FPA Replaces McCallen With Tuttle

In its third major organizational change in five months, the Financial Planning Association announced in early January that its executive director and CEO, Janet McCallen, was leaving immediately and would be replaced by its associate executive director, Marv Tuttle.

The announcement follows hard on the heels of a September announcement that FPA was spinning off its broker-dealer division into a separate association and a November announcement that it was centralizing its headquarters in Denver and closing its office in Atlanta. At that time, McCallen had said that she planned to move to Denver.

When FPA was formed in January 2000 by the merger of the International Association For Financial Planning in Atlanta with the Institute For Certified Financial Planners in Denver, most members had assumed that the dual headquarters were only temporary. In fact, when the move to Denver was announced in late November, many members considered it long overdue.

However, several members expressed surprise that the respected and well-liked Tuttle was immediately named executive director, not acting executive director, while the board conducted a search for a successor. When there is a change of leadership at many associations, a search committee is typically formed to interview several candidates even though the inside favorite often emerges in the catbird's seat. Indeed, the Denver-based CFP Board of Standards is currently in the process of its second such executive search in three years.

"We considered doing a search but felt Marv was the right person at the right time," FPA President Elizabeth Jetton says.

McCallen joined the IAFP in early 1990 at a time when the organization was experiencing dramatic membership and operating losses, both of which she managed to reverse. After the creation of FPA in 2000, the association was able to hold onto its 29,000-membership base, despite the worst bear market in 70 years. FPA officials have said that while many members have left in the last three years, many others have joined the association. As CEO of FPA, McCallen was considered an excellent administrator if not a far-sighted visionary, though past board members said her job really involved implementing the board's vision, not developing one on her own.

McCallen says that she was told the board "felt it was time for a change in leadership, and after talking with them, I agreed. I'm okay with the way things turned out. For everything, there is a time and a season."

Throughout the profession, reactions varied widely. Richard Wagner, principal of WorthLiving LLC in Denver, thinks the decision was a good one. "I don't know of any person who has gone through more personal growth in 20 years than Marv," Wagner says. "He's been there 20 years, but he's fresh. Marv may not be a visionary but he's a great understander of vision, a good implementer of vision and he knows where and how the profession fits into society."

Deena Katz of Evensky Brown & Katz in Coral Gables, Fla., voices some concerns, not about Tuttle, but about the recent pattern of events at FPA. "Marv is a really good guy," she says. "I'm a CFP, and I think every advisor should be a CFP, but it [FPA] should also be an industry-wide organization, In the U.K. when they brought in the CFP mark, they made it fee-only and now they are having a very hard time because they cut out everybody. In this country, the issue isn't compensation, it's narrow-mindedness."

Though some of the decisions FPA has made in the last few years have been painful, some members think they should have been done a decade ago. Jeffrey Lauterbach, president of Capital Trust Co. of Delaware in Wilmington, Del., was instrumental in setting up the broker-dealer division of the IAFP in the mid-1980s. He thought it should have been spun off as early as 1990. He also thinks Jetton can serve as a unifying force. "She has a clear vision, and she has ideas I think all the different groups within the association can rally around," he says. "She believes that FPA must stand up for what's right and all that's good about financial planning."

For her part, Jetton praises McCallen's record and acknowledges the difficulty of merging two organizations during a bear market. "Over the past four years, FPA has experienced the natural challenges and opportunities of creating a new organization," she says.


Waterhouse and E*Trade End Merger Talks

The future of TD Waterhouse is up in the air again, after its parent company and E*Trade Financial Corp. broke off talks aimed at merging the two companies.

The two companies announced the end of the talks in January, just days after disclosing they were in talks to combine the two companies. TD Bank Financial Group, consisting of Toronto-Dominion Bank and its subsidiaries, including TD Waterhouse, says in a statement that the companies mutually agreed to end the talks.

"Both companies agree that while there were potential benefits to concluding a transaction that merited serious discussion, they were unable to arrive at a mutually agreeable terms," says the statement.

The companies gave few details on the reasons for the break. The Globe and Mail in Toronto reported it was due to disagreement over how much control over the merged company TD Bank would have as a minority shareholder.

With the talks canceled, the future of TD Waterhouse is once again open to speculation-with the looming possibility that another competitor will step into the picture to purchase the company.

Toronto-Dominion signaled last year it intended to look for possible merger opportunities, when it hired Goldman Sachs Group Inc. to examine strategic options involving TD Waterhouse's U.S. assets.

E*Trade had been mentioned as among the potential buyers of the company. So have competitors such as Charles Schwab and Ameritrade Holding Corp. Schwab himself has publicly mused about possibly buying the company on several occasions.


ICI Says Study Shows Fees Are Fair, But Spitzer Blasts Them

As investigations into alleged trading abuses by mutual funds continue, the attorney general leading the probes and the fund industry continue to debate the fairness of mutual fund fees.

In a recent study, the Investment Company Institute, a lobby group for mutual funds, says the fees mutual funds pay sub-advisors are "quite similar" to those paid by pension funds.

The study found the mutual fund management fees to be about $31 per $10,000 invested by shareholders, compared with a fee of about $28 in the pension fund industry.

The ICI claims its study refutes a 2001 study by two university professors that contended mutual fund fees were inflated when compared with pension funds.

That study, often cited by New York State Attorney General Eliot Spitzer in his campaign against mutual fund abuses, was conducted by John P. Freeman of the University of South Carolina and Stewart L. Brown, professor of finance at the University of Florida.

"We identified a way to provide an 'apples-to-apples' comparison of portfolio management fees incurred by both mutual funds and pension plans," says Sean Collins, a senior economist at ICI.

But Spitzer blasted the ICI study, noting that only 20% of the mutual fund industry employs sub-advisors. The other 80% of funds set fees without the benefit of competition, he says.

"Those fees, which are not negotiated at arm's length, are significantly higher than the fees charged by sub-advisors," Spitzer says. "It is unfortunate that the ICI report focused on only a small corner of the industry and did not address the dominant mechanism by which fees are set and services are delivered."

He also says the ICI study failed to mention that fund managers often layer on a "premium" or "monitoring" fee to what sub-advisors charge, increasing the net fees paid by investors.

In defense of its study, ICI officials say there is no evidence that sub-advisor fees are unrepresentative of the broad mutual fund industry.

"Our study found average overall fee levels for mutual funds that use sub-advisors are about the same as for funds that do not use them," says ICI's Collins. "This suggests that portfolio management expenses are likely to be quite similar, too."


Fidelity Offers Trust Services For Advisors

Fidelity Investments has added trust services to its WealthAccess technology platform.

Fidelity officials say the service, offered through Fidelity Personal Trust Company, FSB, allows advisors to retain investment management control for clients involved in trust issues.

The second-largest custodial and brokerage provider in the nation, Fidelity serves about 2,000 independent advisors with a total of $94.7 billion under management.

"As the wealthy population continues to age and increasingly seeks help in developing estate and wealth transfer strategies, advisors who offer a range of trustee services may be well-positioned to strengthen existing client relationships and even extend them into future generations," says Jay Lanigan, president of Fidelity Registered Investment Advisors Group.

The trust services consist of three categories:

Agent for Trustee Services: Through this service, a trustee-which could include an advisor, client or family members-can hire the Trust Company to act on their behalf. The trustee retains fiduciary responsibility and the advisor retains investment management responsibility.

Trustee Reporting Services: Advisors can provide clients with enhanced accounting and reporting, including principal and income separation, tax-lot accounting and marketable and non-marketable securities.

Administrative Trustee Services: An advisor's client can appoint the trust company as a corporate trustee.


Advisors Seek Information From Mutual Funds

Its seems that regulators aren't the only ones scrutinizing mutual funds. Advisors are getting into the act, too.

The Alpha Group, an informal association of 18 wealth management professionals, announced that it sent a letter to more than 50 major mutual funds at the end of 2003, with detailed questions about the funds' practices.

"It's letting the whole fund world know it's not just the regulators who care about this," says Harold Evensky, an Alpha Group member and a principal of Evensky, Brown & Katz in Coral Gables, Fla. "There are professionals who care about the fact that what happens reflects on our whole industry and profession."

Evensky says members of The Alpha Group will share all its findings, including a list of funds that did and did not respond, with their clients. The group was founded in 1990 and consists of professionals providing advice on a total of about $3 billion in assets.

The questions include whether the funds have a policy regarding market timing, if they use fair-market pricing, their policies regarding managers investing in their funds and whether they use lot basis tax trading.

Evensky acknowledged that some of the information is probably available in fund prospectuses, but he says The Alpha Group is interested in how cooperative the funds are in handling information requests.

"To me, a nonresponse is telling in itself," Evensky says. "Standing behind a legal department is not particularly acceptable anymore."


Custodial Firm Offering New Technology Platform

A recently created custodial firm is offering its advisors a new technology platform for dealing with both data and clients.

Shareholder Services Group Inc., formed in San Diego last year as a brokerage and custody firm focused exclusively on independent financial advisors, announced it will provide the platform through a partnership with Investigo Corp.

The platform was launched in December and includes both reporting and contact management functions, according to SSGI. Functions include the production of performance reports, comparative analysis and the maintenance of cost-basis and tax-lot information. The platform also provides direct interfaces with applications such as MoneyGuide Pro, Morningstar Principia, LaserApp and Microsoft Office. SSGI will provide the training and support services for the platform, company officials say.

The platform's cost to advisors will start at $150 per month, plus 50 cents for each account. There are no startup costs or lock-in periods, says Peter Mangan, SSGI president and CEO.

"To have all this functionality ready at hand gives independent advisors a competitive edge and can greatly enhance their efficiency," Mangan says. "The system is easy to set up, easy to master, and with the daily data reconciliation and the low monthly costs the service is an extremely good value."