Thinking Financial Planning

Financial Advisors: Think You Know How the Monetary System Works?

This is a wonderful and insightful video on our monetary system which was part of a presentation on the merits of a sound money bill in Montana. If you want a primer on the underpinnings of our recent market meltdown, this is it:

Testimony of Dr. Lawrence Parks on the MT Sound Money Bill (HB 639) from Constitutional Money on Vimeo.

Consumer Perceptions of Financial Planning

The Financial Planning Association has twice yearly events for their Major Firm constituents where about 100 financial planning advocates from the large wire houses and broker dealers get together to share ideas and best practices about financial planning. The last such event was in NY about two weeks ago. One of the presentations was on consumer perceptions of financial planning, based on at least four studies either conducted or commissioned by the FPA over the last three years. It's always good to know your market, and if you are selling the merits of a financial plan (as either an end in itself or a means to another revenue opportunity), its helpful to know what the market thinks about your service.

I would not say that the results of the study highlighted anything that was particularly unexpected, but it reinforced a lot of truisms that most of us probably believe, and put a lot of quantitative data behind the assumptions we make about clients perceptions. For those us like Dennis Hopper who stand in the middle of an intersection and say with stern conviction, "You Gotta Have a PLAN!!!", the results of the survey may be a little disappointing. The key takewaway is that across most demographics, the perceived value of a financial plan is fairly low. ($144 was perceived as "inexpensive" and over $400 was perceived as "expensive"). Naturally this improves somewhat in the six-figure income range, but not as much as one would think. The top three takeaways according to the presentation, though, show the opportunity for advisors:

• Consumers have an established idea of what "financial planning" and a "financial plan" are. However, education in the value, purpose and possibly the true definition is needed.
• Consumers are driven to professional planning by retirement planning and base their choice of planner on reputation, fees and service specialty.
• Providing a written, professional plan, tangible actions and reinforcing client confidence increases client satisfaction and positively impacts your bottom line.

Like I said, not exactly earth-shattering, but it's important to keep in mind that the more planners educate clients on the need for planning, the more the clients will appreciate it and develop a more trusted relationship with the advisor. The decisions that are made have a more defensible and justifiable framework, and the perception of the advisor, even if things get off track through tough times, will generally remain higher.

There's about 45 pages of compelling charts and data in the presentation that backs up all these conclusions. Let me know if you are interested. The next Major Firm Symposium will be at the FPA Show this October in Anaheim.

TV Variety Show Guy 1, Financial Guru 0

I was initially torn by being one more of the 997,614 blog posts related to the Stewart v. Cramer cage battle on March 12, or being maybe the only financial blog that didn't chime in on the biggest mismatch this side of an 18-wheeler versus a squirrel. If you aren't up on the proceedings, you can click the photo at right for the full smackdown (which if you work in this industry and you haven't seen, you really MUST). USA Today, which pre-hyped this historic battle on its cover page had a terrific post-mortem of the TKO, which raises probably the most important question: What was Cramer thinking exactly and where was the CNBC PR department when you need them most?

Now, I'm not a fan of Cramer's show or his advice, and his schtick is a little sophomoric (the constantly rolled up sleeves and goofy sound effects), but I have come to admire the guy based on the size of the following he's been able to amass, and what I perceive to be a relatively high degree of naive sincerity (for a Wall St. icon) that the masses find appealing. That naive sincerity was certainly on full display with Stewart who took no prisoners with Cramer who had his tail between his legs long before Stewart rolled incriminating video clips #210-212.

In many ways, I think this actually was somewhat of a historic event and a bit of a sea change in this financial crisis. The Wall St. guys always think they are the smartest guys in the room (when in fact much of it is equal parts chutzpa and deceit as opposed to raw intelligence) and they know much better what's best for the economy than the poor unwashed masses. E.g., Stewart did well to caution Cramer to not talk to him like he was a five year old (prompting Cramer to talk like a four year old in quick deference).

Well, on full display, the unwashed masses had their day in the sun through Jon Stewart and the moral high ground. The clear message, which Wall St., Congress and both administrations handling the crisis have not been hearing finally got through: "We the People are fed up, not only with the financial institutions, the lies, the bonuses and lack of transparency, but with the media that supports this system. Not only that, but the people are much smarter than the government and Wall St. give them credit for, and collectively much more so than the likes of the ill-prepared Cramer and his weak-kneed apologies."

As an aside, I don't think this was faux populism on the part of Jon Stewart. His approach was straight from the heart and showed sincere and deep convictions. I have never seen Jon Stewart show as much reverence for any guest as he did a couple years ago for Evo Morales, the president of Bolivia, who is one of the genuine populist leaders in South America.