NAPFA Debates Its Future
The National Association of Personal Financial Advisors (NAPFA) was formed with a goal of taking fee-only financial advisors from the fringe and into the mainstream. Eighteen years later, it‚s a mission accomplished. So what does NAPFA do for an encore?
As a first step, the association is consulting with a futurist. John L. Petersen, founder and president of the Arlington Institute in Arlington, Va., will run a session at NAPFA‚s annual meeting in May that the group describes as an effort "to help fashion ideas for NAPFA‚s future."
"It has to essentially do with how NAPFA can best support its membership in different worlds that might evolve in the future," Petersen says.
The debate could get hot. The 750-member organization recently set up a members-only online forum on the topic, and it‚s reportedly bristling with opinions. One advisor privately describes the debate as "NAPFA with an identity crisis."
Much of the debate revolves around what the group‚s priorities should be after successfully promoting the merits of fee-only advice, which has now gained broad acceptance. "What happens when you win the war?" the advisor asks. "Their primary issue has prevailed. What next?"
Janet Briaud, the lead organizer of the session, counters that NAPFA is not undergoing an identity crisis but a shift in focus. The group‚s primary goals–serving clients better and helping advisors do their jobs better–remain the same, says Briaud, of Briaud Financial Planning in Bryan, Texas. "It‚s just looking at the same issues and saying, "Now what?" she says. "We still want to do the best we can for clients and advisors."
The four-hour session will be held May 16 at NAPFA‚s annual conference in Phoenix. Titled "Envisioning the Future of NAPFA," it will center on four possible scenarios for the group.
Petersen says he hasn‚t decided what the scenarios will be, but they primarily will be based on what feedback he sees in the online forum. "There‚s lots of different opinions," says Petersen, who is the author of several forward-looking books, including, "The Road to 2015: Profiles of the Future."
Briaud says she hopes that by bringing in a futurist, NAPFA members will be encouraged to think outside of the box. "They really try to get you to think way beyond what you would think of normally," she says.
Among the subjects NAPFA members are debating among themselves are whether the organization should continue to require its members to offer comprehensive financial planning at a time when more advisors are specializing and how to help new advisors get a practice up and running on a fee-only basis. "Fee-only practices are gaining lots of momentum with established practitioners, but it‚s still very difficult for new advisors to go fee-only," one NAPFA member says.
Then there is the issue of the changing association landscape after the merger between the International Association For Financial Planning and the Institute of Certified Financial Planners to create the Financial Planning Association (FPA). With only about 700 members, NAPFA pales in size compared to the FPA, which has about 29,000 members. Some privately have wondered if it wouldn‚t make sense for NAPFA to become a division within the FPA, which potentially could provide it with greater resources, so that could also be on the agenda.
Only a few NAPFA members, most of whom are fiercely loyal and independent, see that as a serious possibility. Moreover, they point to NAPFA‚s strong membership growth last year as a sign of its vitality. And NAPFA still boasts the strongest referral program of any association in the profession.
ACLI Pushes For Federal Insurance Regulation
If you want to make insurers more competitive with banks and securities firms, give them a federal regulator. That‚s the controversial proposal being touted by the American Council of Life Insurers. The proposed Office of National Insurers would have extensive regulatory and enforcement powers and would give insurers an expedited approval process for bringing products to market, ACLI spokesman Herb Perone told Financial Advisor.
Now, it can take an insurer 18 months to get regulatory approval for new products, in contrast to banks‚ and securities firms‚ centralized, streamlined process that allows them to introduce new products to the national marketplace in as little as 30 days.
"The point isn‚t to create an exclusive, mandatory federal regulator," Perone adds, "but to give the U.S.‚s 1,500 life insurers the option of choosing state or federal regulation." It remains to be seen whether the plan will expedite the National Association of Insurance Commissioners‚ decade-long effort to modernize state regulation. As part of its push, the ACLI also is asking the NAIC for more uniform product regulation, agent licensing and sales practice oversight.
Bear Market A Reason Joint Venture Is Off
Risky investments can strike a nerve closer to sheer terror in the current bear market.
So it was of no great surprise when Zurick Scudder Investments and Thomas Weisel Partners Group canceled a three-month old joint venture to sell private equities to affluent investors.
Both companies still insist there‚s a potentially large market for such alternative investments. Just not now.
"I don‚t think I‚m maligning alternative investments such as these as riskier," says Thomas Weisel Partners spokeswoman Amanda Duckworth. "In this kind of environment, people don‚t want to do that."
Under the original plan, announced in December, the two companies set up Scudder Weisel Capital to offer affluent investors access to research and investment vehicles normally relegated to institutional clients. The company planned to offer investors direct access to IPOs, original research, venture-capital funds, private-equity funds and hedge funds through a distribution channel of brokers and financial advisors.
It was just one of many examples of how financial-services companies are trying to zero in on investors with $1 million or more in assets–the generation of millionaires created by the historic bull market of the 1990s.
"Scudder Weisel Capital will put affluent investors or their financial advisors on a par with the big smart-money players," Boyd Fellows, the company‚s CEO, said in December.
But at the time of the cancellation in late March, the company‚s only product was one fund, the Scudder Weisel Capital Entrepreneurs Fund, which was scheduled for liquidation April 30. The companies haven‚t commented on the size of the fund, but published reports say it only accrued about $20 million in assets.
In addition to the declining stock market, Scudder also shifted strategy and decided it would rather pursue such a strategy alone, when the time is right, Scudder spokeswoman Shannon Bell says. "It was a confluence of events," she says.
Duckworth, of Thomas Weisel, says the company doesn‚t know when it would pursue the goal again.
"Until there is a dramatic change (in the market), we have no intention of relaunching such a business," she says.
Fidelity Appoints Head Of Advisor Services
Fidelity Investments has named the former president of its Institutional Retirement Group as president of Fidelity Investments Institutional Services Co. Inc.
Ellyn A. McColgan, an 11-year Fidelity veteran, succeeds Kevin J. Kelley, who was named president of Fidelity Brokerage Co.
McColgan‚s duties will include oversight of Fidelity‚s independent-advisor services, which currently has 1,100 clients with assets totaling about $50 billion.
"Advisors are playing an increasingly important role in helping investors develop sound financial plans to meet their goals," McColgan says. "I am very excited about the opportunity to lead the intermediary-services company and look forward to continuing Fidelity‚s commitment to helping financial advisors build their businesses."
McColgan was president of the Institutional Retirement Group for nine months. She previously spent four years as president of Fidelity‚s Tax-Exempt Services Co. Before joining Fidelity in 1990, she worked in Bank of New England‚s institutional custody business.
SEC Requires Online Filing For Some Advisors
Financial advisors have yet another reason to be plugged into the Internet.
As of this year, investment advisors who are sole proprietors and registered with the Securities and Exchange Commission (SEC) are required to file Part IA of form ADV online.
It‚s the first phase of a multiyear plan that will result in virtually all state and federally registered investment advisors having to file the form over the Internet.
The online forms are filed with the Investment Adviser Registration Depository (IARD), a new database set up by the North American Securities Administrators Association (NASAA).
The change to a strictly electronic filing system is designed to streamline record-keeping and to give consumers access to the information, says Robert Plaze, the SEC‚s associate director of regulatory policy and investment regulation. "The IARD system will create greater filing efficiencies … and offer consumers a free, easy-to-use method of determining which advisor is right for them," he says.
Advisor Liquidates Fund He Created
Ever toyed with the notion of becoming a mutual fund manager? One veteran financial advisor who lived the dream for two and a half years before resigning last fall has a two-fold message for advisors contemplating the move: Get used to dealing with faceless clients and fickle market-timers‚ assets, which flow in and out at the most inopportune times.
Ram Kolluri, who now devotes all of his energies to building his $180 million investment-advisory firm, Global Value Investors in Princeton, N.J., says it was a mutual business decision in September 2000 to liquidate the Navellier Global Equity Fund. He founded the fund just 30 months before with Reno, Nev.-based fund company president Louis Navellier‚s blessing.
What went wrong? The quantitative international research model Kolluri developed to screen stocks for the fund was eclipsed by an event beyond his control: The introduction of the euro, which drove many of the 11-member-country currencies down by as much as 30%. They‚ve since tumbled further.
"It was a business decision. I had to decide, given the currency volatility, if I wanted to do international investing full time or domestic. The parting was friendly," Kolluri says. "The research we developed is very useful to us today. I take away that experience and a lot of humility."
Today, he gets his international fix through a global value index he‚s built, which screens for companies like Honda, Nestle, Nokia and Sony. To make the index, companies must have 25% of their sales in the United States (which means they have a treasurer who manages currency risk), a minimum daily volume of 50,000 shares and at least two U.S. analysts covering the stock.
Another mutual fund in the making, perhaps? "I‚m not closing the door, but I‚m building domestic assets first," says Kolluri, who maintains that the United States‚ market dominance will not change in his lifetime.
Record Number Register To Take CFA Exam
Falling fortunes on Wall Street apparently haven‚t stopped people from wanting to make a career out of market analysis. A record number of people have registered to take the 2001 Chartered Financial Analyst exam on June 2, says the Association for Investment Management and Research, which administers the test.
A record 86,421 people–including securities analysts, money managers, investment advisors and students representing 143 countries–have signed up to take the test, the association says. That‚s 15% more than a year ago and more than triple the 28,000 people who signed up for the test in 1995, the association says.
Earning the CFA designation takes at least three years. Candidates can take only one test a year and must pass three of them to qualify for certification.
The percentage of candidates who pass the test ranges from 50% to 65% each year, says AIMR spokesman Rich Wyler. It takes the average candidate four years to earn certification.
CFP Board Names Consumer Advisory Council Members
The Certified Financial Planner Board of Standards (CFP Board) has appointed nine members to its Consumer Advisory Council.
Appointed to two-year terms on the 10-member council were: Jan Black, CEO, Everywoman‚s Company/Pro-ject Green Purse; Don Blandin, president, American Savings Education Council; Denise Voigt Crawford, commissioner, Texas Securities Board; Carol Davis, president, Coalition of Black Investors; Craig Hoogstra, manager of financial products, AARP Services Inc.; Brent A. Neiser, director of collaborative programs, National Endowment for Financial Education; Gary Phoebus, vice president of member benefits, National Education Association; David Wray, president, Profit Sharing/401(k) Council of America, and Susan Wyderko, director, Securities and Exchange Commission‚s Office of Investor Education and Assistance.
The council, which is chaired by Rosella Bannister, a member of the CFP governing board, advises the CFP Board on consumer issues and had its first meeting in March.