Emerging-Market Countries Criticize Fed Decision
By BETTINA WASSENER
Published: November 4, 2010
HONG KONG — Policy makers in emerging markets criticized the Federal Reserve on Thursday for its decision to pump more money into the U.S. economy, a measure that they fear could escalate the worrisome influx of cash into fast-growing economies.
Officials from countries like Brazil and Thailand threatened more measures to curb the flood of money that has pushed up currency values and fueled concerns that asset price bubbles might be in the making.
The unusually sharp backlash against the Fed’s action underscores the disagreement among some of the largest economies in the world over appropriate economic policy and is likely to overshadow a gathering of leaders of the Group of 20 top economies in Seoul at the end of next week.
The Brazilian foreign trade secretary, Welber Barral, said the Fed’s policies would impoverish “those around them and end up prompting retaliatory measures,” according to Reuters. In South Korea, the Finance Ministry said it would consider ways to limit capital flows.
While some inflows, particularly long-term investments, are welcome ways of bolstering economic development, the capital influxes into emerging market stocks, bonds and property have increased rapidly in recent months, totaling more than $2 billion a day, according to estimates by DBS in Singapore.
Analysts and policy makers are concerned that the Fed’s injection of more liquidity into the U.S. economy — through purchases of Treasury securities to the tune of $600 billion — could lead to yet more inflows as investors seek higher returns.
“As long as the world exercises no restraint in issuing global currencies such as the dollar — and this is not easy — then the occurrence of another crisis is inevitable, as quite a few wise Westerners lament,” Xia Bin, an adviser to the central bank of China, wrote in a newspaper managed by the People’s Bank of China.
In Thailand, Finance Minister Korn Chatikavanij said the central bank governor had “confirmed discussions with central banks of neighboring countries, which are ready to impose measures together, if needed, to curb possible speculative money flowing into the region,” according to Reuters.
Norman Chan, chief executive of the Hong Kong Monetary Authority, warned that the Fed’s new measures — informally known as QE2, denoting the second round of what is called quantitative easing — added to the risk of asset bubbles, including a bubble in the city’s housing sector.
“For emerging markets, QE2 means a guarantee of the ‘low for longer’ scenario through the first half of 2011, which suggests inflows into emerging markets will continue, if not strengthen,” Richard Yetsenga and Pablo Goldberg, analysts at HSBC, said in a note on Thursday. “The tide generated by the liquidity from abroad is bigger than whatever wall emerging market countries can put up.”
Misgivings about the Fed action appeared confined to emerging markets, but Germany’s economy minister, Rainer Brüderle, also weighed in. “I view that not without concern,” Reuters quoted Mr. Brüderle as saying. It said he added that measures were needed to stimulate growth in the United States and that it was not enough to add liquidity alone.
The French economy minister, Christine Lagarde, said Thursday that some emerging countries’ angry reactions to the Fed’s latest round of easing highlighted the need for an overhaul of the global monetary system. Asked about some emerging countries’ reactions, Ms. Lagarde said: “It confirms the imperative need to forge tools for monetary calm,” according to Reuters.
The president of the European Central Bank, Jean-Claude Trichet, said he did not think the U.S. was pursuing a weak dollar policy, Reuters reported from Frankfurt.
Mr. Trichet said he had “no indication that would change my trust” that the Federal Reserve, the U.S. Treasury and President Barack Obama “aren’t playing a tactic of a weak dollar,” Mr. Trichet said. “I have no reason to think that.”
While the United States argues that China in particular should allow its currency to appreciate more rapidly, China and other emerging markets are loath to do so. They argue that the additional round of quantitative easing by the Fed is hurting the value of the dollar artificially while prompting more cash to flow into emerging nations as investors seek the higher interest rates in such countries.
Although finance ministers who gathered at a preparatory meeting in South Korea last month pledged to refrain from weakening their currencies and to let the markets exert more influence in setting foreign exchange rates, a concrete agreement on current account limits, proposed by the U.S. Treasury secretary, Timothy F. Geithner, is likely to prove elusive.
Many emerging-market countries and Japan have been intervening in the foreign exchange markets in an effort to slow the rise in the values of their currencies, which they fear could harm export industries by making exported goods and services more expensive for overseas consumers.
Partially as a result of currency inflows, the yen is up 15 percent against the U.S. dollar this year. The Thai baht is up 11 percent, and the South Korean won has gained 5 percent.
Some countries have also already announced or signaled steps to discourage capital inflows. Brazil and Thailand, for example, raised taxes last month on foreign investment in government bonds, a step designed to deter excessive inflows.
Capital controls have so far not been “too Draconian,” said Yougesh Khatri, senior Southeast Asia economist at Nomura, in a conference call from Singapore on Thursday. But the risk is that such measures might escalate in the longer term, he added, while more foreign exchange intervention is likely.
The Hang Seng index in Hong Kong rose 1.6 percent Thursday, while the Nikkei 225 index in Japan played catch-up after a public holiday, gaining 2.2 percent.
The Kospi in South Korea edged up 0.3 percent, while the Straits Times index in Singapore was up 0.5 percent by late afternoon.
http://www.nytimes.com/2010/11/05/business/global/05global.html?_r=1&src=me&ref=business
Friday, 5 November 2010
High unemployment in Fed cross-hairs
The United States faces the prospect of high unemployment for some time as the Federal Reserve embarks on a risky and unproven course to bring back solid economic growth.
All eyes will be on the October labour market report on Friday, expected to show a dip in job creation and an unemployment rate stuck at 9.6 per cent for the third consecutive month.
The Federal Reserve announced on Wednesday it would inject an additional $US600 billion ($A598.12 billion) into the struggling economy, through the purchase of new Treasury debt from financial institutions at a rate of around $US75 billion ($A74.76 billion) a month.
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Fed chairman Ben Bernanke said the extraordinary action was necessary because the central bank has a duty to help promote increased employment and sustain price stability.
Though the current low level of inflation was "generally good" it poses the risk of morphing into deflation, a dangerous cycle of falling prices and wages, Bernanke said in an opinion article published Thursday in the Washington Post.
But it was the suffering job market that spurred the stimulus move, known as "quantitative easing."
Bernanke said that in the panel's review of economic conditions, "we could hardly be satisfied."
"Unfortunately, the job market remains quite weak; the national unemployment rate is nearly 10 per cent, a large number of people can find only part-time work, and a substantial fraction of the unemployed have been out of work six months or longer," he said.
"The heavy costs of unemployment include intense strains on family finances, more foreclosures and the loss of job skills."
The Fed action came a day after Tuesday's nationwide congressional and local elections that handed big victories to Republicans, who have called for less government interference in the US economy.
Republicans won control of the House of Representatives and whittled the majority of President Barack Obama's Democrats in the Senate.
At the top of voters' complaints was persistently high unemployment more than a year after the recession officially ended, along with massive federal spending to rescue the economy from recession that has produced record deficits.
The government's weekly snapshot on unemployment trends reinforced the picture of a depressed labour market treading water.
Initial unemployment claims rose more than expected in the week ending October 30, up 4.6 per cent from the prior week, the Labor Department reported.
"Unfortunately, there is nothing in the data that suggests the employment sector is on the cusp of entering a prolonged hiring expansion.
"Instead, the stability suggests that employment growth is going to be slow and sluggish for the foreseeable future," said Jeffrey Rosen at Briefing Research.
Andrew Gledhill at Moody's Analytics noted that businesses remained anxious about economic conditions and were being cautious about payroll decisions, while layoffs were still climbing at a rate consistent with minimal job growth.
"The stalled labour market will not significantly break out of this trend until the second half of next year," Gledhill said.
"Even once widespread hiring resumes, it will take considerable job creation to restore employment to its pre-recession level; we forecast that won't occur until 2013."
AFP
http://www.smh.com.au/business/world-business/high-unemployment-in-fed-crosshairs-20101105-17g4d.html
The Fed turns on printing press: The Implications
The Fed turns on printing press
Sewell Chan, Washington
November 5, 2010
IN ITS latest move to help the economy, the Federal Reserve is about to restart its monetary printing press - or rather, the electronic equivalent.
The Fed announced that it intended to buy $US600 billion in long-term Treasury securities through June. It also signalled that it could make more purchases after that if unemployment remained too high and inflation too low.
The Fed is prohibited under law from directly lending to the Treasury Department, which issues government debt. So the Fed buys government securities on the open market from ''primary dealers'', a network of 18 institutions, including Goldman Sachs and Morgan Stanley, that constantly trade in such securities.
While monetary policy is set at the Fed's headquarters in Washington, it is carried out in Lower Manhattan, at the Federal Reserve Bank of New York, which buys and sells Treasury securities and other assets on the Fed's behalf.
In typical recessions, when the Fed pumps money into the economy, it buys assets, like government bonds, and creates an equivalent amount in liabilities - reserve deposits that commercial banks keep at the Fed. Those deposits, which now exceed $US1 trillion, along with currency in circulation, now $US961.4 billion, make up what economists call the monetary base - in essence, the raw material from which money is created and made available to consumers and businesses.
If banks were quickly start quickly using the reserves to make loans, the supply of money, now $US8.7 trillion by one estimate, could grow rapidly and lead to inflation even as the amount of reserves remained constant.
The supply of money includes not just currency, but also things like bank deposits, savings accounts and money market funds.
For now, that seems highly unlikely. Banks say there is not much demand for loans.
NEW YORK TIMES
Sewell Chan, Washington
November 5, 2010
IN ITS latest move to help the economy, the Federal Reserve is about to restart its monetary printing press - or rather, the electronic equivalent.
The Fed announced that it intended to buy $US600 billion in long-term Treasury securities through June. It also signalled that it could make more purchases after that if unemployment remained too high and inflation too low.
The Fed is prohibited under law from directly lending to the Treasury Department, which issues government debt. So the Fed buys government securities on the open market from ''primary dealers'', a network of 18 institutions, including Goldman Sachs and Morgan Stanley, that constantly trade in such securities.
While monetary policy is set at the Fed's headquarters in Washington, it is carried out in Lower Manhattan, at the Federal Reserve Bank of New York, which buys and sells Treasury securities and other assets on the Fed's behalf.
In typical recessions, when the Fed pumps money into the economy, it buys assets, like government bonds, and creates an equivalent amount in liabilities - reserve deposits that commercial banks keep at the Fed. Those deposits, which now exceed $US1 trillion, along with currency in circulation, now $US961.4 billion, make up what economists call the monetary base - in essence, the raw material from which money is created and made available to consumers and businesses.
If banks were quickly start quickly using the reserves to make loans, the supply of money, now $US8.7 trillion by one estimate, could grow rapidly and lead to inflation even as the amount of reserves remained constant.
The supply of money includes not just currency, but also things like bank deposits, savings accounts and money market funds.
For now, that seems highly unlikely. Banks say there is not much demand for loans.
NEW YORK TIMES
Thursday, 4 November 2010
Fed's $600bn gamble risks throwing away America's biggest asset
Fed's $600bn gamble risks throwing away America's biggest asset
Apparently, there's been an election in the US. The BBC tells us that America's wholly unsurprising verdict on the past two years is frightfully important and signals the end of the Obama dream, whatever that may have been; it was never entirely clear.
http://www.telegraph.co.uk/finance/comment/jeremy-warner/8108660/Feds-600bn-gamble-risks-throwing-away-Americas-biggest-asset.html
Apparently, there's been an election in the US. The BBC tells us that America's wholly unsurprising verdict on the past two years is frightfully important and signals the end of the Obama dream, whatever that may have been; it was never entirely clear.
The Fed is taking a massive gamble with America's long term future by blindly pursuing further monetary stimulus Photo: EPA
Barely able to disguise his horror at the result, Mark Mardell, the Beeb's North America editor, solemnly pronounced that the hope Obama raised when elected president had turned out to be "too audacious for the times".
It didn't seem to occur to him that Obama's drubbing was not so much a case of haplessly falling victim to economic circumstance but was in fact largely down to incoherent legislative experiment, blind disregard for the deficit and chronic mishandling of the economy. Americans had reasonably expected better.
Obama's punishment will make little if any difference to the mess the US economy finds itself in and in any case is something of a sideshow against the latest high risk policy initiative the Federal Reserve is visiting on an already battered nation. The Hill can't act, but the Fed still stands ready and willing at the roulette wheel.
The fresh $600bn (£372bn) infusion of quantitative easing announced on Wednesdaymay or may not provide a lift for beleaguered domestic demand – both Goldman Sachs and HSBC have said much more is needed to escape a real or imagined liquidity trap – but one thing it certainly does do is further debauch the currency. Never before has dollar hegemony been so much under threat.
By flooding the world economy with yet more freshly minted dollars, America further undermines faith in the greenback as an internationally reliable store of value and is thereby squandering an economic and geo-political asset of huge importance to the nation's history.
The dollar's reserve currency status means that America can borrow at will in its own currency from the rest of the world, and at favourable rates to boot. This privilege is being recklessly thrown away. Every time the Fed prints more dollars to fight the domestic recession, it further devalues that debt. The lenders are understandably getting restless.
As is now becoming steadily more apparent, dollar hegemony was a major underlying cause of the crisis, for it allowed America to go on an unrestrained borrowing binge; the developing world is ever more minded to think its demise part of the solution.
The Fed is taking a massive gamble with America's long term future by blindly pursuing further monetary stimulus; it may take time, but the dollar's all powerful reign on the world stage is drawing to a close.
And they wonder why US business remains in a state of paralysed shock. Policy seems hell bent on destruction.
In Obama's defence, it is usually said that the economic legacy he inherited was so poisonous that it was never likely to be easily fixed, and there is no doubt much truth in this contention.
But rather than focusing like a lazer on the economic catastrophe unfolding before him, Obama instead embarked on a wildly ambitious, disruptive and divisive legislative programme that has succeeded only in heaping further uncertainty on already damaged economic confidence.
If ever more mountainous public debt were not deterrent enough to investment and trade, the clutter of futile reform emerging from the White House would have frightened even the most loyal of American investors into inaction.
Stripped of his political authority, Mr Obama can only look hopelessly on as the newly enthused "Reds" suck the lifeblood out of health and financial reform. Hard won at near fatal political and economic cost, much of the president's legislative programme may end up neutered to death.
A Republican House cannot overturn these bills, which have already been passed into law, but it can render them toothless by influencing the fine print and more importantly, refusing to fund them. "Defunding" Obama's legislation is readily justified in pursuit of the small state Republicans aspire to.
Unfortunately, the Republican opposition seems as bereft of a credible plan to put public debt back on a sustainable footing as the White House. The political stalemate makes it most unlikely one will be found any time soon. Any long term fix requires a combination of tax rises, pension and medicare reform. There's no cross party support for any of these things.
The political class has no strategy for rolling back debt in a growth friendly way, while the blunt instrument of ultra loose monetary policy has called into question the dollar's international standing and therefore the nation's ability to refinance itself.
Larry Summers – who departs as the President's economic adviser in January – puts it like this: "For how much longer", he asks, "can the world's top borrower carry on being the world's top power?" It's a good question.
http://www.telegraph.co.uk/finance/comment/jeremy-warner/8108660/Feds-600bn-gamble-risks-throwing-away-Americas-biggest-asset.html
The madness of doing more QE
Mervyn King must turn off the printing press
Quantitative easing will do little to secure the recovery, says Jeremy Warner.
http://www.telegraph.co.uk/finance/economics/8094536/Mervyn-King-must-turn-off-the-printing-press.html
Quantitative easing will do little to secure the recovery, says Jeremy Warner.
The Bank of England has been edging in the direction of more QE Photo: Christopher Pledger
With a bit of luck, this week’s relatively strong third-quarter growth figures might give the Bank of England pause for thought as it prepares to sanction another bout of quantitative easing (QE), popularly known as “printing new money”. As Hallowe’en approaches, opinion is turning against this much-deployed but little-understood form of monetary witchcraft, and with good reason.
The Bank’s Monetary Policy Committee has been edging in the direction of more QE for some months now; George Osborne, the Chancellor, has repeatedly suggested that it could provide a useful counterweight to the austerity of his fiscal consolidation plans.
In the United States, more QE is already pretty much a done deal. The Federal Reserve’s Open Markets Committee is next week expected to give the go-ahead to a further $500 billion of asset purchases. That might seem small beer against the $1.7 trillion already spent, but to describe an extra half-trillion of the stuff as “QE-lite”, as some Fed insiders do, still seems something of an understatement.
All in all, policy-makers are becoming worryingly dependent on further QE for salvation. The argument goes that with mountainous public debt excluding the possibility of further stimulus packages or tax cuts to boost the economy, why shouldn’t we just print more money instead?
To understand why this is a policy blunder in the making, it’s best to start with the case for the defence. There is plenty of evidence to suggest that the initial, crisis-provoked burst of QE worked as intended. It’s always impossible to prove the counterfactual – what might have happened if no QE had been applied – but it seems likely that the economic contraction would have been a great deal worse.
By boosting the money supply, QE helped keep interest rates in the real economy low, supporting consumption and allowing many companies to refinance themselves in the face of contracting credit. An otherwise catastrophic collapse in confidence, investment and trade was partially offset.
But you can have too much of a good thing – and as things stand, it’s quite hard to see why more of this monetary hocus-pocus would help things any further. On the other hand, the risks of it are all too obvious.
The case for going further rests on the idea that the private sector is not yet ready to step into the breach left by a shrinking state, and may actually be about to contract even more. In such circumstances, it would become necessary to keep pushing down on interest rates, to encourage both consumers and businesses to spend more.
It’s a funny old therapy that prescribes another dose of the same poison that brought the economy to its knees – too much consumption and not enough saving – but let’s leave this wider paradox aside for the moment. The more immediate problem is that it’s not at all clear that the slight reduction in interest rates that more QE might bring about would cause consumers to save less. Indeed, it could have the opposite effect: those with a surplus of savings might become more conservative still if they saw the outlook for income worsening at a time when their long-term security is being eroded by heightened inflation.
And where is the deflation risk that might justify more QE? It’s hard enough to see it even in the US, where – to my mind – a long-incubating problem of structural unemployment, hidden for years by the credit boom, is being misdiagnosed as one of deflation. It’s harder still in the UK. With inflation still stuck well above target, expectations of future inflation rising, nominal GDP growth back at almost 6 per cent, and the velocity of money – that is, the number of transactions for any given unit of cash – recovering fast, more QE becomes a very hard sell indeed.
Of course, the economy will require plenty of policy support to compensate for a planned fiscal squeeze that amounts to roughly 2 per cent of GDP a year for the next four years. But it is not at all obvious that more QE is the right way of providing it.
The Bank of England has repeatedly told us that recessionary pressures will cause inflation to abate – yet it has remained stubbornly above target. No one will believe the Bank if it cites a deflationary bogeyman that doesn’t yet exist as justification for turning on the printing presses again.
If all that new money actually were to reach the parts of the economy that needed it, I might have some sympathy. But QE has failed either to expand bank credit to small- and medium-sized enterprises or to lower its cost to them. It has, however, provided spectacular money-making opportunities for the City and inflated new bubbles in bond, commodities and emerging markets.
Goodness knows how central banks will unwind the vast positions they already hold in the debt markets, but the fear that they’ll end up taking the easy option and monetising what the Government owes – permanently adding it to the money supply, as happened in the 1970s – will only add to concerns about inflation.
There are plenty of ways to help the recovery, from raising infrastructure spending (which is perfectly compatible with deficit reduction) to boosting business confidence by enhancing the environment for investment and job creation. But please, no more QE.
http://www.telegraph.co.uk/finance/economics/8094536/Mervyn-King-must-turn-off-the-printing-press.html
Fed spends big to fight deflation
Quantitative easing barely registered on world markets but the message from the US Federal Reserve was heard throughout the world: it would use every measure possible to ward off deflation.
The move to support US asset prices through printing money served to slightly bolster already-high equity markets and pushed the Australian dollar to trade above parity with the US dollar for most of the morning.
George Tharenou, an economist with investment bank UBS, said the Fed’s announcement overnight of $US600 billion ($600 billion) in treasury purchases was combined with a commitment to continue buying troubled mortgage securities, bringing the total value of the package close to $US1.1 trillion.
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The second round of quantitative easing, or QEII, adds to $US1.7 billion in unconventional measures it launched after the collapse of Lehman Brothers in September 2008.
Mr Tharenou said the Fed was continuing action in an environment in which it could not cut already low official interest rates.
‘‘Whether or not the Fed can actually stop deflation is a matter of debate (but) I think the Fed is taking the best possible action it can,’’ Mr Tharenou said.
Andrew Pease, the chief investment strategist for fund manager Russell Investments, said the Federal Reserve had highlighted its commitment to restoring inflation and warding off deflation, with early signs being positive.
‘‘It’s a big package,’’ he said. ‘‘The question is what impact is it going to have. Is it going to be pushing on a string or is it going to do something? My guess is its going to reinforce positive price expectations.’’
Mr Pease said of deflation, which occurred in Japan after its own debt crisis in 1990: ‘‘People don’t spend, businesses can’t make profits ... there’s a whole lot of problems when an economy falls into deflation.’’
Mark Reade, a director of credit strategy for investment bank Citi, said the lack of market reaction was due to the package being broadly in line with expectations.
‘‘The Fed reiterated its commitment to keep rates low for an extended period of time,’’ he said. ‘‘That commitment is going to support asset prices.’’
He said the willingness to support prices also supported people's willingness to continue to invest in riskier assets - including equity markets and the Australian dollar.
On the news, the US dollar fell slightly below parity with the Australian dollar and remained there around midday.
However, Mr Pease warned the Australian dollar was ‘‘overvalued by just about any metric’’.
swashington@smh.com.au
What price for good advice?
Get a grip
HOW much should you pay for financial advice? That's the $64 million question raised by recent research that found a huge gap between what consumers think they should pay and what financial planners reckon they need to charge.
The research by Investment Trends found the average consumer thought about $300 was the appropriate price for both an initial financial plan and ongoing advice. But planners say that's way short of the average $2700 they need to break even for providing full financial advice and the $1200 needed for a simple plan.
This ''disconnect'', as Investment Trends dubs it, must be worrying news for the financial-planning industry, which is facing government regulation to reform the way it charges its customers. Under the Future of Financial Advice reforms set to apply from 2012, advisers will be banned from receiving commissions and other asset-based fees from financial-product providers. Instead, they will have to clearly spell out their charges to their customers, not just once but every year through an opt-in provision in the legislation.
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The changes will only apply to new investments but who'd want to be an adviser explaining to a loyal, long-term client why new customers are getting an improved transparent deal but he or she is missing out? Whether they like it or not, planners are moving to a system where their income is going to come from fees for service and they're going to have to justify that those fees are worth it.
On the face of this survey, they're facing an uphill battle. Investment Trends found while consumers were prepared to pay more for some sorts of advice - most notably retirement planning - there was still a gulf between what consumers thought advice was worth and what planners are charging. Interestingly, consumers with an existing financial plan were prepared to pay more than first-timers, which suggests planners are adding value. But an Investment Trends analyst, Recep Peker, says many existing investors still seem to be unaware of just how much they're paying for advice under the current arrangements.
Part of the problem is that while planners are required to disclose their fees, their true impact is often buried in complex detail and fine print. Commissions and other asset-based fees are charged as a percentage of money invested and come out of your investment, which makes them less in-your-face than fees that require you to physically make the payment. And let's face it, 1 or 2 per cent sounds a whole lot cheaper than $5000 or $10,000 - which is what you might be paying if you have a sizeable investment.
But perhaps a more significant problem is that the advice offered is often overkill. While some planners manage to provide simple, affordable advice to ordinary consumers, there's a widely-held view that in their zeal to protect investors, the government and Australian Securities and Investments Commission have pushed up both the cost and the level that must be provided.
It's like selling a Rolls-Royce to someone who wants to nip down to the local shops. In giving advice, planners are required to take your full circumstances into account - which usually involves an in-depth meeting and the production of a Statement of Advice that ticks all the compliance boxes required by the regulator and the planner's lawyers. These statements are expensive, can weigh a tonne and, according to a speech made by a legal specialist and director of Gold Seal, Clare Wivell Plater, at this week's Association of Financial Advisers conference, many of them contain irrelevant information that adds to their preparation costs and bewilders clients.
The enthusiastic take-up of the limited advice that can now be offered by super funds suggests there is a real market for a simpler form of financial advice that doesn't come with all the hoopla. Many investors, particularly those planning for retirement, can get enormous benefit from a full financial plan. But if you simply want help sorting out your super, starting a share portfolio or drawing up a plan to pay off your debts, you really don't want to be paying big bucks for the Rolls-Royce product.
The financial-planning industry has been pushing to have limited advice extended so it can be offered by financial planners as well as super funds - and so it should be. It's an obvious way to make advice affordable for a wider range of consumers. While super funds often provide limited advice as part of their member service, planners could mount a good case for selling such advice at a reasonable price. We'd still need protection to ensure the advice is in our best interests but if it is tied in with the Future of Financial Advice reforms, that shouldn't be too difficult.
The financial-planning industry has grown from a sales culture in which a planner's income was solely dependent on how much money the client had to invest. That thinking is still apparent in the push by many planners to simply replace commissions with asset-based fees of the same amount.
A full financial plan is worth much more than $300 but if consumers are undervaluing advice, the industry largely has itself to blame. It is time for planners to kick the sales culture and charge appropriate fees for the level and quality of service on offer.
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