New CFP Board CEO Offers Her Ideas

Sarah Ball Teslik starts November 1 as the Certified Financial Planner Board of Standards' new chief executive officer. Teslik previously was executive director of the Washington, D.C.-based Council of Institutional Investors (CII).

The Denver-based board has been without a CEO since Louis J. Garday unexpectedly resigned in July 2003 after two years on the job. Garday, a Denver CPA and former investment banker, came into the position without a background in financial planning.

The 51-year-old Teslik does not have a background in financial planning either, but she has other experience the board feels is very valuable.

"We wanted a person with Sarah's background and experience, including her ability to be heard in Washington, D.C. Her appointment gives CFP Board the ability to take itself to the next level, for the public, in terms of shaping the legislative and regulatory environment in which CFP certificants operate on behalf of their clients," says David Diesslin, CFP Board's Board of Governors Chair.

The board found Teslik through the help of a professional recruiter, Diesslin notes. Eight candidates made the final cut, he says, but Teslik was "far and away" the best choice and was the only one approved unanimously.

The Board would have liked to have found a CEO who also was a CFP licensee, and the board did look for such candidates, Diesslin says. But, he adds, Teslik turned out to be the candidate who has the best qualifications to run a standard-setting organization based on the four "E"s- education, examination, experience and ethics.

As the CII's executive director, Teslik, a lawyer, managed the organization's staff, operations, finances and legal activities. CII's members include 250 pension funds and investment professionals responsible for more than $3 trillion in assets. CII only addresses investment issues that are important to its members, Teslik says. For example that might be done by suing, on the part of shareholders, a company that has behaved badly. It often supports issues that give more power to shareholders, such as reforming corporate governance policies.

Teslik, who has a master's degree from Oxford University and a law degree from Georgetown University, worked for two Wall Street law firms before she became CII's executive director. She helped CII's founding members form the organization 19 years ago, and she had been its only executive director until leaving the post for the CFP job.

Teslik says she has the experience to balance business and policy goals, something the CFP Board needs. "I'm fascinated by management and executive issues," she says. "My first love is trying effectively to work with a group of people to achieve common goals."

She notes the CFP Board understands its core function is holding the right standards for the CFP credential, something that takes constant work and oversight. "You have to set the exam, decide what's in it and what's not, what the pass rate will be, you have to provide monitoring. It's not something you coast on," she says.

The board also recognizes that part of the value of the CFP mark is how it fits into the policy world, and that's more difficult to accomplish, she adds. One issue is how quality financial planning can be provided to those who can't afford it, but you can't do that by saying advisors must become volunteers, she notes.

New means of delivering financial planning to reach new audiences must be considered to achieve that goal, Teslik says. For example, providing financial planning in a group setting might work in some instances, she adds.

"It does behoove us to find new delivery mechanisms, new way to focus the content so it's not just on investor issues," Teslik says. "Even someone with no money in the bank needs financial planning. [The CFP Board has] a very keen sense that those goals are important but are much trickier to attain."

Much of financial planning has been targeted to affluent individuals, but more needs to be done to reach individuals of more modest means and convince them that they need financial planning, too. "It's expanding the potential markets significantly," Teslik says. "There are large numbers of Americans who can pay for some kind of financial planning, but the content has to be tailored to their needs and pocketbooks."

FPA Has Its Day On Capitol Hill, Mixing Planning With Politics

How do you get congressional staffers to sit up and take notice of your organization? Give them free financial planning advice. And lunch, of course.

That's what the Financial Planning Association did last week, when it hosted its fourth annual Financial Planning Day on Capitol Hill. The group sponsored the event in conjunction with the Certified Financial Planner Board of Standards and the National Endowment for Financial Education.

The event drew over 100 staffers from the offices of key members of the U.S. House of Representatives, who each got an opportunity to sit down with one of 12 CFP-certified planners and ask questions ranging from ways to improve debt management to strategies for creating a sound retirement plan.

Rep. Ben Cardin, D-Md., a longtime proponent of enhanced retirement plan investing, co-sponsored the event so the groups could use a room in the Capitol.

"This day serves several key functions for us," says Bill DeReuter, assistant director of government relations in the FPA's Washington, D.C., office. "It introduces these folks to the fact that financial planning is indeed a profession, and planners really do add value." DeReuter says staffers ranged from chiefs of staff and general counsels to entry-level administrative folks just out of college.

"Instead of having them run into a broker when they need financial planning advice, this gives them a broader view about what financial planning is all about," DeReuter says. While the day is billed as an unbiased, noncommercial event, it doesn't hurt that influential staffers have had firsthand exposure to savvy planners and the planning process when important legislation comes up, he adds.

"The staff we talk to come away with a great impression of financial planning and what we do for clients," says Christine D'Amato, a planner who participated in the event. "This is enlightening for them, and I think makes them a little more receptive when issues affecting planners and their clients come up," adds D'Amato, a planner with Burt Associates in Rockville, Md., who regularly lobbies lawmakers as director of government relations for the FPA of the National Capital Area.

To take advantage of the event's success, DeReuter says he is working to have FPA chapters across the country hold their own planning days for state legislators.

Investigations May Aid Lawsuit To Rollback Broker Exemption

As the court-mandated deadline nears for the Securities and Exchange Commission to approve, amend or revoke its proposed regulatory exemption for brokers who offer advice, Financial Planning Association executives met with SEC Commissioner Roel C. Campos last month in another effort to convince the agency to withdraw it.

Failing that, the FPA's board of directors may decide to move forward with its pending lawsuit against the SEC, which maintains the agency exceeded its authority when it created a regulatory loophole for brokers who offer advice, says Duane Thompson, group advocacy director in the FPA's Washington, D.C., office. The fact that the SEC has now announced that it is investigating abuses by brokers who charge fees for just such advice is not lost on the FPA, which agreed to back off its legal challenge if the SEC acts on the pending exemption rule by January 14. "We wanted some face time at the commission before they take final action, and to try to get a sense of what they might do," says Thompson. "We're saying now that reverse churning and double fees are getting regulatory scrutiny, why not get rid of the proposed rule altogether?"

The FPA maintains in its suit that exempting brokers from the fiduciary standards that advisors live by, even when the brokers offer identical fee-based portfolio management services, creates a double standard that severely impairs investors. In fact, the association's lawsuit accuses the SEC of diluting investor protection by removing disclosure and fiduciary protections mandated by the Investment Advisers Act. Still, Thompson admits that "odds are against the SEC withdrawing the rule, even though that's exactly what we'd like to see. When you have brokers offering financial planning services just as advisors do, it's nonsensical to have them regulated in two distinct ways."

That the SEC is joining the National Association of Securities Dealers and the New York Stock Exchange in investigating what they have termed as "widespread abuses" stemming from the broker exemption, proposed by the SEC in 1999, only underscores the problems, FPA officials believe.

The NASD has stepped up its investigation of such fee-based brokerage services, including instances of "double dipping," where brokers use commission mutual funds in fee-based accounts, requiring investors to pay twice. The NASD has also cited widespread instances involving the lack of monitoring of such accounts, the failure of some broker-dealers to assign some accounts to brokers for monitoring and the suitability of such fee-based brokerage accounts for certain investors.

RIA Business Boomed in 2003, But Profit Margins Shrank

RIAs in 2003 made up the business lost to the long bear market, with revenues and assets under management reaching or exceeding five-year highs even as profit margins continued a five-year decline, according to the annual AdvisorBenchmarking Research Study.

The surge in business ended three straight years of decline that followed the bursting of the tech bubble in 2000, according to the survey by AdvisorBenchmarking Inc., a subsidiary of Rydex Investments of Rockville, Md. Median assets under management rose 22.5% to $87 million, the same level as 1999. Median revenues were up 15.4% to $917,000, slightly higher than the $902,000 reported for 1999.

The disparity in the growth of revenues and assets was caused in part, according to the study, by the growing use of financial planning fees by RIAs: Fees made up 20.2% of revenues, nearly double the percentage in 1999, when the survey began. Asset management fees constituted 78.7% of revenues while commissions accounted for just over 1%, the least since 1999.

The median profit margin was 25.85%, down from 31.6% in 1999. Practice expenses continued to rise, by 10.8% in 2003 with median expenses at $710,000. The costs for legal compliance exploded, with the median expenditures up by a whopping 152.9% in one year-to 6.1% from 2.4% in 2002. Another leading expense was staff compensation; while staff levels remained at the same level as in 2002, practices paid 4% more in compensation during 2003.

Other significant trends reported in the survey include:

RIAs focused more on serving clients and managing portfolios, and spent less time on marketing. RIAs reported spending 35.5% of their time serving clients, up from 30.8% in 2002, and 19.2% of their time on portfolios, up from 15.9%. Marketing time dropped to 16.5% from 20.7%

The survey reports that 20% of RIAs say "positioning their practice for sale" is their top goal, while 4.7% cite purchasing another practice. The focus on transition and succession planning is increasing. The number of practices with succession plans in place rose to 37.1% from 32.1%.

Schwab Creates Job Board For RIAs

Schwab Institutional is creating an online service to help its registered investment advisor (RIA) clients post job opportunities for professionals experienced at working on financial issues with high-net-worth individuals. The decision to launch the new program came after several major RIA firms told Schwab the biggest constraint to their growth was finding qualified professionals to handle more clients and prospects, says Deborah McWhinney, president of Schwab Institutional.

RIA firms that are Schwab clients can post job opportunities with the service as well as access a database of job seekers. Job seekers, including trust officers and wirehouse and bank brokers, will be able post resumes and backgrounders for free. Advisors who want to switch firms and perhaps become junior partners at larger firms will also be able to access the service. Firms posting job listings will be charged rates of $100 a month, $250 a quarter or $800 a year.

To protect job seekers' privacy, Schwab has created a blind e-mail system permitting firms and candidates to communicate without exposing their identities at the start of the interview process.

"There is a lot of opportunity in front of these firms, but the constraints are serious," says Tim Welsh, director of strategic programs at Schwab Institutional, where he heads the Schwab Advisor Transition Support platform for RIA firms looking to sell their business or acquire other firms. "We've seen a lot of activity as wirehouse brokers go independent, but they are all not entrepreneurs. This offers them a great opportunity to bring their books of business out of a captive environment and find a home in an independent environment."

Skip Viragh Award Winner Named At FAS Symposium

Steven M. Bloom was named as the first recipient of The Skip Viragh Innovation Award at The 7th Annual Financial Advisor Symposium in Chicago last month.

The award, named in honor of the late Skip Viragh, founder of Rockville, Md.-based Rydex Investments, honors a company or individual showing Viragh's spirit of innovation and integrity by developing a new service, benefit or product that positively affects advisors and their clients.

Bloom was a pioneer in efforts that led to the world's first ETF, the Standard & Poor's Depositary Receipts, better known as SPDRs. Bloom also contributed to the development and launch of the QQQ, the Nasdaq 100 Index Tracking Stock, which is the most actively traded ETF.

Bloom founded Capmark, a financial consulting firm, in 1998. Previously, he was a senior consultant for National Economic Associates, a subsidiary of Marsh & McLennan Companies Inc.

During the presentation, Bloom commended Viragh, who lost a battle with cancer in December, for his innovation and vision. For more information, visit