Author Archives: John Ndege

About John Ndege

Founder of Risk profiling software for financial advisers.

List Of 58 Technology Tools For Financial Advisors

List of 58 Technology Tools For Financial AdvisorsSometimes you are looking for technology tools for your business and don’t want to spend the whole day “googling” around. So we polled some of our customers and asked our network for a list of technology they were using. This is what we heard (in no particular order).

Let me know if there are other tools worth adding.

Customer Relationship Management (CRM)

Morninstar Office
Sugar CRM
Microsoft Dynamics
Solve 360

Financial Planning Software

Money Guide Pro
Money Tree Software
eMoney Advisor
Finance Logix

File Sharing & Document Management

Google Drive
Office 365

Online Meeting Scheduling


Virtual Meetings


Social Media Management

Sprout Social

Email Archiving

Google Vault
Live Office

Newsletter Delivery

Vertical Response
Campaign Monitor
Constant Contact
Active Campaign


Google Apps
Office 365


Virtual PBX


Total Rebalance Expert
RedBlack Software / Rebalance Express

Password Management

Last Pass
Roboform Everywhere
Kaspersky Password Manager

Portfolio Stress Testing

Hidden Levers

Investment Policy Statements

IPS Advisor Pro

Data Gathering


Lastly a small plug for own risk tolerance questionnaire Pocket Risk.

Flicker Photo Credit

Skeptical Quotes From Financial Advisors On Risk Tolerance

Risk ToleranceOver the last 16 months I’ve spoken to 248 financial advisors about understanding their clients’ risk tolerance. Most see the importance of this task but occasionally you will find a skeptic. Someone who doubts the process will yield anything valuable. Below I share the most common quotes I hear from advisors.

“A person’s risk tolerance is largely irrelevant to the investing process. We invest on client’s needs and goals.”

We agree that investing should by needs driven. However,  we don’t think a person’s risk tolerance is largely irrelevant. Obviously we have our biases but let’s step back for a second. Understanding a client’s risk tolerance is not just about you. It’s also about a client understanding themselves and being better educated about risk. A client who is better educated about risk and return is more likely to stay the course. Less likely to want to buy at the top and sell at the bottom. For one this makes a client easier to manage. Additionally, understanding a client’s risk tolerance can tell you how many bumps in the road they can withstand. It’s all well and good to know a client needs a 8% annual return to meet their goals but if the volatility required to get them there sees them selling up then the are in serious trouble and so are you. Constructing the right financial plan is not just about the destination but the journey.

“A client’s risk tolerance changes depending on life events and market conditions so any measurement quickly becomes obsolete.”

We agree that a person’s risk tolerance can change, though it’s largely a fixed psychological construct. Major life events can see a shift but it doesn’t happen quickly and often. At Pocket Risk we usually recommend our customers test their client’s once a year. Recently there has been a body of work that says we need to distinguish a client’s risk perception from their risk tolerance. It’s something we are investigating at Pocket Risk and hope to write more about in the future. The argument goes that a person’s risk tolerance barely changes but their perception of risk fluctuates. So, if the market is doing well they think risk is low but when it is performing poorly the risk is high.

“I have a face to face discussion process that works well. Why do I need a questionnaire?”

Frankly, you don’t HAVE to have to use a questionnaire it just makes the process a whole lot easier. This is because it provides a consistent, objective and documentable measure of risk tolerance it helps standardize the approach across your firm and helps meet your compliance needs.

If you have any thoughts or comments on this I’d love to hear them.

Image Credit – Flickr

All Around The World Labor Is Loosing To Capital

EconomistEarlier this week I came across a great article in the Economist titled “Labour Pains”. It tells a story of something we already knew but were lacking statistics.  All around the world labor is loosing out to the power of capital. Technology in particular has caused this development while the impact of cheap foreign labor is probably oversold. For advisors and clients and those with capital it is critically important to maximize its utility to the full as the returns for labor start to diminish.

Enjoy the read….

ProVise: “The 3 Things Advisors Must Focus On To Be Successful” – Barron’s Top Advisor [INTERVIEW]

Ray FerraraI recently interviewed Ray Ferrara of ProVise Management Group LLC.  He is the President and CEO of a Barron’s ranked financial planning and investment firm based in Florida.

John: Can you give us some quick background on ProVise?

Ray: Sure, first and foremost ProVise is a financial planning firm. We do investment management but we view that as a subset of financial planning. We have 11 planners and work with about 780 families. In total we manage about $900 million. All of our team are well qualified professionals many of which have the CFP (Certified Financial Planner) designation.

John:  How did you become a financial advisor? What brought you to this industry?

Ray:  I have to go way back to tell that story. I graduated in 1970 with a degree in Zoology and went to work selling computers for IBM. A friend of mine was working in the investment business and persuaded me to get involved on a part time basis. By September 1971 it became my full time occupation where I worked for an investment firm. Eventually, I went on to start ProVise in 1986 and I haven’t looked back!

John: Barron’s recently ranked your firm as a top advisor. What distinguishes your firm from others?

Ray: Going back to what I said earlier I would emphasize we are a financial planning firm first and investment management is a subset of that. We form close relationships with our clients helping them bail out their children, deal with health issues and estate planning. Year over year we only loose about 3% of our client base and that includes those who pass away.

John: What would you say to those advisors who believe investment management is not a subset of financial planning?

Ray: I would gently and politely tell them that there is nothing wrong with specializing in investment management but that is not the same as financial planning.

John: What software, tools and techniques do you use to ensure you remain successful?

Ray: Technology is crucial to our business. It’s important that technology platforms are user friendly for clients and advisors. We use Portfolio Center for portfolio management and we use Junxure for our CRM. We also believe social media can play an important part in our business and are slowly doing more in that area.

John: Your firm has been very successful but what challenges do you face on a day-to-day basis?

Ray: You can be a financial planning genius and still fail if you cannot properly run your own business so that is important. Additionally there is always work trying to keep up with the regulators. That’s crucial. Finally as our company grows and scales its been important for us to hire the right people who share our values.

John: What software and tools do you think are missing in the industry?

Ray: Probably what is missing is a technology standard so all software can speak to each other.

John: Lastly, What do you think advisors need to focus on in the future to be successful? 

Ray: There are three things advisors need to focus on moving forward.

1) They must disclose conflict of interests.

2) They must maintain their level of education through something like the CFP designation, which has a continuing education element.

3) The must subscribe to a code of ethics that puts the client ahead of themselves and thus give a fiduciary standard of care. Advisors who do not do all three will fall behind those who do.

John: Thanks Ray, it’s been great speaking to you.

The Biggest Scam In The History Of Mankind [VIDEO]

Federal Reserve

The Federal Reserve, the Treasury, the entire banking system is a scam. At least according to Mike Maloney a self taught economist and gold bug. In this video he breaks down step by step why the entire financial system seems to enrich those at the top and rob those at the bottom.

I am not in the habit of sharing videos from crazy people and I am not starting now. There is a lot insight and value from Mike’s video. Check it out.

A Response: A Better Way To Measure Risk Tolerance

Joseph TomlinsonI recently read an excellent article by Joe Tomlinson of Tomlinson Financial Planning titled “A Better Way To Measure Risk Tolerance”. The article criticizes some of the existing risk tolerance questionnaires that financial advisors use. However, unlike most critiques he actually gave suggestions of how the industry can move forward. Specifically he stated questionnaires need to “anticipate how the client will react emotionally to the inevitable stresses that occur in the course of all financial plans“.

While building Pocket Risk I’ve spoken to 78 financial advisors across the country and the most common demand regarding risk tolerance questionnaires was the ability to understand how a client would react during a downturn. I heard innumerable stories of clients who seemingly had a high risk tolerance before the financial crisis but bailed when things got tough. Advisors want to anticipate the behavior of their clients so they can coach them and recommend  appropriate portfolios.

Below is a look at Joe’s criticisms and how we have addressed them in the Pocket Risk questionnaire.


Joe talks about the importance of emotion in financial decision making and how the person going through a downturn could be completely different from the cold and “rational” individual who completed the questionnaire in the past. A Dr Jekyll and Mr Hyde effect.

In our questionnaire we’ve tried to stimulate emotion in a number of ways. For example in question #3 below…

QUESTION: In 2008 the U.S. stock market dropped by approximately 37%. This meant that $100,000 invested in the U.S. stock market at the beginning of 2008 was worth $63,000 at the end of 2008.

If a similar event were to occur again in your lifetime, what would you do with your investment? 

POSSIBLE ANSWERS: I would sell my entire investment, I would significantly decrease my investment, I would slightly decrease my investment, I would neither buy nor sell, I would slightly increase my investment investment, I would significantly increase my investment, I would double my investment.

What we are doing here to stimulate emotion is to talk about dollar amounts not just cold percentages. Additionally, the 2008 crisis is an emotional event for many  in the recent past and we are attempting to stir emotions as they answer this question. It would not have the same effect if we talked about the crash of 1929. Perhaps we could have done more by asking people what they actually did in 2008 but not everyone was invested in the market so that question would not apply to everyone.

Loss Aversion

In his article Joe cites research from Michael Finke and how loss aversion can be a good predictor of a client’s risk tolerance. In Joe’s words “Respondents who tended to focus more on potential losses rather than potential gains from taking investment risk showed more propensity to bail out in down markets.” At Pocket Risk we agree with this analysis and thus included the following question…

QUESTION: I am more concerned with maximizing returns than minimizing losses.

POSSIBLE ANSWERS: Strongly Agree, Agree, Somewhat Agree, Undecided, Somewhat Disagree, Disagree, Strongly Disagree 

As you can see it gets right to the heart of the issue of whether a client is more interested in gains or avoiding losses. We also include a question regarding a client’s wishes to keep up with inflation or surpass it.

Stock Market Believers

Joe moves on to talk about the experience he had with his clients and how the  those “whose confidence was rooted in the belief that the stock market would be a good investment over the long term and that losses would typically set the stage for later gains were mostly able to weather the storms“. Again we’ve tried find these individuals through a number of questions. Here is an example…

QUESTION: It is possible for some investments to undergo long periods of underperformance. For example, the average annual return for the U.S. stock market between 2001 and 2010 was approximately 2.2%, including dividends. The average annual return for the U.S. stock market between 1950 and 2000 was approximately 14.4%, including dividends.

To what extent do you agree with the statement “I am willing to maintain my investment during long periods of underperformance.”

POSSIBLE ANSWERS: Strongly Agree, Agree, Somewhat Agree, Undecided, Somewhat Disagree, Disagree, Strongly Disagree.

The 2.2% return from 2001 to 2010 was abysmal. The the majority of people who would continue to stay the course during such a period of underperformance are most likely to be stock market believers. When we tested this question with a sample of Americans we found it to be a good predictor of risk tolerance.

Other Points

At various points throughout the article Joe makes some important observations. Such as how an IPS (Investment Policy Statement) can help clients through downturns or how new applications of brain science can improve the level of questioning. He then goes on to make a very important point that risk tolerance and risk capacity are different constructs and should not be muddled into one approach. We totally agree. Our focus is on risk tolerance and we believe our tool solves many of the problems Joe outlined in his article.

The Sedoric Group: “More Than Money Managers” – Barron’s Ranked Top Financial Advisor 5 Years Running [Interview]

Sedoric Group

I recently interviewed Tom Sedoric of The Sedoric Group/Wells Fargo Advisors.  He has been ranked the #1 Financial Advisor in New Hampshire and rated one of the best advisors in the country five years running.

John: Give us some quick background on The Sedoric Group/Wells Fargo Advisors?

Tom: Sure, we are firm based in New Hampshire that manages about $320m for 200 families. Most of our client base is what is called the mass affluent. We are a team of four soon to be five people who act like a virtual family office co-ordinating information between various professions such as lawyers, accountants etc. We are a fiduciary and run our business on an acronym we call ART (accountability, responsibility and transparency) which is part of our core values. 

We also consider ourselves risk managers. Not just about what happens in the stock market but changes in tax legislation, issues with intergenerational wealth, policy changes in Washington D.C. etc. So our responsibility goes beyond managing money.

John:  How did you become a financial advisor? What brought you to this industry?

Tom:  After graduating and short stint as a ski bum I began a successful career at Xerox . What I liked most was working directly with clients. Looking back at my ski bum days I noticed I was the only person around me who subscribed to the Wall Street Journal. It was something I picked up from my father when I bought my first stock aged 19. Rather than climb the management rungs at Xerox I realized I wanted to work in this industry so I could help and deal directly with clients.

John: Barron’s recently ranked your firm as a top advisor. What distinguishes your firm from others?

Tom: We are great listeners. We spend time with our clients understanding their needs and goals. For example, we spend a lot of time thinking about distributions/withdrawals once a person retires. Even if we have a client who is 50 and plans to retire in 15 years we start considering their best options. In our mind asset location can be just as important as asset allocation so we make sure assets are in the right place.

John: What software, tools and techniques do you use to ensure you remain successful?

Tom:  Wells Fargo provides us with very good resources. For example we use Envision to manage our financial planning process. 

John: Your firm has been very successful but what challenges do you face on a day-to-day basis?

Tom: I think people are generally emotionally fatigued after 5 years of financial turmoil. Our biggest job is managing expectations. We are living in a parallel universe when the central bank is pumping $85bn into the economic system every month. We understand why they are doing it, but it can’t last forever.

John: What software and tools do you think are missing in the industry?

Tom: An integrated tool that allows clients to get a 30,000 feet view of where they are, where they want to be and how close they are to their goals. There is software that does this but not in a summarized fashion.

John: Lastly, What do you think advisors need to focus on in the future to be successful? 

TomSurround yourself with people who are smarter than you. You will learn and grow considerably faster.

Top 5 Blogs For U.S. Financial Advisors

After a little research earlier in the year looking for great financial advisor blogs I found a smattering of content across the web but few explained why a particular blog was great. Further still, almost none informed me what I could learn from reading their posts. Here is a list that does both in no particular order.

Wade Pfau - Retirement Researcher Blog

1. Wade Pfau’s – Retirement Researcher Blog

Wade’s Blog is all about retirement. I would go as far to say it is about the science of retirement and calculations professionals make to ensure people have enough money during their retirement years. Wade’s blog is probably my favourite because I love numbers and models. For those who have no interest in safe withdrawal rates it might be best to skip this blog.

 What You Will Learn Reading This Blog - Retirement Science, Safe Withdrawal Rates, Asset Allocation.

Michael Kitces - Nerd's Eye View

2. Michael Kitces – Nerd’s Eye View

Michael Kitces is undoubtedly the most well-known blogger in the financial advisory space. Long before I started building Pocket Risk advisors would send me links to articles he wrote years ago to help me on my quest to solve problems for financial advisors. As someone who has not been an advisor Michael’s posts give me insight into the challenges advisors face (as

well as solutions!). Unlike many bloggers in the industry Michael’s posts are squarely targeted at advisors rather than consumers. Many of the topics are beyond the understanding of a financial laymen but that shouldn’t stop you.

What You Will Learn Reading This Blog – Practice Management, Industry News & Regulation, How To Get More Clients,  Questioning The Status Quo.

Bill Winterberg - FPPad3. FPPad by Bill Winterberg

Modern financial planning could not exist without technology. Thankfully we have blog that looks at the intersection between these two areas. What I like about Bill’s blog is that it’s not just a review of advisor specific software packages. He digs into everyday technologies that make the advisor’s life possible for example his review of Apple’s new iPhone.

 What You Will Learn Reading This Blog - How advisors (and others) can you use technology to improve their businesses.

Roger Wohlner - Chicago Financial Planner

4. The Chicago Financial Planner – Roger Wohlner

Unlike some of the blogs above Roger is more consumer focussed. That being said he doesn’t spend every other sentence pushing his practice. He delivers rich insights and actionable steps to move people forward financially with the occasional dollop of humor.  I liked his post back in August about essential financial steps people should take in their 30′s and 40′s.

 What You Will Learn Reading This Blog - Consumer focussed financial advice that covers everything to do with money – Investing Lessons, Retirement, Insurance etc.

CFA Institute Blog 5. Enterprising Investor – CFA Institute

How many of us are fans of blogs run by associations, institutes or the like? Probably not many. This is because they lack the personal touch typically managed by a revolving door of interns with an inconsistent publishing schedule. The CFA Institute blog is different. There is a human touch (every post has a writer name and picture), there is a community (see the comments) and they write about interesting topics. The behavioral finance section is my personal favourite on the blog.

 What You Will Learn Reading This Blog - Economics, Behavioral Finance, News, Regulatory Updates.

Banyan Partners: How To Grow From $30 Million To $4 Billion AUM In 8 Years [Interview]

David Costigan ImageKicking off our interview series with successful financial advisors I recently interviewed David Costigan of Banyan Partners. David is the Managing Director of Wealth Management at the firm, which has offices across the US. Below is a summary of our conversation.

 John: Give us some quick background on Banyan Partners?

David: Sure, Banyan Partners got going in 2006 and was founded by Peter Raimondi who was recently profiled in Financial Advisor magazine. We work exclusively with HNW individuals to craft custom wealth solutions. We don’t just put a bunch of client information in a blender and spit out a result. We work closely with them to ensure our approach meets their needs and objectives.

John:  How did you become a financial advisor? What brought you to this industry?

David: In the early 90’s I was running a trucking business but eventually went to graduate school and got my CFP (Certificate of Financial Planning). I ended up as a broker at Merrill Lynch but that didn’t quite suit my personality. I wanted to shift my focus from financial products to long-term client relationships. I settled at The Colony Group working for Peter Raimondi for 10 years before following him on to Banyan Partners.

John:  So having a strong mentor was important to your professional success?

David: Having a mentor was paramount to my success.

John: Registered Rep/Wealth Management recently ranked your firm as a top advisor. What distinguishes your firm from others?

David: There is no need re-invent the wheel. We just stick to some key principles. We do what we say we will do. We remain constantly focused on client needs and we bring in partners to help give specialist advice to our clients, such as estate planning. We know our scope and we stick to it.

John: What software, tools and techniques do you use to ensure you remain successful?

David: We use Advent for our trading as well the usual tools you would expect like Bloomberg. We are in the middle of merging a few firms so our software my change over the short term.

John: Your firm has been very successful but what challenges do you face on a day-to-day basis?

David: Client psychology. With everything that is going on in Washington D.C. we are living in uncertain times. We are constantly communicating with our clients to ensure they are well informed.

John: What software and tools do you think are missing in the industry?

David: Healthcare software programs that can predict the cost on portfolios once someone enters retirement.

John: Lastly, What do you think advisors need to focus on in the future to be successful? 

 David: Every advisory firm should have a strong philosophy and the discipline to stick to it.