Wednesday, April 23, 2014

The Choice: ‘A Certain Nobility’ or The Commoditizing of Personal Financial Planning’?

The Choice: ‘A Certain Nobility’ or
The Commoditizing of Personal Financial Planning?

There are no solutions, only tradeoffs
Professor Thomas Sowell

            Is Personal Financial Planning becoming commoditized by the likes of Vanguard (with it’s Vanguard Personal Advisory Service .3% vs 1% + a planning fee) and or Robo-Advisors like Wealthfront?

            Actually, for all the hand wringing and hoopla, the answer is no.

            What is being commoditized is the predominant organizing structure and paradigm of personal planning: ‘More .’

            More’ is going for ‘less’ even at Verizon™.
            More is being sold for Less.
            More is becoming worth-Less (pun intended)

Disruptive distribution is taking its ‘toll’ on the fool’s gold promise of ‘More’ (Tautologically More is never enough). More personal financial planning is experiencing reductions in compensation akin to the effect that ETFs and Index Funds had had on mutual funds market share. And regardless of compensation method for More personal financial planning, compensation reduction due to commoditization is a reality ‘lessening’ the grip of the illusory value proposition of More personal financial planning. Further’more’, planners, head in the sand, whose personal financial planning compensation method is inextricably More woven do so at their own risk and practice peril:

            In particular, More is imbedded in financial planner compensation with the tradeoff supposed value of the method as illustrated below

·         Percentage of assets under management (AUM) compensation -if the client makes More, then the planner makes More (win, win!) But if the market goes down and the client assets are reduced– the planner wins while the client ‘loses’ as the planner is still paid (though less) per assets asset under management percentage. The Assets under Management “More” is you win, I win, you lose, I still win but less so.
·         Value added ‘reduction in taxes’: the client will have More by paying less (even if illiquid non income producing investments are employed for write offs  and or  aggressive tax strategies are used)
·         Sales commission/transaction planning: making More and or paying  less aka fill or kill whereby the salesperson in planner clothing gets his regardless of ‘More ’ or ‘less’
·         Fee and commission or fee and commission offset – see AUM above and fill or kill

Of course, in denial, the planning community will answer, “if we don’t perform (make More or pay less taxes so the client has More – we’ll be fired.” The reality is they’ll be fired anyway – as More is nebulous, ‘never enough’ and continually in akin to the hamster on the spinning wheel while being in comparison to others/indexes (S&P, Dow Jones etc) setting up inevitable relative disappointment in the More planner.
Recently, some financial planning practice experts have counseled solo planners facing shrinking compensation to ‘go big or go away’ (consolidation cost savings). ‘Go big or go way’ is denial of the top line revenue shrinkage – and a failure to see outside the  ‘financial planning practice litter box of More. Another approach bandied about is ‘BFF(F) (1)Yaktdy Yak (‘don’t talk back’) (2) nebulous personal financial life planning – to avoid reduction of fees.. While personal financial life planning is ideal, the faux Trojan Horse Yakty Yak personal financial planning trades on the advisor client relationship to maintain compensation level: mining the mountain rather than assisting the client to climb his mountains linking his personal assets to achieve life goals and values.

Any jackass can kick down a barn but it takes a carpenter to build one
Former Speaker of the House Sam Rayburn

So, how can the personal financial planner offer value and maintain his or her compensation level in the face of the commoditizing and depreciation of the ‘More’ “value” proposition?

Half truth; whole lie
Talmudic Saying

In the early days of fee only planning, commission and fee and commission planners would ask me, ‘how do I explain to present commission and or fee and commission based clients that I am going ‘fee only’ (without losing them?’
Flippantly, my first answer was, ‘tell them, I’m sorry I was shtupping you all these years, but I’m not going to shtup you any more, I’m going fee only.’ After the reaction of a Jerry Lewis spit take or a disbelieving head double take (‘what did you say?) by the ‘planner,’ I would offer the following suggestion: indicate to the client that in one year your practice shall be totally converted to fee only. However, offer the client a choice – he may stay with the current transaction/commission compensation agreement till next year  but thereafter immediately by converted to a fee only agreement or convert immediately to fee only compensation.. Having the sugar of choice makes the medicine go down a little easier – though the planner still should expect some churning and loss of clientele in the transition.
Please note the ‘wealth management division’ of a certain major major wirehouse  is now ‘touting goals based personal financial planning’ with full transparency (3) – not that the realization that ‘More’ personal financial planning does not offer a value proposition conducive to retention. My question to this Wealth Management head (still charging directly or indirectly the ‘More‘ oriented assets under management) – ‘what are you telling your clientele relative to your new approach, ‘sorry we’ve been shtupping you all these years, now we’re gonna make it right but still get compensated on the  More oriented AUM but now we will be transparent?’
(I’ve thought of sending the Wealth Management Director an appropo gift of a brief case filled with Vaseline jars to share with his clients.)

            Making the compensation transition while giving a client choice is the easy part, the hard part is offering a better value proposition than ‘More’ – value that goes to the heart of what really is the core essence ideal ‘a certain nobility’ of the role of personal financial life planning in the client’s life’

‘A Certain Nobility’: Enabling Connection

Every art and every inquiry, and similarly every action and pursuit, is thought to aim at some good; and for this reason the good has rightly been declared to be that at which all things aim
Aristotle, Nicomachean Ethics

Other than coordination, the fundamental promise of that certain nobility of personal financial planning is enabling connection even reconnection to significance. In particular, personal financial planning’s potential is aligning the client’s personal resources (capital – financial and otherwise) to the support the realization of life goals, values and their desired payoffs, thus, transcending to significance. And yes, that significance – the good – is meaning – the meaning IN the client’s life, making that difference fulfilling ‘why I am here.’ In the process, if the personal financial life planner is doing his job, there is a healing of personal financial anxiety, puttin’ money in its place to elevate to that significance – that certain nobility – and in this process minimize or remove some of the stumbling blocks in client’s paths (like “More” for More’s sake) which often is blinding them from realizing their life goals, values and significance.
Given the aforementioned’, and probably available for 99cents used on Amazon, within the first and second editions of my book ENOUGH(sm), is the ‘personal prospectus session.’ This session, which occurs after securing documents and initial information, but before running any numbers, quantifies values, illustrates decisions, turning points empirically on a life line allowing initial inferences as to how personal financial resources decisions and tendencies occurred within the context of past life choices, achievements and yes, even regrets. The personal prospectus concludes with the creation of one’s mission and vision– what it is and ‘more importantly’ what it is not. This personal ‘prospectus’ is not nebulous Yakety Yak personal financial life planning – but rather it is connection, alignment – and concrete.
And if do say so myself, this ‘personal prospectus’  holds up well now 40+ years since first implemented into my prior personal financial life planning practice.

Encore: Ta Daa!!!!

The above said, should I decide to update a 3rd edition of ENOUGH(sm), amongst other changes, I would add a chapter particularly targeted to those 50 and above: The Soul Resume – After Life Insurance©. (This addition to the ENOUGH(sm) process would ideally, though not necessarily, to be implemented prior to the first annual review with the client over 50.)
It is my hope that The Soul Resume: After Life Insurance© will, in part, answer the questions of Encore, and ‘What Next’ (itself symptomatic of the continued search for meaning IN one’s life) as an affirmative exercise to disprove ‘there are no second acts in (this) life’ incorrect setting the stage for the client’s and yes the planner’s encore.
The Soul Resume: After Life Insurance© will be forthcoming in the next few weeks. Contact this blog if interested with acknowledgment that receipt of the The Soul Resume: After Life Insurance© is under the provision that it will NOT be redistributed. Name, address, phone number and email address will be required.

By Jim Schwartz (Yaakov ben Elisha)
‘A Man of Dog’ (In Training)

CHEWish on This(c)  More OR Less

(1).- BFF(F) – Best friend & fees forever a function of fees
(2).- Yakety Yak (by The Coasters) employing the tactic of ‘you have to understand before you are  understood’ (so that fee percentage will remain the same or higher)
(3).- The irony of this wirehouse’s Wealth Management Division advocating transparency is that for years the securities industry as well – yes, the CPA business and bankers fought full and timely disclosure of all compensation legislation in Colorado when functionally acting as and or holding themselves out as personal financial planners. Tooth and nails they fought an estimate of all compensation upfront with actual disclosure quarterly – and now, this wirehouse’s division is born again advocating transparency?

Wednesday, April 16, 2014

MORE & The Altered States™ Mutual Fund

MORE & The Altered States™ Mutual Fund

Against your will, you live
Ethics of The Fathers (Pirkei Avot)

            An all-encompassing theme throughout Torah (like ‘going down to go up’) is that of the involvement, withdrawal & return (Teshuvah).
            For example, on Shabbat we withdraw – separate from involvement with the secular to return again to the profane from the profound.
            (And on Shabbat it is said, the world is complete – unlike the continuous incompletion of our lives during the other days of the week.)
            Thus, there is this continuous cycle of involvement, withdrawal, and return for ‘the final return’ earned and merited.
            However, the above said, the cycle is more and more truncated avoided by the seeking of life ‘altered states’ – not just for the avoidance of pain or seeking of presentational pleasure – but the core motivation is to fill the void of emptiness (the hole in the soul) and alienation caused by a lack of meaning IN one’s life.
            When we think of altered states, this conjures up being high on drugs and or inebriated. But altered states’ to escape the aforementioned cycle include eating, entertainment, living life through others, the Broncos, and yes, readers even our dogs etc. These altered states are but pause button palliatives to band aid  – to flee the breads of our afflictions, short circuit the process of withdrawal, involvement, and return as well as the inevitable downs to go up.
            Thus, stocks involved in offering altered states is an investment theme to consider to capitalize on this ‘getting off’ palliation, and the void (the absence of finding meaning IN our lives – ‘against our (real) will.’
            For this, on behalf of the Shtup Family of Funds™, I present:

The Altered States Fund™ (symbol: OFF)

Tis better to alter than be altered
(so sayeth many a male canine)

            Turned off by the Obama -nation State of America?
            Turn off, Tune in, Drop Some Bucks into the Altered State Fund (OFF)
            OFF: invests in the following numbing/palliating/distracting mood enhancing industries:

  • Alcohol (Distill, Swill & Refill)
  • Tobacco/Pot (Wackie Tobaccie)
  • Gaming – (Thrills & Chills)
  • Sports (Bread & Circuses)
  • X Rated Entertainment (Frills, Thrills & Handbills)
  • Resorts (Sandals, Club Med etc)
  • Companion Animals (Oxytocin & Devotion)
  • Organized Religion’s Commemorative Plaques, Chachkas & Amulets
(Afterlife Insurance)

            The Altered States Fund Capitalizing On Great Escapes

A Kish Meir ‘Altered’ Tuchass Member of The Shtup © Family of Funds™
(A Tongue On Cheeks Production, 2013 update 2014)


Of course, the ultimate never ending enabler of ‘altered states’ is:
(to kiss and make – whatever - better)

            Thus altered states, in time, require – MORE : higher and higher dosages to to ‘get OFF’ and remove one self to avoid confronting the void of lack of meaning IN one’s life and to sidestep the process of involvement, withdrawal, and return – as well as  going down to go up consciously.
            Altered states often become an addiction. And addiction sells as the old Phillip Morris (now Altria) is up over 50% in the last 2 years with dividends increasing over 10% a year and still yielding 5.5% (almost 400% over 1 year treasuries).
            And so, addictive altered states compound the probability that ‘the weekends are for Michelob©’ rather than Shabbat.
            The Altered States Fund(tim): offering A HIGH potential Return on others’ divestment from life (though Return is not guaranteed and restrictions may apply to Withdrawal)

Subsequent Stickering of Altered States Fund ™Prospectus:
As of 4/01/14 The Shtup Fund appoints a new
Altered State Fund™ Co-Manager: Red ‘Matrix’ Piller, CFA.