Friday, September 20, 2013

By Jon Yankee, CFP®

The turmoil this summer in the investment markets might cause one to think that people have lost money this year in U.S. stocks.  But in fact, most of the U.S. indices are sitting on plus twenty percent gains for the year.

The rest of the world is not doing as well.  Emerging Markets are having a horrible year.  Looking over alternative asset classes, real estate investments are about flat for the year, and commodities are, like emerging markets, are down big this year.  Add those asset classes to the fixed income piece of your portfolio, which is also down, and you have a year that is not too pleasant for a diversified portfolio.

This is the kind of market environment that many professional advisors least enjoy – for a variety of reasons.  First, the turmoil over the summer makes it clear that investors are making investment decisions – and moving market prices – based on emotions rather than logic.  The initial panic following Fed Chairman Ben Bernanke's comments during the summer about ending its QE3 stimulus program seems to have subsided.  But when market values drop precipitously based on a single speech about a hypothetical Fed action that would only be taken due to improved fundamentals, you know that investors are not thinking rationally. 

The other reason professional advisors dislike the current state of the markets is the way diversification looks right now. Whenever U.S. stocks are delivering positive returns while almost everything else – emerging market stocks, bonds, real estate, commodities, and all the other pieces of a prudently constructed portfolio – are going in the tank, investors will ask questions like: "The S&P 500 is up 20% so far this year, but my portfolio is only up 6%.  What are you doing wrong?"

The truth is, no professional can pick the one winning asset out of the myriad of options every year (or half year), and no prudent professional would ever try.  There will always be one asset that returns more than the others, and that winning asset will always be different.  Yet American investors hear about the S&P 500 (and the Dow, and other U.S. large stock indices) on the nightly news, so they are most likely to question the competence (or sanity) of their advisor when the U.S. stock markets are booming and everything else is lagging – exactly the situation we have today.

As most of our clients know, this is the “frame of reference risk” that we discuss often…our client portfolios are very different than most peoples’ context for conversations or current events.  It is the first time since 1998 that we have had such an investment market.  Diversification works…even if you don’t want it to work.

Eventually, some other investment will take the lead, diversified portfolios will look better relative to the U.S. stock indices, and professional advisors will look like geniuses.  That, too, will be a naive view of the situation, but it will be a more pleasant one for those of us who believe in the long-term value of diversification.

Friday, September 13, 2013

It is sad to see summer go because it means less golf, but it’s also an exciting time for us with a full agenda for FPA-NCA. As the final quarter of my tenure as president opens, we’re looking at nearly a dozen great events to wrap up 2013. There should be a little something for everyone, so I’m hopeful that each of you gets out of your office to at least a couple of things this fall.

The biggest event of the year is Metro Washington Financial Planning Day (MWFPD). The 2013 event has been scheduled for the first Saturday in November. This event drew over 300 attendees last year, so we’re looking for another huge crowd and great pro bono effort from the chapter. This national Financial Planning Day event is coordinated by FPA, CFP Board, U.S. Conference of Mayors, and the Foundation for Financial Planning. Details:

Saturday, November 2, 2013
Columbia Heights Educational Campus
10:30 a.m. to 4:00 p.m.
(volunteers to arrive by 9:30 a.m.)

Our committee is co-chaired by chapter members and past participants Melissa Sotudeh and Jim Sprung. Melissa is working on facilities, volunteers, and coordination with partners at CFP Board and the Mayor’s office, and Jim is working on outreach to community organizations, non-profits, colleges, and media to generate an overwhelming number of attendees who want to improve their financial lives. Consider volunteering or forwarding event details to your neighborhood email thread or posting on all of your social media outlets.

Another neat event that I mentioned in the last note is the semiannual FPA-NCA and FPA NexGen happy hour. September’s event is two weeks away: September 24 from 5p to 7p at Chima Steak House on Towers Crescent in Tysons. Turnout looks robust. If you like talking, come to share your story as an advisor, whether you’ve been in the business for 5, 10, 15, or 50 years – the next generation of planners who will be working with your clients when you’re retired need to hear battle stories, wildly successful ideas, and be engaged by each of you. They don’t want
to be an owner tomorrow (well, perhaps they might, but then again so did you when you were getting started), but they will be owners soon enough. Please consider taking some time to come for drinks (we’ll buy the first one) and free appetizers. And also consider nudging your 20- to 35-year old colleagues to both attend the event and join NexGen. Leadership in our area is incredible, with Jennifer Quigley (national NexGen president) and Laurie Belew (FPA-NCA board member) engaging their peers at a level we weren’t engaged with in our twenties and early thirties. They’re breaking the mold, and you need to be involved as mentors or members. Come on out for a couple hours and meet them.
More on our programs for the fall are detailed on pages 3, 4, 9 and 10. We have included details on our September and October programs, as well as our Winter Symposium! Also, please remember to vote for our 2014 FPA NCA Board detailed on page 6. Thanks for taking a few minutes to read this note. As always, if you have any questions, concerns, suggestions, or just want to say hi, please feel free to reach out to me or any of my fellow board members. All of our contact info is on the last page of the newsletter, every month. Looking forward to seeing you at one of our events soon!
Best regards,
Ryan M. Fleming, CFP®
2013 President, FPA of the National Capital Area

Wednesday, September 4, 2013

By Bryan Beatty, CFP


Sometimes is a good idea to get back to the basics. It is very easy not see the forest for the trees.  In running an advisory practice you have so many things you must do. You must stay on top of asset allocation models and the economy. You have to keep up with changing tax codes and legislation. You have to manage your office operations and human resources. You have to comply with the regulations and mange to maintain your CE requirements.  You have to manage your operation processes including your technology, your trading platform and your CRM system.  You have to continue to service your clients and market to get new ones. Suffice it to say you are sometimes overwhelmed and you forget that without the basics you can misfire and everything slides downhill from there.

This month’s luncheon brings us Dan Finley of Advisor Solutions and The Five Core Principals For Mastering Interpersonal Relationships.  “Great communication is the lifeblood of every sustainable business relationship.” says Dan.  We are in a relationship business no matter how you look at it. That is the big picture, the forest.   All the stuff we have to do each day, they are our trees.

Spend a lunch hour getting back in touch with one of our essential basics – communication.  Learning to more clearly and effectively communicate with people will improve all aspects of your business.

·         Are you speaking your clients/prospect’s language?

·         Do you know the CORE personality types?

·         Learn the art of story telling

·         Using the metaphors and analogies

These are just few of the things you will re-engage with in this September’s member luncheon. Join us for  a very worthwhile discussion.

2 CFP CE, 2 CIMA, 2 VA Insurance Approved! 2 CPA CPE Offered! No MD Insurance for this program.