FPA of MN Newsletter – June 2017

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The DOL Fiduciary Rule is Here! Are You Compliant? FPA MN can Help!

Watch FPAMN’s video session with Professor Mercer Bullard (see 3 minute preview), securities law expert at the University of Mississippi School of Law and former SEC attorney, to get to the heart of the matter on what you have to do to be in compliance with the new DOL Fiduciary rules.

No more delays. Department of Labor Secretary Acosta has decided not to delay the implementation of the DOL’s fiduciary rule beyond the current deadline. Starting June 9th, all investment professionals providing investment recommendations on IRAs will be operating in a fiduciary capacity on those accounts. The DOL has given everyone until January 1, 2018 to get the wrinkles ironed out before it will begin enforcing the rules.

Changes, yes. Rescind, no. While Secretary Acosta has stated that changes to the rule are still likely, the prevailing expectation is that the rule will stand. The industry’s court challenges to the rule have gone decisively against them. The Republican Congress is generally against the rule but rescinding is not a high priority with all that is swirling around Washington at the moment. Bottom line, it’s time to get with it and figure out what you need to do.

What do you need to know? You have gotten briefed by compliance people and endless emails offering whitepapers on the matter. If you are like the rest of us, you are still not sure what exactly needs to be done for your office to be compliant. Lucky for you, FPA MN has insight from Professor Mercer Bullard, securities law expert with an easy to understand explanation of DOL to help you better understand this complex rule.

An Unbiased Viewpoint. In FPA MN’s video, The New Fiduciary Landscape, Professor Mercer Bullard covers many items that Registered Reps need to review to make sure they are in compliance. RIAs, think you are immune? Professor Bullard says think again and lists the things RIAs need to do as well. You can’t afford to put this off any longer.

Available now, at the FPA Virtual Learning Center.

FPA in the Community - Jump$tart Coalition of Minnesota Annual Conference

The Jump$tart Coalition for Financial Literacy held their annual conference on Friday April 28, 2017 at the Minneapolis Federal Reserve Bank. This year’s topic was: Solving the Puzzle of Paying for Higher Education: Successfully Financing Life after High School

The Minnesota Jump$tart Coalition brings together educators, banking and credit unions, the MN Department of Commerce along with FPA of MN to help promote financial education in Minnesota. This year’s event was attended by approximately 75 members of the community to discuss rising higher education costs. The U.S. has a history of achievement through higher education and statistics of improved financial outcomes and job satisfaction through education is well-known. Paying for post-secondary education has become increasingly more expensive which in turn results in students and families relying more on student loans. Unfortunately, many students and families take on loans without fully understanding the financial impact of repayment.

Highlights of the conference included:

  • Keynote panel discussion centered on answering the question, “What does the student loan crisis really mean?” Panelists included Pam Engebretson, Director of Financial Aid at Century College, Dan Nelson, Chief Institutional Data & Research Officer at Bethel University, Joyce Serido, Associate Professor at the University of Minnesota and Marcio Thompson, Outreach Coordinator at the Minnesota Office of Higher Education.
  • Breakout session on “Solutions to Paying for Higher Education” moderated by Michael Grover, Assistant VP of Community Development at the Minneapolis Federal Reserve. Panel participants included Pam Engebretson, Century College, Quentin Kuta, Student Intern at the Minneapolis Federal Reserve and Dawn Cassidy, National Council on Family Relations.

The afternoon included a Resource Fair with representatives from several community based resources including, BestPrep, Junior Achievement, Banzai, the Federal Reserve and NextGen Personal Finance amongst others.

Get more media attention in 2017!

Have you thought about ways you can market yourself and your practice better in 2017? Why not go through FPA’s media training program this year and then take part in FPA MediaSource – the automated media query platform that is exclusively for CFP® professional members of FPA! We are pleased to announce that we have opened registration for four All-Member Virtual Media Training sessions this year. Now is your opportunity to amplify your voice and marketing, so register for one of the media training sessions today!

2017 M​edia Training

Thursday, June 15 from 3 to 4:30 pm CT

Thursday, September 14 from 3 to 4:30 pm CT​​

Thursday, December 14 from 3 to 4:30 pm CT​​

SYMPOSIUM SPEAKER - October 17, Krishna Memani - The Great Economic Debate 2017

Register Today for Early Bird Rate: www.FPAMNSypmosium.org

2017 Great Economic Debate
Presentation Scheduled for Tuesday, 9:10 - 10:40 am
Approved CE: 1.5 CFP, 1.5 NASBA/CPE, 1.5 CIMA, 1.5 MN insurance, 1 WI insurance, 1.5 CLE Stnd

Have you registered for Symposium 2017? If not, you will want to do so today ….. once again the agenda includes the ever so popular Economic Debate featuring Dr. David Kelly (JP Morgan) and Krishna Memani (OppenheimerFunds) – both are thrilled to be invited and share their opinions about the Trump administration, world events, interest rates, the economy and the impact these matters have on investing and investment decisions.

Krishna recently wrote “Oppenheimer believes that investing is the product of ideation in the broadest sense. The ideas behind Oppenheimer’s investments aren’t always available in the front lobby of a building or a research report. Rather they concern deeper, long term issues facing the world. We generate ideas by continually looking for new things to explore in the world, opening up to all the possibilities and maintaining the optimism that gives us the ability to look to the long term.”

You won’t want to miss this session…

SYMPOSIUM BREAKOUT - October 16, Jon Luskin - Dollar-Cost Averaging Using the CAPE Ratio

Register Today for Early Bird Rate: www.FPAMNSypmosium.org
Dollar-Cost Averaging Using the CAPE Ratio: An Identifiable Trend Influencing Outperformance
Presentation Scheduled for Monday, October 16, 2:30-3:30 pm
Anticipated CE: 1 MN insurance, 1 WI insurance, 1 CIMA, 1 NASBA/CPE &1 CLE Standard
Approved CE: 1 CFP

In practice, dollar-cost averaging (DCA) is most effective as a behavioral finance tool. DCA is used because investors (and arguably their advisors) are scared that equity markets could drop immediately after investing a lump-sum; investment advisers proposing a dollar-cost averaging approach have likely done so in an effort to reduce risk and minimize potential emotional regret on behalf of the client, not grow assets.

And while DCA does unarguably reduce risk (because the process of DCA means holding a large amount of cash for such a long time), DCA actually has also shown been to provide higher returns than lump-sum investing in multiple studies – at least sometimes. So, even though dollar-cost averaging is not conventionally used as a superior wealth-generation tool, are there still opportunities for it to be an effective portfolio strategy? And if so, how can advisors figure out the best opportunity to use DCA to not only reduce risk, but also generate greater wealth?

SYMPOSIUM BREAKOUT - October 16, Chris Wills - 8 Late-Stage College Planning Strategies You Don't Know About But Should

Register Today for Early Bird Rate: www.FPAMNSypmosium.org
8 Late-Stage College Planning Strategies You Don't Know About But Should
Presentation Scheduled for Monday, October 16, 2:30-3:30 pm
Anticipated CE: 1 MN insurance, 1 WI insurance, 1 CIMA, 1 NASBA/CPE &1 CLE Standard
Approved CE: 1 CFP

One of the students we work with, whom we'll call Caitlyn, was a dream that every parent (and counselor) hopes for: kind, bright, studious and incredibly engaged in the college process. In addition to having nearly perfect grades, Caitlyn was highly motivated to reduce the cost of college as much as possible for her family and selectively applied to a number of private scholarships she identified were good fits.

Her hard work paid off, and she and her parents were thrilled when she won a total of $20,000. They hadn't saved much and were staring at the likelihood of quite a bit of loan debt -- and weren't quite sure how they and Caitlyn could afford many of the schools she was considering.

The new windfall greatly boosted their spirits, and Caitlyn enthusiastically applied -- and was accepted! -- to a number of top schools. The scholarships she worked so hard to get were finally making their dream come true.

Or so they thought.

As the financial aid awards from colleges began to arrive, Caitlyn and her family were absolutely stunned. A number of the schools actually reduced their own financial aid to the family, some by the exact same $20,000 she had won in scholarships.

Welcome to the dirty little secret of college financial aid, otherwise known as "scholarship award displacement," when private scholarships result in a reduction of other forms of financial aid.

This provides the family no net gain in dollars and as a further slap in the face, wastes all the time spent on pursuing the private scholarships.

This happens because the private scholarships received push the family's financial aid awarded over the threshold of what is needed as determined by the school. As a result, the school must reduce some aid so the family is not given more aid than deemed appropriate.

What you can do
First, ask about the scholarship award displacement policy at the schools you are considering so you aren't caught by surprise. If the schools practice it and are good fits, it may not be worth spending any time pursuing private scholarships. Or, those schools may not be a good financial fit for your family and you may choose to remove them from your target list.

If your financial aid award gets reduced, request that the school take away the loans first from its financial aid offer and not the grants.

One of the most confusing elements of financial aid awards is that many colleges act as though loans and grant dollars are equal forms of financial aid and ways to reduce the cost of attendance. In reality, grants are truly free money that doesn't have to be paid back while loans have to be paid back plus interest.

So play the same game as the college and if its needs to reduce aid, make sure the loans get reduced first. That truly is a better deal for your family and reduces debt.

Last dollar scholarships
Finally, families don't realize that scholarships have restrictions, so understand what your scholarships can and cannot cover. For example, "last dollar" scholarships cover any remaining financial need after all other sources of aid are considered, while others can only be used for tuition and fees.

According to Amy Weinstein, executive director of the National Scholarship Providers Association, if the scholarship is restricted, you can ask the provider to “bank” the scholarship for a future year when your financial need may increase, apply the funds toward other school-related expenses, or apply the scholarship toward your student loans after you graduate.

SYMPOSIUM BREAKOUT - October 17, Jay Mooreland - Personality Driven Financial Coaching: Reaching Financial Goals

Register Today for Early Bird Rate: www.FPAMNSypmosium.org
Personality Driven Financial Coaching: Reaching Financial Goals
Presentation Scheduled for Tuesday, October 17, 2:55-3:45 pm
Anticipated CE: 1 CFP, 1 NASBA/CPE, 1 CIMA, 1 MN insurance, 1 WI insurance, .75 CLE Stnd

Communication is at the heart of all relationships. Whether it is in our personal or business life, we have learned that how we say something can be just as important as what we say. So how do you communicate with your clients? Oftentimes we communicate with others the same way we like to be communicated with. Effective communication is about communicating with others the way they want it done.

In this presentation, you will learn how to identify your client’s communication preference and how to tailor your communication to each one. This will give you greater confidence and help your clients feel that you “get” them. Additionally, we will discuss a few perceptions to communicate/coach your clients that will help them improve their decision-making process.

The Rise of the Machines

Submitted by Scott Nelson, CFA, CFP® - Professional Issues Committee Director

Robo-advice has got everybody wondering and worrying that entire industry may soon look like something out of the cartoon, The Jetsons. All this consternation led the folks at CFP Board to hire the consulting firm, Heidrick & Struggles, to project what impact robo-advising will have on financial planners by 2021. The CFP Board made the results of that study, Future of Digital Advice, available in late 2016.

The report laid out four possible scenarios in which rapid technological advancement will impact financial planners by 2021:

Scenario #1: There is extensive consolidation in the industry and the remaining large firms handle large numbers of clients via technology. Most advisors will work for a large firm acting like a relationship manager. Because of the client load, they mainly handle common issues and route clients with complex issues to one of the firm’s specialists.

Scenario #2: The public has gone completely robo. Automated advice is offered like free smartphone apps by everybody from banks and insurance companies to credit card companies. Advisors, as we know them today, mainly work with the affluent who can afford the personal touch. Other advisors serving the less affluent fill a role more like a customer service agents helping clients understand their robo-advice reports and providing strategy tips.

Scenario #3: Robo-advising stumbles to gain wide traction due to the short-comings of relying on algorithms and heightened regulatory oversight. Human advisors adopt the new technologies as an additional tool but don’t see much of a change because people are wary of tech-only advising and still prefer establishing a relationship based on trust and face-to-face interactions.

Scenario #4: Robo-advising’s biggest market is advisors themselves. People’s lives are increasing hectic and robos help advisors to offer a one-stop solution. People are also increasingly cost conscious and firms of all sizes find it a necessity to integrate robo-advising to create economies of scale to be competitive.

In fact, all these scenarios are playing out simultaneously today. There is consolidation with big firms getting bigger and rolling out robo-advisors but there are also many smaller firms finding success with a balance of technology and personal service. Some DIYers are more than happy to get all their questions off a website but most stand-alone robo advisors are struggling because the public is still not financially literate enough (and may never be) to be comfortable with such an approach.

The common themes throughout these scenarios are that financial planners will be relying more and more on technology to automate the basic office tasks and to provide generic financial planning services. To remain competitive and achieve the necessary economies of scale to be profitable, most planners have to automate as much as possible. At the same time, planners will need to deepen their skill set to provide human-centric value adds that clients cannot get from a website.

In the end, one can view the rapid technological change as a threat but I suggest it would be better to view it as an opportunity to offload mundane tasks on the machines and focus on human-centric services that build client trust and loyalty. These human-centric skills that clients truly appreciate, are also the same services that make being an advisor so rewarding. So I say, bring on the robo-advisors, I could use a good robotic housekeeper.

Outstanding Achievement Award Nominations Due 7/15

The purpose of the Outstanding Achievement Award (OAA) is to recognize and reward those FPA chapters that have taken the initiative to better serve not only the members of their chapters, but also the public in general. Innovation, chapter involvement, measurable results and application to other chapters are key criteria. The selection committee is looking for both process improvements and “game changers” to award and recognize.

The review period refers to the period of time during which your chapter’s programs or events must have taken place in order to be considered for an Outstanding Achievement Award. This year the review period is January 1-December 31, 2016. Please be sure your submission includes activities that happened only during that timeframe.

Outstanding Achievement Award applications should provide a picture of the chapter’s activities leading to extraordinary achievement in any or all of the areas below. The application should include an explanation of why your chapter’s achievement is exceptional. Describe each of the following: quantifiable goals and results, member involvement in the success of the effort, what the chapter is doing to ensure the effort will be ongoing, how the program supports FPA’s mission and how the effort can be duplicated by other chapters.

Early bird registration is now open for the 2017 FPA Annual Conference

Each year thousands of financial planners from around the world gather at the FPA Annual Conference to take part in an unforgettable educational and networking event. This year won’t be any different! The 2017 FPA Annual Conference will be held October 2-4 at the Music City Center in Nashville and FPA members can attend for the exclusive early bird FPA member rate of only $799 – $400 off the standard registration fee! This special rate expires on July 14, so register today!