FPA of MN Newsletter – June 2015

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President’s Message – June, 2015

For this month’s president’s message, I wanted to give a huge thanks to the folks who really are the lifeblood of our organization, the fantastic partners of FPA of Minnesota. For information regarding our 2015 partners and what they can offer, I highly encourage you to check out the partner page on the FPA of MN website to learn more.

Our partners provide nearly 1/3 of our revenue and without them, our Chapter meeting costs, Symposium, etc. would be much, much higher and we wouldn’t be able to offer nearly the level of programs and initiatives that we do. In addition to providing financial support, our partners work with us to help to lead FPA’s message of building the community of the financial planning community, serving as committee members, Board members, and all-around ambassadors for the “gospel” of financial planning.

To our partners, again a huge thanks for all that you do!

And for everyone else, again, I highly encourage you to get to know our partners, to thank them for all they do for FPA of Minnesota, and to find out how the solutions that they offer can benefit your clients and your practice.

As always, feel free to let me or any of our Board members know of any questions, comments, or concerns that you have. We strive to “ask-listen-respond.”


Steve Gilbertson, CFP®
Accredited Investors, Inc.

Nominations are Open for the 2016 FPA Board of Directors

The FPA Board of Directors is the driving force behind FPA’s vision to be the professional membership association for the financial planning community and CFP® professionals. The Board is a group of dedicated, dynamic FPA members who recognize the impact that today’s decisions can have on the future.

Are you interested in being part of this high caliber strategic team that is leading the profession and the association while serving the members? If so, consider submitting your name as a candidate for the FPA Board of Directors or recommend a colleague for nomination.

Service on the FPA Board of Directors is a three-year commitment that begins January 1, 2016. Contact board@onefpa.org to request a board nomination packet starting April 15. Deadline for 2016 board nominations is Wednesday, July 1, 2015.

FPA Annual Conference Early-Bird Registration Open

Register now to attend the advanced technical conference for CFP® professionals – FPA’s Annual Conference – BE Boston 2015 that will be held on September 26-28 to gain new practice management knowledge, skills and resources. The schedule is jam-packed with insightful sessions that will help attendees be more knowledgeable professionals and better business owners. Confirmed keynote speakers include:

  • Olympic Gold Medalist Jim Craig
  • Futurist Michio Kaku
  • Marketing Strategist David Meerman Scott
  • Keynote Host Jill Schlesinger, CFP® of CBS News.

JUST ADDED KEYNOTE! Attorney Marcia Wagner specializes in pension and employee benefits law. She is principal of The Wagner Law Group, one of the nation’s largest boutique law firms specializing in ERISA, employee benefits and executive compensation. Wagner is recognized as one of the 100 Most Influential Persons in the 401(k) industry by 401k Wire, received the Top Women of Law Award in Massachusetts and Top 25 Attorneys in New England.

Registration is open and members can now save with terrific early bird pricing. Register and learn more at www.FPA-BE.org!

Two Preconferences Added to the FPA Annual Conference

Diversity will take center stage at the FPA Annual Conference with the addition of special preconference events in partnership with PridePlanners and the Association of African American Financial Advisors (Quad-A). The events will allow attendees to engage in dialogue, before and during the FPA Annual Conference, and learn about the key issues impacting planners and clients of diverse backgrounds.

The PridePlanners preconference is focused on the theme of Changing Landscapes: Financial Planning for LGBT Clients and/or Unmarried Couples and will include sessions on Planning for Unmarried Couples, Socially Responsible Investing, Financial Planning for HIV Positive and Chronic Care Illnesses, and much more. The Quad-A preconference is focused on the theme of Building a New Vision of Success. The agenda will focus on relevant topics that are critical for success in a changing demographic, economic and regulatory landscape.

Schedules for both preconference events are being finalized, but registration is now open with special rates for FPA, PridePlanners and Quad-A members and nonmembers.

FPA Residency 2015 is Coming in October

Financial planners who are newly minted, or soon-to-be, Certified Financial Planner™ (CFP®) professionals, can develop a solid foundation for the careers with the right experience. FPA is pleased to offer a one-of-a-kind experience for newer financial planners through FPA Residency 2015.

FPA Residency 2015, to be held Oct. 2-7 at the Inverness Hotel and Conference Center in Denver, Colo., provides a limited number of “residents” an exclusive opportunity to experience real financial planning scenarios and learn from preeminent thought leaders in the profession. Led by a faculty of highly experienced and nationally known financial planners, FPA Residency 2015 is an intensive case-study based learning approach that develops the skills required to become a confident and competent practitioner.

Attending residents can earn 28 Continuing Education (CE) credits or three-months experience toward the CFP Board’s three-year experience requirement. Those interested in attending must meet one of the following criteria:

  • Completed the required CFP Board-registered program and are eligible to sit for the CFP® Certification Examination.
  • Newly minted CFP® professional or a candidate for CFP® certification.
  • CFP® professional who has held the certification for three years or less.

Registration is now open, but space is limited. Register Today!

Trends in Adviser Compensation and Benefits Study Now Available!

FPA members can now access the 2015 Trends in Adviser Compensation and Benefits Study, which was done by the FPA Research and Practice Institute™ and Financial Advisor IQ (a news service of the Financial Times). The research helps all planners and their support staff understand trends in compensation and benefits.

While the study sought to create a valuable compensation benchmark resource for those currently working in the financial advice profession, or seeking a position, the study examined the impact that compensation, benefits and work environment have on job satisfaction and engagement.

The full report is a must read for anyone working in the financial advisory space. Download a copy of the report and see how your compensation and benefits package stacks up with other firms across the country.

Check out the Current Member Discount Program Guide

The May 2015 Member Discount Guide is now available. The guide features over 80 discounts, as well as a centerfold Practice Management article that was co-written by FPA and Fox Financial Planning Network, one of FPA’s Business Success Partners. The article – 6 Tips to Improve Client Service and Boost Profits – will cover:

  1. Identify who you serve. Be specific!
  2. Carefully craft your value proposition.
  3. Get standardized operational systems in place.
  4. Get the right staff in place.
  5. Choose and use the right technology for your business model.
  6. Evolve your business model to provide work/life balance.

Login to the FPA of MN website > Local Member Discounts page to download your copy today!

Connect with Your Peers

One of the major benefits of FPA membership is the opportunity to connect with financial planners from across the country. There is a spirit of collaboration throughout FPA that is unmatched in the profession with members always willing to share their insights and best practices on everything from planning to practice management. Take advantage of this major benefit by tapping into FPA Connect, a virtual community of FPA members coast to coast who avail themselves to their peers. And be sure to download the FPA Connect app on your smartphone! Search for “FPA Connect” in the App and Play stores.

Learn more about FPA Connect and the many other opportunities for community building.

Also be sure to check out FPA Knowledge Circles. These specialized gathering places are for like-minded members who want to engage in dialogue about best practices and innovations on particular topics. FPA Knowledge Circle participants also serve as content experts who help guide the creation of FPA content and educational programs. You can participate now in one of the FPA Knowledge Circles on Business Success, Estate Planning, International/Cross-Border, Investment Planning, and Retirement Planning.

Reason to belong to FPA

Events & Conferences

FPA hosts several financial planner conferences throughout the year, offering diverse educational opportunities that meet every need. In addition to programming and speakers selected for each conference to ensure high-caliber, unbiased business management and technical information, FPA conferences hold the opportunity for what many professionals deem the two most important business assets: continuing education and networking opportunities.

First Year Member Social - July 30th

Save the Date! July 30th
First Year Member Social
Rojo Mexican Grill
1602 West End Blvd.
The Rojo Room
St. Louis Park, MN 55416

Did you join the FPA of Minnesota in the last year? Then we want YOU to JOIN US! As a newer member, we hope you will join us for this special event at Rojo Mexican Grill - The Rojo Room, West End, St Louis Park. There will be delicious hors d’oeuvres and beverages served, as well as interesting conversations. It will also provide an opportunity for new members to meet board members, officers and past presidents, who will be eager to welcome you to FPA of MN. And last, yet never least, it allows the FPA of MN to say thank you for joining!

FPA of MN Volunteers at College Possible/AmeriCorps One-on-One Consulting Event

Volunteers at College Possible/AmeriCorps one-on-one financial consulting event, Friday, 5/22/15. 35 AmeriCorp members came prepared with specific financial questions, sat down with volunteers for one-on-one consulting on questions ranging from budgeting, savings, how to use their Education Credit, etc. Many thanks to: Tiffany Rovaina, Steve Gilbertson, Charles Buck, Barb Kirby, Sophia Bera, Molly Sullivan, Earl Cohen, Corey Purkat, and San Asato.

Recap Pro Bono Workshop

Submitted by:
Tiffany Rovaina CFP®, ChFC - Pro Bono Committee Member

On April 23rd more than two dozen FPA MN members and their guests attended a workshop hosted by the Pro Bono Committee to educate local planning practitioners about how they can best serve members of the military and their families.

The presenter John Bergstrom, CFP®, ChFC, CLU, CDFA, a fellow member of our chapter and Lt. Commander in the U.S. Navy (Reserves), outlined the urgent need for financial planning in military households. He provided specific guidance regarding the pay and benefits available through the armed services, but also highlighted many services and resources available through local and national not-for-profit organizations.

A number of military service members in the audience provided additional clarification and commentary related to little-known aspects of military pay and benefits while Molly Sullivan, a personal financial counselor working with military families, requested assistance from attendees in providing Pro Bono consultations to service members located outside of the Twin Cities metro.

I’ve personally found that the educational workshops and volunteer opportunities I’ve participated in through the Pro Bono Committee have been not only personally rewarding, but have also helped me to further expand and hone my professional tool kit. In particular, attending last month’s session opened my eyes to the immense opportunity that the financial planning community has to provide much-needed support to the over 7% of the American population that is either currently serving or has previously served in the military.

I strongly encourage those who may have experience or interest in working with service members and their families to seek out the Pro Bono committee to discuss ways that you can be a part of giving back to those who have given so much.

Effective Cybersecurity Policies

On April 28th, the SEC issued a Cybersecurity Guidance Update for the purpose of highlighting the importance the Commission is placing on getting advisors to do all they can to protect client information. The Guidance Update did not cover any new initiatives but appears to express the Commission’s belief that almost all advisors are falling short on protecting against cyberattacks.

The Guidance Update recommends creating a strategy to prevent, detect and respond to cybersecurity threats. That strategy should be implemented through policies, procedures and training that provide guidance to officers and employees with best practices and knowledge to limit cybersecurity vulnerabilities and respond appropriately when an attack is detected.

Development and implementation of cybersecurity policies has to start with one overriding policy that: 1) addresses the importance of safeguarding client information, 2) defines the approach taken to manage information security and 3) states top management’s commitment to information security. There will then be multiple policies that address passwords, emails, mobile devices etc. For a cybersecurity policy to be effective it has to:

  • Include parameters that define the technology, software, activities addressed
  • Have processes for maintaining up to date cybersecurity defenses
  • Involve training employees about computer safety and cybersecurity procedures
  • Provides for rewards adherence to policies and procedures and reprimands for violators
  • Recognizes success in a meaningful way the firm’s efforts in defending against cyberattacks

Top management’s buy-in is essential to the success of a cybersecurity policy. Implementing cybersecurity procedures is implementing behavioral change and this is where most firms fall short. The only way an entire firm adopts better computer security habits is if top management preaches the message that protection of client information is the responsibility of every employee and then backs that up with rewards, punishment and recognition.

Cybercrime is constantly evolving and adapting so cybersecurity policies need to evolve and adapt as well. Procedures need to be constantly updated to reflect those new threats as well as take into consideration new technologies and software that the firm adopts. For that reason, it is important that a chief information security officer or team be established that is responsible for staying up to date on the cybersecurity situation. The officer or team will also be responsible for ensuring that the entire firm stays informed of the latest threats and adopts procedures for countering those threats.

The threat is real and the damage from an attack can be substantial. It is estimated that 1/3 of cyberattacks are on firms with fewer than 250 employees. Unlike individuals, small firms have data and assets worthy of a hacker’s time and effort but they lack the resources and defenses of large firms. The SEC’s survey of industry cybersecurity efforts found that over 25% of advisors and broker-dealers had been victim of fraudulent emails that resulted in losses between $5,000 and $75,000. By comparison, the FBI estimates that the typical successful bank robbery nets $8,000. Compared to a bank robbery, the risk to a cybercriminal is negligible compared to the reward so one can only expect the attacks to increase in number and complexity.

The bottomline is that the SEC and FINRAwant the financial advisory community to see cybersecurity as more than an exercise in meeting compliance requirements. Financial advisors have to begin viewing cybersecurity as an essential risk-management practice.A savvy advisor may also be able to turn this into a marketing advantage by informing clients of their cybersecurity procedures. In this age of sensational and well-publicized cyberattacks, clients would likely welcome and appreciate knowing that their advisor is doing everything possible to keep their personal data safe.

FPA Advocacy Day in Washington, D.C. is Right Around the Corner

Our second annual FPA D.C. Advocacy Day is just weeks away. We’re excited to say that so far 50 members from 19 states and 25 FPA chapters will be engaging policymakers and influencing legislation important to the profession. Join us in Washington D.C. on June 23-24 to make your voice heard in the halls of Congress! Participating in this important day will empower you to positively impact government officials at all levels – after last year’s event, we saw an increase of 18 cosponsors to one of our key pieces of legislation.

FPA will provide a structured experience including: training, materials, pre-event tips and tactics, a group room rate at a convenient hotel, appointments with the offices of your representatives and the opportunity to network with your fellow FPA members. All members are responsible for their own travel expenses and meals.

Help get the word out. Register by June 1!

SYMPOSIUM SPEAKER - November 4, Jaylene Howard, CFA, CAIA


Presentation Scheduled for Wednesday, 11:55 am - 12:50 pm
Anticipated CE: 2 CFP, 2 CIMA, 2 NASBA/CPE, 2 MN insurance

Wednesday, November 4th, Luncheon Keynoter - Women: Wired to Invest

Women: The growing opportunity
Why women may be your most important market

We have seen statistics about the changing circumstances of women in education and employment for years now. Less has been written about their changing needs for financial advice. Consider the statistics.

Women have accounted for more college degrees than men in the U.S. for nearly a decade.1 According to the National Center for Women and Retirement Research, as many as 9 out of 10 women will be solely responsible for their finances at some point in their lives.2 More than one third of women are widowed by retirement age3, and half of all marriages in the U.S. end in divorce according to census data.4 At age 65, a woman’s life expectancy is five years greater than a man’s.2

Ken Dychwald, well-known author and president of Age Wave, estimates that women are on track to control 60% of personal assets in the U.S. this decade. Almost all income growth in this country over the last several decades has been among women. Between 1970 and 2000, women's median real income growth rose more than 60%, while median real income for men rose less than 1%. Women investors are clearly a rapidly emerging economic force in the U.S.

What does this mean for financial advisory businesses?

Research shows that there are already signs that women are a high-growth and potentially more profitable source of advisory business than men.

(1) Census Bureau, “Educational Attainment in the United States: 2010”.

(2) National Center for Women and Retirement Research, referenced in “Investing Wisely: What Women Need to Know” by Kathleen Williams April 24, 2011. www.womensmedia.com

(3) Census Bureau, “Current Population Survey, Annual Social and Economic Supplement, 2010”.

(4) Census Bureau, “Number, Timing and Duration of Marriages and Divorces: 2009”.

(5) John Watson & Mark McNaughton, Gender Differences in Risk Aversion and Expected Retirement Benefits, Financial Analysts Journal, July/Aug 2007

(6) “$14 Trillion Dollar Woman” by Barbara Kay/Anthony DiLeonardi

(7) “Ineffective Habits of Financial Advisors” by Steve Moore and “$14 Trillion Dollar Woman” by Barbara Kay/Anthony DiLeonardi

SYMPOSIUM SPEAKER - November 3, Robert Keebler, CPA, MST, AEP


Best Income Tax Strategies for Financial Professionals

With the introduction of the 3.8% net investment income tax (NIIT), 20% capital gains rate, 39.6% income tax rate, and personal exemption and itemized deduction limitations, America has shifted from a two dimensional tax system to a five dimensional system. Virtually every financial decision now needs to be analyzed through this prism. The complexity of going from a two dimensional system to a five dimensional system is exponential, not linear, which requires a quantum leap in tax analysis methodology, tax strategy and tax planning software tools.

There are now seven different ordinary income tax brackets – 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%, and three different capital gains tax brackets – 0%, 15%, and 20%. Furthermore, if you combine these tax brackets with the new 3.8% NIIT, there are even more possible tax brackets; i.e., high income taxpayers will be subject to a 43.4% tax rate on ordinary investment income and a 23.8% tax rate on long-term capital gains. Lastly, when taking into account the phase-out of personal exemptions (PEP) and limitations on itemized deductions (Pease) as income rises above the applicable threshold amounts, the tax rates increase even further.

The increased value created in an investment portfolio by using the tax saving strategies described below is referred to as “Tax AlphaTM.” Put another way, it is your after-tax excess return (after-Tax AlphaTM) minus your pre-tax excess return (pre-Tax AlphaTM) based on the appropriate benchmarks. Generally, an index is used as the appropriate benchmark (e.g., the Russell 1000 for U.S large cap stocks). Research indicates that many portfolios don’t consistently beat their benchmarks on a pre- tax basis, often producing negative alpha on an after-tax basis. That is why creating Tax AlphaTM is important. If pre-tax alpha is positive, tax planning can increase the excess.

Main Room: 75 Best Income Tax Strategies to Generate Tax Alpha
Presentation Scheduled for Tuesday, 7:55 – 9:15 am
Anticipated CE:  1.5 CFP, 1.5 CIMA, 1.5 NASBA/CPE, 1.5 MN insurance
Taxes are the most important drag on investment return – greater than inflation, transaction costs or management fees. Studies performed ten to fifteen years ago showed that taxes reduced returns by an average of one to three percentage points. Recent tax increases should increase these percentages significantly, making it more important than ever to manage tax drag and create positive alpha by virtue of reducing the effective tax rate on investment returns for clients. In this session, Bob will review some of the best income tax strategies in 2015 covering IRA and Roth IRA, Capital Gain/Loss, Bond Income, Dividend Income, Open Transaction, Pension Distribution, Stock Option, and Charitable Planning Strategies.

Breakout Session: Digging Deeper into Strategic and Tactical Tax Strategies
Presentation Scheduled for Tuesday, 12:40 – 1:30 pm
Anticipated CE:  1 CFP, 1 CIMA, 1 NASBA/CPE, 1 MN insurance
With the focus of investment strategies changing rapidly, in order for financial advisors to add value for their clients, they will need to add alpha by virtue of reducing the effective tax rate on investment returns. The heart of this is understanding and utilizing the statutory tax shelters provided within the Internal Revenue Code. In the breakout session, Bob Keebler will go into more detail on a couple of the strategies: Strategic Tax Strategies and Tactical Tax Strategies.

SYMPOSIUM SPEAKER - November 3, Michael Kitces


Main Room: Applying Behavioral Finance In Your Financial Planning Practice
Presentation Scheduled for Tuesday, 9:40-10:30 am
Anticipated CE:  1 CFP, 1 CIMA, 1 NASBA/CPE, 1 MN insurance

Breakout Session: To Roth or Not to Roth
Presentation Scheduled for Tuesday, 12:40-1:35 pm & 2:00-3:00 pm
Anticipated CE:  1 CFP, 1 CIMA, 1 NASBA/CPE, 1 MN insurance

How Do You Deal With Irrational Financial Behavior?

Although so many financial and economic models take as a fundamental assumption the idea that we are all rational human beings, the emerging research from the field of behavioral finance clearly illustrates this is a false assumption. In reality, we have some pretty strange financial behaviors, that do not appear to be at all consistent with a purely rational decision-making process. Fortunately, the world of behavioral finance is showing us that at least some of our irrational behavior occurs in a consistent manner that we can predict, so while our actions may not be rational at least they can be anticipated. But that in turn begs a fundamental question: when faced with a client making an irrational financial decision, is the rational (for the planner) solution to try to change the client to be more rational as well, or to change the recommendation to fit the client's irrational behavior? 

The inspiration for today's blog post comes from some ongoing discussions I've been having with other planners about how to develop financial planning recommendations for irrational clients. But it's not just about what the emerging research on behavioral finance tells us that people do; it's also about what YOU are supposed to do ABOUT it. In general, I'm finding that planners seem to fall into one of two camps: either the "proper" way to deal with irrational clients is to show them how they are being irrational and help them to see the error of their ways so that they will self-correct the behavior, or you are supposed to adapt your financial planning recommendations to arrive at a solution that will work in spite of the client's irrational behaviors.

It's actually a pretty difficult challenge for the client-centric financial planner. The idea of following the latter path - to adapt your recommendations to the client's irrational behavior - just feels... "icky" to many, and is outright anathema to some. How could you, the professional financial planner, possibly make a deliberate decision to offer a recommendation that is not the "optimal" one based on all the analysis and data available? For instance, would you ever recommend an illiquid investment to someone, simply because you wanted it to be harder for them to make a hasty irrational decision to sell it in a panic? After all, almost by definition, if the client is acting irrational, they are making "sub-optimal" decisions that are not in their best interests, and recommending a sub-optimal solution would seem to just exacerbate the problem. How can you be a professional and cater to such client tendencies? How could it be responsible as a planner to deliberately recommend a solution that takes a client down a less-than-optimal path? Or simply put, if you're a rational professional, how can you NOT give rational-based recommendations?

If you're going to go down such a path, though, you'll have to convince the irrational client to stop being irrational, for which the best prescription right now seems to be "show the client how he/she is behaving irrationally, and let them self-correct the behavior." To say the least, this can be far more difficult in practice than it sounds, though. For instance, if there's one thing I've learned in my brief time being married, it's that if I think my beloved wife is acting in an irrational manner, it rarely improves the situation to point this "fact" out to her at the time the "problem" is occurring. Perhaps, maybe, we can have a conversation to reflect on how one of us was behaving irrationally, long after the fact, but even then it still doesn't necessarily mean the same thing won't happen next time. And in a client situation, your time is far more limited; the time that you meet with your client to try to "fix" their irrational behavior is the same meeting at which you're trying to get them to adopt a rationally recommended solution at the end. In other words, you're trying to package together re-education, re-training, and a rational recommendation into a pretty small window of time.

But once again, if you don't think you can convince the client to just stop being irrational by pointing out their irrationality to them, what else is a planner to do? The next step would seem to be right back where we started; if you can't change the client, you have to change the recommendation to fit them, instead. In some cases, this may not be too difficult; for instance, the emerging field of choice architecture has a great focus on looking at how we can better guide client behavior (in finance and many other areas) to the outcome we want them to select, simply by being cognizant of how the decisions are presented in the first place. A classic example is changing savings plans to occur automatically and let people opt out, instead of not-saving by default and asking them to opt in; as a result, savings behaviors come out dramatically improved. In other words, it's a way to use a client's irrational behavior to their own advantage. So maybe catering to a client's irrational tendencies isn't always bad, and sometimes you can take advantage of predictably irrational behaviors for a client's own good?

So what do you think? How do you handle these challenges in your own life and with your own clients? Do you try to "fix" the irrational behavior, or "fix" the recommendation to fix an irrational world? Is one solution more "professional" than the other?

Nominations are Open for the 2016 National FPA Board of Directors

The FPA Board of Directors is the driving force behind FPA’s vision to be the professional membership association for the financial planning community and CFP® professionals. The Board is a group of dedicated, dynamic FPA members who recognize the impact that today’s decisions can have on the future.

Are you interested in being part of this high caliber strategic team that is leading the profession and the association while serving the members? If so, consider submitting your name as a candidate for the FPA Board of Directors or recommend a colleague for nomination.

Service on the FPA Board of Directors is a three-year commitment that begins January 1, 2016. Contact board@onefpa.org to request a board nomination packet. Deadline for 2016 board nominations is Wednesday, July 1, 2015.

Nominate Deserving Members for FPA Awards

FPA is seeking nominations for two prestigious awards. The P. Kemp Fain, Jr., Award honors individuals for their significant contributions to the profession. The Heart of Financial Planning Award recognizes those contributing and giving back to the financial planning community and public through financial planning. So much volunteerism occurs at chapters, so this is a great opportunity to recognize volunteers for their efforts. Please think about members who are making important contributions and nominate them for these prestigious awards. FPA’s goal is one submission from each chapter.

Submissions are due July 1. Nominate a colleague today!