As Craig Iskowitz of the Ezra Group points out, Cerulli research shows investment portfolios managed by financial advisors underperform those they can get through the home office, but yet Rep as Portfolio Manager programs are the fastest growing segment of the fee-based business. That’s not so good for clients, nor, it turns out, for advisors, he says. Advisors who outsource portfolio management have faster growing and more profitable practices, and home offices would prefer to oversee portfolio management for a host of regulatory and compliance reasons. Many firms are trying to “nudge” their advisors away from portfolio management by “allowing them to manage sleeves, with guardrails, within an overall unified managed account environment.”
Last week the CFP Board quietly adopted changes to the work requirement for its certification, allowing three years of "indirect" work to fulfill the “financial planning experience” requirement. But Michael Kitces contends on his Nerd’s Eye View blog, the new, less rigorous requirement—which can include such roles as employee benefits administrators, compliance attorneys, and journalists reporting on financial planning topics—is problematic. It’s ironic, he says, that this change comes after the CFP Board has spent $40 million on a public awareness campaign advocating to the public that CFP certified advisors represent the “gold standard” in financial planning, even as the organization makes it easier and easier to obtain the mark. “All of which raises the fundamental question: Is the CFP Board’s ambitious growth efforts coming at too much of a potential cost to the integrity of the marks?” Kitces says.
While several financial services companies ponder how they can incorporate digital currencies like bitcoin, or if they should at all, Citigroup is instead building its own. Kenneth Moore, head of Citigroup Innovations Lab, recently said that the bank has three separate systems to experiment with cryptocurrency technology, and one of them is a bitcoin equivalent called “Citicoin.” Moore suggested that a digital currency could help Citigroup move money from country to country, and developing their own could help the bank maintain control.
Scientists seeking to replicate behaviors on the financial trading floor have found that increasing a person’s hormone levels can lead to a spike in risk-taking. A study published last week by Scientific Reports concludes that changes in both cortisol and testosterone could play a destabilizing role in financial markets. A total of 142 male and female volunteers participated in the study, offering saliva samples for the measurement of both hormones. They then played an asset trading game in groups of about 10. Those who had higher levels of cortisol were more likely to take risks and were linked to instability in prices. A second experiment saw 75 men given either of the hormones before playing the game. This experiment saw cortisol directly impacting the volunteers’ preference for riskier assets, while testosterone increased optimism on future price changes.