Here's The Big Obstacle To Nabbing New Financial Planning Clients

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The Real Reason It Isn’t Easy To Bring Financial Planning To The Masses (Nerd’s Eye View)

The real challenge to bringing financial planning to the masses is not the technology needed to lower the cost of financial planning, according to Michael Kitces of Nerd’s Eye View. “The real challenge is how difficult it remains to get new clients in the first place, especially given that so many financial planning firms have relatively little cash flow available for broad-based marketing programs.”

This Client/Customer Acquisition Cost (CAC) is especially high in the financial planning world because it is hard to explain the service to the public especially when trust in financial services has been low.

“The end result of these difficulties is that financial planning firms struggle to serve the middle class and mass affluent – not because it’s expensive to provide planning, per se, but because the high cost to acquire clients leaves most planning firms under-capitalised and/or “stuck” with a relatively modest growth rate that necessitates higher prices simply to be able to afford to make a living,” writes Kitces.

Investment Professionals Think The US Will Present The Best Investment Opportunity But Are Concerned About Market Integrity (CFA Institute)

60-three per cent of those surveyed in the CFA Institute 2014 Global Market Sentiment Survey said they expect the global economy to expand in 2014. This is up from 40% last year. 71% said equities were the asset class most likely to perform best, up from 50% in last year’s survey. 26% said the U.S. would provide the best investment opportunity, followed by 10% for China, and 6% for Japan and Germany. Brazil was no longer on the list.

29% of those surveyed said improved regulation and oversight of systemic risk was most needed to improve investor trust. 21% also said there needed to be more transparency in financial reporting and other disclosures.

“Members do not think mis-selling of products by financial advisors is the most serious issue facing global markets in the coming year,”according to the press release. “Market fraud, such as insider trading (24 per cent, up from 19 per cent last year), use and reporting of derivatives (20 per cent, down from 23 per cent in 2013’s report), and the honesty/integrity of financial reporting (21 per cent, consistent with last year) are viewed as more serious issues.” The annual survey measured the opinion of 6,561 CFA charterholders and members.

Mutual Funds Look Set To Have Strongest Inflows Since 2009 (Morningstar)

Long-term mutual funds have seen $US258.8 million in inflows year-to-date (Ytd), and $US14.5 million in November alone, according to Morningstar. These are on pace for the strongest inflows since 2009. Overall mutual fund assets are now up to $US10.8 trillion, boosted by strong flows and stock market appreciation. Alternative mutual funds have drawn a record $US37.1 billion Ytd, a 41% organic growth rate.

Vanguard is expected to be the winner in terms of flows in 2013, with $US65 billion in Ytd flows. Vanguard has come in first or second in terms of flows since 1994. Dimensional Fund Advisors came in second in terms of Ytd flows with $US20.98 billion, and PIMCO came in third with Ytd flows of 19.99 billion.

2013 Taught Us 4 Key Lessons In Investing (AllianceBernstein Blog)

Before diving into 2014, Seth J. Masters at The Alliance Bernstein Blog thinks it is important for investors to think about four important lessons from 2013.

1. “You have to be in it to win it” — “Staying on the sidelines may seem safe, but it also ensures a loss of purchasing power over time.” 2. “If you run with the crowd, you can get trampled” — Doing so suggests that some investors are just chasing past returns, when they should really be establishing an investment strategy based on their own goals and risk tolerance. 3. “Diversification means owning some things that underperform” — It is important to maintain exposure to an asset class or a geographical region that isn’t performing well right now, because it could end up doing very well. 4. “It’s what you keep that counts” — Investors should watch for tax management strategies that could help them defer taxes or avoid them.

The Cost Of Trading Stocks Has Been Tumbling For Decades (Deutsche Bank)

The decline in the cost of trading has helped boost stock market trading volumes, according to Deutsche Bank’s David Bianco. “Transaction costs related to owning large cap stocks have plummeted in the past few decades and remain low relative to most other assets,” wrote Bianco. “We estimate that the competitive cost of owning a well diversified large cap equity portfolio has declined from about 300bp annually from 1960-1980 to under 1% today. Given that investment costs are tax deductible, we estimate that this decline should justify a 100-150bp reduction in the fair real cost of equity, all other factors the same.”

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