Barnash Named FPA President-Elect

The Financial Planning Association (FPA) has settled on its long-term leadership, naming a four-year board member president-elect for 2004.

James A. Barnash, managing director for the Chicago Regional Planning Group of Lincoln Financial Advisors Corp., will become president of the FPA in 2005 as a result of the appointment.

He has served on the board of directors since 2000, the year the FPA was created through the merger of the International Association for Financial Planning (IAFP) and the Institute of Certified Financial Planners (ICFP). Barnash served as president and a board member of the ICFP's Chicago chapter before the merger, from 1996 to 1999. He served on the FPA's Chapter Advisory Council in 2000.

As part of the FPA's turnover of leadership, David Yeske stepped down as president at the end of 2003, and will become FPA chair in 2004. Elizabeth Jetton takes over as president in 2004. "This is an ever-changing community, and I'm excited to have a role in helping shape it," Barnash says.

Barnash has been active in training CFP certificants, as well as practicing as one himself since 1992. His duties with Lincoln Financial include recruiting, training and developing practices for the firm's Chicago-area region.

He is also an adjunct faculty member at DePaul University in Chicago, where he teaches courses for the school's CFP certification program. He is also a graduate of the university.

The FPA also named the following five members to its board of directors: Louis Barajas of Louis Barajas & Associates in Los Angeles; Kenneth "Kacy" Gott, principal of Kochis Fitz Tracy Fitzhugh & Gott in San Francisco; Rebecca Pomering, a senior consultant with Moss Adams LLP in Seattle; Dale Van Scoyk, managing director and national sales manager at Thornburg Investment Management in Santa Fe, N.M.; and Timothy Welsh, director of marketing for Schwab Institutional in San Francisco.

The appointment of individuals like Barnash, Van Scoyk and Welsh place three professionals from relatively large organizations on the FPA's board. Over the past year, some FPA members expressed concerns that the board was dominated by small practitioners who could easily find it difficult to wrestle with the problems inherent in a 29,000-person organization. Whether it was coincidence or not, the new appointments appear to go a ways in muting those concerns.

FPA Will Close Atlanta Office And Move Staff To Denver

One of the vestiges of the merger that led to the creation of the Financial Planning Association-maintenance of dual offices in both Denver and Atlanta-will soon disappear.

The FPA announced that it will merge the functions of both offices in Denver for the sake of efficiency and cost containment. The consolidation is scheduled to take place by the end of 2004, says Janet McCallen, the FPA's executive director and CEO.

The two offices each contain about 35 staff members. The consolidation will result in about 70 staff members working at expanded facilities in Denver, she adds. The FPA will continue to maintain its office in Washington, D.C., officials say.

"In exploring this issue, we recognized not only some financial inefficiencies, but also some inefficiencies in our operations," McCallen tells members in a letter announcing the move. "A consolidated office would allow staff to work more closely together on a day-to-day basis and increase collaboration and communication."

The reason for the twin locations is that they each housed the headquarters of the organizations that merged to form the FPA four years ago. The International Association for Financial Planning (IAFP) was based in Atlanta, and the Institute of Certified Financial Planners (ICFP) was in Denver.

Those offices were maintained after the merger to retain as much of the organization's veteran staffers as possible during the transition into a unified organization, FPA officials say. By finally deciding to merge the offices, the FPA may well lose some of those staffers after all. McCallen, based in Atlanta, says she plans to move to Denver; Atlanta staffers have been offered relocation, she adds, but it's not yet certain who will accept the offer.

The FPA's membership shouldn't be significantly impacted by the consolidation, McCallen says. The offices have already worked under a unified telephone and computer system that made the 2,000-mile separation of the offices practically invisible to membership, she says.

The true benefits of the change will be in the ability of staffers to deal with one another on a face-to-face basis, rather than through the videoconferencing and conference call facilities the FPA has been using to tie its staff together.

The organization also expects to save some money through reduced telephone and computer networking costs. Leasing costs will remain about the same, she says, because the Denver office will probably double its 11,000 square feet of space to accommodate the new staffers.

"The biggest benefit to the FPA won't be monetary," she says. "It will be the value of having most of the staff in one place."

Competitive Environment Expected To Intensify

Advisors have heard it before, but attendees at Schwab Institutional's Impact conference in San Francisco last November heard the giant custodian's executive vice president and chief strategy officer Dan Leemon portray a picture of a competitive environment that could heat up in 2004.

The three-year bear market that started in March 2000 did indeed benefit independent financial advisors, Leemon noted, with some estimates of their share in the personal financial services business rising from 9% to 15% during that period. Assets at RIA firms remained flat during the bear market, reflecting their ability to win new clients, while leading national brokerages lost 10% of their clients' assets.

But "the biggest surprise was how many people stayed with traditional providers," Leemon said. Many advisors think that the endless news about scandals on Wall Street, from compromised research to preferential IPO allocations destroyed any shred of remaining credibility wirehouses still had. "People make a distinction between the broker and the firm," Leemon explains.

He cited a study from Sanford Bernstein research that claimed 85% of people were happy with their broker or advisor. Such studies often produce widely varying results, and Leemon noted that satisfaction often declines with wealth. Among ultra-wealthy individuals with $5 million or more who claimed to be happy with their advisor, satisfaction declined from 41% to 30%, according to the Spectrem Group. Indeed, investors' ability to tolerate poor performance is remarkable. The only group expressing widespread dissatisfaction were those who suffered portfolio losses of 40% or more.

Among wirehouses, Leemon said that Smith Barney in particular is "very successful in trying to look like an [independent] advisor." Local branches are given autonomy, and the firm has a long history in the managed account arena. Most of Smith Barney's managed accounts are in the high-margin, discretionary side of the business, whereas Merrill Lynch's managed accounts tend to be lower margin and non-discretionary. Since the first quarter of 2001, Merrill has laid off or lost 28% of its brokers, while Smith Barney's broker network experienced a more modest 4% decline.

The good news for advisors is that between 1999 and 2003, the percentage of self-directed investors declined from 19% to 9%, Leemon said, with 29% of individuals relying on advisors saying they wanted more advice. Still, the majority of investors may want more control but they also want more advice, as contradictory as it may sound. Leemon estimates only 38% of investors are dependent, while 53% fall into the opinion-seeking or validator category. "I have more control working with my advisor than I had when I did it myself," Leemon said.

The reason competition is heating up is, of course, the huge opportunity spawned by the aging population. Leemon said that between 2009 and 2028, 30% of the current adult population under 60 years old will turn 60, and 72% don't feel financially secure, while half worry they will never be able to retire. He expects that many won't retire, either because they can't or don't want to. But most would at least like the option.

FPA Announces Major Events For 2004

The Financial Planning Association (FPA) has announced its slate of key events for 2004.

The events, in chronological order, are as follows:

Broker-Dealer conference, January 22-24, at the Hyatt Regency Huntington Beach Resort & Spa, Huntington Beach, Calif. This is an annual event that carries more importance than usual this year because broker-dealers are preparing to separate and form their own independent organization-with financial backing from the FPA during a transition period.

Retreat 2002, May 13-16, Cheyenne Mountain Resort, Colorado Springs, Colo. This annual event is designed to allow planners to discuss issues in the profession in an informal environment.

FPA Residency Program. This program gives new CFP certificants, or those close to getting their mark, a hands-on training experience that makes use of case studies. The programs will be held at DePaul University in Chicago, July 25-30; The American College, Bryne Mawr, Pa., August 1-6, and The University of California at Irvine, Lake Arrowhead, Calif., October 24-29.

Annual Convention & Exposition, September 10-14, Colorado Convention Center, Denver. The organization's annual keynote event will include more than 60 educational sessions and more than 250 exhibitors, according to the FPA.

Investor Faith In Mutual Funds May Be Weakened, Surveys Indicate

The three-year bear market and the scandals rocking Wall Street may be taking their toll on investors' attitudes toward mutual funds, judging from the findings of two new surveys.

A study by the Investment Company Institute (ICI) shows a slight decline in mutual fund ownership over the past year. Another, by the Calvert Group, indicates that investors are more closely scrutinizing corporate ethics in the fund industry.

The ICI survey, which looked at ownership for a one-year period ending in July, found that about 53.3 million U.S. households, or 47.9%, own some type of mutual fund. That's down from 54.2 million households, or 49.6%, a year earlier.

It also showed that 91.2 million individuals own mutual funds, down from 94.9 million in 2002.

The figures for mutual funds held in employer-sponsored retirement plans were slightly more encouraging for the fund industry. The survey found that 36.4 million households-a record number-owned such funds. That's up from 35.9 million a year earlier. Percentage-wise, however, the figures represented a drop from 32.8% of households to 32.7% over the course of the year.

The survey authors noted that the year-to-year deviations were within the survey's margin of error, meaning the fund market is still relatively stable.

Nonetheless, ICI officials say the results undoubtedly reflect the tough times investors have faced in recent years.

"The harsh financial environment and weak performance in equity markets starting in 2000 contributed to the decline in overall household fund ownership," says ICI President Matthew P. Fink.

Among the other findings in the survey:

Most households that own funds have moderate incomes: 52% of those surveyed had incomes between $25,000 and $75,000, while 41% had incomes of $75,000 or more.

Fund ownership increases with income: 70% of households with incomes of $50,000 or more owned funds, compared to 28% of households with less income.

The majority of mutual fund households, 83%, are headed by individuals between the 25 and 64 years old.

The Calvert study, meanwhile, suggests ethical behavior has become a significant factor in how investors evaluate where to put their money.

Among the findings are that 84% of investors are more likely to invest in a mutual fund if it engages in ethical business practices in its operations and reporting.

"The survey clearly shows that investors understand that corporate responsibility matters," says Barbara J. Krumsiek, president and CEO of Calvert Group, a leading provider of socially responsible mutual funds.

"It is increasingly clear," she adds, "that investors believe that well-governed, socially responsible companies are better positioned to deliver long-term, sustainable value to their shareholders."

The survey, conducted by Harris Interactive, also found that 71% of respondents either strongly or somewhat agree that companies operating with higher levels of integrity carry lower investment risk.

A majority of investors surveyed also expected better stock performance from companies that act with integrity, with 68% saying they strongly or somewhat agree that such companies bring better investment returns. The report was based on telephone surveys of 600 investors.

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