The Certified Financial Planner (CFP®) designation is the most widely recognized certification for financial advisors. However, CFP® certificants vary enormously in the regulatory environments and business models in which they operate. These differences have tremendous implications for the quality of financial advice that a consumer should expect to receive from a given CFP® practitioner.
Returns in financial markets are often cyclical. That is, multi-year periods during which asset classes or investing styles or mutual fund sectors succeed in generating above-average returns are usually followed by multi-year periods of disappointing returns, and vice versa. Since this market behavior is a key tenet on which our contrarian investment philosophy rests, let's explore the academic research supporting it and the ramifications for successful long-term investing.
The seemingly endless debate about the standards of care with which various types of financial advisors are legally required to treat their clients received some much-needed attention in Congress recently. Given that the SEC and DOL are both working on new rules governing the relationship between advisors and clients, it's critical for current and prospective consumers of financial advisory services to understand the regulatory environment and to be aware of recent developments.
New 401k plan design features (auto-enrollment, auto-escalation, and riskier default investment options) are based on the knowledge that, in general, investors and retirement savers do not make very good financial decisions. Reams of academic research support this conclusion.
The decision as to whether or not to rollover a retirement plan account to an IRA should be based on more factors than just the associated mutual fund management expenses. On its website, the Dept. of Labor provides guidance to retirement plan participants, i.e. employees, on how to evaluate the fees and expenses associated with their plan: "... don’t consider fees in a vacuum. They are only one part of the bigger picture including investment risks and returns and the extent and quality of services provided. Keep in mind the importance of diversifying your investments."
Discerning consumers are becoming aware that there is an alternative to conflict-laden, commission-based and fee-based financial "advice". It comes as no surprise, then, that many financial advisors are now misrepresenting themselves (whether out of ignorance or out of something even less savory) as being "Fee-Only".
The "Fee-Only" business model of delivering financial advisory services has garnered a lot of positive press in recent years. In response to this groundswell of accolades for "Fee- Only" financial advice, commission-based advisors and their employers have devised a number of ways to protect their turf. Most of these are meant to confuse the consumer.
Getting good grades can dramatically reduce total college expenses in a number of ways. Beyond bribing your kids and grandchildren in return for academic performance, here are some other tips and tools to keep college expenses under control:
With summer in full swing, I've been reflecting on what I learned from one of my experiences from a summer past - being hired to serve as an expert witness in a case against another "financial advisor". This was a new and somewhat revelatory experience for me. But what I really took away from this experience was:
In other Articles on Wealth Management Topics, we've discussed the confusion that many consumers of financial services have regarding terminology such as "fiduciary". Another misconception that many people (including related professionals) struggle with is the difference between Fee-Only and fee-based financial advice.