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Reply #1 and #2: Post provides specific, constructive, and supportive feedback.
Reply #1: I think this is one of the most important articles I have read in regards to financial planning. It really is such a tough spot to put people because a lot of times there are individuals who want to plan their finances based on their how they want to live their life and their philosophies that they have for themselves. This makes a financial advisors job very hard to decide if a firewall needs to exist or if they try and help their client with their life problems.
The main question I will be looking at is “this study concerns the changing role of the financial planner and the major implications of that change for the financial planner of today and tomorrow” (Sussman). I have a very unique situation because of the career path u want to take and those involved with it. Currently my financial advisor is my brother-in-law who also has a huge impact with my personal life.
This is where the grey area is drawn because he knows a lot more about my life than a traditional financial advisor would know. When I am buying a new car or looking to move and looking to buy that new computer, he is there. In my opinion, this is how financial advisors should be.
In the article I went over they go over the negatives of being a financial advisor and working with family members or those who you have a deeper look into their life. This can be really thought because you try to make decisions based on the facts that you know, which might not always be the full story. At the same time, and my personal opinion, I think it helps to have someone that close to you to help make big decisions regarding finances that people look over. Such as buying a new car, looking at new homes, or using that bonus to remodel the house. Having someone who knows your philosophies and ideologies of life can help make those decisions easier and more practical. Since there are basic guidelines to follow, you can make sure that the advisor is aware of what is going on so they can give you a better educated decisions on those tough financial calls.
Reply #2: I chose to critically assess the ethical dilemmas that can occur when financial planners are involved in nonfinancial coaching and life planning. Financial planners must take into consideration the Code of Ethics and Professional Responsibility. They must follow the Code of Ethics in nonfinancial practices and financial practices.
In the Code of Ethics, Principle 3 refers to competence. Certified financial planners must provide services to clients only when they obtain the needed skills and knowledge in specific areas. It is understood that this principle implies skills and knowledge relating to financial and nonfinancial practices. If a financial planner is not trained and has little knowledge about life coaching, they could face numerous ethical dilemmas.
A financial planner could violate Rule 609. Under this rule, financial planners cannot practice another profession or offer unqualified services to clients. Financial planners must determine whether they are genuinely qualified to provide nonfinancial advice. The article discussed the Silver Rule relating to ethics. This rule means Do no harm. Financial planners could cause damage to clients if they are untrained on how to handle specific situations.
Financial planners who engage in nonfinancial and life planning with their clients believe it’s essential for their relationship. Financial planners that have strong bonds with clients face ethical challenges. “Financial planners seeking strong bonds or finding themselves in this relationship must be ever vigilant to these pressures and act in accordance with the highest standards of CFP Board’s Standards of Professional Conduct” (Dubofsky, 2010). When financial planners have strong bonds, they tend to have more obligations to clients. Professionals must have the proper self-awareness and education.
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Reply #3 #4 #5 and #6: Response is substantive, insightful, provokes further thought. responses should be researched and must include a citation using APA format.
Reply #3: The Repo Market is a repurchase agreement for short-term loans. Bear Stearns was an investment bank that ended up surviving the Great Depression taking a fall to the Great Recession. The firm offered a variety of financial services, the hedge fund business led to its downfall in 2008. In May of 2007, Bear Stearns hedge funds saw the value of their assets plummet. “Bear hemorrhaged cash when the other banks called in their repurchase agreements and refused to lend more. No one wanted to get stuck with the Bear’s junk securities.” (Amadeo.) By March of 2008, they informed the Federal Reserve they would not have enough funding or liquid assets to meet financial obligations. The failure of Bear Stearns and Lehman Brothers affects the money markets in several ways. The money markets were not able to hold long-term securities. Investors were concerned about the security of their funds. The Federal Reserve and Treasury Department resounded with many actions to fight the mortgage crisis. The Federal Reserve issued new rules for mortgage lenders and provided liquidy and support. Many new programs were introduced to stabilize the economy in hopes of increasing employment and assisting increasing consumption. The actions seem to be justified. The government steps in to the problem and tries to solve it.
Reply #4: The repo market is “a short-term secured loan: one party sells securities to another and agrees to repurchase those securities later at a higher price” (Cheng & Wessel 2020). This type of loan is what caused Bear Stearns to fall during the 2008 financial crisis. The housing market caused the hedge fund to have a huge loss and eventually led to the stock plummeting. This was when JP Morgan Chase bought the company and a tiny fraction of what they were worth. This stock market crash caused the Lehman Brothers to file for bankruptcy after their stock dropped by 48% and a “failed takeover by Barclays and Bank of America” (Chen 2021). When Bear Stearns requested a loan from the Federal Reserve, it was denied. The Federal Reserve also backed the purchase of the company from JP Morgan Chase. Regulations were set in place to prevent this from happening again. They also implemented many programs to support the financial institutions and improve the conditions in the financial market. These actions helped the companies from running into tho situation again and also helped prevent families from defaulting on their loans. These actions were more than justified because many companies went bankrupt and many families were forced to foreclose on their homes. Predatory lending became a strict guideline that the government sought to avoid.
Reply #5: I think there is a point to where the Fed shouldn’t bail out large financial institutions. If the debt of the institutions is very large, then I think the Fed shouldn’t bail them out. I feel that at some point, the Fed bailing out an institution can be pointless. During the credit crisis, they did bail out Bear Stearns. I feel that the way in which they did so, was a decently smart way. They did not directly help Bear Stearns, they instead used J.P. Morgan as a way to get them money. I believe that since the Fed did bail out large financial institutions, it helped keep the market from completely crashing. I think the effects of not bailing them out would have been a lot worse than they were since they did bail them out. With the Fed and Congress bailing out these financial firms, they are putting the government into more debt. The Fed and Congress held a major role in if large financial institutions were going to go bankrupt or if they were going to stay a float. I do not think the Fed or Congress should hold the whole fate of large financial institutions, I think it is acceptable for them to have an opinion or give the institutions options. The institutions should have a chance to bail themselves out of the issues they are in.
Reply #6: I think the Fed should have bailed out large financial institutions during the credit crisis because if the Fed doesn’t act to bail out bankrupt companies, they will drag the entire financial system down with them. Given the highly interconnected nature of the financial system, these companies are simply too big to fail. In the end, although the Fed bailed out defaulting companies, it did so on strict terms and conditions. Sometimes the government has to intervene as a last resort in matters of national interest.
The Fed might argue that the credit crisis is a threat to the financial system and that it needed to intervene to prevent a bigger crisis. Some critics might argue that the Fed has too much power and that congress should be involved in decisions regarding the use of taxpayer funds to rescue financial institutions. So The congress should decide over the fate of large financial institutions that are near bankruptcy as the congress had only led to the establishment of the Fed. These actions help to prevent the consequences of that business’s potential downfall which may include bankruptcy and default on its financial obligations.
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