At this week’s webinar, Fran Kinniry, CFA, who runs the Investment Strategy Group at The Vanguard Group, addressed rational expectations for the stock and bond markets. Though Kinniry expects stocks to outperform bonds over the long term, he said investors might direct more capital to fixed income investments based on trailing returns. Financial advisors must manage expectations of investors who fall victim to recency. Helping clients overcome such behavior is increasingly where advisors add value for clients. View replay of Mr. Kinniry's presentation and download the slides.

Friday, January 9, 2009: Scott Farnsworth, CEO of SunBridge Inc and founder of the Legacy Builder Network, tells advisors how to use an authentic approach to estate planning to make client relationships more rewarding and increase sales.

With so many clients and so much money in motion as a result of the financial crisis, advisors have a historic opportunity to capture new business. But you must communicate that you are trustworthy and capable. Mr. Farnsworth’s coaching programs are very successful and he will speak about his techniques at this session.

Mr. Farnsworth, who was named one of Financial Advisor Magazine’s “Innovators of the Year,” designs and delivers insightful, transformative workshops for professional advisors, and creates practical, imaginative tools that touch hearts and change lives. He is a certified Time to Think Coach and Consultant with nearly three decades of experience as an attorney and a Certified Financial Planner©.

Register now for that session.

Ten years ago, Will Smith was a rapper, Wikipedia did not exist, Charles Barkley—now running for Governor of Alabama—pleaded no-contest after allegedly throwing a bar patron through a plate-glass door, and many of us were still dancing the Macarena. A lot can happen in 10 years. 

That’s why, in financial circles, 10 years means a lot. Ten-year returns have a ring of authority, bestowing an imprimatur of long-term success or failure on an investment manager or strategy. Ten years would seem to be long enough to smooth market bumps. It would seem to be long enough to include all kinds of weird market events. It would seem to be long enough to use as a predictor of future events.

It’s not. I hate to burst your bubble—after all, so many bubbles have been bursting lately—but a recent report from The Vanguard Group shows the folly of relying on the predictive value of 10-year returns . The report, “The ‘Lost Decade’: Rational Expectations in Uncertain Markets,” is co-authored by Fran Kinniry, who happens to be the featured speaker at this Friday’s Financial Crisis Webinar.  

Kinniry, along with co-author Christopher B. Philips, says in the report that the beauty of 10-year returns can be fleeting. For the decade that ended June 30, 2008, the broad U.S. stock market returned just 3.53% a year—and that, of course, was before the recent market rout. (Stocks in this period under-performed bonds, which had an average annual gain of 5.68%.)

Just a few years ago, stock performance looked much better. Kinniry, who runs Vanguard’s Investment Strategy Group, says that at the end of 2002, coming out of the most punishing bear market in 70 years, the 10-year average annual return for stocks was a perfectly respectable 8.74%. As the end of 2004, the 10-year average annual return on the Standard & Poor’s 500 stock index, was a very healthy 11.92%. And the average annual stock market return for the decade that ended in 1999 was an astonishing 18.11%. 

Rearview mirrors, known for making objects appear bigger than they are, distort our view of the future as well as of the past. “The challenge for advisors will be to put the historical results in perspective, presenting them as one somewhat unlikely path that stocks can follow, not as a reasonable basis for expectations of future performance,” says Kinniry.

To learn more, you are welcome to attend this Friday’s session. If you’re thinking of voting for Barkley or want to brush up on your Macarena moves, you definitely want to attend. 

At this week’s Financial Crisis Webinar, Mike McGonigle, 
director of Credit Research at T. Rowe Price Group, spoke about opportunity and risk in fixed income securities. McGonigle discussed how the unprecedented fallout of the financial crisis has opened opportunities in the investment grade corporates  and municipal bonds. These bonds have seen significant yield increases yet hold only moderate risk.
He said that until some stability comes to the financial markets, advisors should seek income protection rather than capital gains.

Though high-yield corporate bonds are yielding 18-percentage points more than 10-year year Treasurys, McGonigle says it is not time to venture into below investmnent-grade bonds. Hstorically, they rebound later in recessions and advisors can wait until the depth of the recession becomes clearer. If you missed the session, a replay is available, and you can download Mike McGonigle’s slide presentation here.
Friday, December 12, at 4 p.m. EST. Fran Kinniry, 
director of Investment Strategy at The Vanguard Group will talk about the outlook for capital markets and the advisor's role in delivering alpha to clients. Mr. Kinniry, a principal at Vanguard, will explain how advisors can put the 2008 market plunge in perspective for clients and optimize the odds for success in wealth management engagements. Register now for that session.

 

 

 

 

I’m shocked that it works so well, surprised it was not more complicated to set up, and amazed at how useful it is. I’ve got to admit that account aggregation from Advisor Exchange is good! It may even be on the way to becoming great!

The reason why I was so surprised is that account aggregation has taken so long to come of age that I began to think it might never really work. You see, when account aggregation first appeared a little over a decade ago, I was one of the first people to write about how great it was. I never thought it would take 10 years to get it right! 

What happened? Like so many Web wonders, the excitement surrounding account aggregation in the heady dot-com days of the late 1990s gave way to real world problems. Formidable obstacles to adoption had to be overcome before aggregation could be used in an advisor’s practice.

One obstacle was that it was complicated to implement. A decade ago, no one had online accounts and almost nobody felt comfortable putting personal information online. Yet advisors had to convince clients to set up online accounts with brokerages, banks, mortgage companies, credit card issuers, and insurers, and then they had to pass on their user IDs and passwords to your firm. Or advisors had to do all of the paperwork and set up their clients.

Another obstacle to adoption was the increasing complexity over the last 10 years in online security. A second layer of authentication, known as “site keys,” was installed by banks, and institutions began automatically suggesting clients change their passwords every six months. With log-in parameters constantly changing, an account aggregation application might work one day and fail the next.

After the dot-com bust, funding for development of aggregation applications dried up. Many advisors gave up trying to make the troubled systems work. I, too, gave up on it and don’t recall writing about account aggregation in my magazine column more than once in the past 10 years.

So it was with great skepticism that I tried again recently. I acquiesced to requests from Advisor Exchange to create an interface displaying aggregated account data on our Personal Client Portal Platform. Whenever a client logs into his Personal Client Portal, a single sign-on with Advisor Exchange pulls in snapshot of all his accounts from brokerages, insurers, banks, credit card companies, mortgage banks, 529 Plans, 401(k) providers, and the full range of other financial product providers.

Following several months of development, the interface was finally completed two months ago. All I had to do was set up my own accounts to test the interface. It took me two months to do this! Which brings me to the main problem with account aggregation: the hassle involved with inputting your accounts passwords.

Truth is, I delayed inputting my account data for weeks because I assumed it would be a giant hassle. I assumed nothing much had changed with account aggregation. I was wrong. It was actually pretty easy. Take a look at the screen shots and you’ll see how the handful of real accounts—ranging from stocks held at Schwab, a 401(k) held at T. Rowe Price, and bank accounts are being aggregated. It took me about an hour to set up an aggregated view of six accounts.

Like I said, I am amazed that it works, that the data are useful, and that it was  easy. Surprise! Account aggregation works!

For more information about the Advisor Products Account Aggregation interface with Advisor Exchange, call Barry Weinstein at Advisor Products at (888) 274-5755.

In running Advisor Products Inc. for over 12 years, I’ve seen some wild market cycles. There was the roaring bull market of the mid-1990s, when large-cap growth stocks led the way for so long and by so much that some professional investors declared small-cap value stocks forever dead. Then, there was the dot-com boom of the late 1990s, followed by the dot-com bust of 2000, and the post-9/11 bear market. Then came the Bush bull market, which gave way in recent months to a collapse of confidence in America’s financial institutions and triggered a global economic crisis.

While I much prefer the ups to the downs, I have to admit to gaining some special satisfaction from this most recent flight from equities. It’s perhaps borne of the maturity that comes to us all in our 50s. Or maybe it’s just that I’ve been through so many market crises since I began covering Wall Street in the mid-1980s at The New York Daily News that this meltdown is somehow easier to bear. For whatever the reason, Advisor Products was better prepared than ever to help advisors manage the financial crisis.

I have to give some credit to my good friend, financial advisor Tom Connelly of Versant Capital Management. Tom scared the heck out of me last spring by telling me that there was about a 30% chance of a systemic problem occuring in the American economy. Tom is obviously a very smart guy and one of the more influential members of API’s Editorial Advisory Board. And when he told me in April 2008 that he was watching the Federal Reserve’s balance sheet, I for the first time understood the serious nature of the subprime mortgage problem. I began assigning our writers stories warning of the possibility of systemic financial problems and a bear market. By late spring, we were publishing articles on advisor websites and in their newsletters warning of a weakening Fed balance sheet and tempering client expectations for portfolio returns.

When the subprime problem erupted into a full-blown financial crisis and stock market collapse in October, we were prepared. We were ready with articles for advisor newsletters and websites that would help advisors communicate with their clients honestly, calmly, intelligently, and in a timely manner. Some of the titles of articles included:

• How The Fed Played A Key Role In The Credit Crisis
• Lessons Of The Auction-Rate Securities Crisis
• How Will We Know When The Credit Crisis Is Over?
• Fed’s Actions Are Swift And Unprecedented
• In A Recession, Keep An Eye On Small-Cap Stocks
• Regulators Won’t Regain Confidence Without Total Truth
• SEC Concedes It Failed To Police Wall Street Properly
• After Wall Street Failures, A New Order
• Opportunities Amid The Wreckage

In early December, we expect the following articles to be back from FINRA review and released for use in our newsletters and websites:

• Investment Implications Of The Federal Bailout Plan
• Key Mechanisms Of The Federal Bailout Law
• How The Bailout Law Changes The AMT
• Lessons From The Wall Street Giants’ Fall
• Managing Cash Flow In Tight Times
• Don’t Make The Economy’s Crisis Your Crisis
• Retirement Plans Changing Due To Financial Crisis
• Your Referrals Are Appreciated Now More Than Ever

Like I said, I prefer bull markets to bear markets, but the work we’ve done to help advisors cope with the crisis has been incredibly fulfilling to me. You see, I had chosen a career in journalism because I wanted to help people. I wanted to do something to make the world better. But by the mid-1990s, when I was covering investing as senior writer at Worth, I had become cynical about my work. Covering personal finance for high-net-worth individuals had begun to make me feel like I was just making the world safe for wealthy people. By 1996, the year I founded Advisor Products, I had gotten married, started a family, and given up on elping people and making the world better. I wanted to just make a good living and take care of my family.

Lately, though, I’ve begun to feel like I am helping people again. If I can help you, Mr. and Mrs. Advisor, inform a retiree about how to avoid panicking in favor of planning, then I am one lucky guy. If we can together educate a pre-retired couple about how they can pull together college financing while still putting away enough to fund their retirement goals, then I can feel good about my work.

So, thanks. Thank you for putting me in a position where I can help you help your clients, thank you for making my company more successful than I had ever dreamed possible when I started it 12 years ago, and thank you for making my life more meaningful.

David Lawrence, President of The Efficient Practice LLC, and Bob Curtis, the developer of MoneyGude Pro, spoke today to more than 130 advisors who attended our continuing webinar series on the global financial crisis. View a replay of the session.

David Lawrence, a consultant who helps advisory firms operate more efficiently, spoke about when, why, and how to communicate to clients amid today’s economic uncertainty. He spoke about the importance of being proactive rather than reactive, and how to use a technology for innovative ways to reach out to clients. View David Lawrence's Slides.

Bob Curtis, CEO of PIE Technologies, spoke about retirement planning in turbulent times. He said advisors must show clients why revising their plans may not be as painful as they think. revise their financial plans due to the crisis. While retirees and pre-retirees may need to make sacrifices--working longer, saving more, or cutting expenses--but their plans may already have reflected making such compromises because planning programs nowadays allow for such compromises. View Bob Curtis' Slides. 

Michael McGonigle, the head of Investment Grade Credit Research at T. Rowe Price Group, will be the featured speaker at the next webinar on Friday, December 5, at 4 p.m. EST. Mr. McGonigle, who manages investment grade and high-yield bond portfolios, will discuss the overall environment and TRP’s outlook for fixed-income investments.

When writer Gertrude Stein said that “a rose is a rose is a rose,” she meant that things are what they are.

But sometimes that’s just plain untrue, as in the case of technology companies marketing client portals to advisors.

Many tech vendors serving advisors are marketing client-facing pages and calling them client portals, but they are using the term all too loosely. Portals are supposed present information from a variety of sources on a unified site. Search engine companies created the first portals by presenting email, news, stock prices, as well as search engine access, on a single page. 

When a portfolio reporting application displays performance data on a page for an advisor’s client and calls it a client portal, that’s hard to swallow. Even if the portfolio software vendor brings in some data from an account aggregation system, calling the site a client portal gives a bad name to portals.

At Advisor Products, we’ve been offering our Personal Client Portals platform for a year now, and what we have is truly a portal. We are bringing in data from dozens of sources, including a long list of professional applications, including:

·         Advisor Exchange

·         Albridge Solutions

·         AssetBook

·         Black Diamond Reporting

·         FinanceLogix

·         Laser App

·         Money Tree

·         MoneyGuide Pro

·         Orion Advisor Services

·         PortfolioCenter

·         XLR8

At Advisor Products, we are actively developing interfaces that will allow us to display data from By All Accounts and EZ-Data Smart Office, and discussion with several other firms is under way.

 

Moreover, our client portals bring in RSS feeds from hundreds of websites. Feeds about health, sports, technology, science, weather, and much more are all ported in and personalized to each client’s personal interests--plus we bring in RSS feeds from personal finance websites.

 

In addition, our portals contain content that we produce about personal finance and that is also personalized to each client’s interests. Advisors can securely store clients' personal files in an online vault that is integrated with our portals. They can use the blog to communicate with clients, and they can assign or receive tasks in the To-Do Manager. Outside professionals, such as an estate planning attorney or tax accountant, can also be permissioned to assign and receive to dos. And feeds of market indexes, stock prices, and useful calculators are also provided as resources to clients.

 

Our client portal is truly a portal because we are totally focused on creating the best client portal you can get. We are not making CRM software. We are not making portfolio accounting software or a financial planning application. We want to do one thing great: make the most flexible, complete, and fully integrated client portal system offered to advisors.

 

So be skeptical when firms that make other applications tell you they have a client portal. While it is possible that a planning application or CRM system might create a client-facing application, it is unlikely to truly be a client portal.

Some roses are not roses at all, but are every bit as thorny. Don’t get stuck.

David Loeper warned advisors not to rely too heavily on Monte Carlo and to tell clients always to expect that their financial plans will need to be updated. Meanwhile, Tom Connelly said there’s only a 10% chance that the global financial crisis will cause a systemic collapse that leads to a depression but warned that the economy is most likely headed for a long period much like before the crisis erupted, only not as robust. Loeper and Connelly, thought-leaders among independent advisors, offered these thoughts this past Friday during a 90-minute webinar attended by about 125 advisors. If you missed the session, which was part of the Financial Crisis Webinar Series sponsored by Advisor Products Inc., it is available now for replay

Download David Loeper Slides

Download Tom Connelly's Slides

Please join us Friday, November 21, at 4 p.m. EST for another session in the Financial Crisis Webinar Series. David Lawrence, a consultant who helps advisory firms operate more efficiently, will speak about organizing a cost-effective system for communicating regularly with your clients during the crisis. Bob Curtis, the inventor of MoneyGuide Pro, a financial planning application with about 12,000 users, will speak about tradeoffs clients may need to consider in revising their financial plans because of the crisis, including working longer, saving more, or cutting expenses, and how advisors can handle these delicate discussions with clients. Register now for that session. 

During last Friday’s webinar with guest speakers Bill Bengen and Greg Brousseau, we conducted a series of polls. The results are surprising.

Based on answers to our polls, advisors are sticking with the traditional buy-and-hold asset allocation doctrine that has dominated the profession for two decades. Advisors say they have not reduced equity allocations. But they are looking for a less dogmatic approach. Here are the results of the poll from the webinar attended by about 120 advisors.

With 74% of those polled saying they have not significantly reduced equity allocations, the great majority of advisors have adhered to a strict buy-and-hold strategy.

Yet many advisors are questioning the most fundamental precepts of traditional portfolio management. More than a third of advisors say Modern Portfolio Theory and The Efficient Market Hypothesis are not a valid basis for managing portfolios.

While conventional wisdom has been that a buy-and-hold strategy is the best course of action for long-term investing, two-thirds of the advisors polled say it is wise to make judgments about the future direction of the market. I believe we are witnessing the beginning of the end of the traditional buy-and-hold appraoch to asset allocation. My column in next month's issue of Financial Advisor magazine provides a new approach being put forward by one of the best thinkers among institutional money managers. Please see the magazine's website after December 1 to read about a new approach that could be influential as advisors move into the era of "Post-Modern Portfolio Theory." (I've never seen this term used before. Have you?)

Just how pessimistic are advisors? The good news is that a majority (59%) of the advisors we polled believe the economy will remain in poor condition for one or two years, while only 4% believe the American economy will remain in poor shape for more than five years. However, a significant number of advisors polled (40%) said they believe poor economic conditions will plague the nation for a three- to five-year period.

73% of the advisors polled believe now is a good time to buy stocks. Market sentiment polls like this are actually reverse indicators. The optimstic sentiment could mean that too few advisors have capitulated, and that the market must drop further before hitting bottom. Finally, in what may be the most significant finding, last Friday’s poll revealed significant dissatisfaction with the industry’s membership organizations. At the suggestion of one of our guest speakers, Bill Bengen, CFP®, who is best known for his groundbreaking research into “safe” withdrawal rates for retirees, I asked advisors attending the webinar whether they have been well served during the financial crisis by the industry’s educational apparatus. The answer: 48% of the 110 advisors participating in the webinar disagreed. This means that almost half of the advisors at the session believe they’ve not been well served by the industry’s professional educational system.

I don’t understand why the membership organizations have not produced weekly programs to help financial advisors deal with one of the worst financial events in the nation's history and certainly the worst financial crisis since the advent of personal financial planning. These groups have far greater resources than I do, can reach a much larger audience, and are paid by their members to provide this kind of support. Moreover, even though I’ve been conducting these webinars for over a month now, no one from the educational arms of the major membership organizations has called me to ask how they can help, whether they can provide some expert speakers, offer continuing education credits to attendees, or just to say thank you.

I'm grateful for the many kind words of support from advisors who have attended the webinars. Your encouragement is motivating.

Thank you for placing me in a position to be able to help during this difficult time.         

Frank Maselli and Michael Kitces spoke yesterday to more than 160 advisors who attended our continuing webinar series on Crisis Communications. 

If you missed yesterday's session, you can see a replay.  

Download Frank Maselli's Slides.pdf (2.66 mb)

Download Michael Kitces Slides.pdf (514.66 kb)

Join us this coming Friday, Nov. 7, at 4 p.m. EST, for another webinar. 

Bill Bengen, best known to advisors for his research on "safe" retirement withdrawal rates, will speak about the market's crash and the economic crisis that precipitated it. Bengen, in a story I wrote in the May 2008 issue of Financial Advisor, entitled "America's Financial Crisis," said he had by last spring raised more cash in portfolios than at any other time in his 25-year career because of his discomfort with economic conditions and financial markets. 

Also speaking Friday will be Greg Brousseau of Cental Park Group LLC. CPG distributes alternative investments to independent advisors. The firm's management pulled up roots in the large Wall Street brokerages to provide alternatives to the growing independent advisor market. The private partnerships CPG offers cannot be discussed for regulatory reasons, but the ideas driving them are good to know about. Brousseau will talk about opportunistiic investments in distressed securities, such as mortgage debt trading at deep discounts.