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Grading the Trades

Are the industry's trade publications keeping up with advisors' needs?

David J. Drucker, 05/15/2008

(Editor's note: As is stated at the end of this article, the views expressed in this article are the author's. They do not necessarily reflect the views of Morningstar.)

I started reading my first industry trade publication--Financial Planning magazine--back around 1981 and found it to be just what I needed at the time.

The experience harkened back to an even earlier era when I'd first enrolled in business school (the MBA program at the American University in Washington, D.C.) in 1973. As I took certain core business courses and simultaneously subscribed to the Wall Street Journal and Business Week under student discount plans, I had that familiar experience of finding I could understand more of what I was reading the further along I got in my course work. All of the sudden, the Journal's discussion of central bank "M1 policy" and subjects like "multinational firms' needing to bribe foreign governments" were starting to make sense. My courses dovetailed nicely with current events and what I read reinforced what I learned.

It was much like that with Financial Planning. In 1981, I had just begun my work on the CFP curriculum and was relatively uninformed in areas such as estate planning and cash value life insurance products. By studying those subjects as a CFP candidate and reading articles in the magazine on those same topics, my education progressed quickly. Over the years, though, the topics covered by the trades didn't change. I know now that these publications continuously address the major technical areas of financial planning--investing, estate planning, tax planning, yada yada--and, for some, this coverage is no longer ideal.

Blasphemy, you say? Not necessarily. Every private business must remain relevant to its customers or it doesn't stay in business. Most of the major trade publications in our industry (with the exception of Financial Advisor magazine) change hands every couple of years. That suggests to me that either 1) the whole business model is flawed, or 2) these publications aren't as relevant as they could be.

Now let's stop for a second and get specific. The three top trades I'm focusing on here are Financial Planning, Financial Advisor and Investment Advisor magazines. I have written for the first two, at various times, and today write monthly for just Financial Advisor. The reason I might write for one publication vs. another is business-related, not content-related. I'll still write for a publication if I think its content is subpar because--I rationalize--my contribution will make it better. (Hey, we all need self confidence, right?)

So what I'm getting at is, are the trade publications still helpful to the majority of advisors who read them if they're still covering the same topics they did more than 25 years ago?

Many will say the trades are still relevant and, in any event, have a mandate to continuously cover the six technical areas of financial planning. First of all, many new entrants to the field need the trades to learn their craft, just as I needed them in the 1980s. Second, and more obviously, veteran planners need a way to keep up with changes and additions to the body of knowledge that constitutes their technical expertise, and the trades are an obvious way to deliver that.

Yet, the face of the profession has changed dramatically since 1981. My fellow planners from that era--we now know--constituted a sort of baby boom within the profession. Enough so that the average age of advisory firm owners is creeping steadily upward as it approaches what many would call early retirement age. And what do planners at that stage in their career tend to do all day long? I know from talking to many of them that they're not spending a lot of time reading trade magazines. Could it be--once again--that the magazines are no longer relevant to them?

I think it could, and what trade magazine publishers and editors might be missing is that this change has even occurred (i.e., their readers got older--who would've thunk). In other words, maybe the veteran advisors don't need the technical updating because they have financial advisor underlings to deal with the planning details for clients. Talk to most advisors 55 and up and--unless they've deliberately remained sole practitioners with little or no staff support--they're involved in their firms but they're now more familiar with the business end of a golf club than they are the latest nuances of establishing a QPRT. And they're really just fine with that.

And those advisors just behind them--40-somethings, those with maybe 10 to 20 years into the business--see these successful firms their elders have built and somehow...they just don't think an expertise in stock option conversions is what got them there. Not that it's not helpful to have a planning niche that might attract clients, but the point is a bigger one, namely, that practice management knowledge (of which technology is a part) is what got these advisors where they are, and it's going to be their primary focus for the remainder of their careers.

And the trades aren't devoid of practice management guidance; they just don't make it a priority. So the question becomes whether or not our industry's trade publications are bringing to the most prominent segment of their readership the kinds of information those advisors really need. Let's take a look. In preparation for this article, I examined three of the four first issues of 2008 for each of the above-mentioned trade publications and created the following summary:

* Each publication contains a section for "industry news," such as goings on with the CFP Board, the Merrill Lynch Rule, FINRA, etc. that consumes about 10% of the publication's content space; in some cases, regular columnists, like Bob Veres in Financial Planning, write primarily about industry events.

* Financial Planning and Investment Advisor devote about 60% of their content (non-advertising) space to technical topics; Financial Advisor is closer to 50%;

* Financial Planning and Investment Advisor devote about 30% of their content space to practice-management topics; Financial Advisor is closer to 40%.

Another measure is how many columnists the magazines devote to technical vs. practice management topics. Financial Planning has just two columnists who write predominantly on practice management topics: John Bowen and Glenn Kautt. Investment Advisor has five: Hirschman, Waddell, Herbers, Tibergien, and Olivia Mellan (if you count the art of client relationship building as part of practice management, which I do). And Financial Advisor has me, Bruckenstein, Gluck, Pomering, Lawrence, Diliberto, Rowland, and Anthony--or eight journalists who, more often than not, write about practice management. (If any of these publications has an "out" from what I'm proposing, it's Investment Advisor since its very name implies a slightly different readership than the other two publications; yet, does the publication really mean to attract only investment advisors and, if not, then why does it retain a misleading name?)

I would submit that a heavier dose of practice management topics in all of these publications would serve all readers better. Veteran advisors are concerned with building value in their businesses and succession planning. Younger advisors are concerned with selecting the business model that will bring them success without unnecessary wheel-spinning, and more effective ways of attracting clients. Sure, the trades cover all of these issues, but do they cover them enough to meet the needs of an aging readership?

To make room for more practice-management-related articles, I would suggest these publications first cut some of their articles on investing, and here's why. First, investing-related articles within the three trades account for between 35%-60% of all their technical coverage. Second, Morningstar specializes in investment news and does it better. Most advisors don't hunt through the trades looking for articles on their favorite mutual funds when they can read Morningstar's analyst comments online whenever they need them. And third, successful advisors--unless they're just money managers in disguise--don't want to build their reputations on investment expertise because they're too busy building the perception (and rightly so) that they are comprehensive planners. Heck, a lot of successful advisors don't even manage investments themselves any more; instead they outsource the process, literally, to a third-party trader or SMA outfit, or they use a company like DFA, which has the same effect.

Or, to look at this subject another way, what kind of knowledge contributes to success in this industry? Just ask any advisor who has ever attended a professional conference where he or she picked up the most useful information--in the sessions, discussing the 10-year performance history of Next-New-Thing Mutual Fund, or in the hallways discussing how one's peer achieved 50% revenue growth last year? I think we all know the answer to that one...all, except for our trades, that is.

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