Ymh Ymh Yeah?
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The way you debate ruins your credibility...you struck out a long time ago in my league.
Don't even start on fee based until you've addressed the inherent conflicts of commission-based brokerage. When you say that your way is always right and my way is always wrong, you expose youself as the fool that you are.
Possibly I am being unrealistic, since I only have experience as a commissioned rep. I am planning to sit for the Series 66 in a few more weeks.
I don't see what is wrong with Joe's business plan. It is how I "think" that I will be doing business. Some people who only hold long term bonds or have such low trading amounts in their accounts would benefit by paying commissions. Others who want to have very actively managed and traded accounts may be better off in a flat fee account. My B/Ds RIA only allows flat fee, not % of assets under management. The idea of dividing the client into two buckets is attractive too. One for the inactive account (commissions) and one for the active (fees or fees + ticket charges)
As I see it, there is room in the same business for both platforms. In addition for the commission only clients, I intend to charge by the hour for other financial planning services that are not incidental to making trades or investing.
Where am I wrong? I really would like to know since I haven't yet begun the transition from 100% commission based.
I went to a Fidelity seminar a number of years ago, and they talked about how clients don't think about asset allocation like we do. Rather, they tend to classify their money in "pockets", and think of these accounts or "pockets" according to the level of risk involved or the goals to which they are dedicated. The folks at Cannon Institute talk about a similar outlook, dividing client's portfolio into "Capital Growth" and "Capital Preservation" sections. Many of my fee based clients also have "safe money" accounts where they purchase CD's and muni bonds and GNMA's, and their "risk capital" goes into the separate fee-based accounts. It seems to give them a great peace of mind to take this approach
This is key. So you do everything. Asset allocation, fee based, transaction based (at lower cost) - even fee only (just charge a flat planning fee).
From the client's view, one time you are talking about those pockets, or where their cash flow will come from if the market is down for four years (various fixed).
Or asset allocation between the mix of stocks and bonds. For a lot of clients, right now we are pulling back five or ten percent from equity to fixed. Specifically talking about asset allocation.
Coming out of 2000 and 9/11, we were of course holding the course with the equity "pocket", but also talking about laddered guaranteed certificate pockets - in case we needed to draw upon these, otherwise, we would and did "sell off" a little equity as things grow.
Which of course they have, and you all likely know the last time we went so long without a five or ten percent correction in the market was, something like 1956.
It would be a gambler's bias to just pull money back because the market is doing well, but in terms of other goals, risk profile, or even mental visualizing about pockets and how people think about their money, these are reasons to be talking to our clients now about portfolio adjustments.
Before the correction (this year, next year, whenever).
The investment into this activity will help get a lot of referrals - why not, you did good proactive work - even if portfolio values decline, you were showing your clients what will happen.
You see articles, like Nick Murray's, talking about how "you are not bullish enough". In a sense, he is right, in terms of holding enough equities and just riding the up and down markets, but when you bring in the "pocket" thinking, and just being here after five or six good years, you come up with a tailored and personal approach.
All of this is much more important than how we get paid, or this or that hot shot sector or particular vehicle. After all, the University of Chicago profs proved that asset allocation pretty much works in a perfect environment - minus investor behaviour. "Pockets is a big part of helping shape investor behaviour, and a very personal justification for our services."
[quote=ymh_ymh_ymh]
Ladies and Gentlemen:
It all depends on the client as to which type of account is deemed appropriate. Am certain you're all familiar with the term, "know thy client," right?
As to being a cop, I have to wait until 2009 and even then, it's all up to the incoming POTUS (President of the United States). Until then, you have nothing to fear from me or my (hopefully) soon to be new organization, the Securities and Exchange Commission.
Feel free to exercise your First Amendment Rights (Freedom of Speech).
[/quote]
It's not like you were really trying to be incognito, Lady, with that fancy email address of yours.
Do you mean the ymh one which is the ticker symbol for my initials or the LoveLEHGirl one?
Does the LUV in yours represent Southwest Airlines?
MERrill likes hiring ex military types. They're probably the most ex military friendly wirehouse.
I did 7 years in the US Army myself. Thanks for serving.
[quote=joedabrkr]I went to a Fidelity seminar a number of years ago, and they talked about how clients don’t think about asset allocation like we do. Rather, they tend to classify their money in “pockets”, and think of these accounts or “pockets” according to the level of risk involved or the goals to which they are dedicated. The folks at Cannon Institute talk about a similar outlook, dividing client’s portfolio into “Capital Growth” and “Capital Preservation” sections. Many of my fee based clients also have “safe money” accounts where they purchase CD’s and muni bonds and GNMA’s, and their “risk capital” goes into the separate fee-based accounts. It seems to give them a great peace of mind to take this approach.
[/quote]
I attended a Cannon workshop delivered by Ted Ridlehuber, the President. I got a lot from it. In fact, I hadn’t taken so many notes since college.
He compared golf to asset allocation: putter is cash; nice, slow and predictable, the irons are balanced-core holdings and the drivers are stocks; special situations, aggressive, going for distance.
I agree with the folks at Fidelity. This is the way clients think and feel. They have a natural tendency to group us into those pockets as well. They have the retirement plan guy, the insurance guy, etc.
I think what I’m saying is that clients think of their advisers as “specialists”. I am a firm believer in specialization. All of the specialists I know, from different professions, always charge full price for their services and get better qualified referrals.
I’m probably going to encounter some pretty stiff opposition on this board because firms have been trying hard for years to capture every client’s last penny through planning questionnaires. I think its very difficult to accomplish as a sole practitioner. As a team, the concept works better, kinda. Sort of like a law firm. This guy does malpractice and this guy does real estate and the other does estate planning.
Okay, now you can fire…
"You seem a reasonable fellow; it's a shame I have to kill you!"<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
[quote=Indyone]
The way you debate ruins your credibility...you struck out a long time ago in my league.
Don't even start on fee based until you've addressed the inherent conflicts of commission-based brokerage. When you say that your way is always right and my way is always wrong, you expose youself as the fool that you are.
[/quote]
His debate style doesn't diminish the veracity of his position. the math is the math, is the math is the math, period.
Why should anyone have to start a discussion by pointing out the perceived failures of advocators of his position before he can attack the other position?
If this were the case then you would have to defend the practice of financial mismanagement that every fee only practitioner who takes on a fixed income account is committing. But you won't do that, will you Indyone?
What Mr. A has shown here is that your presupposition that the commission based bond broker's business paradigm is illegitimate due to conflicts of interests is plain old wrong.
What he has done is debunked the notion that a fee only advisor can make up his fees by buying bonds cheaper.
What's beautiful about this is that it is emotionless mathematics. It doesn't presuppose that either side does anything against the client's course of action (it doesn't suggest that the fee based guy takes the client for granted, nor does it suppose that the commission broker wangles bonds). Nor does it suppose that the firm supplying the bonds is making ANY money from the Fee Only advisor (which is highly unlikely).
Mr. A did not say that his way was always right, or that your way was always wrong. He only argues that in a case like this, your way is wrong. He arrives at that conclusion after giving your side every benefit of the doubt.
DPR
Ymh Ymh Ymh,
Ok, now you've seen the facts presented. How would you rule on this if you were asked to prepare an opinion paper on this issue?
You say you want to be a regulator, so... This is an issue that WILL be in front of regulators.
And so ladies and gentlemen, I'm done. The adminstrator saw fit to remove my posting privs. I don't blame them, I'd hate to think it was done because of this topic, prolly had to do with the Sexy Lady exchange.
I leave you with this: The vast majority of you aren't nearly as smart or as independent minded or as ethical as you would like to think you are. Further, you are not nearly as dumb, as sheeplike or criminal as everyone else here says you are!
DPR
I think what I'm saying is that clients think of their advisers as "specialists". I am a firm believer in specialization. All of the specialists I know, from different professions, always charge full price for their services and get better qualified referrals.
I'm probably going to encounter some pretty stiff opposition on this board because firms have been trying hard for years to capture every client's last penny through planning questionnaires. I think its very difficult to accomplish as a sole practitioner. As a team, the concept works better, kinda. Sort of like a law firm. This guy does malpractice and this guy does real estate and the other does estate planning.
Thanks, the golf analogy is awesome, I am going to think about it during my drive to my little solo office down the street.
Your idea squares with a few facts. The affluent (1m+), generally want to have multiple advisors - including spreading their money between firms.
I'm sure many solo generalists, like me, have a nice share of 1m+ accounts, it helps make our business model possible.
As Mary Rowland point out in the 02/07 FA magazine, quoting planner Richard Lee, if we define strategies (for an ideal practice model), people will stop experimenting and try to fit into one of them.
How do you define success? In terms of what is best for the client, sometimes they need and want the fancy downtown office and sometimes the strip mall office works just fine.
As far as the planner, we all know you can make a good living in your own creatively constructed practice.
Of course, you would tell the golf analogy to a golfer and maybe the pockets analogy would be appreciated by a quilter. I love the creative side of this business.
[quote=dredpiraterobts]
Ymh Ymh Ymh,
Ok, now you've seen the facts presented. How would you rule on this if you were asked to prepare an opinion paper on this issue?
You say you want to be a regulator, so... This is an issue that WILL be in front of regulators.
And so ladies and gentlemen, I'm done. The adminstrator saw fit to remove my posting privs. I don't blame them, I'd hate to think it was done because of this topic, prolly had to do with the Sexy Lady exchange.
I leave you with this: The vast majority of you aren't nearly as smart or as independent minded or as ethical as you would like to think you are. Further, you are not nearly as dumb, as sheeplike or criminal as everyone else here says you are!
DPR
[/quote]
What a shame that they have to do so much screener here - this is worse that Uncle Sam monitoring mil computers! So you used a sense of humor. So what! And if they banned Sexy Lady - wasn't that enough? I mean you're a fa guru with good topics & posts, man. What's up with these forum admins not supporting free speech or allowing for a little lighthearted posting.
Planrcoach & pal: you didn't respond - assume you dont' use cookies as AirForce claimed you did. Does everyone have to be a BIG BROTHER! Geeze!
-4 Luv of money (theme song: Apprentice)
You are an interesting poster: stick around.
[quote=dredpiraterobts]
Ymh Ymh Ymh,
Ok, now you’ve seen the facts presented. How would you rule on this if
you were asked to prepare an opinion paper on this issue?
You say you want to be a regulator, so… This is an issue that WILL be in
front of regulators.
And so ladies and gentlemen, I’m done. The adminstrator saw fit to
remove my posting privs. I don’t blame them, I’d hate to think it was done
because of this topic, prolly had to do with the Sexy Lady exchange.
I leave you with this: The vast majority of you aren’t nearly as smart or
as independent minded or as ethical as you would like to think you are.
Further, you are not nearly as dumb, as sheeplike or criminal as everyone
else here says you are!
DPR
[/quote]
Thank you so much!
Bye bye then!
As Chairman of the SEC in 2009, my comments are my own and do not reflect the opinions of my fellow Commissioners and/or the Commission:
Commission only acccounts are better for SOME clients. Fee based accounts are better for others. There is no "one schedule fits all" solution. Commission only accounts do tend to encourage a little churning from time to time (excessive trading). Fee only accounts tend to make an FA a bit lazy. He/she collects a few whether there's any "work" done on behalf of the client or not. He/she tends to be more motivated to acquire new accounts rather than service the ones he/she already has.
There you have it, ladies and gentlemen. Should this "issue" still be an issue in 2009, I will take it up with my fellow Commissioners and request that both my staff and the NASD weigh in with theirs.
I ran across this in case some of you missed it:
http://registeredrep.com/securities_law/finance_yolanda_quix ote/
SEC here she comes!
[quote=ymh_ymh_ymh]
As Chairman of the SEC in 2009, my comments are my own and do not reflect the opinions of my fellow Commissioners and/or the Commission:
Commission only acccounts are better for SOME clients. Fee based accounts are better for others. There is no "one schedule fits all" solution. Commission only accounts do tend to encourage a little churning from time to time (excessive trading). Fee only accounts tend to make an FA a bit lazy. He/she collects a few whether there's any "work" done on behalf of the client or not. He/she tends to be more motivated to acquire new accounts rather than service the ones he/she already has.
There you have it, ladies and gentlemen. Should this "issue" still be an issue in 2009, I will take it up with my fellow Commissioners and request that both my staff and the NASD weigh in with theirs.
[/quote]
Pssst, ymh. When you're done speakin', you're supposed to hold up both arms, outstretched with hands flashing the V (for victory) sign. Think: Richard Nixon....
I’m sure she will make a great SEC but anyone who goes after Krespy Kreme is no friend of mine. I just love those hot dougnuts!
I may be already checking this out.
FD: I like Krispy Kreme donuts once in a while but not with breakfast. It's bagels for breakfast (whole grain ones with low fat Kraft cream cheese).