Get Your Facts Straight
As CEO of CFP Board, and therefore as the only person who can speak about staff layoffs here, I was appalled that you would run an article called "Heads Roll At CFP Board" [March 2005], reporting it during the one week I was out (though I was reachable). Your "facts" are not correct. For example, the legal staff was not an "unmitigated disaster." Most of IT was not outsourced. Gary Diffendaffer was not one of the layoffs but chose to retire even though he was offered a major consulting contract.
There WAS need for change, as there is in most organizations. Among other things, advances in IT have fundamentally changed the nature of not-for-profit companies and their employee needs. We no longer need armies of people to do what computers can do, and the Web makes possible entirely different outreach activities than in the past. These changes, and the personnel changes that should accompany them, do not need to reflect badly on employees who are laid off. In fact, we have hired quite a number of former staffers for specific consulting engagements–something we wouldn‚t do if they were not very competent. The Web and improved IT mean we simply can do more things–and different things–with fewer staff, and, in some cases, with different staff. That is organic change, not anything negative.
Sarah Teslik
CEO, CFP Board

All Hail Sarah Ball Teslik
Sarah Ball Teslik is to be commended for doing what no one has done for 20 years. She has spanked the CFP Board for its freeloading, unqualified business structure. We can only hope that the next housekeeping event that she pursues is cleaning out the deadwood on the Board itself–a board loaded with, at various times, as much as 40% of nonqualified personnel, members who are not themselves professionally trained and experienced financial planners. Such a balance permits a few CFP Board members to control the entire Board regardless of the irresponsible decisions that they have regularly perpetrated on the profession.
Here‚s to Sarah Ball Teslik. May she accomplish what others have tried but have never been permitted to do.

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

Bachrach Off The Mark
In the February 2005 issue of Financial Advisor, Bill Bachrach wrote "School of Schlock: Why advisors need to stop educating their clients."
He stated his thesis up front: "This idea that the purpose of financial advisors is to educate their clients is a fundamental error in our industry."  I strongly disagree. He goes on to say that "As a financial professional, you need to focus on getting them results, not information." I think Mr. Bachrach is setting up a false and unnecessary dichotomy, as if a client needs to chose between results or education. Why can‚t a client have results and education?
He starts out to support his contention that clients want results and not education with a personal story about someone he hired to clean and otherwise maintain his backyard swimming pool. He doesn‚t want to do it himself. He just wants his pool cleaned and doesn‚t want to spend time "getting educated" by his pool guy about water chemistry, etc. I understand his example. I don‚t want to be educated by my pool guy either. But, unfortunately, I think he chose an inappropriate example. Having your swimming pool  maintained is not very high on the list of most people‚s priorities. I believe that most people would not attach an importance to that service as they do to having a financial advisor manage their portfolio.
A better example would be major surgery. If you just found out that you had a cancerous tumor, wouldn‚t you ask your physician a lot of questions? Wouldn‚t you want to understand what you can expect the surgery to accomplish and how you are going to feel after it is done? I think so. You would do your homework not to become a doctor, not to be able to perform your own surgery, but to thoroughly understand what you are going through and why. You would want to "get educated" because submitting to a surgeon‚s scalpel is serious business. And I think, to most clients, the management of their portfolios is serious business. Much more serious than having their pool maintained.
I believe that clients need to be educated so that they don‚t have unrealistic return expectations. We who are in the business are very familiar with history. We know that between 1926 and 2003 the S&P 500 Index has returned 10.2% per year on the average. Many years it returned more, but also for many years it returned less. I know of clients who jumped into the market when it returned 37.4% in 1995, and saw returns of 23.1% in 1996, 33.4% in 1997, 28.6% in 1998 and 21.0% in 1999. With these returns being their only point of reference, their expectation was that the market always goes up 20% or 30% per year. Without education, these clients were very disappointed, and some were even angry at the bear market returns of 2000-2002. Angry enough to fire their financial advisor.
I believe that clients need to be educated about the risks of investing in the equity markets. Stocks can be very volatile. I invest my client‚s portfolios mainly in equity mutual funds, for adequate diversification. I believe most clients don‚t need to take on single-stock risk for which they are not compensated.
I believe that clients need to know why they shouldn‚t chase the last investment fad. I had a client come to me in January of 2000 with a hot stock tip from his barber. His barber guaranteed him that this new Internet stock selling for $7 a share was going to go up to $120 a share by year end. Guaranteed! I talked him out of investing his life‚s savings in this stock, and convinced him to invest only his "casino" money in it. We got into the stock at $9 a share in February. By year end, it was selling for $.90 a share.
I believe that clients need to be educated about the benefits of being diversified not only by holding multiple stocks, but being diversified by company size, investment style and industry sectors. In the late 1990s clients needed to be educated that there was more to investing than technology stocks. Following the Nasdaq‚s 70% to 80% technology weighting back then proved to be a disastrous investment strategy in the new millennium.
I believe that clients need to know that although equities have outperformed bonds over most 15- to 20-year periods, every portfolio should have some fixed-income exposure.
I could go on, but I think my point is made. Most clients need education in addition to results. They are happy to receive it. And, they are happier when they get their results, because they haven‚t been expecting too much and understand more fully why their portfolio is diversified.
Alexander J. Cudzewicz, CPA/PFS
President, Oak Brook Asset Mgt.
Scottsdale, Ariz.