This week's guest on The Long View is financial advisor Harold Evensky, who Morningstar managing director Don Phillips has often called the "dean of financial planning."

Evensky is chairman of Evensky & Katz/Foldes Financial, and he's a retired professor of personal financial planning at Texas Tech University. Evensky has been extremely active in the planning community during his career. He's the past chairman of the International CFP Council, the CFP Board of Directors, the CFP Council on Examinations, and the Board of Appeals. Evensky is a frequent public speaker and has authored several books, including The New Wealth Management. During the course of this conversation, he weighed in on the SEC's newly approved Regulation Best Interest, calling it an "unmitigated disaster." He also discussed asset allocation leading up to and in retirement, his firm's application of a core/satellite approach, and different business models for financial advice. 

Show Notes and References

Background (0:18-0:57)

Evensky explains why his practice opted to charge clients a percentage of assets under advisement instead of an annual retainer: "An unmitigated disaster." (0:58-2:51)

How Evensky and his fellow practitioners spend their time: "It's all built around the planning." (2:52-4:02)

On the firm's receptiveness to younger clients with less assets to advise: "Absolutely yes." (4:03-4:40)

The future: Comprehensive, modular financial planning. (4:41-6:49)

On the commodification of financial advice: "To the general public … it pretty much looks like the same service." (6:50-7:37)

On robo-advice: "Our conclusion was ... it's dangerous." (7:38-11:15)

Helping clients navigate turbulence: "Our goal is to call the client before they call us." (11:16-12:15)

The critical importance of communicating with clients: "Brokers and, much to my surprise, trust officers … hide under their desks." (12:16-13:02)

Where risk tolerance and client-specific circumstances come to the fore and human capital and age take a back seat: "Everything calls for a customized mix." (13:03-15:25)

• Human Capital 

"That's horribly inefficient." How Evensky came to embrace the simplicity of the core-and-satellite approach to portfolio construction. (15:26-19:27)

Evensky's construct for "explore" positions: "It can be most anything." (19:28-20:37)

Value's dry spell: "The basic concept of the value premium remains viable." (20:38-22:19)

• Dimensional Fund Advisors 

Permanent impermanence: How Evensky and his colleagues grapple with investing ephemera. (22:20-23:58)

Global diversification: "We've always believed in an international exposure." (23:59-25:45)

• Home-bias definition 

Risk tolerance and return needs drive strategic asset-allocation decisions: "Our maximum equity allocation is 80%." (25:46-27:53)

"Rebalancing is an immensely powerful tool, painful though it is in the short-term." (27:54-30:44)

Human capital's influence on the planning process: Car salesman versus tenured professor. (30:45-32:42)

Ramping up equity exposure through retirement: "Intellectually I think it's very sound research; but from a behavioral standpoint I don’t think it's realistic." (32:43-34:24)

The simple two-bucket approach: "My experience is the relatively small opportunity costs (associated with the bucketing approach) are way outweighed by the behavioral benefits." (34:25-38:24)

• Testimony of Deena Katz, CFP, on "Boomer Bust? Securing Retirement in a Volatile Economy" before the Senate Special Subcommittee on Aging, Feb. 25, 2009 (see Page 7 for "paycheck syndrome"). 

Time- and goals-based bucketing: "A great deal of appeal but they don't make any sense." (38:25-39:19)

How the complexion of retirement has changed: People will have to work longer. (39:20-41:32)

"Where's the protection of the investor?" Evensky takes a dim view of the SEC's just-finalized Regulation Best Interest measure. (41:33-43:34)

• "A New Rule Won’t Make Your Broker an Angel" by Jason Zweig, The Wall Street Journal, May 31, 2019. 

Competency standards: Professionalism subsumes competency. (43:35-46:57)

About the Podcast: The Long View is a podcast from Morningstar. Each week, hosts Christine Benz and Jeff Ptak conduct an in-depth discussion with a thought leader from the world of investing or personal finance. The podcast is produced by George Castady and Scott Halver.

About the Hosts: Christine Benz and Jeff Ptak have been analysts and commentators on investments and the investment industry for many years. Christine is Morningstar's director of personal finance and senior columnist for Morningstar.com. Jeff is head of global manager research for Morningstar Research Services, overseeing Morningstar's team of 120 manager research analysts in the U.S. and overseas.

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