Current Issue of the Journal
The Journal of Personal Finance is a member benefit of the
International Association of Registered Financial Consultants (IARFC).
You can access the full online version by logging into your membership or by joining the IARFC. Hard and Adobe PDF copies are available to Members and Non-Members; Order today.
Archive Issue Join the IARFC IARFC Members
Welcome to the Spring 2018 issue of the Journal of Personal Finance. We are excited to bring you another six articles representing cutting edge research and current thinking in the field of personal finance. We also wish to announce that this is the last issue of the Journal of Personal Finance that we will be editing. The journal will be left in good hands, though, as we are happy to announce that Benjamin Cummings, Ph.D., CFP®, RFC® will serve as the journal’s next editor. Dr. Cummings serves as an Associate Professor of Behavioral Finance at The American College of Financial Services. He earned his Ph.D. from the Personal Financial Planning program at Texas Tech University, and his areas of focus include charitable giving, education planning, estate and tax planning, life insurance, portfolio management, and retirement planning. We have enjoyed our time at the journal and are grateful for the opportunity to be actively involved in guiding one of the key journals in the field of financial planning and personal finance.
Volume 17 Issue 1, 2018
Recognizing Conflicts of Interest in Financial Planning: A Sequential Study ………………………………...9
Frank C. Bearden, Ph.D., Managing Member, Frank C. Bearden LLC.
AbstractConflicts of interest (COI) are an important issue for financial planners. This study is sequential to a prior study, providing improved sample uniformity and focus. The emphasis is upon measuring the recognition of COI by CFP® certificants in financial planning practice. Recognition was measured in six pending financial planning engagements. Participants were 134 CFP® certificants in financial planning practice. To measure recognition of COI
in each engagement, participants were asked the likelihood the financial planner would encounter a COI by accepting each engagement. Participant recognition of COI aligned with expectations in 4 of the 6 engagements, but did not align when considering a family member or business associate as a client. Time in financial planning practice and number of professional designations were measured as possible influence factors on the planner’s recognition of COI, and found to have insignificant influence.
Vance P. Lesseig, Associate Professor of Finance, McCoy College of Business Administration, Texas State University
Do Interest-Only Mortgages Really Make Sense for Investors?……………………………………21
Kenneth P. Moon, Associate Professor of Finance, McCoy College of Business Administration, Texas State University
AbstractInterest-only mortgages began as a way for well-qualified borrowers to reduce their monthly mortgage payment and increase their available funds for investment. However, during the financial crisis, these loans were viewed as one of the factors precipitating the mortgage problems as borrowers had instead used them as a way to qualify for larger loans. While this paper will not debate the merits of how interest-only mortgages are used, we will try to determine if their original intent is reasonable. This paper attempts to analyze how easily an investor can earn returns that “beat” mortgage rates. Specifically, we use portfolio return simulations with the historical return characteristics of various assets and mortgage rates to determine the probability of various “typical” investment portfolios earning returns that exceed mortgage interest rates. Not surprisingly, our results show that the probability of successfully employing this strategy is often less than 15 percent, and increasing the probability of success requires large increases in risk.
Why Financial Advisors Have Yet to Leave the Professionalism Bar…………………………………………33
Jeffrey M. Camarda, PhD, CFA, EA, Camarda Wealth Advisory Group
The Charitable Bequest Gap Among African-Americans: Exploring Charitable, Religious, and Family Estate
Jennifer Lehman, J.D., Ph.D. Candidate, Texas Tech University
Russell N. James III, J.D., Ph.D., CFP®, Professor, Texas Tech University
AbstractPrevious research reports that African-Americans are significantly less likely than Whites to have a charitable estate plan, even when controlling for other socio-economic characteristics. Two possible explanations are a documentation barrier or lack of charitable intent. Evidence for a documentation barrier includes relatively lower engagement with the formal financial system in general. The evidence further indicates that, among those who have estate planning documents, African-Americans are not less likely to include a charitable component. Using nationally representative data from the 2007 Panel Study of Income Dynamics (n=8,289), we present direct evidence of attitudes regarding charitable, religious, and family estate planning. In absolute terms, African-Americans rated the importance of charitable and religious bequest gifts higher than others did. This suggests a documentation barrier—a barrier that advisors can actively address–rather than a lack of charitable intent. Additionally,consistent with theories and findings in current charitable giving, African-Americans were also more likely to give religious bequests greater importance relative to other charitable or family bequests.
Personal Finance Bloggers…………………………………………57
David Donovan, David Donovan Consulting, Upper Coomera, Queensland, Australia