From the April 2005 issue of Investment Advisor • Subscribe!

More Notes from the Gen Wars

"The Great Divide" (February 2005) made strong assertions about the current state of financial planning. I am a 22-year-old newly-minted fee-only financial planner and while I agree that the obstacles mentioned in the article do exist for young planners, I can say with confidence that they don't need to. I practice financial planning under the Sestina Network, created by John Sestina, and it has made my transition from student to financial planner seamless. My experiences over the past 16 months have been so vastly different from what was depicted in the article that I urge other young planners not to settle for a position that underutilizes them and not to give up on their profession, because solutions most assuredly do exist. If you find yourself struggling to get started, look into joining your local chapter of the Financial Planning Association. The FPA has provided me with a wealth of resources that have proven to be invaluable, and could help you find a mentor to guide you through this process.

Matthew M. Brandeburg

Columbus, Ohio

Kickin' It Old School

I just read your article, "The Great Divide." I must say it left me feeling that the new, educated financial planners want to jump right into a practice without growing pains or, as some have expressed, "paying their dues." I have been a sole practitioner for some 17 years now (my first three were with IDS [American Express]). I started with no formal degree in financial planning. I sure wish it had been available. I believe the new graduates have an advantage.

You exposed the frustration of those new planners who want to work in a place where they can share in the ownership, especially in those cases where the new planner "generates half of the earnings." I don't think it is entirely fair to present only this angle. Generation of fees or earnings is a combination of getting the client in the door and then having the systems in place to present a viable planning process and finally getting paid for it. I do not wish to diminish the efforts and professionalism of the young planner, but he/she is but one piece of the process developed by the owner of the business.

The planners who have been in practice for a number of years have done much more than study for entry into the profession. I entered the industry as a financial planner; I had no experience as a broker or an insurance agent. At the time I lived far away from family and friends so I was carving out a client base from the very beginning. Once I completed the CFP requirements, I left IDS and opened a practice in New Jersey. Six months later I relocated to San Juan, where fee-only planning was virtually nonexistent. Almost 15 years later I am still here, but with a much more solid client base. When you hear the "older" planners' expressions of "paying dues," I believe it refers to the professional and business growth one endures while developing a practice. The study of the planning process is but one of the many, many components of any practice. I believe the new planner must research the practice he or she joins to better understand the type of clients serviced and the types of services offered.

I agree with you that independent financial planning firms need to do a better job at utilizing the new, educated resources better. There are large firms (banks, brokers, and other institutions) that have programs in place to use the new talent more effectively.

Kurt A. Schindler, CFP

Financial Planning Group Corporation

Hato Rey, Puerto Rico

What's For Sale Matters

The section of the February 2005 Gluck Report ("Marketing Wisdom) under the subheadline "Remember: You're Selling" misses the point.

Yes, we are all selling something. A fee-only advisor is selling his knowledge and advice. A commissioned or fee-based broker is selling a product. Don't confuse the two because there are significant differences.

The problem arises when commissioned advisors sell for the sake of selling because they have to sell the client something in order to get paid. Worse yet, they may choose to sell the products that pay the higher commissions, whether or not they are appropriate.

When fee-only advisors get a bit fervent, it is because there are several conflicts of interest when taking advice from someone who is selling you a product. These conflicts are eliminated when someone is selling you pure advice. The solution and better way is, without a doubt, fee only.

For example, suppose you inherit $100,000 and go to a broker for advice. He is going to recommend products that pay him a commission. If you go to a fee-only advisor for advice, he may recommend buying products, but he might also recommend that you pay off your credit card debt, pay down your mortgage, or buy no-load index funds. These solutions might better suit the client's needs, but brokers wouldn't recommend them because they cannot get paid from any of the better options.

You are entirely correct that selling is not evil. However, what is evil is the underhanded delivery that brokers use when they guise their salesmanship as "advice."

Jeff Broadhurst, MBA, CFA

Lansdale, Pennsylvania

Money Can't Buy Me Love

The general idea may be of high value, but if that article (Bill Glasgall's interview with George Kinder, "The Next Stage For Life Planning," February 2005) wasn't the most non-informing, self-promoting article, then I don't know what is. Kinder should know--as probably most behavior financial folks seem to understand--that you can't measure happiness.

Anyone using throwaway lines that stereotype an entire culture of Americans, or any group, as "experiencing a spiritual crisis," evidently is either distorting his own view by hanging around a select group of people who are in "spiritual crisis" or is simply promoting himself by broadcasting self-promoting sound bites and talking points...and misses the professional point that money at best buys comfort, not happiness.

Thomas L. Sullivan

Roseville, Minnesota

Before the Fan Gets Hit

Hopefully your Social Security legislation "doomsville" prediction is wrong ("What's Next in the Capital," February 2005). We as planners should be taking up the fight. Everybody agrees that it is a serious problem that is better off being addressed now instead of when the proverbial fan gets hit around 2032. What is needed is to give Congress permission to make the hard choices. As you point out, indexing to cost of living in and of itself will sustain Social Security. Private Accounts would give people a chance to make up for their reduced benefits. Now the President is talking about increasing the cap on Social Security so that the transitional costs will be made up. The Administration should be commended for forcing this debate. Planners could be helping. We should be educating our clients, stressing that the problem should be fixed now instead of later, and urging bipartisanship. If ever there was an issue that belongs to the FPA, Social Security is it.

Alan B. Ungar, CFP

President, Critical Capital Management

Calabasas, California

Clarification on VULs

The February 2005 article on variable universal life ("On the Rise") incorrectly stated that John Hancock--which was acquired by Manulife Financial Corp. last year--plans to replace both companies' variable life offerings with two distinct products--a COLI and a survivorship VUL. The article should have said that John Hancock addresses the variable life market with two distinct single life products--an accumulation-oriented and a protection-oriented policy. The company's combined life portfolio is marketed under the John Hancock brand.

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