Survey Finds Americans Feel Unprotected, Cynical About Financial Institutions

Clients who visit financial advisors may be more in need of a couch than a chair, judging by a new survey released by the Financial Planning Association.

Many Americans feel gloomy, pessimistic and unprotected when it comes to their finances, the survey indicates.

As one example, 63% of those responding said they do not feel America's financial, government and regulatory systems "protect people like me" against investment losses and fraud.

A hefty 31% said they do not believe they will ever again feel confident in their financial prospects.

"These findings are profound," says FPA President Bob Barry. "Not only are many Americans feeling ill when it comes to their finances, but in many cases, the patient has given up hope."

In other words, Barry added, the news isn't good-"especially for our financial institutions."

The survey, conducted September 12-15, consisted of telephone interviews with 1,015 adults. The margin of error was 2% to 3%.

In other responses to the survey, 58% said they were only "somewhat" or "not very" confident in their financial future. Women expressed greater pessimism, with 34% saying they were "very confident" about their financial future, compared with 46% of men.

The most likely people to trust financial institutions and regulators were those under 25. Forty-three percent in this group felt the system "protected people like themselves," compared with 48% who said no. The most cynical were people from 45 to 54 years old-71% had no confidence in regulators or financial institutions.

In a sign that investors are looking for help, the study also found that nearly 30% of consumers are more likely to seek professional financial help now than a year ago.

"This survey should be a clear call to those of us in the financial planning community," Barry says. "Americans' finances have taken a hit, and they're not sure whom to trust. It falls to us to make the case for ethical, comprehensive financial planning-to provide for our clients' life needs-especially in disappointing economic times."

In a separate inquiry, the FPA conducted focus groups in July and August in which 50 people were asked their impressions of financial service professions.

Despite the wave of accounting scandals, accountants were the most trusted professionals, with an average score of 3.6 in a range of 1 (lowest) to 5 (highest). They were followed by personal bankers and financial planners. Planners received an average rank of 3.2. Stockbrokers were least regarded, with a response of 2.7.

Financial Services Giant To Buy MyCFO

Bancmont Financial, a U.S. holding company of BMO Financial Group, plans to acquire most of California-based myCFO for approximately $30 million.

Amy Yuhn, a spokeswoman for Harris Private Bank, part of BMO, says myCFO's tax advisory business is not part of the deal. The acquisition does include client relationships representing more than $5.7 billion in assets under management, as well as certain technology and rights to the myCFO name, she says. Yuhn adds a decision hasn't been made on whether myCFO will be a subsidiary or integrated into another BMO unit, such as Harris Private Bank.

MyCFO's CEO, Art Shaw, is joining BMO, Yuhn says. She declined to comment on how the firm's 190 employees would be affected.

MyCFO is based in the high-tech area of Mountain View and provides family office and investment services to high-net-worth individuals. The acquisition offers BMO entry into key markets, such as Mountain View, Irvine, San Francisco and Los Angeles in California, Denver and Atlanta. Harris now has offices in Arizona, Florida, Illinois and Washington.

MyCFO includes a high-net-worth client base, a team of highly experienced professional wealth advisors (many of whom come from Big Five accounting firms), a well-recognized brand and services that are complementary to the Harris Private Bank. Harris reportedly had considered entering the custodial-services market and competing against firms like Schwab Institutional, TD Waterhouse Institutional and Fidelity's custodial-services arm. But now it appears more interested in the high-margin advisory business.

The transaction is expected to close by the end of this year and is subject to regulatory approval. BMO Financial Group also includes Bank of Montreal, Chicago-based Harris Bank and Nesbitt Burns, a full-service investment firm.

Fall Of Variable Life Expected To Continue

Deterioration in the equity market is taking its toll on the once-vibrant variable-life insurance market.

A new study says that the variable-life market is expected to decline 25% in 2002, after falling 15% in 2001. The fall came after the market hit a high-water mark of $6.95 billion in sales in 2000.

"The market is now at a crossroads," says Eric Speer, managing principal of the Americas for Tallinghast-Towers Perrin, which conducted the study.

The study concludes that a rebound in the market will require more favorable market conditions and more aggressive movement into investment-oriented distribution channels, including wirehouses, regional firms, banks and independent broker-dealers.

The market also will have to recapture the attention of career agents and insurance-oriented independent advisors, many of whom have switched back to selling fixed-income life products. "They must believe once again that variable-life products are strong, long-term protection and accumulation vehicles," the study concludes.

In any case, the market will be hard-pressed to duplicate the boom it experienced in the 1990s, according to the report. During this decade, the variable- life market grew from $1 billion in 1990 to $6.95 billion in 2000-a 21% compound annual growth rate. The growth came at a time when other life insurance products languished, as variable-life's share of individual insurance sales grew from 7% to 37% during the decade.

Investors Look To Real Estate To Outperform

As stock market volatility continues, investors appear to be holding out hope that real estate will continue its run of success.

That was the finding of a new survey released by Behringer Harvard Funds, a commercial real estate investment company.

In the survey, conducted by Opinion Research Corp., 45% predicted real estate would outperform the stock market over the next three years, compared with 12% who felt the stock market would do better.

Asked to rank the importance of real estate investment objectives, capital appreciation came in first, cited by 40% of respondents. It was followed by portfolio diversification (31%), capital preservation (15%) and income (11%).

The survey also found that about 75% of respondents use a broker or financial advisor for some or all of their investment advice.

The survey was conducted in September and involved 400 investors who had made at least one stock, bond or mutual fund purchase or sale outside a retirement plan within the past two years. The margin of error is plus or minus 5%.

"These findings help explain the explosive growth in real estate investments over the past two years," says Robert M. Behringer, president and CEO of Behringer Harvard Funds. "Once investors recognize the value of diversifying a portfolio with real estate, their next step should be to evaluate the differences among the types of investments available and the expertise of the professionals managing them."

Majority Plan To Work During "Retirement"

If you're helping clients plan their retirement, don't assume their working days are over or that they're settling into a life of ease and recreation.

That's because a new study released by the AARP indicates that for many retirees the opposite is true.

The survey of 1,500 employed workers aged 45 to 74 shows that 69% of respondents plan to work in some capacity in their retirement years. More than a third, 34%, said they would work part time out of interest and enjoyment. Another 19% said they would put in part-time work hours for the income.

Ten percent said they would go into business for themselves and 6% said they would work full time. Less than a third of respondents, 28%, said they would not work at all.

"Americans are living longer and healthier lives, and [older workers] represent an increasingly dynamic force in the economy," says AARP President James Parkel. "The potential role for the 50-plus worker in the future is even more exciting."

Advisors should note that money isn't always the deciding factor when workers ponder retirement, according to the study. Seventy-six percent of all respondents said the fact that they enjoy their jobs is the reason they are working-the same percentage that cited the need for money.

Clients' Kids May Be At Risk For Credit Card Fraud

Advisors who counsel their clients on credit card management may also want to have a chat with their clients' children, a new survey suggests.

The Internet survey of 208 college students, commissioned by Chubb Group of Insurance Companies, concluded that these newcomers to the world of credit are leaving themselves open to credit card theft and fraud.

The risk is heightened by the fact that these young adults are getting besieged with offers from credit card companies. The survey found, for example, that 49% of respondents receive credit card applications on a daily or weekly basis.

The study also found that 30% of students do not destroy pre-approved cards when disposing of them, and 28% rarely or never reconcile their credit card and/or checking account balances.

Forty-eight percent of students also reported that their professors still use Social Security numbers when publicly posting grades, and only 5% said they regularly change their passwords and personal identification numbers. Thirty-one percent, meanwhile, said they never change their passwords or PIN numbers.

The lax attention to credit card security is risky considering how many college students have credit cards, the study says. Eighty-four percent said they have at least one credit card, and 51% said they have two or more.

"Credit card offers, dormitory burglaries, poor financial management skills and even the way professors post grades leave many students extremely vulnerable to fraud and theft on campus," says Mary Ann Avnet, vice president of Chubb & Son and marketing and customer relations manager for Chubb Personal Insurance.

William L. Anthes Gets P. Kemp Fain Award

William L. Anthes, Ph.D., president and CEO of the National Endowment for Financial Education (NEFE), has received the Financial Planning Association's P. Kemp Fain Award.

The FPA presented the award to Anthes at Success Forum 2002 in September in New Orleans. The FPA had planned to honor Anthes at FPA's Success Forum 2001. But because of September 11, the FPA called off the 2001 convention and postponed the presentation until this year.

Previous award winners include Charles Hughes, Henry Montgomery and Jack Blankinship. The award, which recognizes an individual who has made an outstanding contribution to the financial planning profession, is named for P. Kemp Fain Jr. Fain formed the first chapter of the International Association of Financial Planning in 1971. From 1984 to 1985, he was president of the Institute of Certified Financial Planners.

Anthes served as president of the College for Financial Planning/NEFE for 18 years, before NEFE sold the college to the Apollo Group in the late 1990s to focus on consumer education.

51% Pass CFP Exam; International Directors Named

The Certified Financial Planner Board of Standards Inc. announced a 51% pass rate for its July 2002 CFP certification exam. The exam was passed by 947 of the 1,869 people who took it, the board says.

The exam has had a cumulative pass rate of 73% since 1995. In that time 25,537 people have sat for the exam, of whom 18,556 have passed either on their first try or in subsequent attempts.

The next exam is scheduled for November 15-16. The deadline for applications was in October.

The CFP Board also announced the nine members who will serve on the inaugural board of a proposed international body that will administer the CFP certification worldwide.

The international directors are: Raymond Griffin, CFP (Australia), chair-elect, International CFP Council and past-chair, Financial Planning Association of Australia; John S. Carpenter, past-chair, Financial Planners Standards Council, Canada; Nicolas R. A. Koechlin, CFP (Switzerland), CEO, Swiss Financial Planners Organization, and Ian A. Middleton, CFP (South Africa), president, Financial Planning Institute of South Africa.

The U.S. directors are: CFP Board Chairwoman Elaine E. Bedel, CFP; CFP board members Joanne A. Bickel, CFP, and Maureen M. Tsu, CFP; CFP Board CEO Louis J. Garday, and CFP past-chair Timothy S. Kochis, CFP.