As the cost of college continues to rise, and more and more students graduate in debt, and then try to enter a difficult job market, many have begun to question: is college actually worth the price? The basic formulation is pretty straightforward: by going to college, you spend 4(+?) years not in the labor force, and spend money outright on the cost of college itself; in return, you have a higher employment income for all the years that follow college until you retire, which in theory can make up the college tuition outflows plus the years of foregone earnings. However, as college gets more expensive, and the "bonus" to future salary for having a college education doesn't seem to be what it once was (especially for many liberal arts degrees), it's getting harder to make the case that college is still worth it. There's just one problem: while you earn one future income without a college education, and a higher future income with a college education, neither projection accounts for the crucial income risk of unemployment.

Sunday, May 29th, 2011 Posted by Michael Kitces in Human Capital | 15 Comments

With an increasing focus on fiduciary from NAPFA, the FPA, and a global trend towards fiduciary advice witnessed as far as reforms in Great Britain and Australia, it would seem that fiduciary is at the forefront of concerns about financial advice. Yet at the same time, we discuss the issues of fiduciary, broker/dealer, registered investment advisor, and the distinctions about advice that they imply, in the industry and technical jargon not really accessible to most clients. In the process, are we making fiduciary issues more relevant to clients, or actually diminishing the importance? In the end, is it really about having a legally-bound fiduciary on your side... or is it just about talking to someone you trust?

Thursday, May 26th, 2011 Posted by Michael Kitces in Planning Profession | 3 Comments

Lifetime gifting is a widely accepted technique for managing potential exposure to future estate taxation. The purpose of the strategy is not just the obvious "if I give it away while I'm alive, I can't be taxed on it when I die" - due to the fact that both gifting and estate taxation share the same single lifetime exemption amount that is protected from taxation. Nonetheless, gifting can still be highly effective, because once the asset is transferred, all future appreciation is in the hands of the donee, and not the donor; as a result, the value of the asset is "frozen" at its value on the date of gift in terms of its cumulative gift and estate tax impact. And with the gift tax exemption recently increased to $5 million - and only until the end of 2012, after which it is scheduled to lapse back to $1 million - many estate planners are counseling clients to make some big gifts while they can. There's just one problem: it's not clear whether a future reduction in the gift and estate tax exemption could indirectly cause a so-called "recapture tax" on prior gifts.

Tuesday, May 24th, 2011 Posted by Michael Kitces in Estate Planning | 2 Comments

This past week was the NAPFA 2011 National Conference in Salt Lake City. Pulling almost 500 attendees from across the country, it's one of the top financial planning events of the year. Unfortunately, though, many did not have the time or opportunity to attend the conference. The good news, however, is that a growing cadre of Twitter users "live-Tweeted" the conference for all to enjoy, using the #NAPFA11 hash tag. So for those of you who missed the conference, here's a quick synopsis of the entire 3-day conference from start to finish... from those who Tweeted it!

Sunday, May 22nd, 2011 Posted by Michael Kitces in Conferences | 1 Comment

NAPFA has long been at the front vanguard of the profession, carving a path to advance financial planning forward. And for the most part, it has been incredibly successful. It put fiduciary in the center of the debate, and organizations from the CFP Board to the FPA have adopted fiduciary into their own Codes of Ethics and Practice Standards. It put comprehensive in the center of the debate, and now the CFP Board’s public awareness campaign is anchored around the comprehensive nature of financial planning to pull together all of life’s intricacies. It put fee-only at the center of the debate, and now methods of compensation, conflicts of advice, and objectivity of advice are being evaluated by Congress and government agencies to determine future regulation of the profession. It put the importance of competence at the center of the debate, and now the public media openly acknowledges the value of having the CFP certification as a cornerstone of financial planning knowledge. With so many victories in its core missions, NAPFA had to some extent begun to render itself less relevant, as its successes brought all parts of financial planning closer to its own ideals and diminished its own differentiation. And so at NAPFA National 2011, the organization announced a new branding effort and vision for 2020 – once again, throwing down the gauntlet for leadership of the profession.

Thursday, May 19th, 2011 Posted by Michael Kitces in Planning Profession | 9 Comments

Once again, the Social Security and Medicare Boards of Trustees have released their annual report on the fiscal health of the Social Security and Medicare programs, and once again the Trustees report shows that the fiscal health of the two programs has further deteriorated, a combination of primarily slower-than-projected growth, upwards adjustments to long-term costs (Medicare), and increases in estimated longevity (Social Security). With the latest projections, the Social Security trust fund is projected to be exhausted in 2036 (last year it was anticipated to last until 2037), and the Medicare trust fund will be depleted in 2024 (compared to last year's estimate of 2029). But while it's true that the systems are both headed for serious trouble as the trust funds potentially go "bankrupt" - the reality is that the actual depletion of the trust funds may still have a far less severe financial planning impact than many assume, for one simple reason: the overwhelming majority of Social Security and Medicare benefits will actually still be funded, via our ongoing Social Security and Medicare tax system!

Monday, May 16th, 2011 Posted by Michael Kitces in Retirement Planning | 14 Comments

Earlier this month the Financial Planning Association hosted FPA Retreat, one of the leading cutting edge conferences on the art and science of financial planning. Drawing hundreds of attendees from across the country (and around the world, with participants coming from as far away as Australia!), the conference never lacks for interesting ideas and conversations, both within the sessions and out in the hallways. This year, though, those who didn't attend still had the opportunity to enjoy some of the content virtually, thanks to an active group of participants who "live Tweeted" highlights throughout the conference on the #FPARetreat11 hashtag. For those of you who missed it, here are some of the highlights...

Sunday, May 15th, 2011 Posted by Michael Kitces in Conferences | 1 Comment

As the popularity of social media rises - from Facebook to LinkedIn to Twitter - advisors are increasingly asking "what's all the buzz about" and "why should I care?" As many point out, planners develop new clients primarily by getting referrals from existing clients, and having face-to-face meetings to get to know them better. No one makes a decision about who to give their life savings to based on a Facebook page, right!? Perhaps, but a focus on the new business development opportunities from social media misses an important but crucial point - there's already plenty of value to be derived from social media, just by connecting to your EXISTING clients, to deepen the personal relationship you already have with them!

Tuesday, May 10th, 2011 Posted by Michael Kitces in Client Trust & Communication | 7 Comments

Being a good financial planner is not just about having the knowledge and information to direct clients on how to best achieve their goals and financial success. Ultimately, most would agree that the true measure of success is to look at how effective the planner is in actually helping clients achieve those goals; in other words, does the client actually have an improved path to success because of the planner's involvement. In turn, this means that the planner's true success hinges not only upon having the right advice, but also depends upon the client actually implementing that advice, and the planner's ability help those clients make the required changes! There's just one problem: it turns out that telling people what to do is actually a terrible way to get them to do it!

Tuesday, May 10th, 2011 Posted by Michael Kitces in Client Trust & Communication | 6 Comments

If there's one piece of investment advice that's almost universally agreed upon by financial planners, it's this one: don't bail out of stocks after a bear market. In fact, the entire foundation of wealth accumulation in the financial planning world is predicated on a healthy exposure to stocks for the long run, especially during the accumulation phase. The planning world has attached itself to this stocks-for-the-long-run focus over the past two decades with its shift to an assets-under-management business model, where revenues and value for the firm are tied to the markets in a similar manner to the client's wealth and (future) income. Yet in recent years - and especially since the 2008-2009 bear market - some planning firms have been starting to shift away from the AUM model, opting instead for more stable income business models like retainers. Yet this raises the question: if clients are supposed to stick with stocks for the long run and stay the course through temporary market downturns, are planners being hypocritical by not doing the same thing with their AUM business model?

Monday, May 9th, 2011 Posted by Michael Kitces in Practice Management | 9 Comments

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Thursday, September 25th, 2014

Should Equities Decline in Retirement, Or Is A Rising Equity Glidepath Actually Best? @ FPA Houston

Tuesday, September 30th, 2014

Future of Financial Planning in the Digital Age Setting a Proper Asset Allocation Glidepath in Retirement @ Society of Financial Service Professionals

Wednesday, October 1st, 2014

Setting  A Proper Asset Allocation Glidepath in Retirement Cutting Edge Tax Planning Developments & Opportunities @ FPA San Diego

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