” and the cover from Medical Economics’ November 2006 list of the “Top 150 Best Advisor For Doctors.”

The allegations of wrongdoing against a former NAPFA president could not have come at a worse time for the group, which is part of a troika with FPA and the Certified Financial Planner® Board of Standards lobbying Congress for creation of a new Self Regulatory Organization to oversee financial planners. Last month, another NAPFA member, Matthew Weitzman of AFW Wealth Advisors in New York City, was caught up in scandal and was reportedly the target of an SEC probe, according to a story by New York Times personal finance columnist Ron Lieber, who was one of Weitzman’s clients.

In a post here just yesterday, I mentioned that the continuing string of scandals involving RIAs make it unlikely that any effort to further regulate RIAs could be thwarted by NAPFA, FPA and the CFP Board. But revelations about Putman are particularly sad because he held himself out as a leader of NAPFA, an organization that is dominated by members with great integrity, advisors who have always been at the forefront in campaigning for issues in the interest of consumers. To see NAPFA’s reputation stained by a few bad members is heartbreaking.

For years the "fee-only" brand and NAPFA's brand itself were slowly compromised.The fee-only brand starting about 10 years ago was embraced and then abused by advisors who take hidden sales fees and behave unscrupulously. (NAPFA did try saving it by trademarking the term "fee-only," but was met by harsh criticism and gave up the fight.) Now, however, the NAPFA brand itself has been abused, which will inpsire a new skepticism from the press and cause confusion among consumers.

While NAPFA has remained a beacon of light in the sometimes shrouded world of financial advisors by supporting a fiduciary standard, it also increasingly became a marketing machine for advisors who used the referral network and favorable press garnered by NAPFA to grow their businesses and who were little interested in the high ideals of many the group’s members. Perhaps the news about Putman’s troubles will cause an introspective discussion among NAPFA members and help the group reclaim its high moral ground.

One other good thing that may come of this is that maybe—just maybe—a reporter in the consumer press will write about the idiocy of these “top financial advisor” lists, which sell magazines but stink at figuring out which advisors are really the best. There is no substitute for real research, which these magazine stories always fail to do. While the articles in Worth and Medical Economics were great marketing for Putman’s firm, these publications can’t possibly research all of the nation’s advisors and find the best ones without a massive effort, an undertaking they are unlikely to know how to effecutate or finance.

There ought to be rule prohibiting advisors from using the “top advisor” lists as the centerpiece of their marketing effort when the list is old. Worth has done several new lists since 2002, but Putman’s website does not mention this. It just has the cover from Worth’s 2002 issue on the home page. The same true of the Medical Economics list from 2006 on Putman’s site, which makes no mention of the more recent lists by the magazine, which presumably left out Putman.

Putman-SECComplaint.pdf (1.10 mb)

More On RIA Regulation Changing

Pat Allen's question about my previous post about RIA regulation touches on an important issue. She wrote:

“I've been thinking that the reason Investment Advisors are more communicative on the Web is that they are not regulated by FINRA. Is that right–would you expect that a different advertising standard will be applied? One consequence of which would be that IAs will be discouraged from blogging, tweeting, etc.?”

Yes, that's absolutely right! If you look at the day-to-day compliance issues that SEC- and state-registered RIAs face versus Registered Reps regulated by FINRA, you see that RIAs have a lot more freedom.

The rules reps face are much more stringent because they are supervised by BDs. An advertising-rules manual from a BD that is given to reps is typically 100 pages in length or more.

In contract, RIAs supervise their own compliance and don't create elaborate compliance bureaucracy. They can operate more efficiently and with less hassle–tweeting and blogging, for instance.

Rules RIAs face are very serious but simple. In a nutshelll: disclose all conflicts, don't make anything approaching a false claim, don't advertise a performance track record unless you've had it checked over by an expert in this area, and don't publish any sort of testimonials. That arguably covers just about everything RIAs need to worry about when it comes to advertising.

Keep in mind, the regulation of RIAs is different from regulation of reps for good reason. RIAs have traditionally been a pretty trouble-free area.

When I wrote The Advocate column at Worth magazine during 1994 and 1995, I was charged with helping investors who felt they had been ripped off. I received scores of letters from investors every month. None of them ever was a complaint about an RIA. Not a single one!

Since then, however, many more advisors have realized the benefits of not being affiliated with a BD and have set up RIAs and dropped their securities licenses. Invariably, I fear, the ranks of RIAs have been infiltrated by less competent advisors and some entirely lack integrity. Even an active NAPFA member was recently caught up in scandal.

RIAs should have been more active in policing their ranks themselves. THe FPA, NAPFA, and CFBP Board have made a lame efort at creating a self-regulatory body for over 10 years evenr they it was becoming obvious that the industry was becoming less exclusive and and more open to unethical behavior, and they all failed to get anywhere. Now the horse is out of the corral. We've had Madoff and, worse still, a string of other frauds.

Meanwhile, many RIAS have become irresponsible in following the rules. Just yesterday, for instance, I came across an advisor on LinkedIn who was recommending his partner! That could easily be construed as a testimonial. And what value does it have? It’s an endorsement from his partner! And this is an IA rep I know for years who has been in a leadership position at FPA! He's attended webinars about social networking compliance and knows this is an issue.

Also yesterday, an IA rep told me he had testimonials on his LinkedIn profile page from leaders of important institutions in his niche. When I mentioned that this may violate the rules prohibiting testimonials, he went on a rant about how the rules are outmoded and don’t make sense in a Web 2.0 world. While he may be absolutely right in saying that the testimonial rules on RIAs may be outdated, he can’t just ignore the rules! We'd have anarchy if everyone ignored traffic lights that are unresonably long or stops signs we deem to be misplaced.

Calls for more regulation of RIAs will be hard to fight at this point. The shape and form remains a big unknown. Since RIAs don’t have the equivalent of a BD, what can take its place in a new regulatory regime administered by a branch of FINRA? I wish more advisors would chime in here on this issue.

Life Planning Will Be A Winner In The Financial Crisis

While the economy has escaped the most frightening doomsday scenario, the financial crisis is far from done with us. Department stores and malls remain practically empty in Long Island most weekdays. Getting into fine restaurants on a Saturday night no longer requires reservations weeks in advance. Workers at my local Home Depot are so fearful of losing their jobs that they're actually friendly and service-oriented now. Meanwhile, in our corner of the economy, many advisors worry that over the next couple of years clients who have been disappointed by their portoflio's performance will fire them.

However, the setback suffered by clients in their retirement portfolios and the rampant distrust of financial advisors unleashed by the Madoff scandal are likely to cause advisors to rethink the way they practice. Advisors will reinvent the financial advice business. As with earlier financial crises, change will follow. Progress will come inevitably. And a winner when this crisis ends is likely to be Life Planning.

This school of financial planning is practiced by only a small minority of advisors but is nonethless highly inlfuential in the way planning is performed. With Life Planning technqiues, advice you give clients can be more meaningful and fulfilling–not just to your clients but also for yourself. It can make your business less susceptible to market gyrations. With regulatory changes on the horizon that are likely to further blur the line between fee-only planners and brokers and between fiduciaries and salespeople, Life Planning practitioners will still stand apart from crowd.

To understand Life Planning and the shape of things to come, you may want to attend The Financial Crisis Webinar Series this Friday at 4 p.m. EDT when George Kinder, the inventor of Life Planning, will speak about how this way of practicing can help advisors and their clients through the crisis.

Kinder is an orginal thinker who inpires people. He yearns to bring meaning to his life by making the lives of others more meaningful. I first interviewed Kinder seven years ago for a column published in the August 2002 issue of Investment Advisor Magazine. Below is that story, which seems as timely now as it was then.

George Kinder Interview by Andy Gluck

I’m a meat and potatoes kind of guy. I like facts, clear-cut answers. I like Monte Carlo simulations that project my portfolio’s potential returns 10,000 times to show me that I have a 90% chance of not running out money until I am 112. “The proof will set you free!” is my motto. So I’ve been totally nonplussed by the life planning movement.

For those of you who don’t read Bob Veres’s newsletter and who have missed the trend, a growing number of planners have been asking clients touchy feely questions about their lives and a handful of larger planning firms are hiring a social worker or psychologist to help give better financial advice to their clients. They call what they’re doing life planning. Cynic that I am, I have been challenging the planners I know and respect who espouse this mode of practice to explain what they’re to me. No one could convince me of its value. Then, I met George Kinder, father of the movement.

Reading his book, Seven Stages of Money Maturity, and interviewing Kinder for nearly three hours has made me a convert. And that’s sad in a way. It’s been more than 20 years since the financial planning profession was born, and it has taken this long for planners to realize that there is more to financial planning than numbers. To me, that’s astonishing. But many planners are nothing but left-brain number crunchers who do need to be told to act like caring human beings and not treat their clients like profit centers.

I’m not saying that financial advisors need to play psychologist, and neither is Kinder. I don’t think you need to hire a shrink to work in your office or turn your practice into a money ministry. But getting some training in listening skills and in pastoral counseling could help many planners help people better, and maybe the CFP licensee educational curriculum should place some emphasis on teaching empathy. Kinder makes the case better than anyone.

While reading your book, it became clear to me that you’re one of the most important thinkers in personal financial planning today. But you have a different background than most financial planners. It’s only with great affection and respect for you that I’d let my readers in on the secret that you’re a weird guy. Who are you, George Kinder, and how did you get here?
I am a weird guy. I’m the kind of guy who had an 800 on the math boards in high school––a genius in math stuff––and only got a 580 in English. But I decided to major in English. You see, there’s some part of me that is interested in what I’m no good at. That doesn’t go along with the Buddhism, but there’s a part of me interested in filling the holes, seeing if I can develop the holes into strengths. I come from a middle class background. My dad was a small town lawyer in Appalachia. We were not wealthy. No inheritances, nothing like that. But my parents knew the value of a good education and sacrificed so that my siblings and I could get a good education. While at Harvard, I became interested in creative work––poetry and painting and in the world’s religions. Of course, this was the late 1960s—it from 1966 to 1971 that I was at Harvard.

Then you did something unusual, kind of a sabbatical. Please tell us about that.
Right after school, I made a deal with the woman I was then married to: I could take two years off to do whatever I wanted and she would support me, if I would later do the same for her. So I took a couple of years to do meditative internal work and practice the world’s major religions. Starting with Christianity, moving to Judaism, then Sufism, and on to Taoism, Hinduism and Buddhism, I explored the meditative practices of each. Harvard was intellectual, but I was interested in the experience of these religions, in getting an understanding of the profound experiences they are known for—being born again, attaining nirvana. So I dove into the practice of each religion four or five hours a day, practicing each tradition for several months. And I did a lot of writing and painting. In a way I’m back to that now, but that’s how it all started. I’m interested in human experience, the depths of human experience. These were six different expressions of the way people live at their greatest passion.

What happened after those two years?
I had to earn a living, so I had to move back into Boston. My math skills were still my best skill set, and my parents suggested that I pick up taxes. I’d work part-time at it and the rest of the time I would work on the things I was passionate about. I went back to graduate school at Northeastern for accounting and took the CPA exam. I left grad school one semester short of graduation because it was just too much up in the head and I wanted experience. But I took the CPA exam and received the bronze medal in Massachusetts for scoring third highest in the state. I prepped with a Big Eight firm for a summer and I saw things a lack of integrity in the CPA profession even back then. I didn’t want a life where you work 60 or 80 hours a week and don’t have a moment free to reflect on the fact you’re living without integrity. After purchasing a 15-volume set on the tax laws and tax court cases, I started filing tax returns in the mid-1970s. Clients came in and had problems, but I knew I had the solutions in those 15 volumes, and I got good at helping them with their tax problems and charged less than H.R. Block. I made a couple of thousand dollars the first year and it tripled or doubled each year through the early-1980s.

What led you into financial planning?
My clients would say they needed to know what to invest in but I’d didn’t know and suggested they find an advisor. They’d come back the next year and tell me about limited partnerships they bought and how they were going to save on taxes, but they were just horrible investments, of course, with very high fees. They were sold a bag of goods. I got pissed off that they were being taken advantage of by salespeople, and I started to read about financial planning. At the same time, the National Association of personal Financial Planning (NAPFA), a group of fee-only advisors, was just getting started. I joined NAPFA in 1984 when it was a year old or so, and began to attend their conferences and educate myself about financial planning. That’s how I became a financial planner. People started coming to me because I developed reputation as someone good with numbers who cared about his clients.

People are calling what you’re doing life planning. Does that work for you?
I coined that term in an interview with I did with Bob Veres of Inside Information. I’m not attached to the term. There are people that love it and some hate but it seems to be the one that’s catching on. It’s planning for a person’s whole life and planning for what’s absolutely most important in life. We call what we do financial planning, but that focuses on the math side of what we do as planners. Life planning is human work and focused on the human side.

Give me some practical life planning tips that advisors can use.
The easiest thing for financial planning community to get has been the three questions I ask clients. You ask the questions in progression. You start off with, “What if you have all the money you need for the rest of your life? You’re not as rich as Bill Gates but have all you need. What would you do differently with your life?
After you get the answer, you ask the second question, “Say you discover that you have only five or 10 years to live. You’ll be healthy for those years, but death can come at any time after the fifth year. What would you do with your life? Finally, you as this one, and this is the kicker and that gets to bedrock: “You’re told that you have only 24 hours to live. What did you miss? Who did you not get to be? What did you not get to do? What do you regret? Right there, the answers to that question seven times of 10 is the focus of the financial plan, or ought to be. Instead of focusing on the traditional version of retirement and funding your kids’ education, or buying a second home or downsizing by moving to Florida, the focus is on that question seven times of ten. That’s helpful. Often, the answer is simple, like I regret not spending more time with my kids. That’s most common response but appears in only 40% of the responses—and I’ve asked these questions to about 500 people in my career. Other responses have to do with spiritual life or a creative side to the person that never found fruition. Another common response, in 20% or 30% of the people I’ve asked, is, “I work too hard.” The beauty of this is that what were doing is we’re getting to what is often secret side of a client, a side they didn’t come in to tell us about. They came in to discuss how to get a second home and look at a traditional retirement in 15 years. They’re coming in with expectations of what we do, and there’s probably a bit of them that expects to deal with a salesperson, and often that’s what we are. Often we are pigeonholed as engineers of money or sales people, so clients come in with their guard up. And it means we’ll do a lousy job because they won’t tell us what they really want, what really matters to them. They will be tied to a treadmill longer than they have to be because we never got to what they really wanted. And that’s a hell of a life. Many will die with regrets because we never found out what it is they would regret. Financial planning is really about freedom. Money frees us to fulfill our potential. But its our relationship to money that does that. Most of us can find freedom by downsizing and living more simply. We all talk about how materialistic the world is as if it is everybody but ourselves. The fact is we all get trapped by it. One of my main focuses is looking at whether the freedom a client describes calls out a simpler life and whether he or she already has the resources to make a lot of it happen. I’m not just about asset under management, I get juiced brining someone to what they’ve always dreamed of doing. That’s why emotional skills are useful as an advisor.

Tell me about the interest being shown in your ideas and how it’s affected your work.
After 1999, when my book was published, the first couple of years were an intense on the road experience. There was enormous enthusiasm and a feeling that this was the beginning of something big. In that time, I was looked to for leadership and it was very exciting but also a lot of work and I was on the road too much. I got tired of being out there working long hours and being away from home so much, so I withdrew a bit from the speeches.
What were seeing now, however, is wonderful. It’s another wave of interest is manifesting around what is being called the life planning movement, and you have the coaching movement rising in popularity as well. So there are now many facets of this life planning movement. I kind of pulled back and rearranged how I did business. I combined my planning practice Sherman Financial in Philadelphia, which is run by Spencer Sherman. I essentially sold my firm, so I wouldn’t have to do any more administration and management and could do what I love. When Sherman has a business strategy or investment committee meeting, I’m part of that. Otherwise, I just do client work and none of the administrative work I do not like. This gives me enormous flexibility to get more reflective about the life planning movement and other things I want do. I’m working on several books now. Meanwhile, we’ve sold about 30,000 copies of the book, and by far the majority have been sold to financial advisors. I’ve spoken to tens of thousands of people at conferences and given my three-day seminar to about 1,000 advisors. My six-day training is something I think will take off in next couple of years and I’ve done that with between 50 and 100 people. So there are that many people deep into this, and many of them have joined The Nazrudin Project, a community of about 250 planners that includes many of the leaders of FPA and NAPFA.

Why has the reaction been so strong?
Advisors are thirsty for this knowledge because we’re all faced with these intimate situations where a client comes in and tells you something they’ve longed to do all their life but cannot afford to do it. And the client usually just figures that he’ll delay achieving the goal for another 10 years. Of course, in another 10 years maybe he won’t be alive. Or maybe a couple comes in and wants to do something profound or each spouse wants to do two very different things and you can see the tension in their relationship. One of the things I’ve been saying for years is if we sell a financial plan to couple and they wind up fighting over money, we are selling a fraudulent product. So how do I help a person realize their dreams when they feel caught on the treadmill? How do I work it out with a couple so that their marriage doesn’t fall apart and they come to a great place around money? Couples are a real dilemma. Couples come in and you think you can just do a plan for them. But fighting over money is usually cited as the No. 1 cause of divorce, right up there with sex. We can’t help clients with their sex lives, but we have an obligation as financial advisors to help with the money piece. I think many advisors feel this and are questioning what skills they need to do their jobs right.

Buddhism is mentioned often in your book. A lot of people will think you’re just a crunchy-granola hippy holdover. What’s Buddhism have to do with personal finance?
In my next two other books––one directly related to life planning and one only peripherally related––I don’t mention Buddhism at all. When people when hear about Buddhist ideas, they also think of Judaism, Islam or Christianity. But Buddhism actually is not a religion. It is a way of working with the psychology of the individual and has nothing to do with your faith. It’s a way of approaching the human condition in a psychologically savvy way. A focus is on suffering, how suffering arises as a mental state and ways of avoiding the bad habit of falling into stress, suffering, and anxiety and depression. The techniques used in Buddhism have been adopted by branches of the therapy community in America and throughout the West. It is a way of approaching states of unhappiness using psychological techniques and learning to do that internally rather than going to a counselor. I think of it as an engineering methodology to facilitate reducing stress and suffering, and that’s how it’s related for financial planning. Most people come into to see us because they’re anxious. They know things need to get done and haven’t been able to figure out how to do them. Basic counseling skills, along with the math skills most planners must use all the time, can help all of us bring the client to a place of ease. I think it is incredibly valuable for an advisor to have both skill sets. So I am not prostletizing Buddhism, but I think counseling skills are very important. We can all be good friends to people who play golf like we do, get on a boat like we do and who are a lot like we are. But when people are different, how good are we at listening to them, identifying with them and empathizing so that we can deliver a financial solution to their problems. Buddhism, or basic counseling courses, can help with that, as can contemplative prayer or meditation.

You focus a lot on how attitudes about money are formed in childhood. Why?
As a rule, I don’t go into childhood with my clients although many people I’ve trained do. It’s useful to know how our belief system got formed. If we know that, we know much more about the intensity of the belief system and emotion behind it and how to inspire people to be free of beliefs that are hurting them. A client I have is very skittish around money and stepping out. She just got an inheritance from her dad, who as a child laid her with a lack of confidence by being negative or verbally abusive whenever she tried to do something positive and to express herself. This breaks my heart and my ability to then convey that her lets her know she is not alone and maybe there’s a way out of a habit formed around money. I view one of my jobs as seeing the money helps her as long as it can. But because of her childhood, she is prone blowing the money. She’s shared with me these things because the money is complex because it came from her dad and one way to almost spit on her dad is to go out and spend it. Since she was young, when she would step out and try to succeed, she felt her dad would cut her down or tell her that she would get married one day and her husband would care for her. Anytime she tried to be independent, he would belittle her. I always assume that there is a belief system underlying any situation that is problematic. Then I look at how functional is this construct in relation to where the client wants to go with his or her life. I’ve got a financial plan that will get the client there if only they execute it, but they might not because they have this belief system about life and money. In the case of this woman, she might not execute her financial plan and say, “I’m really angry because whenever I tried to do something good for my future my father squashed it.” If I see people with dreams and they’re not moving for them, I look at why. What is preventing them from doing it. Listening skills and counseling skills become more helpful. You’re not trying to psychoanalyze someone but to show empathy and compassion. By my being able to empathize, this woman can listen more to me and is more likely to change her belief system. Otherwise, I might just sound like a projection of her dad telling her she is not good. If we had more listening in financial planning, it would make an enormous difference in the success of plans.

A lot of what you do and encourage other planners to do involves listening to clients better and talking to them like people and not spreadsheets. Isn’t all of that just common sense?
That’s a wonderful question. And it’s a tough one too. It is about people. And we’re all as planners have a bit of an engineer in us. We all love rate of return analysis. We love the numbers and making them work for people and showing them how numbers get them where they want to go. But somehow when we go into a room one on one with a person or a couple for a couple of hours to prepare for their financial plan, we end up having a pretty important conversation about what is meaningful in their lives. Here we are engineers who sought out this profession with this extraordinary sense of intimacy. I suspect most of us don’t have a counseling degree and yet yearn for the intimacy that financial planning rewards us with. But many of us simply don’t have the skills. Not that we must become therapists, but to the extent we know how to identify with people and empathize and get into our clients’ shoes, we can be their good friend and do a better job. That’s why they’ve come to see us––because we are another human being––not just for a financial plan. They want that supportive mentor-like friendship around an issue that is profoundly important and their terrified all we’ll do is be salespeople and engineers. True, many would be more comfortable with that because they won’t then have to confront why they have not lived their lives more fully. But if we do an honest job for a client, it inevitably leads us to how finding out how we can help them lead life to the fullest.

Some anecdotes in your book get into deep psychological territory. For instance, the story of a woman had been a victim of sexual abuse by her father, which you tie into her powerlessness on money issues. Are advisors capable of dealing with serious psychological issues like this?
I’ve actually had four or five people who shared things that intimate during my career. As financial advisors, if we really are empathetic and connected to client they’ll share stuff that’s is pretty gut wrenching and we don’t need to know how to deal with it as a psychoanalyst might. What we need to know is how to empathize and let the person know we care about them and are sorry they had to go through such a bad time. I don’t ask for this stuff to come out and don’t probe for it. It comes out when a client is feeling very trusting of our relationship, when they know there is a money connection to some trauma they’ve experienced in their life. If I am out of my league, I’ll say, “I’m touched that you felt you could share that with me and I am so sorry you had to go through it, and it’s not something I know about professionally and am trained to work with.” But usually people just want to understand how tough this was for them. This woman who was sexually abused by her father, her father had a powerful money relationship with her. Money was a string he used in the relationship to those activities, a reward and punishment. That is pretty dark stuff, and here I am the next authority figure around money in her life. Most financial planners are not able to go there and many don’t want to. What I find in the Nazrudin Project discussion group is that many planners would like more skills in this arena. They may not want to go to a place of that much intimacy, but want to be able to handle situations with more emotion in them. But I firmly believe that you cannot go with a client where you have not gone yourself. If you haven’t confronted that much ugliness yourself, if you haven’t at some point in your life confronted your own dishonesty and been disgusted by it, seen ugliness in yourself in how you deal with others at times, then I’m not sure you can go to those fractious places with your clients. The only way to do be a better planner is to learn to be a better person. I have to learn over and over again the places where I’m unkind and thoughtless and where I missed something someone said and did something unkind. I need to keep learning those lessons myself.

Have you heard from planners who probed these depths only to have it backfire?
It has backfired for some, and it has for me. For some, it’s too close to the skin. Venturing into an area where the client did not want to go or asking people what they would do if they had five years to live, they bristle and ask what this has to do with why they’re here. I train people to back off. If the defense mechanism is strong, back down. We’re not in business to battle their defense mechanism and if they resist hard, we’re not trained to do it and we’re not paid to do it.

You took two years of your life to make art and pursue spiritual fulfillment. You meditate and teach Buddhism. Most planners don’t have your background. Are you expecting too much of financial planners?
I’m guessing that at least a third of planners don’t want to practice this way. They can do wonderful financial plans. But I believe that their audience will be limited, however, as life planning becomes more common in the profession because they won’t have range in reach. I think the other two-thirds of the profession will want to incorporate life planning into their practice to some degree, and they can. It’s really about being a good friend, being able to be there when your friend is going through a bad time. But it does mean getting trained in how to be with people who have gone through tough times.

If a planner wants to learn these skills, how does he or she prepare to do it?
I’m doing two things now. I hope will be a big help. The six-day training have been concentrating on facilitation skills that can be useful with clients but I’m beginning to shift the training to life planning skills with less emphasis on presentation skills or talking to an audience. I’m also working on a book that links the seven stages of money maturity to a financial planning product. It address how these emotional aspects work with a financial plan and how can you in a methodological way ask questions that get at the belief systems and e emotions the person is dealing with. The second book will be more practical and will be published in about a year. Also, Nazrudin is a good community to join if you are interested in these questions. Anyone can join.

Many advisors are going through a terrible time because their clients are losing money in portfolios they recommended. As a result, many may be attracted to counseling clients on these issues as an escape from giving investment advice and also as a marketing device. What say you?
That would be unfortunate. It’s tough to acknowledge that we’ve blown it. I had a client in my office recently who kept coming back again and again to performance. Finally, I said as much as I’ve warned you about bear markets, I am invested in exactly the same things you are, and I feel it as much as you do and liked having much more money like I did two years ago. The difference is that I know how bear markets work, and understand that this happens. She thanked me and said she was so happy to hear that. She didn’t want to know about 1973 or 1929. She wanted me to connect with her feelings. But if we used life planning as a way to escape from acknowledging that results haven’t been as good as we would like, it would be manipulative. There will be some advisors who use this in an unfortunate and manipulative way but I don’t have fear that many will. I think it is a good marketing device and will become even more so. Just look at the Merrill Lynch ads about trusted advisors. For years, the big wirehouses have been advertising trust and family and it is a marketing thing, but independent planners have been the ones really delivering it and eventually people will see that. This is what people want.

How Will RIA Regulation Change?

As the number of Ponzi schemes and investment frauds prosecuted by the U.S. Securities and Exchange Commission soared in recent months, so did the odds for change in the way small RIAs are regulated.

You don’t have to be a math genius to understand the calculus. In the last six weeks, the SEC issued press releases about prosecuting 18 fraud cases involving registered investment advisers, hedge funds, and Ponzi schemes. During the same period a year ago, the agency brought just six such cases. It prosecuted one such case during the same period in 2007.

Add to these grim statistics the Obama Administration’s vow to clean up Wall Street, massive mistrust in Wall Street, and the announced intention of the SEC chairwoman Mary Schaprio to “harmonize” RIA and broker regulations. The equation logically leads to one solution: RIAs are likely to be regulated by FINRA.

The coalition announced earlier this year of the Financial Planning Association, National Association of Personal Financial Advisors, and Certified Financial Planning Board of Standards is likely too little, too late. The coalition proposes creation of a new regulatory body to regulate financial planners. However, Congress is unlikely to complicate the regulatory framework further by supporting any effort to create yet another regulatory body that is new and has little history of regulating other than the 60,000 or so CFP designees.

I’m not an expert on Washington affairs but a proposal to create a new regulatory body to oversee financial planners would look wasteful, since a statutorily-empowered self-regulatory organization that regulates retail financial advisors already exists. While FINRA’s bureaucracy and history of being dominated by large Wall Street firms is likely to put RIAs in a bad position, it’s hard to imagine any entity other than FINRA taking the reins in regulating RIAs.

So it’s time to start wondering aloud about what it will mean if indeed FINRA becomes the regulator of RIAs. What will the new regulatory regime mean to RIAs and financial planning firms? Here are my guesses:

  • Compliance expenses for RIAs are likely to rise sharply once FINRA is in charge.
  • RIAs will be required to pay some additional fees to FINRA to help defray the cost of a FINRA examination program.
  • Instead of naming a junior-level employee your chief compliance officer (CCO), your CCO may have to pass an exam as is required by FINRA.
  • IA reps will have to pass a competency exam akin to the Series 7.
  • RIAs will be required to submit for review to FINRA client communications touching on certain subjects, such as limited partnerships, recommendations of stocks, mutual funds or derivatives, or that describe your performance history.

What do you think? Let the speculation begin.

Correction To My Twitter Webinar

My webinar, Twitter For Advisors, on Friday, May 8, contained an error.

In the presentation, I incorrectly said that if you keep your tweets private and approve all of your followers on Twitter, other Twitter users could not see your followers. That's incorrect.

While approving your followers allows only approved followers to see your updates, any other Twitter user can still see your followers.

It’s important for financial advisors to keep this in mind. I incorrectly advised in the presentation that, if you create a separate profile for clients only, other Twitter users could not see them. Even if you protect your updates using the checkbox in the “Settings” menu in Twitter, any other Twitter user can still see your profile and the list of your followers.

Twitter’s terse "Help" on its "Settings" page is unclear, and it was only after testing the "protect updates" feature that I discovered this serious flaw in using Twitter to communicate with your clients. Keep in mind, this is very different from the way LinkedIn works. LinkedIn lets you make connections private so that no one outside of your network can see people in your network.

And keep this issue in perspective: Finding prospects on Twitter and marketing to them remains an intriguing new way to generate new business and network with other professonals. The presentation is still valuable to advisors and this was only one of the many points discussed in the one-hour session, which was focused on Twitter basics along with finding and marketing to prospects on Twitter.

However, I'd now recommend against tweeting clients because competitors could visit your profile, see your followers, and request following them. Since many, if not most, Twitter users automatically follow back anyone who follows them, your clients could wind up following your competitors.

I contacted Twitter’s development team to let them know that financial advisors and other business owners are unlikely to use Twitter for communicating with clients unless this feature is cleaned up, and I’ll let you know about any response. It’s hard to imagine that Twitter will not correct this flaw.

Are You Too Sexy For Social Networking?

In the 1992 pop hit, “I’m Too Sexy,” by Right Said Fred, lead singer Fred Fairbrass insists he’s “too sexy for Milan, New York, and Japan.” It’s a silly statement.

Just as silly was a statement by one of New York’s most prominent estate planning attorney, who told me he’s too sexy for social networking. I won’t name him because he’s a close friend and he’ll never come to our house for dinner again.

But he only had a couple of glasses of wine when he said that all of the requests to connect that he’d received on LinkedIn were from people who wanted to sell him something, socio-economic climbers who’d benefit from knowing him. He wasn’t connecting with people from which he could learn, get referrals, or derive some other benefit from knowing virtually.

This was my first reaction, too, when I first started using LinkedIn and again when I first used twitter. But once you use these tools, you figure out how the privilege of giving away information benefits you as long as you target the right people.

My lawyer friend is actually right about one thing: LinkedIn connections that you want to connect with probably won’t seek you out. You have to seek them out.

If you wait for your target client to seek you out, you won’t see the value in social networking. You have to go to them. On LinkedIn, this means looking at other people’s connections to see who among them you want to know.

For instance, say you’re an estate planning attorney or financial advisor and corporate executives with stock options, deferred compensation plans, and restricted stock are your target clients. You want to connect with senior executives at numerous companies in your area or industry about which you’re an expert.

In LinkedIn, you could click the “Search” the pull-down menu next to the “Search Companies.” If you want information about executives at Research In Motion, for instance, you click on “see more” in the “Current Employees” section at the top of the page and you’ll get a list of hundreds of executives. If you only want top executives from RIM, use Advanced Search to filter for “Senior Vice President.”

You can request a connection with top executives at just about all of the 1,000 largest companies in the country.

Is that like cold-calling? Not if you have information valued by these executives.

If you request connecting because you have a white paper about the latest tax court ruling on restricted stock sales, or offer a service that tracks insider stock trades by executives at his company every day, he may value that.

Or, better still, network with people you know. If you have a client or college buddy who is a top executive at RIM, for instance, why not connect? You can then ask that friend to introduce you to a colleague at RIM. If you know the SVP for handheld software development, you can look at his connections. You might find that the SVP for channel sales went to the same high school as you or previously worked with someone else that you know and you could ask for an introduction to that person.

The same rules apply to Twitter. A lot of the people who want to “follow” me want to sell me something—search engine optimization, social networking tools, financial planning software. And that’s okay. Sometimes they actually have valuable information for me.

But at the same time I’m actively reaching out to financial advisors on Twitter and Linkedin and streaming news about personal finance, regulators, and marketing. I’m updating people I connect with about my latest blog posts about advanced marketing techniques and events in the economy.

To make social networking work for you, figure out who your target clients are and what information you could easily send them regularly for free to prove your value to them. Shortly after you do that, you’ll stop complaining that only product salespeople want to connect with you and realize that you’re not too sexy for social networking.

For more information about Twitter and social networking, please read my latest column in Financial Advisor.

And please register for this week’s session of the Financial Crisis Webinar Series on Friday at 4 p.m., when I will speak about Twitter for advisors.

You are currently browsing the Financial Advisor Marketing & Technology blog archives for May, 2009.