Policy-based financial planning is a technique that Elissa and Dave have been developing since their first article on the topic appeared in The Journal of Financial Planning in 2006. The approach has received a lot of attention in the press lately, in no small part because of a book called Investor Behavior: The Psychology of Financial Planning and Investing to which Elissa and Dave contributed a chapter on the topic of financial planning policies.
Financial Planning Magazine
Carol J. Clouse from Financial Planning Magazine wrote an article about client behavior that discussed policy-based financial planning (free registration required) as a system for developing compact decision rules that make it easier to take appropriate actions in a rapidly changing environment. Carol did a great job of capturing the essence, notwithstanding the article’s unfortunate title, “When Clients Behave Badly: What to Do,” which would, of course, never apply to Yeske Buie clients!
Carol opens her article with a humorous example of how our natural propensities can be channeled by a simple policy:
You know that friend who always arrives 15 minutes late, so you tell him the movie starts at 7:15 when it really starts at 7:30?
Advisors who use a strategy they call policy-based financial planning do something like that. A good advisor knows that, while you cannot change human nature, you can use a client’s habits and behavioral biases to craft a financial plan that works for him.
POLICIES: CLEAR BUT FLEXIBLE
A good policy should return an unambiguous answer for clients even if circumstances change, so it should be structured around percentages and other adaptable targets. For example, a young client (or a client’s adult child) who needs a strategy for saving might have a four-part policy that sounds something like this:
- I will save the first 10% of every paycheck.
- All of that will go into my emergency fund until I amass three months’ wages.
- After that, the savings will go into a retirement vehicle up to the maximum contribution.
- Any remaining savings will go to a supplemental retirement account.
Yeske’s observations on policy-based financial planning are among the insights he has developed with his wife and business partner, Elissa Buie. They appear in a recent book, Investor Behavior: The Psychology of Financial Planning and Investing, by H. Kent Baker and Victor Ricciardi.
At more than 600 pages, the book has 30 chapters written by investment professionals and academics. “The majority of the content focuses on the decision-making process of the individual investor,” says Ricciardi, a finance professor at Goucher College in Baltimore.
The book tackles a wide array of subjects, including the effects of religion on investment decisions; the neuroscience of financial decision-making; post-crisis investor behavior; and the real world of trader psychology.
Investment Advisor Magazine
Bob Clark wrote a review in Investment Advisor Magazine saying that while the 30 articles in the book were fascinating from an intellectual standpoint, he singled out the policy-based financial planning chapter as particularly useful for practitioners in their work with financial planning clients.
Finally, one of the dynamic duos of the financial planning world, veteran planners Yeske and Buie, wrote: “Practitioners not only need an understanding [of behavioral finance concepts] but also practical tools. Policy-based financial planning is one such tool, offering a framework and approach that allows practitioners to craft decision rules that can keep clients committed to a consistent course of action.”
Based on their 2011 paper, Yeske and Buie provided a six-step process for creating effective financial planning policies for each client:
- Engage in the discovery process in which the financial planner learns about the client’s personal history, values, beliefs, goals and resources.
- Identify planning areas and best practices required by this client.
- Combine goals with best practices to create a proposed policy.
- Test the policy: Is this a good policy?
- Test-drive the policy with the client and listen to their feedback.
- Conduct periodic reviews and updates checking for changing circumstances.
The couple concluded: “Financial planning policies are structured decision rules that can act as a touchstone for both clients and their advisors and allow for rapid decision making in the face of a changing environment.”
While Yeske Buie has found Policy-Based Financial Planning to be very helpful in developing policies for risk management & insurance, investments, charitable giving, and when and how to refinance, financial planning policies can also be extremely helpful in the work we do with the adult children of existing clients, some of whom are just launching themselves in their career. In most cases, these young people will experience many significant changes in a relatively short period of time, including multiple job changes, significant changes in pay or benefits, and multiple living arrangements, from shared apartments to buying homes. Policies can help them deal with all of these changes without requiring them to “reinvent the wheel” with every move.
In conclusion, policy-based financial offers a framework and approach that allows practitioners to craft decision rules that can keep clients committed to a consistent course of action in a seemingly chaotic and unpredictable world.
YeBu in the Media
•on August 28th, 2014
On Tuesday, August 19, Dave Yeske was featured on CNBC’s Power Lunch to discuss what small business owners need to do to prepare for retirement. The discussion stemmed from a recent survey conducted by the Financial Planning Association (FPA) and CNBC.
Lori Ioannou, senior editor, summarized the study and interview on Power Lunch in her article (snippets below) on CNBC.com.
Neglecting a personal financial investment strategy and just plowing money into a business is fraught with risk. “It means the only way to fund retirement is to sell and cash out,” explained David Yeske, a principal in Yeske Buie, a financial advisory firm with offices in San Francisco and Vienna, Virgina. “There is always uncertainty on how successful the owner will be in finding a buyer at the right price. If he or she dies before this is accomplished, all can be lost.”
Financial advisors who participated in the CNBC/FPA survey pointed to three key initiatives small-business owners and their financial planners should follow in order to secure their financial future.
1. Diversify. Work to reduce dependence on the eventual sale of the business to fund retirement. Instead, strike a balance between reinvesting all profits in business expansion and diverting some funds to other investment assets.
2. Prepare for the worst. Protect your family and your business assets by buying insurance that covers the business owner’s disability or premature death.
3. Plan for succession. The time for a business owner to start developing a succession plan or exit strategy is from the first day the firm is launched. That’s because a well-designed strategy—including grooming the right individuals for succession—may take years or decades to implement.
The good news is, there is usually a fallout benefit. As Yeske pointed out, “Having a smart exit strategy boosts the odds of a small business’s long-term success, since it guides the founder on how the business should be properly structured and managed on a day-to-day basis.”
YeBu in the Media
•on February 28th, 2014
Dave was recently quoted in the Chicago Tribune, where writer Janet Kidd Stewart tells readers how ‘Getting personal with your financial expert can pay off.’ Stewart suggests that clients get more for their money if their financial adviser has conversations with them and plans for those things that matter most to them, including the lifestyle they want now and in the future. Many financial service firms are increasing their efforts to address these important planning areas with clients. So how do you balance the values/lifestyle discussion with the numbers? Dave tells Stewart that it requires more than just a good relationship:
How do you ensure you’re actually getting something other than a new best friend out of these more intimate conversations?
Always look for metrics, said Dave Yeske, a financial planner with Yeske Buie, a firm with offices in San Francisco and Vienna, Va.
For retired clients, for example, Yeske advocates long discussions about matching lifestyle needs with the realities of a nest egg’s size. Once a spending level is agreed on, he sets strict guidelines on sticking with the plan.
If investments underperform, spending is automatically cut back according to a formula. If they outperform, clients get a bonus for the next year.
Yeske said the system greatly reduces client anxieties about market volatility because they see the original parameters as guidelines that they set based on their own goals.
“You can’t just talk the talk about having more personal relationships,” he said. “Advisers will do their best work if they can go deep with clients, but they can’t just pander. They actually need to bring in financial planning rigor with well-crafted strategies.”
Read the full article
Why do investors behave as they do? That is the question posed and answered by the book “Investor Behavior: The Psychology of Financial Planning and Investing,” edited by H. Kent Baker and Victor Ricciardi and published by Wiley Finance.
This 30-chapter book (available from Amazon) covers the major principles of investor psychology and how personality, emotions, financial planning strategies, and the behavioral underpinnings of various trading and investment topics play into how clients make decisions.
Dr. Dave Yeske, CFP® and Elissa Buie, CFP® Managing Director and CEO of Yeske Buie, respectively, were part of the dynamic team of academics and experienced practitioners who contributed to the body of knowledge in “Investor Behavior.” Their contribution, “Policy-Based Financial Planning: Decision Rules for a Changing World,” places Policy-Based Financial Planning squarely within the context of behavioral finance and “choice architecture.” They describe the concept as follows:
“Although the field of behavioral finance helps to provide a deeper understanding of the cognitive biases present when individuals make financial decisions, practitioners need not only understanding but also practical tools. Policy-based financial planning is one such tool, offering a framework and approach that allows practitioners to craft decision rules that can keep clients committed to a consistent course of action in a seemingly chaotic and unpredictable world. . . . These comprehensive yet compact decision rules serve as a touchstone for both client and advisor, providing clear guidance in the face of rapidly changing external circumstances. In their ideal form, financial planning policies are both broad enough to encompass virtually any external change and specific enough to return clear answers as to appropriate action.”
Ms. Buie and Dr. Yeske have been writing and speaking on the topic of Policy-Based Financial Planning since 2006, when their article “Policy-Based Financial Planning Provides Touchstone in a Turbulent World,” was published in The Journal of Financial Planning. The Journal also published their most recent collaboration, “Evidence-Based Financial Planning: To Learn. . . Like a CFP®,” which appeared in the November 2011 issue.
YeBu in the Media
•on January 29th, 2014
When it comes to assessing where to put money to work in 2014, Andrew Osterland of CNBC reports that advisors are largely in agreement: tilt towards stocks. Of the 1,449 CERTIFIED FINANCIAL PLANNERTM professionals surveyed by CNBC/Financial Planning Association, 87% were bullish on stocks, particularly when the investment strategy is long-term. In addition to the stock tilt, advisors are shifting towards greater international exposure. In the report, 81% of advisors reported that they planned to talk to their clients about increasing their allocations to international stocks with about a 51/49 split between emerging markets and Europe.
“Notwithstanding the boom and bust cycles in emerging markets, there’s every reason to believe that they’ll continue to be among the fastest-growing markets in the world,” [David] Yeske said. “There’s a wide range of advisors and financial planners who see the virtue of building global portfolios.”
This doesn’t mean, however, that advisors aren’t recommending bonds.
“Bonds can be a stable reserve of value, or they can be as volatile as stock,” said David Yeske, co-founder of advisory firm Yeske Buie Inc. “I think a lot of advisors are shifting their bond allocations to shorter maturities and higher credit quality.”
Yeske, who participated in the survey, said that 100 percent of his fixed-income portfolio currently has a duration of less than a year and an average credit rating of single A.
A topic that continues to be hotly debated is whether to employ tactical asset allocation, which is a strategy to move large amounts of assets into one asset class or another to produce greater return. So far, the general consensus is that it is a best practice to rebalance funds back to their target.
Yeske, for one, has been selling large-cap and small-cap U.S. stocks and buying global real estate, emerging-market stocks and even bonds over the last six months.
He said that many of his clients are still traumatized by the financial crisis of 2008 and want to get out of the U.S. market after the recent run-up.
“I agree, but we do it according to plan,” he said. “It’s all about rebalancing.”
Read more of Osterland’s article.
Elissa and Dave were featured in InvestmentNews‘ 15th anniversary edition special feature of the top 15 transformational advisers. The feature, written by Andrew Osterland, highlights Elissa and Dave’s relationship and their extensive contributions to the financial planning profession, focusing especially on their work in the areas of “policy-based financial planning” and the introduction to greater scientific rigor to the profession’s body of knowledge.
Osterland notes Elissa and Dave’s longtime commitment to improving practice through research and teaching.
The two financial advisers, whose firm has offices in Vienna, Va., and San Francisco, are well-known in the financial planning profession for their work at the industry’s major trade group — the Financial Planning Association — as well as their roles as educators at Golden Gate University and their contributions to the academic literature of the financial advice field.
Also noted in the article was the work Elissa and Dave have done to develop the concept of “Policy-Based Financial Planning,” which involves the development of compact decision rules that can guide clients who must make decisions in the face of a rapidly changing environment.
Mr. Yeske’s and Ms. Buie’s most important contribution to the academic literature was a paper published in the Journal of Financial Planning that they co-authored in 2006 on policy-based planning. In it, they argued that just as advisers use investment policies in managing assets, they also should draft policies to guide their planning with clients.
Find out their most important contributions to academic literature and to the planning profession
SAN FRANCISCO, CA, JUNE 13, 2013 - The campaign to support the delivery of financial planning to the underserved was organized by the northern California chapters of the Financial Planning Association® (FPA®) along with TD Ameritrade on behalf of the Foundation for Financial Planning.
This achievement took place at FPA’s 41st Annual NorCal Conference held in San Francisco, CA on May 28-29, 2013. The conference is a regional event for the northern California area that also attracts many of the most influential financial planners from across the nation.
Chair of the Foundation, Elissa Buie, CFP® of Yeske Buie, took to the stage on the first day of the conference to address the nearly 500 attendees. She highlighted the Foundation’s mission to help people take control of their financial lives by connecting the financial planning community with those in need, and shared TD Ameritrade’s generous commitment to match pledges to the Foundation dollar-for-dollar up to $1 million. In her comments, Buie noted the role of pro-bono service in the financial planning profession.
“As financial planners, we know the power of financial planning. It changes peoples’ lives. But not everyone has access. One of the hallmarks of any true profession is a commitment to public service and the delivery of pro-bono aid to those in need. Members of FPA’s Northern California chapters have long exemplified that spirit with exceptional generosity in their commitment of both time and money to help the less fortunate. The Foundation is the only organization devoted solely to supporting the delivery of pro-bono financial planning. We have a track record of success that has impacted millions. And those in this room know that pro-bono financial planning enriches the lives of all those involved, from recipients to volunteers to donors.”
Eric Flett of Concentric Wealth Management emphasized the need for the community to be a part of the Foundation’s mission by volunteering their time and/or their financial resources.
“While many advisors and clients have rebounded from the economic downturn, many people still need financial advice, including, for example, those who are out of work, who have mortgages under water, who have excessive credit card debt, and who just can’t make ends meet. The Foundation is helping reach those people most in need.”
By the end of the conference, attendees had pledged $327,565, which, when combined with TD Ameritrade’s matching offer, brought the total dollars raised to $655,130. Among the most generous donors was Ken Coit, whose substantial pledge over the next five years will bring his lifetime donation to the Foundation to more than $500,000.
The financial planning teams at Gemmer Asset Management and Yeske Buie® both made new pledges to the Foundation during the conference, with both companies promising to match employee pledges dollar-for-dollar. In making the commitment to match employee contributions, Dave Yeske, CFP® expressed the hope that financial planning firms across the country would similarly commit to multiplying the impact of their employees’ commitments to the Foundation, “as business owners, we’ve all benefited tremendously from the emergence of financial planning as a true profession, this is our chance to give back in gratitude for all the gifts we’ve received therefrom.”
Visit the Foundation’s website and click on the green “Pledge Now” button for information on how you can contribute to making a difference in the financial lives of others. The next $200,000 of new pledges over $1,000 will be doubled using the remaining TD Ameritrade match.
About the Foundation for Financial Planning
The Foundation is a 501(c)(3) non-profit charitable organization whose mission is to support the delivery of pro-bono financial planning services to those in need. Governed by a volunteer board of financial planning and industry leaders, the Foundation has awarded grants, provided volunteers, and contributed financial services to organizations such as Wounded Warriors, the American Red Cross (Southern Arizona), Girls, Inc., Operation HomeFront, and the Kentucky Domestic Violence Association, among many others.
In a recently announced partnership, the Foundation has taken over the administration of the Financial Planning Association’s pro-bono activities and will manage the day-to-day logistics within the FPA® community. In combining the financial and administrative support of the Foundation with the energetic pro-bono efforts of FPA chapters across the country, FPA and the Foundation hope to show how such partnerships can enhance the pro-bono efforts of any segment of the financial planning community with a commitment to serving the public.
A recent article in the Wall Street Journal profiled three adviser couples who work together. Elissa and Dave were one of those couples. Here is what Caitlin Nish had to say in her article, “Adviser Couples Who Live, Work Together”.
Dave Yeske and Elissa Buie
Yeske Buie Inc., Vienna, Va. and San Francisco, $440 million in assets under management
First comes a board commitment, then comes marriage:
Mr. Yeske and Ms. Buie met while on the board of a financial planning group in 1996. At the time, they each had their own practice–on opposite coasts, he in California and she in Virginia. They also were married to others. Six years later, when both were single again and at a conference in Alaska, they decided not to let 2,419 miles stand between them, Ms. Buie says.
They married in 2006 and finished merging their firms in 2008.
Why they combined practices:
“At first we assumed we wouldn’t merge,” Mr. Yeske says. “We thought we might kill each other.” But their businesses were complementary: Ms. Buie had the staff and systems to serve clients in a particularly consistent and effective way. Mr. Yeske had hardly any staff but strong technology.
They also had different interests: Ms. Buie wanted to manage the business. Mr. Yeske wanted to work with clients and bring in new ones.
How he got top billing:
Ms. Buie volunteered for the second spot in the firm’s name. “She said, ‘It matters more to you. And, oh, by the way, I’m going to be the CEO,’” Mr. Yeske recalls.
The toughest part of working together:
“We eat, sleep and breathe the business,” Ms. Buie says, adding that it occasionally frustrates their daughters. “The challenge is making sure we focus on things other than the business.” These include sports, opera and travel.
Read the rest of the article
YeBu in the Media
•on May 20th, 2013
In the May 2013 issue of Investment Advisor Magazine, columnist Bob Clark asks the question: Do we really need another book about financial planning?
Bob is asking the question in response to the release of the CFP Board’s Financial Planning Competency Handbook, published by John Wiley & Sons. The book is an attempt to define and flesh out the financial planning profession’s body of knowledge as defined by the CFP Board. Elissa and Dave contributed 30 chapters to the book and Bob makes note of their participation.
Also a leader in the financial planning profession, Elissa Buie, MBA, CFP, is both a practicing planner and a professor of financial planning at Golden Gate University. As the last chair of the ICFP, she was instrumental in the creation of—and the first chair of—the FPA, and is the current chair of the Foundation for Financial Planning. Her husband and partner, Dave Yeske, CFP, MA, DBA, is also a past president of the FPA, and is an associate professor at Golden Gate University.
After noting some of the potential issues raised by the book, including the possibility of its contents being treated as de facto practice standards in a court of law, Bob concludes:
The “CFP Board Financial Planning Competency Handbook” is an impressive work, compiled by leading academics and practitioners in the profession. It undoubtedly will achieve its goal of advancing the knowledge base of the planning profession. Part of that process will be CFPs comparing the contents to how they practice financial planning.
YeBu in the Media
•on April 11th, 2013
GGU: The Magazine of Golden Gate University just published their Spring issue with the cover story “The Power Couple”, which highlights Dave and Elissa and their team approach to teaching and living. The article takes you on a journey starting with how Dave and Elissa first met and how Yeske Buie evolved, to how this duo used their complementary skill sets to revamp the Cases in Financial Planning capstone class at GGU. It wraps up with a shared appreciation for how the work they do influences the minds and lives of their students and how this continues to inspire them on their mission to evangelize financial planning.
“It is truly one of the most special things, one of our favorite things that we participate in,” Buie says. “We love it. … When you see the transformation of these very well-educated, enthusiastic human beings coming in the front of the class, going out the back end of the class actually getting the magic of financial planning… It’s just beyond imagination.”
“The school,” says Yeske, “attracts motivated students who are open to deep learning and personal transformation and have been a joy to teach. Anyone entering GGU’s financial planning program becomes part of a very special learning community that offers tremendous opportunities for personal and professional growth.”