Judging Risk Tolerance

Us planners love to find a piece of software that will mechanize any portion of our messy jobs. "Practice Efficiency Explored" (October 2004) recommended packages to judge client risk tolerance. While intellectually appealing, there‚s only one problem: The client fills out this profile in a nice calm environment and answers logically; six months later when the market falls 25% in a week, he‚s freaking out to sell and his logic is out the window.

I wish I could tell newcomers that a finance degree would prepare them for a career in planning, but the cruel joke is that a BA in psychology is much better preparation. At 48, one would accuse me of being a fuddy-duddy, but I believe the only way to judge a client‚s risk tolerance is to talk to them and get to know them. However, use the software so you have something in the file to defend yourself.
Larry Klein, CPA/PFS, CFP
Certified Retirement Financial Advisor
NF Communications Inc.
Walnut Creek, Calif.

Major Issues Are Missed

Sarah Ball Teslik, the new CEO of the CFP Board (November 2004, "New CFP Board CEO Offers Her Ideas"), has impressive credentials, and we look forward, hopefully, to a Board that reflects the integrity that her credentials imply. Once again the Board has selected someone who is not a member of our profession. Her comments emphasize the problems this can cause.

She addressed five issues that she feels are important in her new post. She is apparently unaware that all of those five issues have all been thoroughly dealt with already. The critically important issues that desperately need attention are not mentioned. It is understandable, in that she is new to this field, but all the more reason to speak cautiously until she learns as much as she can without, unfortunately, ever experiencing the profession first hand.
Though the CFP Board controls less than one-third of the equally qualified and credentialed members of the financial planning profession and refuses to unite the other two-thirds for the benefit of the public and all others involved, its refusal to act responsibly is its major problem.

The fact is that the Board itself has consisted repeatedly of individuals, as many as 40% of the Board, who compete directly with financial planners but without the training, experience, etc. required for membership. This alone has been a major cause of much of the problems hampering the Board‚s success. In spite of Ms Teslik‚s credentials, the fact that she refers to problems that are incidental at best suggest a continuance of a problem for the Board rather than a solution.

That being said, I, and I‚m certain that all others in our profession, wish her the best of everything, particularly in bringing ethics and better solutions to a needy Board. Dropping their trademarks might be the most important move that they can make. Then common ground and professional cooperation could move us ahead more rapidly and effectively for all, including the public.

Gib Kerr, QFP, CFP, ChFC, CLU
Sherman Oaks, Calif.

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