Tag Archives: CFA

Don’t Get Thrown for a Loss

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Craig Popp, CFA

CFA Society Minnesota encourages its members to contribute to Freezing Assets.  This is piece written by one of them to help individuals identify a trustworthy investment advisor.

On October 23, 2016, 60 Minutes aired a story titled “Thrown for a Loss” that detailed how dozens of NFL players lost over $40 million in an investment brought to them by their financial advisor. These individuals invested in a risky entertainment and gambling complex built in Alabama. Mistakes were made that caused the losses. One of the biggest was also the first—the individual these NFL players hired to advise them. Catastrophe may have been avoided had more time been taken to vet their financial advisor.

The financial advisor you choose to work with is among life’s important decisions. I believe the vast majority of us are trustworthy; however, bad apples do exist. Unfortunately, the process of selecting an advisor is intimidating. Therefore, people make their decision based upon uninformed criteria such as:

  • He/she goes to my church.
  • I see their ads on TV or hear them on the radio.
  • I’m related to him/her.
  • He/she drives a nice car (or has another other status symbol), so he/she must be good at what they do.

The fact is none of the above offer insight into the person’s integrity, competence, or qualifications. A good financial advisor will tell you the questions you should be asking. If not, here’s a list to get you started.

  • What is your wealth management process?
  • What is your investment management process (the two are different)?
  • How are you paid?/What are your fees?
  • Do you earn incentives from the products you recommend to me?
  • Do you have any business relationships with any outside financial firms?

The above questions can provide meaningful insight. The first two questions allow you to compare between multiple financial advisors. Their process should be disciplined, repeatable, and remove human emotion. The final three show transparency, or lack thereof. Watch how these questions are answered. The advisor should be comfortable describing fees. Every professional (doctor, lawyer, accountant) receives compensation for their services. Many investment products contain fees that aren’t prominent to the investor. If a financial advisor tells you there’s no cost, it’s a red flag.

The direct method of asking questions is effective. However, there are also indirect red flags to watch out for. Be aware for the person that sells past performance rather than a process. Also, many advisors offer seminars to the general public and/or to their clients. Unfortunately, the intent of these seminars is to sell you a product rather than provide education. That’s financial sales, not financial planning.

With the above in mind, it can still be a daunting task choosing among the 285,000 financial advisors in the United States (according to Reuters). To narrow that list, consider working with a CERTIFIED FINANCIAL PLANNER™ professional or Chartered Financial Analyst. Members of these professional organizations sign an annual ethics pledge. It states they will act with integrity, independency and objectivity, and put your interests first. Individuals who attained either designation completed a rigorous education and examination process they don’t want to jeopardize.

Finally, utilize tools to help you in this process. One such is BrokerCheck. It’s from FINRA (Financial Industry Regulatory Authority) and helps you research the professional backgrounds of brokers and brokerage firms, as well as investment advisor firms and advisors. Your attention should be placed on the disclosures section. Disclosures can be any customer complaints or arbitrations, regulatory actions, employment terminations, bankruptcy filings and any civil or criminal proceedings the individual was a part of.

Look how often the individual has switched firms. My personal opinion is that this is also a red flag. Reasons for departure are not given, so I would suggest asking. This industry heavily recruits, often paying the advisor to switch firms. Those who do that often are probably looking out for themselves rather than you.

The process of hiring a financial advisor should be completed with the same diligence as buying a home, car, or television. With the tools to perform the proper research and ask the right questions, you can find someone who puts you first.

 

Craig Popp, CFA is a Financial Advisor with Raymond James Financial Services, Inc. Member FINRA/SIPC located at 115 Litchfield Ave SE, Willmar, MN. Craig Popp can be contacted at craig.popp@raymondjames.com. Any opinions are those of Craig Popp and not necessarily those of RJFS or Raymond James. Expressions of opinion areas of this date and are subject to change without notice. Investing involves risk and investors may incur a profit or a loss. There is no strategy that ensures a profit or guarantees against a loss. Past performance is not a guarantee of future results.

A Letter From Our Society President

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Joshua M. Howard, CFA

Society Members –

One of my favorite events of the year is the CFA Society Minnesota’s New Charterholder Dinner. There is an excitement in the air that equals or exceeds all of our other events, for reasons that those of us who have completed the three exams can easily understand. The excitement extends beyond just the honorees – the guests in attendance are usually just as relieved as the new charterholders that their partner or spouse is finally done with all that studying.

As I handed out charters at the dinner I couldn’t help but wonder what these new charterholders will be doing ten or fifteen years from now. My fifteen-year-career in the industry has seen the explosion of fundamental indexing and smart beta strategies, the rapid growth of ETFs, the slow bleed of actively managed assets and the massive shrinking of employment in traditional equity trading and investment banking. The next 15 years may continue some of these trends, or be upended and taken in a new direction by big data, increased regulation, demography or some unforeseen events (which seem to be happening a lot lately).

In 2013 CFA Institute launched an initiative called the Future of Finance. This initiative is an effort to “shape a trustworthy, forward thinking financial industry that better serves society.”  I do not discount the challenge of taking the time to be “forward thinking,” given the time demands placed upon us to complete our regular day to day tasks and the constant short termism we face from markets, investors and clients.  But, it is useful to step back every once in a while and really contemplate the future of the industry.

  • How will new and developing technologies such as block chain and artificial intelligence affect investment management and wealth management?
  • Will passive continue to take asset from active, or is there a limit to the amount of money that can be invested passively and still have efficient markets?
  • Are defined contribution plans an effective way to provide retirement security, or will they need to be reimagined or replaced?
  • How will states and companies fund their huge pension deficits in a world of low returns and expensive assets?

These are important questions that will need to be answered, some sooner than others, and hopefully by people with financial expertise. In the meantime, I want to once again congratulate our 70 new CFA charterholders and 34 Level III Pass Candidates in Minnesota, North Dakota and South Dakota, and to the others around the world.  It is a tremendous accomplishment to get through all three exams while working in the industry, and I look forward to seeing you at future CFAMN Society events and programs.

Josh Howard, CFA
President, CFA Society Minnesota

A Letter From Our Society President

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Joshua M. Howard, CFA

Society Members –

I just returned from the CFA Institute’s annual Americas Regional conference, held this year in Miami, FL. Also attending the conference were Society Vice President Mark Peiler, CFA and two of our Society staff, Mark Salter, CAE, ABC and Diane Senjem.

The Americas Region is the largest of three regions into which the Institute has grouped Societies: the other two are Europe, Middle East and Africa (EMEA) and the fastest growing region, Asia Pacific (APAC). Even though this conference was a regional conference I once again came away impressed with the global reach of the charter. I listened to presentations from Society leaders from Mexico and Cayman Islands, networked with charterholders from Bozeman, Bahamas, and Boston, and attempted to keep up at social events with the Argentinians.

I want to convey to the members of CFA Society Minnesota my takeaways from the conference. The theme of the conference was “Ideas to Impact.” Too often great ideas have little impact because there is no strategy in place to execute those ideas. This conference attempted to get all of us to focus on not just coming up with big ideas, but to consider our strategy for implementing those ideas to have the greatest impact on our membership.

After last fall’s Society Leadership Conference I wrote to you about the CFA Institute’s determination to better partner with Societies through additional funding, improved IT resources, better branding and increased dialogue between Institute staff and Society volunteers. I can attest that this has occurred over the past year and is expanding over time, which allows volunteers at the local Society level to better implement our ideas and have a bigger impact.

The Institute staff – from CEO Paul Smith to Society Relations personnel – continue to listen to us, involve us in major initiatives and provide funding for innovative programs and projects. Through the brand campaign they are raising awareness of the CFA charter amongst employers, clients, potential charterholders and regulators. Through the Asset Manager Code of Professional Conduct, now adopted by over 1,300 firms worldwide, they are leading the investment profession to maintain the highest standards of ethics when dealing with clients. Through their credentialing programs they are educating the next generation of investment professionals with the latest skills and knowledge required to work in the industry today.

We are part of an organization that has over 147,000 members in 158 countries, represented by 147 Societies. We are committed to upholding the highest standards of professional excellence and education, and I am excited to lead the local Society as we partner with the global body to develop future professionals, deliver member value and build market integrity.

Josh Howard, CFA
President, CFA Society Minnesota

A Letter from the Changing Perceptions Chair

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In 2015, the CFA Institute launched its Women in Investment Management Initiative with an educational conference titled simply “Women in Investment Management.” At the same time, a handful of CFA Society of MN board members and staff began discussing this idea, and similar actions we could take at the local level. Less than 15% of the local members are women. We had heard the frustration of local employers who were not getting diverse pools of applicants for their open jobs, and we also heard from local universities that they were working to reverse the decline in young women entering finance and investment programs. Maybe, through local efforts, we could find a way to help address these concerns. After attending the first Institute conference, we were equipped with a solid overview of the current situation along with enough ideas to commit to a local initiative which we named “Changing Perceptions.” Unfortunately, the current situation is not a new situation. There is awareness, with some, but not enough action to date. And, the conference did not provide much information on actions to be taken.

This past year has been a period of incubation for the direction of our initiative, as we researched, networked, discovered other organizations with potential for collaboration, sponsored a couple of programs, and were given a small budget, thanks to the generosity of our past president Leyla Kassem, CFA. We were certain of two things: any programming would be inclusive and for the benefit and interest of any and all members. Second, we recognized our need to rely on the resources of the Institute given our limited capacity as a professional association that relies on volunteers and a staff of three. However, we were in need of a more focused direction.

And then, I along with Amanda Sullivan and Diane Senjem attended the second annual CFA Institute Conference on Women in Investment Management which was held two weeks ago. The title of this conference was “Alpha and Gender Diversity: The Competitive Edge” – a powerful title for a powerful conference. In short, the Institute supported, with data and research, the assertion that diversity in executive management and decision making is much more than a nice thing to do – it is a competitive advantage! In addition, they provided information on actions that will lead to change. The conference provided a compelling and communicable incentive for change and actions to make that change. This information is what was missing from our local initiative.

I look forward to sharing updates regarding the progress of our newly refocused local initiative, and providing programs, and opportunities to continue changing perceptions.

Teri Richardson, CFA
Chair, Changing Perceptions: Women in Investments

A Letter From Our Society President

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Joshua M. Howard, CFA

Last month the Board of Directors of CFA Society Minnesota met to discuss the status of our current three to five-year strategic plan, which has been in place for two years now.  We took some time to reflect on what we have accomplished, debated whether any goals needed revising, and brainstormed ideas on what we hope to accomplish in the upcoming year. I was once again impressed by the commitment of your Board of Directors, as 18 board members spent three and a half hours at the end of a work day engaged in strategic planning, which isn’t every analyst’s idea of a good time.

CFA Society Minnesota’s Mission and Vision, which you can find on our website under the About Us tab, guided us in the creation of our current strategic plan and continues to guide our thinking about how we run the Society.  Our Mission is “To promote and advance the professional excellence, ethical behavior and fellowship of our members through quality programs, educational offerings, and volunteer opportunities.” Our vision states that “We envision a CFA Society of Minnesota that is highly valued, well respected, and widely recognized by investors, academia, and the business community in our region.” Both our mission and vision were updated in 2013. They align with and compliment the CFA Institute’s mission and vision, recognizing that each entity (Society and Institute) has different capabilities and goals.

Our current strategic plan has three main objectives. They are:

  1. Member Engagement: Expand participation and involvement among Society members
  2. Industry Awareness and Involvement: Increase awareness of and involvement in the Society among professionals and firms in our local investment industry
  3. Operational Excellence: Improve the effectiveness and sustainability of the Society’s business processes

Each of these objectives is supported by 2-3 specific, measurable goals. These include finding ways to assist our members as they grow in their careers (leadership training, writing and speaking groups, etc.), building a brand campaign and adopting policies and procedures that will aid in long-term financial and organizational stability. If you would like to see a detailed strategic plan, please contact the Society office at executivedirector@cfamn.org and they would be happy to provide the latest version.  If one of these objectives or goals is an area you would like to support please let our staff know that as well. We are always looking for thoughtful, energetic volunteers to help us accomplish our strategic plan.

Joshua M. Howard, CFA
President, CFA Society Minnesota