Summer Reading List Of “Best Books” For Financial Advisors – 2020 Edition

Author: Michael Kitces

Team Kitces

Michael Kitces is Head of Planning Strategy at Buckingham Wealth Partners, a turnkey wealth management services provider supporting thousands of independent financial advisors.

In addition, he is a co-founder of the XY Planning Network, AdvicePay, fpPathfinder, and New Planner Recruiting, the former Practitioner Editor of the Journal of Financial Planning, the host of the Financial Advisor Success podcast, and the publisher of the popular financial planning industry blog Nerd’s Eye View through his website Kitces.com, dedicated to advancing knowledge in financial planning. In 2010, Michael was recognized with one of the FPA’s “Heart of Financial Planning” awards for his dedication and work in advancing the profession.

Financial Planner Book List For 2020 Summer Reading

Virtual Culture: The Way We Work Doesn’t Work Anymore (Bryan Miles) – For most industries, including and perhaps especially the financial services industry, being in-person is just the way the business has ‘always’ been done, both with respect to meeting with clients, and doing the work of the business itself. Yet the shutdown caused by the coronavirus pandemic in recent months has forced advisory firms to suddenly go virtual… and in most cases, the business is still doing just fine, raising questions of whether or how much should go back to the ‘normal’ in-person world once businesses can re-open, or if in reality virtual is the new normal instead? The challenge, though, is that when it comes to executing the business in particular, operating virtually is about more than just literally “can employees get the work done from their home computers without coming into the office”, but also about how the business manages and oversees its employees and creates a sustainable culture in a virtual world. But that it can be done is the key message from Bryan Miles, the CEO of Belay Solutions, a virtual assistant outsourcing solution that itself has grown to operate with hundreds of employees on a virtual basis… and still managed to win the #1 spot on Entrepreneur Magazine’s “Top Company Culture” list for small businesses (beating out 49 other finalists, all of which were in-person businesses). In Virtual Culture, Miles shares his philosophy of why he operates the business on a virtual basis (though notably, his own leadership team is still in-person in the Atlanta area, while the rest of the company’s employees are all virtual, so it doesn’t have to be ‘all-or-none’), makes the case for why at least most businesses can and should operate virtually (as obviously some like restaurants must be in-person to deliver their services), the benefits of doing so (from hiring flexibility to employee well-being to the outright dollar savings of not paying for office space), and most importantly how to effectively manage employees and actually build and execute a strong culture in a virtual environment. Ultimately, Miles suggests that the real key is shifting the organization to focus more on results (in terms of what each employee achieves) than on just time in the office, that the foundation of a successful virtual team is hiring employees you can trust and then actually trusting them to get the work done (while having measurable results to which they can be held accountable). For any advisory firms that are already fully virtual, Virtual Culture does provide some helpful tips and ideas about how Miles actually runs his virtual business (particularly in the middle chapters), though other books like Yael Zofi’s “A Manager’s Guide To Virtual Teams” may be more helpful. But for advisory firm owners that have been living a forced virtual environment from the coronavirus pandemic and are thinking about what it would be like to just stay virtual going forward… Virtual Culture provides some helpful guidance and suggestions about how to change your own thinking and mindset to survive and thrive in a more virtual-work future!

The Virtual Assistant Solution (Michael Hyatt & Bryan Miles) – The conventional view of productivity is that getting more efficient is all about finding the key technology tools and other ‘productivity hacks’ that let you squeeze a few more moments of productive work into the day. Yet while I’m a fan of investing in productivity tools as much as anyone, the reality is that real productivity isn’t about cramming more into the day, but instead figuring out what it is that only you can uniquely do to add value… and then either say “no” to the rest or delegate it to someone else instead. In the context of financial advisors, the opportunity to delegate at least a layer of paperwork and administrative tasks has long made the administrative assistant a popular role in advisory firms (allowing the advisor themselves to focus on client-facing work)… which was typically an in-office role sitting directly at the ‘right hand’ of the advisor. But with the onset of the coronavirus pandemic, advisory firms have suddenly been forced to operate virtually… and discover that virtual teams really are viable. In “The Virtual Assistant Solution”, personal productivity expert Michael Hyatt, and Bryan Miles of Belay Solutions (which provides virtual assistants across a wide range of industries), explore the benefits of leveraging a virtual assistant as a means to enhance productivity by letting go of and delegating the tasks that you, personally, don’t really need to do. In particular, the appeal of the Virtual Assistant – or more specifically, hiring a virtual assistant service (e.g., Belay), is for all those advisors who may not really need a full-time assistant, and are struggling with the thought of a full-time salary for what might not really be full-time work, and the burdens of finding, hiring, and training that person (in the ‘spare’ time they’re already lacking!). As even on a virtual basis, virtual assistants can still be easily trained for a wide variety of common tasks, including screening email, scheduling and confirming client meetings, screening voicemails and phone calls, taking meeting minutes, booking travel and other reservations, filing expense reports, handling other routine paperwork, buying and sending thank-you gifts, and more. And with a virtual assistant, the advisor only hires for the hours they actually need (and pay for accordingly), without the obligation of hiring, training, office space, employee benefits, etc. On the other hand, for those who actually do want to hire a full-time assistant of their own (virtual or otherwise), Hyatt also provides a book and supporting guidance materials – aptly titled “Your World-Class Assistant” – to go the full-time route. Either way, though, the key point is simply to understand the personal leverage that comes with having someone to delegate tasks to… and that in the modern digital era, the fact that you don’t need a full-time person, or don’t have physical space to hire someone, is no longer an excuse!

Lean Startup (Eric Ries) – One of the biggest pressures and outright challenges of launching an advisory firm is figuring out what is the right solution to launch in the first place. Is it best to go after older clients or younger ones? What is the best niche to pursue? Should the firm charge AUM fees, or monthly subscription fees, or pursue some other business model? Is it better to manage the client portfolios, or outsource it to a TAMP? What’s the best financial planning software to use, and is it better to create a financial planning deliverable or simply deliver the plan interactively and collaboratively with a 1-page follow-up summary instead? And most importantly: which of these questions do you have to get right or risk the business being doomed? As it turns out, the answer to the last question is: none of them. You don’t have to figure out the answer to any of these upfront. Instead, the whole point of the startup stage of the business is to, with intention, try any and all of these ideas, test them, see which one works… and then pursue that. Or stated more simply, the goal of the early stage of a business – an advisory firm or otherwise – is not to simply start growing the thing that the founder has already envisioned in their head (and hope they got it right, with all the pressure that brings), but instead to start testing with the goal of figuring out what that thing should be in the first place. Accordingly, Ries suggests that there are two core hypotheses that any new advisory firm should be trying to solve for: 1) the value hypothesis (does the service I’m offering provide real perceived value to the people I’m providing it to); and 2) the growth hypothesis (is there a clear way to find new clients who will engage the service). With that mindset, then, the goal is to figure out how quickly the firm can create something of value – what Ries calls the “Minimum Viable Product” – and put it out into the marketplace to test, and get feedback to see if it’s valued. If it is, persevere and grow what’s been created; if not, pivot and figure out what to change to make it valuable (or who else to provide it to who might value it more). The key point, though, is to recognize that advisory firm owners – or any entrepreneur – don’t need to mastermind upfront what the “perfect” business and clientele will be, and in fact, trying to do so can just cause the firm to place too big of a bet in one direction and actually increase the risk of failure. Instead, the real key is to approach the new business as “lean” as possible, view the process as a giant series of tests to figure out what clients really want… and then, after figuring out what clients really want, focus on delivering it, and growing the business to reach more clients!

Competing Against Luck (Clayton Christensen) – One of the fundamental challenges of “innovation” is that what seems obvious after the fact is never so clear at the moment, as for every ‘big idea’ that changes the world (what if you could just click a button on your smartphone and the car comes to wherever you are to pick you up!?), there are a dozen more that seemed just as ‘obviously good’ but didn’t turn out to succeed. Which at some point makes it seem like innovation is little more than luck… throwing a bunch of seemingly great ideas at the wall, and seeing which ones turn out to stick and gain consumer/client adoption. Or that it’s simply safer to take the ‘traditional’ approach that we’re certain will work reasonably well, and not bother with the creative risk of trying to do something completely different that could end out being a complete failure. Yet Clayton Christensen – who penned the seminal “Innovator’s Dilemma” on the difficulties of innovation, and spent decades since studying how businesses can learn to actually be more innovative – suggests that the best way to find creative new ways to solve problems is to ask the deceptively simple question “what job is the customer hiring that product to do?” After all, the whole point of buying a product, in the end, is to “hire” it to get something done (and if it goes well, then the next time we need to solve for that same job, we “hire” the same product again). Which is important, because sometimes the job we hire a product for isn’t the job we might have realized, such as when we hire the New York Times to fulfill the job of “filling my time while I am waiting for a doctor’s appointment and I don’t want to read the boring magazines available in the lobby” (which means it’s competing for the entertainment value of the magazines), versus hiring the New York Times because “I’m a basketball fan and it’s March Madness time” (which means it’s competing to deliver sports information). Which is important because if you don’t understand the job to be done, you can’t improve the solution; for instance, the milkshake company that is trying to figure out if their milkshakes should be sweeter, or more chocolatey, etc., may find that consumers have a wide range of milkshake flavor preferences, but that the real “job to be done” is based on why consumers were actually buying the milkshake from that particular fast-food chain in the first place – it gave their mouths something to do during a long and boring ride to work (which means the key to success wasn’t more chocolate or more sweetness but a thicker milkshake, and a thinner straw to make the experience last longer!). The key point, though, is simply that the most successful products succeed in part because they have a clear vision of what job they are being hired to do, how they will help the consumer make progress towards completing that job, and how they can therefore solve for that job especially well. In the context of financial planning, the question is equally relevant. Does the client hire the financial advisor to get an answer to their question? Or for peace of mind? Or to delegate tasks they don’t have the time to do themselves? Or simply because the couple wants someone to blame if the market goes down to reduce their own marital strife? Because the clearer you get about the job your clients are really hiring to be done, the easier it is to figure out what to actually deliver to them to grow the business and generate more referrals (and what you can stop doing to save costs because it doesn’t actually matter!).

Fascinate: How To Make Your Brand Impossible To Resist (Sally Hogshead) – Most businesses compete by trying to be better than the competition. Being better allows you to charge more for your products or services, retain the loyalty of your customers and clients, and grow by word-of-mouth referrals of the quality you provide. Yet the challenge is that in the modern marketplace, everyone says they’re great at what they do, and when it comes to complex or intangible services – like financial planning – it’s often difficult or outright impossible for consumers to actually know which solution really is better. So what’s the alternative? As Hogshead puts it, “it’s better to be different than better”. Because in the end, it’s the ability to be different that lets us stand out from a crowd and attract the attention necessary to actually grow a business and a brand; in other words, being different allows us to be fascinating (from the Latin fascinare, “to bewitch or hold captive so others are powerless to resist”). Accordingly, Hogshead’s “Fascinate” lays out a framework for how to think about being ‘fascinating’, and the ways to meaningfully differentiate, including what she calls the Seven Fascination Advantages: Innovation (you surprise clients with the creativity of doing something new and different that they’ve never seen before); Passion (you connect clients with your brand emotionally, so their decision is based on the relationship and goes beyond just rational choice); Power (you connect with clients through your own decisive goal-oriented self-confidence that affirms you can lead them where they’re trying to go); Prestige (clients aspire to purchase or engage with the excellence of what you offer, and it’s the superiority or exclusivity that commands respect); Trust (you lead with the consistency and stability of what you offer, and clients buy because they know they can trust that you’ll always deliver); Mystique (you pique the curiosity of those you serve by understanding exactly what it is that catches their eye); and Alert (where you are alert and attentive to the client’s needs, with the checklists and methodical focus on detail that assures them that everything is organized and under control). Notably, Hogshead doesn’t suggest that businesses – including and especially advisors – necessarily need to ‘craft’ their fascination advantage, but instead should simply look to their natural style (e.g., take Hogshead’s “Fascinate Assessment”) and then amplify the Fascinating Advantages you already have. Ultimately, Fascinate is both a guide in how to think differently about branding and marketing, a way of understanding one’s own natural distinct advantages, and then a guidebook of ideas and tactics on how to execute in each of the fascination advantages (whichever ones apply to you). But at its core, the underlying message is more profound: simply to recognize and embrace the idea that, at least when it comes to marketing, it’s better to be different than better.

Communication Essentials For Financial Planners: Strategies & Techniques (John Grable & Joseph Goetz) – On December 12^th of 1969, Loren Dunton and James Johnston called together an 11-person meeting in Chicago with a vision of making retail financial services more about the financial advice that was provided, than the financial products that were being sold. Over the subsequent 12 months, they formed the International Association of Financial Counseling (which later became the International Association for Financial Planning and ultimately the Financial Planning Association), and the International College for Financial Counseling (which later became the College for Financial Planning). Yet while the language has changed over the years (from Financial Counseling to Financial Planning), the core nature of providing ‘counsel’ to clients remains, and the skills of being a relational ‘counselor’ remain as relevant as ever. Yet in practice, the core of the CFP Board’s financial planning curriculum remains focused on the ‘technical’ knowledge aspects of financial planning, and not as much on the counseling or relational aspects. To help fill the void, in 2017 the CFP Board commissioned “Communication Essentials for Financial Planners”, a book that gathers together the research (across financial advice and other industries) around best practices in actually enhancing advisor-client communication, as research has shown that in the end the vitality of any relationship is based on the quality of communication. Which, notably, spans everything from the words actually spoken, to the layout and interior design of the financial advisor’s office, the nature and quality of the questions that the financial advisor asks, engaging in focused active listening, and different approaches to advising itself (e.g., a ‘challenger’ approach of pushing clients to think differently about their situation to engage action, versus a more ‘consultative’ approach of trying to problem-solve for clients in the hopes that it will leave them to engage the advisor’s products or services thereafter). Of course, the reality is that historically in the advisory business, most people were compelled to take ‘sales’ jobs getting prospects from day 1, which mean in practice the only ones who survived and thrived already had a natural skillset towards communication. But as more and more advisors start out today in an employee model with a more technical role (e.g., as a paraplanner), and want to move up to the domain of relationship management, it becomes more and more important for financial advisors to focus on developing their own communication skills as part of their own natural career progression… for which “Communication Essentials for Financial Planners” is perfectly suited. (Though it doesn’t hurt for everyone, even experienced advisors, to brush up on their ‘counseling’ skills as well!)

Bringing Out the Best in People: How to Apply the Astonishing Power of Positive Reinforcement (Aubrey C. Daniels) – As the internet makes more and more information available directly to consumers, it’s never been easier for self-motivated individuals to learn about and then implement nearly anything… including getting their household finances in order. As a result, financial planning is undergoing a shift from simply being the ‘experts’ that dispense knowledge (which the internet now makes accessible directly), to change agents that are actually responsible for helping clients to implement that advice to achieve their goals. Yet the reality is that helping people to obtain the knowledge and skills to focus their efforts towards achieving their goals isn’t unique to just how advisors work with clients; it’s equally relevant in how advisory firm business owners manage their employees as well. In fact, there is an entire field of study known as performance management, dedicated to examining how organizations can maximize employee performance by learning to focus employees’ efforts towards the attainment of business goals. The essence of performance management is that by understanding the causes and consequences of human activities, we can then seek to engineer an environment that promotes desirable behaviors that yield successful outcomes. In his book, Bringing Out the Best in People, Aubrey Daniels presents a clear and simple guide for how organizations can utilize the psychological principles of operant conditioning (a method of provoking desirable behaviors while stopping undesirable ones through rewards and punishment) to create an environment that maximizes human performance. Through research, case studies and personal experience, Daniels demonstrates how positive and negative reinforcement, and punishment (positive punishment) and penalty (negative punishment), are misunderstood and often misused tools. More importantly, he demonstrates how successful outcomes can be best achieved using positive reinforcement (while avoiding undesirable negative consequences). As while negative reinforcement (actions motivated by the threat of losing something desirable, invoking loss aversion) is often used to influence behavior, because of the quick results it yields when acting on negative reinforcement, people will only respond when prompted by some sort of external motivator (as opposed to being self-generated), and they will do just enough to avoid the undesirable consequences (e.g., the pain). Positive reinforcement, on the other hand, takes longer to influence action but is more likely to result in long-term and intrinsically motivated responses, even after initial goals have been achieved. Notably, though, these dynamics of behavior change apply more universally than ‘just’ to employees, and Daniels’ book is not just for organizational leaders; the principles of reinforcement can provide guidance to anyone seeking to engage and influence the behavior of others, including those advisors aiming to ethically and transparently guide clients towards their own goals and build stronger relationships. For example, an advisor may get quick results by emphasizing the potential loss of retirement income by not taking immediate action. The downside is that using this negatively reinforcing tactic may require the advisor to consistently push the client to save more, and the client may only save just enough, no more. In this case, though, while positive reinforcement may take more work, it can result in a stronger long-term client relationship as well as better financial outcomes. The lesson, here, is that performance management principles focused on behavioral modification and goal attainment are not only relevant for advisory firm owners helping their employees to succeed but are indeed very transferable to the field of financial planning, too!

Never Split the Difference: Negotiating as if Your Life Depended on It (Chris Voss) – Human beings are social animals, where interacting effectively with the ‘herd’ of fellow human beings has been crucial for our species’ survival… and therefore has honed our focus in how we interact with others, including and especially in how we negotiate with others (tremendously important to humans in almost all areas of life). Chris Voss, a former FBI hostage negotiator, presents a number of real-world negotiations (from bank robberies to international abductions, to terrorist standoffs) that provide practical insights related to how we actually should negotiate. In particular, Voss highlights the increasingly acknowledged role of emotional factors in negotiation, rather than looking at it as a hyper-logical (and ‘rational’) activity. Guided by this focus, Voss argues that many of the ‘old school’ negotiation insights (e.g., focusing on the Best Alternative To a Negotiated Agreement, or BATNA, which refers to finding your best option available to fall back on if negotiations fail) can be disastrous to apply in real-world scenarios assuming that actors are behaving ‘rationally’. While many of the negotiating stories are entertaining enough in their own right, the real value of Voss’ book is its application to real-world scenarios such as salary negotiations, client negotiations, getting someone to respond to an email, and even ‘negotiations’ in our daily lives with our friends and family. For instance, Voss explains how “calibrated” open-ended questions can diffuse aggression and allow you to nudge your counterparty without sounding pushy and while actually giving them a sense that they are in control (e.g., instead of a more overtly confrontational demand for payment delivered to a client who is late on their obligations, a consultant could ask “How am I supposed to continue working on this project when I haven’t received payments to cover my team’s expenses?”). Voss also presents the “Ackerman model” as a step-by-step negotiating model that captures a lot of advanced negotiating concepts (even if unintentionally) in a manner that is easy to remember (i.e., set a target price; first offer 65%, then 85%, 95%, and 100%; use empathy and ways of saying “No” without saying “No”; use precise numbers for a final offer—e.g., $1,997 instead of $2,000; and throw in a nonmonetary item on the final offer to signal you are at your financial limit). Additionally, Voss provides a number of useful tips throughout, from communication strategies (e.g., mirroring, silences, and the “late-night FM DJ voice”) to offer strategies (e.g., countering with a range of values instead of a fixed number, since this shifts the anchor of your offer and makes the lower end sound more reasonable [even if you would have normally countered at the low-end anyways]). Ultimately, Voss presents his real-world negotiating expertise in a manner that is both interesting, and practical for any number of real-world situations where we may need to negotiate for ourselves!

One Small Step Can Change Your Life: The Kaizen Way (Robert Maurer) –  When faced with a departure from safety and comfort, our brains have a natural response to flood our bodies with hormones that put us into ‘fight-or-flight’ survival mode, slowing down rational and creative thinking processes that may otherwise interfere with the body’s immediate ability to resist or avoid risk and danger… even when the perceived ‘threat’ (the thing that is forcing us to change) actually represents the desired outcome (e.g., when we feel threatened by the pressure to change a bad habit into a good one!). Accordingly, Maurer explains that because any big change – whether good or bad, desired or not – may be subconsciously viewed as a potential threat to safety, we often have a difficult time implementing the steps needed to attain major goals and establish new habits, even when they support our own good health or well-being! As while innovative breakthroughs might effect more immediate results, sudden change isn’t always a viable solution as the body’s natural survival response can kick in, interpreting the overwhelming fear of change or scope of responsibility involved with the goal as a threat, and compromising a person’s ability to take any action other than fighting or fleeing. However, the principle of “kaizen” (from the Japanese word for “improvement”), which implements very small steps over time, can be used to help ‘disguise’ the perceived threat to ourselves by circumventing the brain’s fight-or-flight response and facilitating the engagement in more creative and rational thinking – the very thought processes most important in problem-solving – making it easier to take action toward a goal. For financial advisors with clients struggling with goals, kaizen can be a useful strategy to help clients overcome their psychological roadblocks. Some tools that Maurer offers include asking “small questions” to discover creative solutions to facilitate gradual progress toward big goals (e.g., advisors can ask clients, “How can you reduce your weekly grocery bill by 10%?”, instead of telling them they need to amass $1.5M to retire at age 65); visualizing “small thoughts” every day to build courage to face a daunting or challenging goal (e.g., advisors can tell a client unhappy with their current job, but afraid of applying for a new one, to visualize the happiness and relief they would have from a more satisfying job for 30 seconds each day); identifying “small actions” to make gradual progress on goals instead of trying to tackle one huge project (e.g., a client who wants to stop overspending may agree to take one unessential thing out of their shopping cart every time they go to the cash register); offering “small rewards” to recognize and cultivate intrinsic motivation, which Maurer says “cultivates the native drive for excellence,” instead of larger rewards, which rely more on extrinsic motivation fueled by gaining material value (e.g., offer clients a simple gift, such as a mug or fountain pen, for providing all of their requested documents to prepare their financial plan); and contemplating “small moments” every day to identify ordinary instances that inspire happiness and bring pleasure, bringing focus to the present moment instead of reminders of past regrets or future worries. Because, as Maurer points out, while “paying attention to small moments may sound easy… it takes respect, imagination, and curiosity.” And it is often these states of mind that can help a person maintain the commitment needed to effect big change – especially when the change is accomplished through many small steps!

Cribsheet: A Data-Driven Guide to Better, More Relaxed Parenting, from Birth to Preschool (Emily Oster) – It is no secret that parenting is stressful in and of itself, with the pressure of nurturing a human being in the hopes of seeing them grow up healthy and happy to be productive adults… and raising a never-ending stream of questions of what is ‘good’ or ‘bad’ in developing them accordingly. When we need help making a decision (e.g., is screen time harmful?), we often encounter communities or champions of various perspectives that sometimes are so extremely set in their ways and even judgmental (either overtly or covertly) of those who disagree, that it’s difficult to figure out what the right course of action really should be as seeming experts diametrically oppose each other. To make matters worse, often neither side really has evidence that is grounded in solid data-driven insights that should be a prerequisite for such confidence in their favored approaches, and sometimes common practices are entirely based on extremely flawed statistical analyses or completely devoid of weighing both pros and cons (i.e., “Don’t do X because there is some risk”, despite the fact that the expected benefits of X may outweigh the expected harms of X). Emily Oster—an economist at Brown University—was frustrated by her own experience trying to make data-driven parenting decisions, and ultimately wrote Cribsheet (and a previous book, Expecting Better, focused on pregnancy) to help parents avoid the “Mommy Wars” and make better decisions. In this book, Oster tackles topics arising from immediately after the birth of a child (e.g., breastfeeding, vaccinations, and sleep considerations) through toddlerhood (e.g., screen time, potty training, and talking). Ultimately, Oster aims to help make parenting less stressful, and gain a better understanding of what science actually says (or doesn’t say) about various parenting techniques and decisions. Whether it is to share with clients with young children, or for advisors trying to manage their own careers in conjunction with their family life, Cribsheet provides many great insights for taking a more data-driven approach to what science says really “works” when it comes to parenting… which of course, scientifically still isn’t a guarantee of a good outcome, but at least it gives you the best probability of success!?

Stubborn Attachments: A Vision for a Society of Free, Prosperous, and Responsible Individuals (Tyler Cowen) – American culture purports to place high value on abstract notions such as prosperity and individual liberty. However, according to economist Tyler Cowen (who also hosts the popular Marginal Revolution economics blog), Americans do a poor job of remaining “stubbornly attached” to such notions in practice. In other words, while we pay lip service to the notions of prosperity and individual liberty, Cowen feels we don’t actually stay as attached to those values as we ought to promote individual and societal well-being, and as a country, we don’t focus on the metrics necessary to ensure we’re achieving that vision. While his book may appear, at best, loosely relevant to financial planning (or at least to the context in which our economy functions), Cowen’s exploration of his “two-thirds utilitarian” moral philosophy (i.e., Cowen first relies on a utilitarian evaluation of what provides the most well-being for all, but the other “third” refers to times when we should not just blindly follow the utility-maximizing outcome, such as not killing one person to harvest both of their kidneys for two people who each need a kidney, even though this would kill one life to save two) actually wrestles with many deep and interesting dilemmas with relevance to how we think about and manage wealth. For instance, Cowen argues that we humans place too little emphasis on economic growth, but that we think about economic growth in the wrong manner. As while we focus on measures like GDP that do a decent job of capturing easily quantifiable growth, GDP misses valuable dimensions of growth that truly promote well-being such as personal leisure time, accumulated gains from trade, household production (valuable work people perform at home for “free”), and environmental amenities (the value derived from maintaining a healthy, sustainable environment)—concepts that together comprise what Cowen refers to as “wealth plus”. Cowen argues that we place far too little emphasis on the exponential growth of “wealth plus” and, accordingly, the long-term wellbeing enhancements that accrue to society with (properly focused) GDP growth. While examining his more holistic concept of wealth, Cowen touches on interesting considerations with relevance to decisions such as how long we should work (e.g., focusing on “wealth” instead of “wealth plus” may overweight growing the portfolio and underweight the value of leisure), and how we should manage our wealth (e.g., policies that promote “social responsibility” at the expense of long-term growth of “wealth plus” may unintentionally move us away from the “socially responsible” outcomes desired in the long run). Additionally, Cowen examines considerations regarding what discount rates should be used when weighing decisions of current versus future benefit, not just with respect to their own financial decisions (e.g., the discount rate in evaluating a pension versus lump-sum decision), but also regarding some particularly salient considerations for questions related to our clients’ legacies and their altruistic intentions towards their families, institutions they value, and society broadly. For instance, positive discount rates applied to inter-generational well-being considerations will lead to conclusions most feel are absurd, such as one person’s death today being worth thirty-nine billion deaths five hundred years from now at a 5% discount rate. Ultimately, whether one agrees with Cowen’s assessments or not, he presents many thought-provoking considerations that are ultimately important to how we (and our clients) manage wealth and pursue our individual, family, and societal goals.

The Color Of Wealth: The Story Behind The U.S. Racial Wealth Divide (Meizhu Lui, Barbara Robles, Betsy Leondar-Wright, Rose Brewer, & Rebecca Adamson) – Albert Einstein famously stated that “compound interest is the eighth wonder of the world. He who understands it, earns it… he who doesn’t… pays it.” Yet the caveat to the wonder of compounding interest is that it’s not possible to compound interest – or wealth in general – until you’re able to save and accumulate a little wealth to grow and compound in the first place. Which is important, because historically, not all races in America have had equal access to the ability to earn or even own wealth in the first place. In “The Color Of Wealth”, researchers from United For A Fair Economy – a national non-partisan non-profit that studies the adverse consequences of (over-)concentrations of wealth – take a deep dive into the data and facts of how historical government and business policies have shaped wealth accumulation in the U.S., and how differential treatment of different races under various government programs over the past two centuries have contributed to a drastically different paths to compounding wealth (with the end result of a substantial racial wealth divide today). From the collapse of Freedman’s Bank that wiped out a large swath of African American savers in the aftermath of the Civil War (and contributed to a century of racial distrust in the banking system), to the “Operation Wetback” mass deportation of Mexican-American immigrants (including many who were legal U.S. citizens) after World War II that shattered their family wealth trajectory, to preventing Asian Americans from being able to become U.S. citizens and fully participating in the U.S. wealth creation system from 1882 (the Chinese Exclusion Act) until 1965 (ending with the Immigration Act of 1965), and various programs throughout U.S. history that forcibly relocated Native Americans (and often in the process partially or fully destroying their family wealth and requiring them to start the compounding over from $0 again). In other words, to the extent that wealth is so greatly impacted by the long-term effects of compounding, it’s impossible to evaluate the racial wealth divide today without understanding the historical context of institutionalized private or government programs that caused wealth to compound so differently across the races in the first place. Which is important when it comes to financial planning in particular, as when the majority of financial advisor business models are based on either selling financial services products, and/or managing already-existing financial wealth, racial disparities in wealth end out being reflected in racial disparities of who financial planners serve (and may also help to explain the lack of racial diversity of financial planners themselves!).

If you’re still looking for more book ideas, be certain to also check out our prior summer reading lists, along with our overall list of recommended books for financial advisors. They may be lists we’ve published in the past, but if you haven’t read the books yet, they’re still new to you! 🙂

Top Must-Read Books for Financial Planners
2019 Summer Reading List of “Best Books” For Financial Advisors
2018 Summer Reading List of “Best Books” For Financial Advisors
2017 Summer Reading List of “Best Books” For Financial Advisors
2016 Summer Reading List of “Best Books” For Financial Advisors
2015 Summer Book List For Financial Advisors
2014 Summer Reading List Of Best Books For Financial Advisors
2013 Summer Reading List Of Top Financial Advisor Books

So what do you think? Will you be reading any of these books over the summer? Do you have any suggestions of your own that you’re willing to share? Please share your own great reads in the comments below!