Recent Event Update: 6/28/11

We would like to thank all of those who attended the most recent Young Financiers event on June 28th, 2011. It was definitely a success in getting local Phoenix planners to meet and get better acquainted in a casual setting. We definitely want to acknowledge our host for this event, Walton International Group, a local real estate investment firm. We appreciate them allowing us to use their suite at Chase Field for the D-Backs game as well as provide food and beverages to complement the festivities. There was also a charitable component to this event. We want to recognize those who made a contribution to the Foundation for Financial Planning which provides pro-bono financial planning services to those in need.

The next meeting will be over the coming month or two and details will follow with an invitation over email. The date, location and topic are to be announced.

Why an up-and-coming financial planner in Phoenix should not join the Young Financiers

There has been talk recently with other individuals in the financial realm about the Young Financiers group. There is some surprise that people aren't knocking down the door to ask to be a part of the group. A tremendous amount of benefits can be recieved by being part of the group that should make it a no brainer for an up-and-coming professional serious about the industry to join and participate. Here are some reasons why one would not join the Young Financiers or a NexGen related organization:

-they don't care about lifelong learning

-they aren't interested in becoming acquainted with their colleagues

-they are not open to new ideas

-they are afraid of competition

-they want to keep their best practices to themselves

The Young Financiers is a group committed to the success of the next generation financial planner in Phoenix, AZ. NexGen is a group committed to the success of the next generation financial planner in the world. These groups foster collaboration, sharing, discussion, openness, growth, support, and many more characteristics.

Someone who is serious about their profession needs to be part of an organization that can help them get to the next level of their ability. The Young Financiers is that group for the next generation financial planner in Phoenix, AZ.

NexGen Gatherings for 2009

We wanted to make an announcement about the upcoming NexGen gatherings in 2009. There are actually two this year that will be taking place. One is occurring at the end of the month of July in Moline, IL. Fellow NexGenner Eric Kies from The Planning Center will be hosting a roundtable gathering where planners can share their thoughts and ideas on their businesses and life. More information can be found on the Yahoo Groups discussion board. The next event occurring this year is a piggyback on the FPA National conference held in Anaheim, CA. The formal NexGen sessions will be held on Friday, October 9th and Saturday, October 10th. More information can be found on the NexGen page at http://www.fpanexgen.org such as the brochure with the lineup of speakers and agenda, the registration section, and details on the National conference held after the NexGen event.

Why I Hired a Financial Planner

This post may seem like a routine piece on a Yahoo Finance or CNN Money page, but there is a twist to this. Typically, people who hire a financial planner are not planners themselves. That’s where this is different. I am on the path to become a certified financial planner and you would think that I deal with the nuances of this industry on a day-to-day basis. That is true, but what makes this unique is the value a third party perspective has on your life. There is more on that later in the post.

My inspiration for hiring a planner came from Rick Kahler, a CFP practitioner in South Dakota who wrote an article in the November 2008 edition of the Journal of Financial Planning entitled, “Becoming Consumers of the Profession we Practice”. After I read this, I came to the realization that we planners need to practice what we preach. We cannot tell clients/prospective clients to do as we say and not as we do. Once I had this epiphany, I chose to take action. The following describes the path of how I did so:

I think in today’s day and age, it can be difficult to find a competent and ethical planner. It seems as though all the good ones have minimum asset/ net worth requirements and individuals like me as an investor/consumer get second tier assistance. I feel the issue stems from the model of our business. The way the majority of the industry that targets my demographic is currently setup is advice sold within a product. I wanted to separate the product from the advice and keep the advice as objective as possible. One way for me to do that was to look for a planner who charged by the hour or charged a flat fee to do a comprehensive plan. There are a group of individuals across the country who follow this same philosophy. They have formed a network to assist the wealthy as well as the not-so-wealthy on improving financial situations. I thought I would start there and see where it took me. I found out there were a handful of individuals across town who were in alignment with this group. I reached out with an email introducing myself and what I set out to accomplish. Below is a sample of this email:

Good day Mr./Ms. Planner,

My name is Darin Shebesta. I came across your name recently from the X Network. Here is why I am contacting you:

I am part of the next generation of financial planners in the country. I work with X in Scottsdale. I am an Associate Planner with them and am working on my CFP courses currently. I read an article recently from Rick Kahler in the Journal of Financial Planning about planning for the planner (see attached). This got me thinking: why shouldn't I have a financial planner myself? Since I am just beginning the accumulation stage of my life, it is difficult to gain unbiased advice because the traditional business model is not set up to cater to consumers like myself. The brokerage side and the insurance side are biased because the compensation is built into the product and the advice is ancillary. I was looking for someone who was a CFP that I can sit down with and work on an hourly basis. I would be receiving professional advice and the planner would be getting paid for his/her time. This would also help me in my profession as I would see what it is like from a client's standpoint.

There were 4 planners that came up in the X Network search in Arizona. I am reaching out to each one of them (including you) to figure out who would be the best fit for our situation. I am getting married within two months and thought that now is as good a time as any to gain a third-party perspective. I would like to set up a phone appointment with you to have a conversation and ask a few questions. Let me know some days and times this week that would work with you.

I look forward to learning more about you and your insight. I look to those in our industry as comrades as opposed to competition. Take care and talk with you soon.

Darin

After sending out this email, I followed up with phone calls to each of the recipients. I believe any of them would have been appropriate to work with, but one stood out. Even though there is a generational difference between us, we still felt they were the best fit. The other candidates seemed to naturally fall out of the running. After the initial consultative meeting, my fiancee and I were comfortable with the relationship and chose to move forward with the fact finding and data gathering process.

Here is how I see the concept of a planner hiring a planner as a beneficial relationship. For one, we all have our own perspective on the world. If we have filters on this, our view is only one piece of the pie. To step outside of our mindset and look at it from another angle is valuable to notice blind spots. I do not know everything there is to know about financial planning or any other topic for that matter. What I do realize is everyone has their own particular experiences and value can be added by applying learning from those experiences to other situations such as my financial situation. We may have differing views on investment philosophy or budgeting, but it is good to hear another’s perspective because this gives you options you wouldn’t otherwise have. Why wouldn’t you have other options had you not been exposed to other perspectives? Because you wouldn’t know the other options existed. Our planner has given us a perspective which we can choose to apply or choose not to apply. There is freedom in this situation.

One of the biggest reasons why planners have resisted hiring planners is the idea that they can do it themselves. If you ask an investor/consumer who does not have a relationship with a planner, the number one reason is “they can do it themselves”. If we are not following the advice that we give clients, how can we expect them to listen to us and follow our advice? There also may be a sense of awkwardness or embarrassment with this situation. All I can say is when you open up your financial life to someone you know and trust, this will go away and you will realize that they are here to help you. There is much more potential benefit from working with a planner versus not interacting with one.

If we want to consider financial planning a profession rather than just an industry, we need to move in the direction of hiring certified financial planners to help us with our financial lives (I am speaking to the planners of the world). Let me close with these questions: Would a doctor operate on him/herself? Would an attorney represent him/herself in court? Take an opportunity to think about this and see if it makes sense. If it makes sense, you have the chance to take action and make a difference in your life.

This topic will be discussed at our next Young Financiers meeting on Tuesday, April 7th, 2009.

Overview of Last Meeting in 2008

The Young Financiers met one last time before the end of the year on Tuesday, November 11th. There have been some newcomers this year to the group and they have contributed to the conversation significantly as well as provided office space for the meeting.

The most recent meeting was meant to discuss topics such as:
-Asset Allocation
-Re-Balancing
-"The Bailout"

These items were discussed as well as other items that came onto topic. It is interesting to see how different the views are on various ideas. There is definitely "more than one way to skin a cat" as they say. For example, one member discussed using single position stocks to build portfolios, while other members delegated the investment task to portfolio managers outside the firm. One member dealt with Tenants In Common for his clients and others used REIT's.

One topic of discussion came up that was fairly significant: variable annuities. This was interesting because they have been a very controversial financial product and there is a mix of advisors who use them and those who don't. The majority of the members at the meeting used VA's for a portion of their clients' assets. The group that this conversation may outcast would be the fee-only RIA group. Since VA's payout commissions, in the past it was not something they used. There are more and more products entering the marketplace that are catering to the fee-only channel. The question is: are they as competitive in cost and in benefit to their counterparts? One favorable benefit that was mentioned was the guaranteed lifetime income stream that could be provided to clients so they would not run out of income. This will definitely continue to be a topic of interest moving forward in the profession.

There was also discussion of the various Financial Planning Programs that students had been enrolled in. Members who were involved in these programs were present: DePaul, Boston, and Florida State. Members who were not present had taken the AFPP at ASU, the College for Financial Planning, and Jeff Rattiner's Fast Track. The main item people got out of this particular part of the discussion is it didn't necessarily matter which program you went through because the student ultimately determined how much they wanted to get out of it. They all provide similar material. It is a matter of the drive of the individual.

Looking at future meetings, there is definitely a need for more of what the Young Financiers do. This is especially important in trying times like these. This is about the camaraderie that is developed between members. When someone has a question, they know they can turn to this group to help answer it. The members need to be resources for one another and they will grow in the process.

Overview of the 2008 NexGen Conference

What an amazing experience this conference was! There is something to be said about the camaraderie between those in our field, especially when you have the same demographic together in one place. There is tremendous synergistic opportunities with the NexGen folks.

There are a couple of great articles written on the NexGen Conference that provide an overview of the topics presented as well as the breadth of attendees:

http://www.financial-planning.com/asset/article/642811/notes-nexgen.html

http://www.investmentnews.com/apps/pbcs.dll/article?AID=2008162623074

The topics chosen for sessions were timely, relevant, and fulfilling. There were two types of tracks with each set of presentations: a technical track and a practice management type track.

There was a nice mix of work and play at the conference. Many opportunities arose to meet fellow NexGenners. There are many benefits of this experience. The chance to connect with other planners across the country opens the door to meet up in the future. Job opportunities arise out of getting to know one another. Being resources for each other is valuable as well. It does not hurt to know people. The face to face interaction solidifies the relationship.

It is great to have media cover these types of events. They do a good job of painting a pleasant picture which is verifiable by talking with attendees about their experience.

The topic of ownership is a big issue in this profession. Especially when the average age of a Financial Planner is 54-57 years old and most of those individuals will be out of the business in 15-20 years. They need some way to transition themselves out of the workforce into retirement. The potential is tremendous in this industry as the demographics of our country shift. I don't know of a more rewarding and fulfilling profession than the one the NexGenners are in.

A special thanks is given to all the individuals who made the NexGen Conference possible. The event could not have happened without the attendees as well.

There will be a Young Financiers meeting in August. A post will be created shortly to announce the logistics.

NexGen Information

The time is here and now for NexGen to arrive. Over the past two conferences, there has not been a representative from Arizona present (as far as I know). This year is different. I've got my skin in the game now fully and I am ready to learn as well as contribute.


NexGen will be held in St. Cloud, MN at St. John's University from July 25-27, 2008. This is an opportunity for planners across the country to get acquainted with one another, learn from each other, and learn about the industry and how it relates to the next generation of financial planners. NexGen is not about replacing the Financial Planning Association. This is about supplementing it with a group that caters to our generation.

More information on this event can be found at the brand new FPA National website. The roster for this event can be found here. Also important is the registration form, which provides the sign up sheet. The other item on this section of the site is the brochure that describes the agenda and schedule for the event.

There is a lot to be said about building a network of like minded individuals that act as support and a resource to help us achieve our goals. Every single person has something to contribute and I am looking forward to seeing them shine.

I will provide a full report upon return from the conference of take-aways at NexGen 2008. This trip will help strengthen the Young Financiers as a group, which is a benefit in its own right.

Dichotomy of the Young Financiers

I have identified two types of individuals in the Young Financiers group (maybe this exists in NexGen as well).

• One type are those who are working with an established firm with partners who are seasoned in the industry. This type (I would include myself in it) is learning the ropes of the business and will eventually be a planner and relationship manager.
• The other type (which I have to give my "hats off" to because of the potential extreme difficulty) are those who are their own boss and are responsible for generating revenue to pay their bills and put food on the table.

In the financial planning business, the second type mentioned is extremely difficult to do (especially when you are younger than your clients). Not to mention that doing what's right for the client may hinder the financial success for the short term because what's in the best interest for the client may not be what's best for an advisor's pocketbook. I wholeheartedly agree that doing what's best for the client should be the #1 priority for a financial planner, much less all industries. I was trying to make a point that it's tougher to make it in this business from scratch.

Both types of individuals in the group complement each other well. One is curious what the other does for tasks and activities. What does the "other side" look like? That's why we have these meetings: to find out more about each other's practice and be the best we can be.

Review of Technology Forum Meeting

We had a great turnout for the Technology Forum in June. Thank you to all of those who made it out to the meeting and a big thanks to Daniela Urs for allowing us to use Barnes Investment Advisory's conference room. It is great to learn from one another about the different systems and processes each of us use in the business. It's amazing how there is not one right way. People have different pieces to create their own puzzle. This was an opportunity to open up each other's world by sharing ideas and applications that others had never heard of before. The exposure is greater when more people contribute based upon their experiences. By discussing a particular program being used, it gives the listener an idea of that application without having to use it. There is some trust and validation within the Young Financiers that I think people take one another seriously and have a great deal of respect for others' comments.

One thing the group agreed upon is that there is not a silver bullet in the industry of technology for financial planning. It is almost a best-of-breed combination, but even the applications in that breed are not unanimous. The idea is to stay open to learning new technology and seeing if it is a fit in your practice. Things are constantly evolving in this world. If you stay the same, you will become less competitive because everyone else is adapting to those changes.

Next Young Financiers meeting: Technology Forum

The time has come in our organization to generate another Young Financiers meeting. A topic that is timely and relevant that the group has not focused on in the past is technology within financial planning. We are calling our next event "Technology Forum", which will be a culmination of the various systems and processes that are used within the industry to make our jobs easier.

A great article published recently that provides an overview of some current systems in our industry is David Drucker's piece in May's issue of Research Magazine entitled, "The State of Advisor Technology". David touches on:

• Customer Relationship Management Software
• Financial Planning Systems
• Portfolio Management and Reporting Systems
• Document Management Systems
• Software Integration
• Remote Computing

I think these are great talking points for the meeting because every one has it's place in a financial planning practice. I think there is a great deal to be learned from the group because everyone does things differently and there is not "one right way".

Some firms that are large such as brokerages and banks already have many of these systems in place. Other small sole practitioner or partner shops may have a few in action because they haven't focused their efforts on the technology area. Technology has been known in some aspects as a cost center and in a financial planning practice, the firm is not paid on the actual technology segment of the business. The relationship is the main driver for revenues within the firm.

This is about opening professionals' eyes as to how critical technology is to a financial planning practice. If the systems and processes are mastered, more time is allowed to develop relationships for greater revenue generation and a better chance of a successful venture.

More details will come as far as the logistics for the meeting. Thank you for allowing me the opportunity to serve our community.

Review of our First Meeting in '08

Hat's off to Michael Kitces! What an amazing performance he gave at the FPA of Greater Phoenix Chapter meeting on February 27th. That man knows everything there is to know about all the nooks and crannies in the financial industry, especially taxes. His presentation on "Cutting Edge Tax Planning Developments and Opportunities" was certainly worth listening to. Who would have thought it could be done by a man around 30 years of age? The man has more designations than anyone I had ever seen (I know he gets that a lot). I like to call him the "etcetera man". When they made his name tag for Wednesday's chapter meeting, Jo Lynne put three or four designations and then included an "etc." because there was no more room.

The Young Financiers had the pleasure of hosting Michael for dinner after the afternoon chapter meeting. Some pictures are posted below of our experience at the Red Rim Bistro in the Phoenix Airport Marriott.

Michael got started with the meeting sharing about his background. He had mentioned getting started in the insurance field. That is where his CLU and ChFC designations were derived. He then moved to an independent broker/dealer for a few years, ending up in his current position as Director of Financial Planning at Pinnacle Advisory Group in Maryland. The firm is a fee-only RIA with $600+ million under management. Michael was able to describe his experience under the three different environments. They each seem to have their place in the industry, but Michael seems to like where he is at currently. Michael has transitioned over the years to more of an author and commentator in the financial planning industry with the various books he has published as well as "The Kitces Report", similar to Bob Veres' newsletter style but focused more on the technical aspect of the business. For more information about Michael and his activities, feel free to visit www.kitces.com.

Michael was interested in hearing about each of the Young Financiers' backgrounds. Many in the group were ASU graduates.

The Young Financiers' attendees were locked into listening to Michael's commentary.

A diner at the restaurant was nice enough to take a picture of the entire group present for Michael's get together.

The dynamics of the attendees were great because we actually had representation from a wirehouse or brokerage perspective for the first time. FPA of Greater Phoenix President Neal Van Zutphen had made a comment in the past about "cross-pollinating" the members with various models for doing business in the financial arena. The numerous parties involved could gain perspective and learn how things are done outside of their own philosophies.

As a result of Michael's graciousness to speak with the Young Financiers, our group thought it would be appropriate to provide a small token of our appreciation. We thought a gift with southwestern flair (a glass cactus and desert coasters) would be most relevant and memorable since Michael was a visitor from the East Coast.

Michael shared the history of how NexGen began. He said the movement had started at a FPA National Conference. A group of younger financial professionals got together at this event aside from the other activities occurring. They had modeled it after a financial group called the "Rat Pack". In 2006, they had the first gathering of NexGen at a conference in the summer. I believe there were 95 attendees. The FPA agreed to provide support to get this program up and running. In 2007, about 110 members attended the NexGen conference. They are expecting an additional 20-40 more for 2008's event, which is July 25th-27th in St. Cloud, Minnesota. More information can be found at http://www.fpanet.org/nexgen/. There were no representatives from Arizona last year, but we are planning to have multiple attendees from the Young Financiers this summer.


Thanks again to Michael Kitces for providing insight, perspective, and inspiration to the Young Financiers group. We are very appreciative and will continue to be the change as the next generation of financial planners in Phoenix, Arizona.

Our next Young Financiers meeting will be in April. We are looking to have a Technology in Financial Planning session where we will delve into the impact of technology on our business and create a best practices forum in relation to systems and processes. This will pertain to the efficiency of a financial organization.

1st Meeting of 2008

Hello Young Financiers,

Happy 2008! I am excited for the prospects of this year and we are kicking it off with a bang. I wanted to post details regarding our first meeting of the year. See the release below:

Attention Young Financiers

Our group will be having the first meeting of 2008 with special guest Michael Kitces, the speaker at February's FPA of Greater Phoenix regular Chapter meeting.

Michael is a co-founder of NexGen, an organization created to support the next generation of financial planners. Michael is Director of Financial Planning for Pinnacle Advisory Group.

The meeting will be on Wednesday, February 27th from 6-8 p.m. Please email youngfinanciers@gmail.com for the location.

Come learn how Michael helped create a $600+ million firm as well as start the NexGen revolution! You are responsible for your own dinner cost.

One really exciting piece to all this is the Young Financiers were featured on the first page of the Financial Planning Association of Greater Phoenix's February Newsletter. Click here to view the press.

It is an honor to have Michael as part of our group for February. Please acknowledge him for his willingness and ability to join us and share his knowledge on the industry.

Special Thanks to J.P. Dahdah

We had our third Young Financiers meeting this past Tuesday and I want to thank J.P. Dahdah for acting as our guest speaker and sharing his insight with the group. I thought he would be an excellent candidate because he was in the financial services field for much of his career and still is so to say. I would like to share some takeaways I got from the meeting:

• J.P. began the conversation by having everyone introduce themselves by stating their name, the company they work with, and their role within that company. He wanted to get a feel of their background and develop relatedness with each member.

• Mr. Dahdah next spoke about his career history. He interned with Merrill Lynch while at U of A and then progressed on to American Express Financial Advisors. He commented on the great training program they had. While he was there, J.P. was involved in a mentorship type program where he was matched up with a more seasoned professional at the firm. I think this is valuable because learning from someone with experience is better than reading it from a book. There is something to be said about absorbing information (osmosis) from first hand knowledge.

• J.P. then talked about ending ties with AEFA and going on his own with his mentor. He talked about having his own clients, his partner having his own clients, and the two of them having mutual clients. I found this to be an interesting concept. He had formed Dahdah Global Wealth Management with the idea that he could give his clients more opportunity than a selected list of preferred funds and limited breadth and depth. Learning to run a business on your own is a powerful skill to have. There are elements of each business that are universal and can be carried across industries.

• Mr. Dahdah was continuing to search for various investment opportunities for his clients. A client had talked with him about putting real estate into their IRA. J.P. did not have the capabilities at AmEx or thereafter locally to act on this matter. He went to various sources seeking the truth. He found a company that could do this on the East Coast and was able to bring a solution to the client instead of saying, "this is not possible". I like the idea that he may not have known the answer, but he was sure going to find out.

• J.P. talked about discovering The Entrust Group and then creating the opportunity to own the license for Arizona. He acted on this opportunity and has been building this business ever since. The business of self-directed IRA's is growing more popular everyday. Many people have no idea you can place real estate or other alternative assets into IRA's. They are led to believe by the Schwab's and Fidelity's of the world that stocks, bonds, and mutual funds are only what's available to invest in. There is nothing wrong with not offering this, it is their model of doing things. Entrust is out there to educate the general public and investing community that investor's have options when choosing investments for IRA's.

• With his position of President at Entrust Arizona, J.P. has figured that it is more important he work on his business rather than in his business. He mentioned the word scalability. This clicked with me as he used an analogy of a doctor/lawyer/financial planner. If you are not there, the company does not make money. How could he structure something so that if he wasn't there, the company would make money? I believe he found his answer.

The next Young Financiers meeting will be in Mid-January. Happy holidays and finish out the year strong.

Recent PR for the Young Financiers

I wanted to make everyone aware of some PR the group has recently received across the valley. There have been two instances I am aware of within the past month where the group is noted.

The first is in the Financial Planning Association of Greater Phoenix's newsletter Newsline in their October issue. The issue can be found here on page 11. This is excellent because it goes out to the target market for potential members of our group. The article discusses the purpose of the group as well as contact information to get involved.

The second piece is pertaining to one of our actual members of the Young Financiers. Joe Clancy, Operations Manager and Portfolio Administrator at Perspective Financial Services, is featured in his firm's monthly newsletter A Broader Perspective for October as recently joining the Young Financiers. See the newsletter here. This is a way for Perspective to let their clients know the employees are taking on additional learning opportunities. What an excellent way to gain exposure to let clients know there is a group out there that caters to younger individuals in this business.

I look forward to sharing many more media pieces focused on this group, potentially in the Journal of Financial Planning and the Wall Street Journal.

Next Young Financiers Meeting

I wanted to make you all aware of our next YF meeting as we are having bi-monthly meetings now as opposed to quarterly. We are excited to have our guest speaker J.P. Dahdah:

• share his insights and experience running a wealth management company
• explore self directed IRA’s
• provide any other information pertaining to the group’s topics of interest

If you would like to read his biography, please look below the details. Here are the specifics for the meeting:

Who: Young Financiers

What: 3^rd Meeting for 2007

When: Tuesday, November 13^th, 2007 from 7PM-8PM

Where: Entrust Office (20860 North Tatum Blvd. Suite #240 Phoenix, AZ 85050), NW Corner of Tatum and the 101 @ The Desert Ridge Corporate Center

About J.P.

J.P. Dahdah began his professional career in 1997 as a financial advisor with American Express Financial Advisors, Inc., a Fortune 100 company. He graduated from The University of Arizona, where he earned dual degrees in Finance and Marketing. In 1999 he founded Dahdah Global Wealth Management, LLC, a comprehensive wealth management company which specialized in working with business owners. Throughout his career, Mr. Dahdah has been a featured speaker at various financial workshops throughout the United States, focusing on wealth accumulation, retirement planning, and estate conservation.

In June 2004, Mr. Dahdah founded Entrust Arizona Retirement Plan Administration, LLC, an affiliate of The Entrust Group. Entrust Arizona provides retirement plan administration and record keeping services to individuals and small business owners who wish to include non-traditional assets, such as real estate, as part of their tax-deferred and tax-free portfolios.

Internationally, Mr. Dahdah co-founded Capital Field Business Corporation (“CFB”) in 2005, a Latin American real estate investment company. CFB’s mission is to stimulate capital growth throughout Central America, primarily Guatemala, by creating investment opportunities in the real estate sector.

Mr. Dahdah is actively involved in the Arizona community, as well as, various philanthropic organizations. He is a member of Arizona State University’s School of Global Management & Leadership Dean’s Advisory Council, Treasurer for the Urban Land Institute’s (ULI) Young Leaders Group, and volunteers his time to Big Brothers Big Sisters of Arizona. In 2007, he was selected as a “40 Hispanic Leaders Under 40” Award recipient, presented by The Arizona Hispanic Chamber of Commerce and Univision Radio.

Revision From Previous Post

I received some feedback from the last post about the revision of a particular comment.

Michael Kitces was Chair of the 2007 NexGen Conference, but not the Chairman of NexGen Leadership. The role of Chairperson of NexGen Leadership for 2007 belongs to Tara Scottino. Tara was last year's NexGen president.

I appreciate the revisions so we have accurate information on the blog. Thanks for those who have provided insight thus far.

Introducing NexGen - the Next Generation of Financial Planners

I think it's time to discuss how NexGen could fit into the Young Financier's picture and vice versa. We will begin with an introduction of the concept, determine who is influential in this movement thus far, and complete the message with how we can play a role as the Young Financiers.

To give a background about NexGen, we would refer to the Financial Planning Association for inspiration. NexGen is the next generation of financial planners in the country (potentially the world someday). In the past, there had not been an avenue for the younger professionals to connect with one another in a formal fashion. The majority of the members of the Financial Planning Association were and are an earlier generation of professionals such as the Baby Boomers, Generation Jones, and the Baby Busters. There is nothing wrong with this, it just is the way it has been. The profession used to (and maybe still does) attract a career-changing individual, whereas now the trend seems to be toward those straight out of college wanting a career in financial planning. There are even colleges and universities who have degrees in financial planning, namely Texas Tech. Many students secure internships with financial planning firms that lead to full-time opportunities.

NexGen may have been underserved for some period of time, but a select set of individuals created an idea to do something about this. NexGen arose and now it is on to the growth stage of the organization. Michael Kitces, the Chairman of the group, was a key proponent in making this happen. Sabrina Lowell, the current President of NexGen, has been crucial in steering the ship for 2007. Mike Branham is the President-Elect and will chart the path for the following year. I read an article recently about Aaron Coates, another co-founder of NexGen. The professionals involved in this project are truly incredible and I look forward to getting to know them as NexGen progresses.

To get to how YF fits in the picture, I would like to give you a background of how we began. I had been attending the Financial Planning Association of Greater Phoenix meetings since June of 2006. I quickly learned that I was one of the youngest members in the chapter. It was great to speak with veteran planners in the industry, but I needed a deeper connection with others of my demographic with the similar passion for financial topics. Throughout the year and into 2007, I recognized individuals like myself who were recently out of school and working with independent financial planning firms as well as firms that support the financial planning process. I wanted to create an avenue where we could get together as a group to discuss various topics related to what we are doing in the field and develop long-term relationships to provide support throughout our careers. I identified about half a dozen individuals who stood out in this industry. Through conversations about what's possible, I generated interest within these people and created the Young Financiers. Since our first meeting in June of this year, I have discovered another half-dozen or so individuals who would be a great fit for our group.

NexGen has had annual conferences for the past couple of years, where young professionals from across the country traveled to attend an event to bring this group together. In fact, if I am not mistaken there were 120 members at the meeting this past July in Minnesota. On a national level, the group is picking up momentum. I believe the challenge now is to create a local and/or regional presence across the U.S. It seems as though the Young Financiers would be a good example of what the local presence of NexGen would look like. We would definitely like to pursue what this would look like. We are for the sharing of knowledge and providing assistance in the areas pertinent to our success.

I wanted to provide a few articles from national publications discussing NexGen:
NexGen: The Sequel from Financial Planning Magazine, September 2007
The Competition for Young Talent is Heating Up from FPA Solutions Magazine, October 2007
Young Rebel With a Cause from Investment Advisor Magazine, September 2007

Items from the Fall Meeting

I thought I would share with the group more about what was talked about during our meeting on Tuesday, September 18th and provide resources for further education.

The first area we spoke about was fundamental indexing. This seems to be a fairly new concept and Schwab is the first company to market to investors with mutual funds that use fundamental indexing. Rob Arnott and his company, Research Affiliates, created the methodology of the RAFI (Research Affiliates Fundamental Index).

On the Schwab website, they say the benefits of fundamental indexing are:

• Access to an indexing approach that can potentially help investors avoid overexposure to overvalued companies
• Reduced market risk through diversification
• Long-term growth potential by tracking the market

The group thought the concept was interesting, and some were looking into using it as a opportunity for their clients depending on the needs of the investor's situation.

There were a couple of items passed out during the meeting on this very topic, namely Efficient Indexing for an Inefficient Market by Research Affiliates (provided by Jared) and New Frontiers in Index Investing by Jason C. Hsu and Carmen Campollo (provided by Joe). A contrarian article is available here from the WSJ with John Bogle and Burton Malkiel entitled Turn on a Paradigm.

The next topic concerned fee/ low-load/ no-load insurance. This is drastically different from how insurance was structured in the past. The field has been commission-based and many independent fee-only advisors shied away from offering insurance because of this. A structure has been established to allow fee-only advisors to place insurance for their clients, all the while aligning the fiduciary responsibility of the registered investment advisor toward the client's best interests. There are several advisors who have created businesses out of being the insurance expert as part of the wealth management model for a client and set up the compensation to be fee-based as opposed to commission-based. An article that sparked an interest in discussing this topic was by one of the major proponent's of fee-only financial planning, Bob Veres. He writes columns and articles in various financial publications, and the one that caught my eye was New Life for Life Insurance in the September issue of Financial Planning magazine (click here for the article).

We as a group also discussed mentorship experiences within our firms and in our lives. The Cone of Learning by Edgar Dale (below) shows that we retain most of what we are exposed to by actually doing as opposed to reading or listening to a lecture.

(Click on Dale's Cone for larger view)

Mentorships are tremendously valuable because it is rare to find opportunities that allow you to learn more quickly, especially when you are in connection with someone who has "been there, done it". We agreed that we have had these experiences within each of our firms, but it was more of an informal structure and a learn-as-you-go model.

Toward the end of the meeting, we agreed it would be beneficial to have bi-monthly meetings as opposed to quarterly meetings. The participants thought it would be a better chance to develop relationships with other members.

Our next meeting will be scheduled for Mid-November. Details will follow within a month of the actual meeting (mid to late October).

Introducing the Young Financiers Fall Meeting

Good day Group,

This is Darin Shebesta. I am the current spokesperson for the Young Financiers. You had expressed interest in being a part of this group and I wanted to let you know the details of our next meeting.

Event: Young Financiers Fall Meeting 2007

Date: Tuesday, September 18, 2007

Time: 7:00PM-8:00PM

Place: Jackson Financial Advisors Conference Room, 9590 E. Ironwood Square Drive #110 Scottsdale, AZ 85258 (map), Courtesy of Jared Roskelley

Potential Topics for Discussion:

-Fundamental Indexing

-Fee/low-load insurance

-Mentor experiences

-Anything else that would like to be brought up

Please let me know if you are able to attend by responding to this email. Please let me know if you have any questions or concerns. I trust everyone is well. Take care and make it a stellar day.

Darin Shebesta

The Broker-Dealer Rule

I found this article regarding the transformation of the Broker-Dealer Rule very informative, especially the timeline of the rule since inception. I'm not sure if we have seen the last of the FPA/SEC brawl since there are many clients with fee-based advisory accounts at broker/dealer firms. Will the broker/dealer industry adapt to the new rules or will they force others to adapt to their rules?

http://www.fpanet.org/journal/articles/2007_Issues/jfp0507-art2.cfm

(click for PDF)

Source: The Journal of Financial Planning

In the End, Votes Count in the Broker/Advisor Donnybrook
by Duane Thompson

Duane Thompson is managing director of the Financial Planning Association's Washington, D.C., office. Chronology: Evolution/Devolution of the Broker/Dealer Rule Spring 1940. Congress approves Investment Advisers Act of 1940; act provides for limited industry exemptions, including brokerage firms that give advice in connection with stock sales. Summer 1999. Major wirehouses meet with SEC regarding new fee-based "brokerage" programs and exemption from Investment Advisers Act of 1940. November 4, 1999. SEC proposes additional exemption for brokerage firms in a no-action rule titled "Certain Broker/Dealers Deemed Not to Be Investment Advisers." SEC staff states it would not recommend enforcement action against broker/dealers complying with proposed rule. January 14, 2000. SEC deadline for submitting comments on the rule. December 20, 1999–July 10, 2004. SEC receives 248 comment letters regarding the proposed rule. Of this total, 96 percent are opposed, 1 percent is opposed in part, 3 percent support the rule. July 20, 2004. Lawsuit filed in federal court by FPA challenging the rulemaking on technical grounds. August 18, 2004. SEC reopens comment period on rule, citing FPA legal challenge. August 27, 2004. D.C. Circuit Court of Appeals orders delay of lawsuit, following motion for delay by SEC, which promises final action on rule by December 31. Court orders reports by SEC every 45 days. September 22, 2004. SEC deadline for submitting new comments; additional 1,500 letters received since lawsuit filed, overwhelmingly opposed. December 22, 2004. SEC adopts temporary rule to extend broker exemption through April 15, 2005, proposes modified rule. Commissioners publicly pledge final rule adoption by deadline. Reopens comment period for third time. February 7, 2005. SEC deadline for submitting comments on amended rule; receives another 300 letters for cumulative total of 2,000. February 9, 2005. D.C. Circuit Court orders SEC and FPA to file new motions related to the lawsuit by April 29, or no more than 30 days after SEC adopts final rule, whichever comes first. March 29, 2005. SEC focus groups express confusion over the many titles used by financial services agents and are generally unaware of the different standards for consumer protection. April 6, 2005. SEC unanimously adopts the broker/dealer rule (IAA Rule 202(a)(11)-1). April 28, 2005. FPA files a petition in the United States Court of Appeals for the District of Columbia Circuit challenging the SEC's final rule exempting certain broker/dealers from the requirements of the Investment Advisers Act of 1940. FPA also seeks, with the SEC's consent, to file a motion consolidating the petition with FPA's pending petition, filed on July 20, 2004, concerning the rulemaking proceeding. December 16, 2006. SEC issues a no-action letter easing the restrictions on brokerage firms offering financial planning services and effectively allowing them to offer and deliver financial plans and similar services to customers under similar-sounding marketing terms. January 31, 2006. Implementation deadline of the broker/dealer rule goes into effect: brokerage firms can no longer hold out as a financial planner or offer financial planning services, or deliver a financial plan to a customer. March 23, 2006. FPA submits written brief to court citing that the SEC improperly created a new exemption for the brokerage industry that defies congressional intent and puts the investing public at risk. May 11, 2006. SEC responds to FPA's brief, challenging its standing to bring the lawsuit, and contesting its version of legislative history. May 25, 2006. FPA responds to SEC. October 5, 2006. Oral arguments are held in FPA v. SEC in the U.S. Court of Appeals for the District of Columbia Circuit. March 15, 2007. FPA seeks formal interpretative guidance from the SEC in understanding the differences between financial planning and fee-based brokerage services under the broker/dealer rule. FPA also notes clear violations of the financial planning and disclosure requirements, and questions timing of the delivery of the required disclosure of potential conflicts of interests by brokers as inadequate. March 30, 2007. U.S. Court of Appeals for the District of Columbia Circuit rules in FPA's favor in FPA v. SEC in a 2-to-1 decision, vacating the broker/dealer rule in its entirety. The ruling of the U.S. Court of Appeals for the District of Columbia Circuit and the legal briefs filed in the case can be reviewed online at www.FPAnet.org/member/govt_relation/lawsuit-against-sec-broker-dealer-rule.cfm.