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Financial Planning > Behavioral Finance

A Tale of Two Cities

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At a time when investor confidence has been shaken by the almost daily news of unprecedented bailouts, bankruptcies, nationalizations, and stock markets that seemed to be permanently on the way down (as Ken Fisher of Fisher Investments said to me, I think with tongue in cheek, on October 10: “Well, the Dow was down another 5% yesterday; just 20 more days till it hits zero”), two major gatherings of advisors in late September and early October reflected the uncertain times.

At Schwab’s annual Impact conference in Atlanta in September, the number of attendees and exhibitors was down from its 20th-anniversary gathering in Las Vegas the year before. Held in a week when the House of Representatives failed to pass the $700 billion Administration bailout bill, which led to what was then thought to be the nadir in the markets and consumer confidence, there was a palpable sense of sobriety in the sessions and exhibit hall, as advisors gathered around big-screen televisions to hear legislators and talking heads expound on the crisis and its proposed solutions. The mood was captured by Schwab Institutional chief Charles Goldman at the opening session, when he acknowledged the “incredibly turbulent markets,” asked the assembled RIAs “Are you doing enough?” for clients, and then argued that “as severe and unique as this crisis is, there’s also great opportunity,” noting that “you have relationships that the wirehouses can’t replicate,” and that those firms have suffered “long-term damage to their reputations and brands.” Belying the somber mood and presenting the case for the value of independent advice in bottom-line terms, Goldman told the crowd that in the first six months of 2008, “you have brought more assets into Schwab than the wirehouses brought into their private client groups in total.”

Seemingly feeling a similar jolt of having been proved right in fostering the independent model’s approach, Financial Planning Association President Mark Johannessen greeted attendees at the opening session of the FPA national conference in the beginning of October in Boston with a call to “raise the bar” of accountability and service to the accounting, brokerage, and mortgage professions. At a session with journalists later, Johannessen, President-elect Richard Salmen, Chairman Nick Nicolette, and Executive Director Marv Tuttle ticked off the group’s recent accomplishments: 5% growth in membership to 29,800; an increased emphasis on research; a planned consumer portal off the FPA’s Web site, which Tuttle said he hoped would become a “Web MD for financial planning;” and a diversity scholarship program. But the biggest accomplishment seems to be the FPA’s new Standard of Care, adopted by its board on August 28, the role of which, Johannessen said, is to “sing out loud and clear that in all financial transactions, there’s a fiduciary standard.” While admitting that the priorities among legislators and regulators in Washington will of necessity shift due to the reaction to the crisis, Johannessen said that “financial planning is mainstream; it’s on everyone’s lips, so we’re ahead of the curve.”


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