Advisors Help Colleagues Affected By Katrina
Just as they did after the September 11 attacks,
advisors are rallying to provide pro bono services to victims of
This time, however, the victims include a sizeable number of their colleagues.
The Financial Planning Association is ready to set up a financial planning support center in the New Orleans area with the help of the Red Cross, says FPA spokeswoman Heather Almand.
The center-modeled after the support center that was created after the September 11 attacks in New York City and which has become a permanent service offered by the FPA-will start operations as soon as the Red Cross is ready, she says.
"The Red Cross isn't quite ready for us, but we will be setting those up we hope in the next few weeks," Almand said on September 14.
The FPA is also getting to work to help advisors who have been impacted by the hurricane, setting up a Hurricane Relief Center at its Web site-www.fpanet.org-where planners can offer office space, equipment or other forms of help.
The FPA has about 800 members in the region affected by the hurricane, but it's still unclear how many members were displaced by the natural disaster, Almand says.
"We are slowly starting to hear from those members, but we don't have a good number," she says. "From what we've heard, I would suspect at least several hundred. I tend to think that number may be higher."
The FPA has already heard from 500 advisors who have offered pro bono financial advisory services for victims of the hurricane.
As it did in New York City four years ago, the FPA will offer victims help in obtaining grants from FEMA, dealing with insurance claims and other issues.
This would be the third branch of the FPA's support operations. There are already operations in New York City and Washington D.C., with the New York office still handling cases of many September 11 victims, according to Almand.
The centers have also done work for victims of the recent wildfires in California, hurricane victims in Florida and the victims of other natural disasters, she adds.
The rest of the financial services industry has also rallied to support those impacted by the hurricane, including monetary donations and support programs. Insurance companies have extended grace periods for premium payments in areas affected by the flooding.
The IRS also has taken action, offering a variety of deadline extensions and services for hurricane victims. The IRS has set up a hotline for more hurricane relief information at (866) 562-5227.
Intuit Enters Portfolio Management Arena
Intuit, the nation's largest provider of personal finance software, unveiled a new Web-based portfolio management application for financial professionals at the FPA San Diego 2005 National Conference in September.
The product, targeted primarily at small- to mid-sized independent RIAs and broker-dealer reps, has been in development for at least one-and-a-half years and is currently being beta tested by 50 firms. Because the product is aggressively priced, it could represent a serious competitive threat to Advent and other makers of portfolio management software.
According to a company spokesperson, the new product is designed for advisors who want a simple, inexpensive portfolio management solution capable of providing performance reporting, asset allocation modeling and billing.
The initial pricing is expected to be $150 per month, which includes support. There will also be a one-time set up fee of $495, which includes help with the initial configuration. Interfaces are already available for major RIA custodians such as Schwab, TD Waterhouse, Fidelity, Ameritrade and Pershing. Interfaces for DST and a number of independent broker-dealers also are available. There has been no word regarding data conversions from other portfolio management programs.
Intuit is best known for its Quicken personal finance program, as well as QuickBooks, a small business accounting program, and TurboTax tax preparation software. In addition, Intuit offers the ProSeries and Lecerte tax preparation suites for professionals. It is estimated that one in four U.S. tax returns is prepared with an Intuit tax product.
Inefficient Operations Are Eating Up Revenue Growth
Many advisors are succeeding in increasing revenues but are failing to make the operational changes needed to keep up with the growth, according to a new study. The end result, according to the study by management consulting firm Moss Adams, of Seattle, is that many advisors are losing money due to inefficiency and lower productivity.
"We are noting among most advisors that while revenue is growing, the processes are not keeping pace," says Mark Tibergien, a principal of Moss Adams. "In other words, they're pretty good at building the revenue and assets side, but the infrastructure is suffering."
The study, in which 1,200 advisory firms were surveyed, found that firms are losing an average of 8.3% of their total revenue to operational inefficiency-a figure that doesn't include losses from lower advisor productivity, Tibergien says. "In many respects the operations side is really the next crisis for advisor firms," he says.
Moss Adams conducted the study for Pershing Advisor Solutions, which like other custodians and clearing firms is rolling out services to help advisors on the operational level. Tibergien says the steps necessary to shore up operations depend on the size and nature of the firm. The options range from effective technological solutions to hiring a chief operating officer.
If a firm finds its overhead is increasing at the same rate as its revenues, that usually signals it's time to make a change, Tibergien says. "They need to know when they make a change in their operations it means that they are going to give operations a strategic priority," Tibergien says.
One example of how a firm can make operations a higher priority is to offer employees incentives that make jobs on the operational side of the business a meaningful career track, he says. Operational jobs are more often viewed as stepping-stones to the financial advisory side of the business, which is why the average firm sees a 70% to 80% annual turnover rate in their operations staff, Tibergien says.
The lack of attention to operations often means advisors are forced to pick up the slack. The study found that the average advisor spends 20% to 50% of his time on operational issues. "The pressure is not coming from rising costs as it is from advisors spending time on operations," Tibergien says.
RIAs Overwhelmingly Oppose B-D Exemption
An overwhelming majority of registered investment advisors feel that the broker-exemption rule recently adopted by the SEC will harm investors, according to a new survey. Brokerages themselves now are having doubts about the disclosure requirements in the rule and, as a result, the Securities and Exchange Commission granted a recent Securities Industry Association request to delay its scheduled October 24 implementation to at least April 1.
Ninety-five percent of the 2,903 RIAs surveyed said they felt the new rule would hurt investors, while 86% said it would also reduce investors confidence. The survey by TD Waterhouse also found that 92% of respondents felt that all providers of fee-based advice should offer equal levels of protection to investors.
"At a time when we need to be boosting investor confidence in markets, this new rule creates more confusion for investors and leads to greater uncertainty about who consumers can trust for investment advice," says Tom Bradley, president of TD Waterhouse Institutional Services. "With more and more brokerage houses aggressively marketing fee-based 'advisory and planning' accounts, investors are increasingly at risk."
The SEC's broker-exemption rule has been an ongoing controversy for several years, marked by lengthy delays before final passage and a lawsuit by the Financial Planning Association last year to pressure the SEC into resolving the matter.
The SEC finally adopted a rule in April that allows broker-dealers to provide fee-based advice without complying with the standards of the Advisers Act of 1940. Among the requirements brokers have to meet for the exclusion are that their advice is "solely incidental" to their brokerage services and that they disclose that their interests may not always be aligned with those of their clients.
The final adoption, however, seems to have created even more acrimony. The FPA and others in the RIA community continue to oppose the rule, but now the broker community-staunch supporters of the exemption up to its final adoption-appears to be having second thoughts.
Study Links Charitable Planning To Increased Wealth
Wealthy investors express more interest in charitable planning as their asset levels increase, according to a new study.
The study by the Fidelity Charitable Gift Fund, Charitable Giving Behavior: Wealth and Advice, found that 52% of households with $5 million or more in assets discuss charitable giving with their advisors. By comparison, only 33% of households with $1 million to $5 million in assets have those discussions.
Investors in the $5-million-and-up asset range accounted for $248 billion in charitable donations last year, according to recent studies.
"Our study shows that wealthy investors consider charitable giving a natural discussion with their advisors and that they would welcome the conversation," says Jay Quinn, senior vice president of fundraising and outreach for the gift fund.
The study found that 34% of those with $5 million or more in assets use donor-advised funds, while less than 20% of those with between $1 million and $5 million in assets used the funds. Those who use donor-advised funds most frequently cited the immediate tax benefit and the simplified recordkeeping as their favorite feature of the funds. The survey consisted of online responses from 617 investors with $1 million or more in assets.