Outside-IN

Outside-INblog

Outside voices and views for advisers

Apr 16, 2014, 5:19 PM EST

Quantity does not equal quality: Expanding 'disclosure events' on BrokerCheck a bad idea

By S. Lawrence Polk

The Financial Industry Regulatory Authority Inc.'s Central Registration Depository makes publicly available brokers' “disclosure events” — including descriptions of most investment-related customer complaints — through its free, Web-based BrokerCheck service.The intention is admirable. By disseminating such information, BrokerCheck can provide useful information to the investing public. The problem, however, lies in what is considered a “disclosure event.”(More: Under Finra proposal, brokerages will be forced to conduct background checks on new brokers)Under the current version of Form U4, brokers and their firms are required to disclose any written customer complaint, no matter how frivolous, as long as it somehow relates to a sales practice issue, even if the broker is not named in the complaint. The broker that is the subject of the complaint has it reported on his or her CRD and can remove the... Read full post

Apr 16, 2014, 3:24 PM EST

Time to sell stocks?

By Paul Schatz

With major indexes down 4% to 8%, I am once again getting asked whether the bull market has ended and a multiyear decline is unfolding.I don't think so. The New York Stock Exchange's cumulative advance/decline line (a cumulative measure of net stocks advancing) recently scored an all-time high. When bull markets end, we typically see this indicator peak months, quarters or even years before the Dow Jones Industrial Average and the S&P 500. The same can be said of the high-yield bond sector, which also just struck all-time highs. Bear markets are usually associated with restrictive monetary conditions and excessive valuations. It's very hard to argue we are seeing those right now.This decline continues to look like a pullback, meaning less than 10% in the Dow and S&P 500. It will end when the weaker bulls give up hope and throw in the towel, something that has not happened yet, but may be close. Sometimes that takes a few weeks, other... Read full post

Apr 10, 2014, 3:32 PM EST

The power of purpose: Benefits of goals-based investing

By Daniel Crosby

Much of behavioral finance's departure from traditional financial models centers around the respective approaches' vision of what constitutes “rational” behavior. Traditional approaches take a simple, objective approach — rational behavior is all about optimizing returns. Through a behavioral lens, rationality takes on a more subjective lens and could be construed as making decisions consistent with personal financial goals. The behavioral approach is constructivist in that the client sets the parameters for rationality through the articulation of personal goals. But by drawing out the financial goals of their clients, advisers do more than simply highlight a finish line, they actually catalyze a positive behavioral chain reaction.READ MORE about how goals-based planning is taking flight Consider the followings ways in which having deeper conversations about client goals might make your job easier and improve your... Read full post

Apr 9, 2014, 5:56 PM EST

Coming soon (thanks to the SEC): More adviser review sites

By Michael Kitces

Last week, the SEC issued new guidance on social media and the Rule 206(4)-1 "Testimonials" rule. While the guidance did not provide much clarity on ongoing sticky issues such as whether LinkedIn "endorsements" constitute testimonials, it did provide important clarification to one key area: third-party adviser review sites. Specifically, the SEC affirmed that as long as the adviser has no ability to change or alter the public commentary and that all of it will appear (good reviews and bad), then advisers do not have to worry about whether clients posting reviews on such sites will trigger a violation of the testimonial rule. Simply put, as long as the review site and the reviews themselves are beyond the adviser's control, the adviser won't be held accountable for any positive reviews (i.e., testimonials) that appear; in fact, the SEC even declared that advisers could cite the average score of the reviews (e.g., "Joe Smith Advisory... Read full post

Apr 9, 2014, 12:40 PM EST

Three big trends top advisers need to focus on now

By Michael Nathanson and Adam Birenbaum

Forward-thinking independent advisory firms have no shortage of substantive industry trends on which to focus in 2014 — from increasing uncertainties in the regulatory environment to the unyielding pace of technological change to new outsourcing opportunities and even new cyber and competitive threats. For smart advisers, there's a veritable smorgasbord of challenges and opportunities awaiting them, seemingly custom designed either to keep them up at night or get them up in the morning, depending on their perspective.Emerging from this expanded list, however, are three specific trends that we see gaining the most traction and creating the greatest potential and impact in the near term: • Increased pressure for consolidation across the industry; • Significantly more competitive and complex personnel;• The continued evolution of “advisory practices” becoming true “advisory businesses”Let's... Read full post

Apr 8, 2014, 9:22 AM EST

Answering the questions high-frequency trading raises

By Brian Schreiner

There has been a media firestorm over high-frequency trading since Michael Lewis appeared on “60 Minutes” on March 30 to discuss his new book "Flash Boys". But HFT is nothing new. It has been around since at least 1999 when stock exchanges became fully electronic. HFT is a complex and nuanced issue, which requires more than a cursory overview to gain an informed opinion. HFT is a type of algorithmic trading executed by sophisticated programs run by high-powered computers. These systems automatically buy and sell securities on electronic exchanges where the orders are automatically filled. HFT is computers trading with computers — very quickly.High-frequency traders have discovered ways to measure (buy/sell) order flow and move faster than many other participants, allowing them to beat other traders to the punch and thus receive better prices for the securities they buy and sell. They aim to capture pennies or even... Read full post

Apr 4, 2014, 2:57 PM EST

Why compliance is the "Green Eggs and Ham" of financial services

By April Rudin

Compliance is not a word most people like. It conjures up images of endless boxes that must be checked, raps on the knuckles, stern-eyed regulators, red tape, pages and pages of documents in tiny, incomprehensible print. When it comes to compliance for social media in the wealth management business, it's certainly no different. In fact, there is perhaps no topic that generates more angst among wealth managers and their compliance departments. For a time, the angst was so great that some compliance officers simply opted to opt out: No use of social media, no problem. It was banned at many firms. But then social media got too big, and too important, to ignore. Cue general freakout.Here's the thing. There really is no need for a freakout. Last week, as I stood in a hotel lobby listening to yet another wealth management executive sweat over how to manage all this free-wheeling social-media stuff, Dr. Seuss popped into my head. Remember... Read full post

Apr 3, 2014, 9:53 AM EST

6 steps to a perfect business plan

By Eric Sheikowitz and Michael Silver

Your business plan is your formal statement of your business goals, the reasons why you believe they are attainable, and your plan for reaching those goals. In the book "What They Don't Teach You in the Harvard Business School" (Bantam, 1986), author and business success expert Mark H. McCormack talks about a study conducted on students in the 1979 Harvard MBA program. In that year, the students were asked, "Have you set clear, written goals for your future and made plans to accomplish them?" Only 3% of the graduates had written goals and plans; 13% had goals, but they were not in writing; and a whopping 84% had no specific goals at all. Ten years later, the members of the class were interviewed again, and the findings, while somewhat predictable, were nonetheless astonishing. The 13% of the class who had goals were earning, on average, twice as much as the 84% who had no goals at all. And, what about the 3% who had clear, written... Read full post

Apr 2, 2014, 9:33 AM EST

All stressed up and nowhere to go

By Jack Singer

Studies have described the emotional and psychological stress that being a financial adviser entails. When you chose this profession, maybe you didn't realize that there are ongoing, job-related stressors that you have to address to function efficiently and prevent burnout.To be an effective adviser, you must become comfortable filling many different roles for your clients: financial expert, trust attorney, marriage counselor, clergyman, social worker, psychologist, CPA, etc. Of course, you can refer your clients to these professionals, but in meetings with clients you need to be the equivalent of a medical “general practitioner,” able to answer many questions, as if you are an expert in all of these specialties. Other hats you wear are fiduciary and compliance expert, research analyst, referral prospector and marketing manager, and the need to switch among them is a constant and unpredictable hassle. Other stressors... Read full post

Mar 31, 2014, 2:47 PM EST

High-frequency trading runs over a rigged market: Barry Ritholtz

By Barry Ritholtz

On "60 Minutes," author Michael Lewis made a bland assertion: High-frequency traders, he said, working with U.S. stock exchanges and big banks, have rigged the markets in their own favor. The only surprising thing about Mr. Lewis's charge was that anyone could be even remotely surprised by it.The math on trading is simple: It is a zero-sum game. One trader's gain is another trader's loss. Only in the case of HFT, the losers are the investors — by way of their pension funds, retirement accounts and institutional funds. The HFTs' take — the “skim” — comes out of these large institutions' trade executions.The technology behind HFT may be complex, but the math is that simple. Once the Securities and Exchange Commission allowed stock exchanges to share with traders all of the unexecuted incoming orders, it was hard not to make money by skimming a few cents or fractions of a cent from each trade. Several years... Read full post

Earlier Posts »

  @IN Wire

Apr 16 11:34PM
Average retiree health costs could overtake Social Security benefits: http://t.co/5DyIioCOTb
Apr 16 08:06PM
Wealth Explained: Unrestricted Funds http://t.co/BJNiB7Ek49

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